Monday, September 17, 2012

Extraenvironmentalist Episode #49: Developing Breakdown

In Extraenvironmentalist #49 we speak with Dmitry Orlov about the developing systemic breakdown threatening to destroy the global credit system. Dmitry describes his view of the mortal blow to globalized trading and discusses ideas of how society would transform after it evaporates. We ask Dmitry about those who may be best prepared for the financial system to go broke. To find out more about people prepared for a world without money, we speak with photographer Lucas Foglia [1h 19m] who tells us what it was like to capture the lives of those dropping out of society for his book A Natural Order. After we hear from the people in Lucas’ work, we play a discussion from CNBC with Marc Faber [1h 52m] where he echoes the sentiments of Dmitry and those living off the grid.

And remember: Listening to XE #49 is the perfect way to celebrate the launch of QE ∞

Podcast: Play in new window | Download (Duration: 2:14:47 — 185.2MB)

Podcast (96kbps): Play in new window | Download (Duration: 2:14:59 — 92.8MB)

[Many thanks to Larry]

Seth: Hello, welcome to the Extraenvironmentalist, I’m your host, Seth Moser-Katz along with my co-host, Justin Richey.

Justin: We cover a lot of heavy topics on our show, but none carries more gravity than the potential collapse of the financial sector and our system of global trade, which is what we’re going to be covering today with Dmitry Orlov, and he has been writing about the potential for collapse and about the process of collapse, due to energy and its interaction in the economy, for years now, and talking about the collapse gap between the United States and the USSR, where he grew up, and where he had the ability to go and travel around for many years as it fell apart. So he got to see the perspective of an outsider on his culture, but he was familiar enough with his culture that he could get in there, talk to people and understand the process that was going on and then compare the weaknesses that caused the Soviet Union to collapse to the United States, to say that the United States would soon collapse as well.

Seth: So after we talked to Dmitry about the hard times that are upcoming, we jump over to Lucas Foglia, who takes pictures and actively interviews people who have chosen to move off the grid, who have chosen to go and live on homesteads and exit themselves from the culture that is pervasive around the Western society.

Justin: Lucas is going to tell us about what it was like to live and to meet numerous people in the southeastern US for a series of photographs that he put together called A Natural Order.

Seth: We’ve got a jam-packed show today. Let’s jump right in. (2:47)

Justin: Dmitry Orlov, thanks for joining us from Boston, Massachusetts today, from your boat in Boston harbor.

Dmitry: Thank you, great to be on your show.

Justin: Dmitry, you’ve been at this for quite a while now, writing about peak oil and writing about the collapse of America and of industrial civilization, and now the symptoms are getting so severe that even the middle and the upper class are starting to feel this collapse in so many ways, and—how are you seeing people, maybe in Boston, or in media reports, starting to feel the collapse in all the different classes in society? (3:48)

Dmitry: I run across a lot of people who don’t know what it is they’re looking at. They’re dealing with more or less the same thing they’ve been dealing with all along. It’s just that they’re maybe suffering a little bit more, but these are normally the people who suffer. So they’re used to it, and they take suffering as a normal sort*of thing. I think it’s a little bit different for the middle class people because they feel that suffering is just a gigantic indignity and they’re a little bit more fragile psychologically, and they tend to come down with serious problems that need professional intervention; and I’m afraid to think of what will happen when the rich people start feeling the pinch, because I think they’ll just become suicidal right away.

Seth: Really, wow.

I want to investigate some, a little bit of your past and give our listeners a preview about where you’re coming from and how you’re prepared uniquely to make these forecasts that you’ve been making. I’ve watched some of your talks where you talked about how you grew up in Russia. Can you talk a little bit about that and how you managed to come to the United States?

Dmitry: It was the Jackson-Vanik amendment that was recently repealed by the US Congress, which stipulated that credits depended on the Soviet Union abiding—and then Russia—abiding by certain international conventions on the reunification of families, specifically, and so that was a loophole that allowed a lot of people to leave Russia, because the Soviet government was interested in getting grain credits and that was a ploy that they used to get rid of undesirables, and my family was semi-undesirable. So we were allowed to leave politely. We got our exit visa for Christmas. So yeah, that’s how we ended up here, and then later on I started going back to Russia because it was interesting and I still had family there, and when I was done doing that, which was in 1996 or so, I had a lot of thoughts about why the Soviet Union collapsed, because of all the stuff that I observed while I was there, and then I realized that the United States is not that far behind, and started paying attention to peak oil at around that time and have been paying attention to it ever since. So it’s not as swift a process as the Soviet collapse, but it’s going in the same direction.

Justin: ...and what was it that clued you in to peak oil originally? For many years it sat as a fringe topic, as something that many people even thought was a conspiracy theory, and now more and more science, more and more data comes in that’s confirming that it’s true. So much so that, in the mainstream, people are starting to have to deny it, even, and come up with all of the shale gas and all these things saying that America is going to be an oil exporter. So, what was it that clued you in originally to peak oil? (6:31)

Dmitry: Well I’m an engineer. I’m not in public relations. So, whether something is fringe, or whether people consider it a theory, doesn’t actually have any impact on me at all, and the fact is that the theory was sound from about 1970 on. That’s the last time that anybody cared to dispute it, really, outside of people who chatter about things without knowing what they’re talking about. So, by the time I realized that that’s what was going on, the reason I was clued in to it is because the Soviet Union collapsed largely because of very low oil prices. It was very import dependent. It relied on credits in order to import enough food, to feed its people, and when oil prices went down to ten dollars a barrel, because of North Sea and Prudhoe Bay going on stream, their trade was severely disrupted and they were left at the mercy of their Western creditors, who wanted to destroy them, and that was the end. So that’s when I realized that oil is the most important artifact in an industrial economy. When things go wrong having to do with oil, that very possibly spells the end of the industrial experiment for a while. So that’s the reason I started paying attention to it.

Seth: A lot of people think that peak oil means high prices. Is what you’re saying that the oil price was low?

Dmitry: See, the Soviet Union was an oil exporter. The United States is an oil importer. So, the Soviet Union was destroyed by low oil prices. The United States is going to be destroyed by high oil prices.

Seth: I see. So, there’s a distinction to be made between the high oil prices and the low oil prices in the Soviet Union, because...was the Soviet Union importing not as much as the United States is importing now? (8:14)

Dmitry: The Soviet Union was, and Russia now still is, one the largest oil exporters in the world, and the largest oil producer in the world. The difference with the United States is that the United States is dependent on the outside world for sixty percent of its oil, which is ninety percent of the transportation fuels.

Seth: Got you... I’d like for you to talk a little bit about what it was like in Russia during this collapse period that you had a chance to tour around the country a little bit and see what it was like. Could you talk to us a little bit about what it was like during that time?

Dmitry: Well, it went through a few stages. There was a stage of relative normalcy right before the Soviet collapse, and then there was a year when nothing worked, and it was very hard to do very basic things, like buy gasoline, or buy food—find a place where you could get food, and then there was a period of disaster capitalism where there was a lot of black market activity. There was a huge spike in crime, which didn’t start out particularly organized, but by the mid-1990’s it was very tightly organized and eventually ingratiated its way into government and into the system as a whole. So, a lot of the people that came up through the ranks as racketeers during the 1990’s, they’re running banks and doing very responsible-looking things. Society was turned upside-down for a while, and now it’s resurfaced right-side up, but in a very different form and in a very different state, flawed in some ways, and much better than what was before in various others.

Justin: Right, and you mentioned that there was this period of the rise of the informal economy and rise of black markets, and also crime. Did that start out as just shooting sprees or random one-off events and then start to look more and more organized over time?

Dmitry: Oh no, well the whole black market thing in Russia it existed the entire time, but mostly it was just plugging up holes in the official economy, the way it does here, but then Gorbachev tried to ban alcohol. He had this anti-alcoholism campaign running for a while, and so what that did was—same thing that the Prohibition did in the United States, which is it drove alcohol production underground, and created gigantic fortunes. So suddenly you had a class of underground millionaires in Russia, and the people who were working for the government, and the black marketeers looked at each other and the people in the government thought, well “We have power, but we don’t have any money,” and then the black marketeers looked at the government and said, “Well, we have lots of money, but we don’t have any power,” and then they got together and decided, “Well, let’s, let’s just wreck the whole system and then each side will get what it wants.” So that’s where it got started, but then it immediately went completely off the rails and out of control, and the things that happened afterwards are things that nobody could possibly imagine.

Seth: So when you came to the United States you were in high school. Um, can you talk a little about what is was like coming to the United States from a different—totally different country and a place, during a time that—had some very harsh feelings for each other. What was it like in coming to the United States?

Dmitry: Oh, the people here are just so clueless. People here they didn’t know where these countries are. If you handed them a globe and said, “Well, where am I from?”--they’d have no idea. So, it didn’t really matter. There was some just general xenophobia. You know, reactions against people who didn’t seem like they belonged or something like that, but generally the impression that I get about the United States is that nobody knows enough to actually figure out who they’re supposed to hate half the time. So that makes it a safer place than most places in the world, where everybody’s completely on the ball all the time. The United States is a completely safe place because it’s full of just completely clueless people, who don’t know anything at all.

Seth: ...and how does that contrast to Russia, per se?

Dmitry: Oh, in Russia right now there’s an incredible hatred and suspicion of all foreigners. Part of that is the result of the experience of the privatization that went on. You know, a lot of it was influenced by Harvard economists like Jeffrey Sachs, who, in spite of their best intentions, did a horrible, horrible thing and hurt a lot of people. They played into the hands of criminals by liberalizing the economy. So that’s something that the Russians will not forgive any time soon.

Justin: Could you talk a little bit about what you did after high school and how that shaped your view of the United States?

Dmitry: Yeah, I worked a bunch of jobs. I did all sorts of different things. I ran a floor sanding business for a while with illegal immigrant labor. That was very interesting. I worked for a bank for a while, did corporate accounting. I was responsible for the daily balance sheet report. It had to add up to something like thirteen billion dollars. That was a lot of money at the time. That was before college. So I did that for a while. That got boring, and then I went to engineering school.

Justin: Yeah, and so all these experiences gave you different views on life in the United States and then eventually you put together quite a bit of writing about peak oil and collapse, and put out Reinventing Collapse, and so now that the US is well on the road, and more and more people are writing about collapse, what do you think the major signs of collapse that are becoming apparent for many people? You talked at the start of the interview about how more people are just facing some of the same things that they’ve always faced in terms of hardship. It’s just starting to trickle up a little bit into other classes in society.

Dmitry: I think what’s becoming apparent now is that there isn’t really a solid story for what’s going on. People will continue talking about how to stimulate the economy to produce growth. That’s one of the narratives that’s going on. Every time a politician opens his mouth that’s what comes out, and then if you look at it, well stimulating the economy involves going into debt, and the debt-to-GDP ratio is already at a level where it hurts growth. Everybody concedes that, and then if you look at how much the country is going further and further into debt versus how much GDP growth that’s producing, that’s 2.5:1. So it’s not a productive thing to do, to take on more debt in order to stimulate growth. So, from that we can assume that there’s no more growth, but once we assume that, then we have to concede that all of these debts are going to go bad, and once they do, the global economy’s going to be shut down, because it’ll be impossible to get a letter of credit processed to put cargo on a container ship. So, that’s the end for the global economy after that, and then, if you look at what that means here, an economy that is very dependent on imports, and what happens when those imports dry up, well, it’s not very long before it's lights out, and once it's lights out then you don’t have access to your money, government doesn’t work, transportation breaks down, etc. So, we’re not looking at, like, a nice, gentle slide. It’s going to be a few weeks of mayhem, and then [suddenly] nobody knows what’s going on.

Justin: You were talking about the constant rhetoric about finding new ways to grow the economy, and one of the new things that’s been coming out recently has been all these financial scandals that are coming to light, and so many new scandals are being uncovered and shown. Why are they coming to light right now, and why weren’t they uncovered in the past?

Dmitry: There are two things there. One is, suppose you have a lake and the water’s draining out of it. Well, that’s when you discover that it’s full of old tires, and oil cans, and oil drums, and maybe a Model T sitting there, and maybe a few corpses. As the water level drops, things get exposed, and that’s what’s happening now is the blood is draining out of the economy, and the other thing happening is that a while ago the people who are at the commanding heights level of the economy decided that laws don’t apply to them, but then they have to have some way of settling scores, don’t they?—amongst each other, nothing having to do with us. So, there’s a lot of mafia shake-out going on right now, where people are trying to figure out who’s out, who’s out, who’s dead, who’s in charge; and this has nothing to do with the rule of law. This is more of a new, mafia economics that’s taking over, and right now it’s about scandals and conversation, but eventually it will get a little bit more violent, because it usually does.

Justin: ...and what do those next steps look like in terms of how the financial elites shake down their ranks?

Dmitry: Right now they’re still in the mode of “Okay, I want all the money and you won’t have any,” but it’s still about money. They’re still fixated on the idea that money is a store of value, that financial paper represents wealth. Now, once they realize that money is worthless, money is a useless artifact, and that the only thing that matters is personal relationships and things you have immediate control over, they’ll have a nervous breakdown, and once they have that nervous breakdown, we’re in a slightly different situation. My feeling is a lot of them will commit suicide. That’s what typically happens in a big financial collapse. The people who are the richest are the most susceptible to suicide, because they’re the most fragile psychologically. Take your typical poor person, and it’s all a question of “Where am I going to get dinner, where am I going to sleep tonight?” Right? Once you get to the very rich people, and they don’t get the first-class ticket, they have to go coach—right?— and people are looking funny at them and making fun of them, they just crack. They just completely lose it at that point.

Justin: ...because they’re so wrapped up in the social construct of money and what it does for them?

Dmitry: Yes, exactly.

Seth: Their whole status is just eradicated, huh?

Dmitry: Exactly, it’s the twilight of the gods for them. For everybody else it’s that “Okay, I’m broke. I was broke yesterday, I’ll be broke tomorrow,” but for them it’s a critical juncture where they just completely lose it.

Seth: ...and I’m sure you saw examples of that kind of stuff during the break-up of the USSR.

Dmitry: Well, no, I think the Russians started out pretty hardy. Everybody was poor then, but right now you have a lot of rich people in Russia, and while a few of them are young enough to actually be that fragile, I suppose, at this point, I didn’t see any of that back then.

Seth: So that’s a, I guess, a fundamental difference in societies. What’s it like to see, in the United States, to see these conversations being so openly discussed now, about how, the illusionary that our financial system really is. I mean you’ve been talking about this stuff for a really long time.

Dmitry: Illusionary, I think, is the wrong term, because, this is the only financial system that this country will ever have. Once this one falls down that’ll be it, and so one thing that people don’t realize... people talk about reform, right? “Get rid of the Federal Reserve,” or “Get rid of interest-based lending, and let’s shift to local currency,” and the thing that they realize is that they want access to, I don’t know, Q-Tips, right?—and the thing that they don’t realize is that the factory that makes Q-Tips uses leased equipment that was purchased based on a loan, and that loan has to be paid, and that loan doesn’t have a zero interest rate. So, if you want your Q-Tips, you have to go with the system that we have now, but if you eradicate the system, if you do anything to it, then the whole thing crumbles because it was created during a time of plenty which is gone. It’ll never come back. What we have now will keep going for a while, and then it will no longer exist, and that’ll be it.

Seth: So there’s not going to be any slow decline where other financial systems will jockey for placement in trying to take over the old one?

Dmitry: Well, no, what happens is one giant bank somewhere goes insolvent and the government backing it is no longer able to keep up the pretense that, “Oh, we’ll just issue a sovereign guaranteed credit and that’ll prop it up for a while,” because the problem isn’t liquidity, it’s solvency, and you can’t make money out of garbage, which is what they’ve been doing for a while now. So, once you have that then all the banks around the world start hoarding cash, and they no longer grant letters of credit, so you can’t put cargo on ships. So, the next thing that happens after that is all of the supply chains around the world, for all of the manufacturing processes, stop working. Hospitals don’t get supplied with pharmaceuticals. Fuel doesn’t get supplied to fuel depots. So transportation grinds to a halt, and a little while after that, the electric grid stops working, in a lot of places. After that you have a situation where nobody can do anything, not the government, not anybody. Maybe the army can do something to just superficially maintain order, and then the damage accelerates from that point on. It’s a cascading effect. So things break down more and more and more, and at some point you reach a point where there’s no going back, where there’s no way to restore what was there before. So then we’re in a brave new world where it’s who you know within walking radius of where you live.

Justin: ...and do you think people don’t really imagine the breakdown happening that way because they aren’t aware of the reach of the financial system or the dynamics of the financial system into their daily lives? Is that really the core component?

Dmitry: Most people don’t realize why it is they can walk to a supermarket and scan an item and pay for it using a swipy card. Most people don’t understand what’s behind that. Most people don’t understand how fragile that whole thing is. It’s actually quite resilient. You know, it can deal with little shocks, like Argentina default, Russian default, Japanese tsunamis. Little things like that it can deal with, but at some point a shock big enough to knock the system completely out of balance, will come along, and then there will be no way of restoring it. Suppose you have a a little saucer on your kitchen table and there’s a shiny blue marble bouncing around on that saucer, because you have earthquakes, right? You live in an earthquake zone, and you’re looking at that marble and thinking, “Oh, everything is just completely stable because look, the marble is just bouncing around,” right? “It’s still in the saucer. Everything’s fine,” and then a chunk of the ceiling falls and smashes the saucer and the marble bounces away and goes out through a crack under the door and down the hallway and down the stairs and out the front door and down the street and down a storm drain. That’s the expected thing that people should expect, but don’t.

Justin: I’ve been reading a lot of Greek newspapers and accounts of daily life in Greece as much as I can, because their financial system and their economy really is in free-fall. It’s been contracting for several years now, and every single month the level of contraction that they’re expecting gets increased. There’s more and more contraction and, exactly like you’re saying, medicines aren’t being delivered; I’m reading accounts of, like, older women who need prescription drugs wailing in pharmacies because they can’t get them. What’s going through your mind as you’re seeing the development of the European debt crisis and the collapse of those economies, like Greece and Spain and Italy?

Dmitry: One of those things is going to actually register. The funny thing about Greece is that Greece seriously does not matter. It’s just that if they drop the pretense and concede that Greece is over as part of the Eurozone, then they have to have a work-out procedure. They don’t know what that is. They have no idea at all, and the other thing is that once they concede that it’s over for Greece, then what is there to say that it’s not over for Spain or Italy or Ireland?—and once you concede that it’s over for Spain, Italy and Ireland, then what’s there to stop you from conceding that it’s over for the Euro as a whole?

Seth: ...and then you can take that exponentially to anywhere you want, right?

Dmitry: Well, then you’re done. Then, no bank can clear anything, anywhere, because they don’t know whether their counter-party is good. Nobody can put cargo on a ship, because they don’t know what the outlook will be once the bill of landing is issued or whether it’s even issued. The whole thing starts breaking down from that day on. There’s a flash-crash with no recovery.

Justin: You’ve mentioned cargo on a ship. What are some of the key indicators that you track or that you follow that really clue you in to where we are in this process?

Dmitry: People make a big deal out of the Baltic Dry Index, which is showing that global commerce is slowing down, but that has nothing to do with what I’m talking about. There’s nothing to track. What people don’t actually do is look at how this thing will break down once it does, which doesn’t really have anything to do with what it’s doing today.

You Can Do a Lot of Living on a Credit Card”, and Andy Zaltzmann on the Global Economy interlude

Justin: You are listening to the Extraenvironmentalist, and today we are talking with Dmitry Orlov about the process of systemic breakdown.

Seth: Okay, so let’s take all the things that you’ve said as facts. Let’s take it a step forward. How do we maintain a population of seven billion people on this planet when all the supplies that we need to live stop coming in?

Dmitry: Well, who are “we”? I mean, I hear people talk about this all the time, and usually it’s some article I’m reading by an environmentalist, or a progressive, and they say things like, “Unless we blah-blah-blah,” or “We have to blah-blah-blah.” Then they propose things that then don’t happen, and then they go and write another article saying the same thing. So, my question to them is, “What are you saying, and why are you saying it?” And going back to your question, how do “we” keep however many billion people, that I don’t know personally, alive? I don’t know. I don’t know them. I’ve never met them. You tell them that they’re on their own. What else can you do?

Seth: You just say, “You guys are going to have to handle this on your own. This is the situation. If you don’t make your own arrangements, sorry.”

Dmitry: Well, you can say a lot more things than that, but it doesn’t actually address the problem as far as most people would define it. It’s not a question of fixing something. It’s a question of giving people options, or maybe teaching them that some things matter more than others, and what I try to steer people toward is the understanding that it’s not what you do, it’s who you are. It’s what your assumptions are. It’s what you expect of life. Those are the things that are subject to rapid change without notice, and if you’re flexible enough in terms of your expectations, then you’ll have a better time of it than if you expect things to remain “normal”, based on what your life has been like so far.

Justin: How do you break the news to people who are so used to trusting in government, or governmental organizations, that there is no “we” out there to handle these problems, that it really is about you and your personal relationships, and the supplies and skills that you have on hand, because so many people in, especially, developed world nations are just used to having government services to tackle their daily challenges or prop them up in ways that they don’t even see. How do you break that news to people?

Dmitry: Well, again, you have to figure out why you’d want to do that to begin with. Is it because you expect them to do something useful as a result, or are you just trying to bother them? With most people, you can’t possibly expect them to react in any sort of useful manner. So why even bother telling them? If they’re people that you actually care about, then it’s a long process that depends on your force of personality and what you are willing to do for them, on a personal level, because nothing else really matters anyway, but then your approach is likely to be very individualistic, very highly attuned to what your relationship with that person is.

Justin: You mentioned environmental organizations a moment ago, and a lot of environmental organizations are really talking about sustainability and trying to solve the sustainability problem, offering all kinds of ways to reduce material waste, saying no to plastic bags and such. Is targeting consumerism the issue, and why do you think environmental organizations take it on so readily?

Dmitry: It’s an easy thing to make people feel guilty about. It’s tokenism, really. It’s just a, “Hey look, we can make this little thing, this little gesture, and then you will feel less guilty, feel better about yourself, and maybe give us money, so we can continue doing that same thing.” It’s like Buy Nothing Day. Well, what do you do the rest of the year? But really, the sort of training that people have to put themselves through, if they really want to make a go of it in the future, is just don’t use any consumer goods at all. See how far you get doing that. Short of that, reduce your consumerist needs as much as possible. See how little money you can make and spend. See how far you can go trying to drop out of the system and still feel like your life is worth living, that you’re not suffering, that it’s fulfilling on some level, and it’s an interesting experiment for a lot of people, and for others, that they won’t even think about it. They’d rather die, and so I expect more of the same. There will be a few people who will actually make a concerted effort to make a go of it and many other people who just will sit around waiting for somebody to rescue them, or feed them, or something.

Seth: ...and you mentioned that many people will just stop trying. Do you think that’s going to be a theme across the world as just mass suicide?

Dmitry: It depends. In a lot of places the people are just not susceptible to suicide. They have a basic connection with the people around them that makes them very, very sane and very non-suicidal, no matter what happens. There are people all over the world who will, more or less calmly, starve or go extinct, without much mayhem at all, without bloodshed, and certainly without any suicide; and then you have communities, mostly in the West, I would say, that are very highly individualistic, and where people think that they’re in it for themselves and that they have to look out for number one. What they don’t realize is that they think they’re individualistic, but they’re very influenced by surrounding society in terms of their expectations and their sense of self-worth, and so they’re much more likely to commit suicide. And then in other parts of the world, and everywhere in the military, you have people who don’t put any value on their own life. They’re willing to die heroically or they just don’t really care, and they tend to kill themselves quite a bit. So there are these pockets of populations that are much more likely to commit suicide than the rest of humanity; and most of humanity is fairly neutral in terms of just slowly going extinct, but they’re not going to kill themselves.

Seth: So you yourself live on a sailboat, and you mentioned that skills and training are really, really important to be successful in this new post-economy world. Do you have any other skill sets you recommend people to learn and start understanding so they can survive?

Dmitry: Well, it’s whatever you need, but one thing I’ve discovered is that the civilized people expect food to be a certain thing, wrapped in plastic, refrigerated, and a certain thing that they’re used to eating, and so that’s a little bit different from what I grew up with, which is everybody knows the entire universe of edible things out there, and they’re not very squeamish or picky. So that’s something that I would recommend to people: look for fairly unlikely sources of food, and figure out everything edible in your environment. And another thing is—this has been something I’ve realized a long time ago, but recently I read and reviewed a book [Unlearn, Rewild by Miles Olson] that made a lot of sense to me, which is: people here have a division into wilderness and the space that they inhabit, and they wander out, into what I consider the real world, thinking that it’s an alien environment; which is very strange to me. I don’t know where that set of cultural blinders came from. The whole planet is habitable. If you know what you’re doing you can survive in any stretch of woods anywhere in the world by eating insects and bark; and so if people really tried, they could lose who they’ve been. They could abandon their civilized way of being long enough to figure out how they can survive.

Justin: Since 2008—there was a giant financial crash, and the banks have been propped up by sovereign debt loads continually increasing. You were writing about the potential for collapse well before it happened. Has there been anything that’s happened since then that really surprised you in the way that governments have responded and moved forward from that crisis?

Dmitry: Well, to begin with, I didn’t realize the extent to which the governments don’t really exist anymore. There’s very few sovereign nations left on Earth, and they’re labeled as the enemy. So that would be Iran, that would be North Korea, and then there are a lot of defunct states, like Somalia, that are posted off limits. They’re a no-go zone. Afghanistan is probably going to become one of those next year, and Syria used to be a sovereign state, but not so much anymore, given what’s going on there, but then the rest of the countries, they’re not really nation-states anymore because they’re completely beholden to financial interests. So, the countries we have are exactly as fragile as the financial system. That is not something that I initially realized. I knew that there was a lot of corruption. I knew that there was a lot of inbreeding between the financial and political elites, but I didn’t realize that the nation-state, as such, is pretty much gone; that what we want is a smooth passage from the completely undermined, superficial state controlled by the financial elite, to a defunct state. What we don’t want is to go through a stage of being a weak state that can be preyed upon by all sorts of interests, like Mexico, for instance. A weak state is a state that makes things illegal but can’t enforce the laws, which is what we see everywhere, and that causes a great deal of bloodshed. A defunct state is a state which no outsider can actually blunder into and expect to get a reasonable result.

Seth: What we’ve seen a lot in Mexico is large, drug-running gang cartels taking a large part of the economy over. Do we see those cartels, those—you mentioned Mexico—preying on the United States? Do you see those cartels, kind of, coming up and taking a larger part of the United States over? Is that something that might happen?

Dmitry: I think the drug cartels are reasonably well-positioned to start an alternative, more competitive way of doing things in the United States, because I don’t think the officialdom in the United States actually being able to provide the people here with a survivable alternative, given all of the rules they have. If you look at ridiculous rules, like zoning, for instance, what you’re allowed to do with any given piece of land, and the amount of official nonsense that you have to go through to do basic things, like grow food where you live, collect rainwater, things like that, various other forms of regulation. If you look at that and you compare going through the lawful channels to gain permission to do something, versus hiring some thugs to annihilate anyone who gets in their way, then hiring the thugs is actually a competitive solution. It saves you money. So that’s the reason that way of doing things will win. That’s what I saw in Russia in the nineties: organized crime became a competitive alternative to doing things the legal way, because people weren’t doing very well and they needed to survive, and the government was too expensive.

Seth: So , if you don’t pay your property tax, some guys show up with AK-47’s and then you don’t have to worry about ever paying your property tax again.

Dmitry: Well, it’s not like that. It’s just you pay your property tax to somebody else, and—but you only pay half of it, and then they maybe go and talk to somebody, so that they don’t bother you. It’s more like self-government. It’s not an official system of government. It’s just that some people are more adept than others in using violence in constructive ways, without resorting to unnecessary violence. Things get messy when the government starts to fight back. The thing that’s really destructive is having a government that will stop at nothing to make a point that they have the monopoly on violence. That’s the sort of thing that happened in Mexico and it’s the sort of thing that happens in the United States a lot, but provided that the government officials actually know who butters their bread and are willing to accept the best deal they can get, then things can be worked out.

Seth: Ideal situation for both sides if the government just rolls over and lets the unofficial government take it’s place...

Dmitry: It doesn’t have to roll over completely. One of the things the government can do is partially privatize and offer private services for people who pay extra. So that’s been the pattern in Russia and in a lot of places in the world. People call it corruption, but it’s really a pay-as-you-go scheme, you know? The tax base isn’t there to support the full set of government services, so the government services can be available for whoever can afford them. So there’s a continuum, but the basic idea that there’s one set of rules that applies to everyone, that’s the thing that’s not really workable.

Justin: Yeah, and that’s exactly what’s happening in Greece right now. There’s a lot of police departments that can’t fund their operations. So they’re essentially saying, “Hey, if you want a police boat detail, pay us seventy euro’s for a day, and we’ll send a police boat out.”

Dmitry: Well, yes, every Russian police department has a unit that is for hire. That’s legal and official, and that’s how it works.

Justin: Living in the United States and seeing different parts of the United States, what have been your thoughts as you’ve traveled around the United States about the culture and about the people that live there? What are some of the best places and worst places that you’ve been?

Dmitry: I’ve been looking for a reasonable place in the United States for a really long time. I haven’t found it yet. So, my alternative is to live on a boat because a different set of rules applies when you’re on the water. There’s a huge scheme to rob people by charging them exorbitant amounts of money for a place to live. That is across the board in the United States, but if you don’t have an actual toehold on land, if you’re on the water, then they can’t rob you, strangely enough. It’s a loophole that I’ve found, and it’s a pleasant lifestyle. So that’s why I’ve been doing it, but every time I look at settling down somewhere—I was just recently looking into buying land in a small town. There isn’t a lot going on there and it’s doing poorly, and a lot of people there are suffering, and they have a lot of property for sale, but just wait until you buy that property. The number of regulations—and if you want to do anything reasonable, you have to get a zoning variance, and you have to get a permit for every last thing, and it’s this silly little town hall, but if you want to do anything, they’re the giant roadblock, because they have books of rules and standards, and all kinds of ridiculousness; and you drive around town, and yes, there are houses falling in, and the people who are living there, they don’t have any money, and yet if you want to do the right thing, forget it.

Seth: It is hard, though, to grow plants on a sailboat, is it not?

Dmitry: There are lots of places on land, that you can only get to using a sailboat, where it’s very reasonable to grow plants.

Seth: So, I guess a logical question to ask, if—saying that you don’t really like living in the United States or don’t like living with the rules that exist now, is why of all the places do you still live here?

Dmitry: Because it doesn’t matter where in the world you live on a sailboat with an internet connection. It’s as simple as that.

Seth: What parts about the United States do you enjoy?

Dmitry: Where I am now, I like my neighbors and I have some friends here and it’s comfortable. And it gets cold during the winter, so for the winter I would prefer to [sail] south, but really, life on a sailboat is a little different in that you’re not constrained in your location. Why am I here? Well, because I’m here, but it doesn’t mean that I’m going to be here tomorrow.

Justin: ...and so do you see in the future more of a nomadic lifestyle as things break down?

Dmitry: Using the word “nomadic” makes you a certain [kind of] person, I suppose. It’s better not to be pegged as anything at all, but the whole point is that I don’t—I’m in a situation where I don’t have to think about it very hard.

Justin: So, a lot of people may hear the steps of breakdown that you were describing, where everything just goes dark over a period of a few weeks, because all of these contracts stop being fulfilled, and they might say, “Well, what if you informed everybody and all of these social movements had the right information about how dire our predicament is?” Do you think that if people really had information about how this could happen and breakdown that, they could really do anything about it, or do you think that all of this is just already in the cards in many ways, and it’s just going to play out over the next months, years, whatever it may be?

Dmitry: If you look at the social movements, the Occupy movement was interesting. Maybe it still is, but... [there's] not much happening... But the interesting thing about the Occupy movement is that in Zuccotti Park they all had to wait in line to go urinate at Burger King, and so the whole movement really depended on Burger King allowing them to go urinate in their toilets, unlike the New York Police Department horses, who have permission to urinate right on the sidewalk. So the protesters have fewer rights than horses, and they didn’t actually increase the number of rights that they have as a result of that entire experience. So they didn’t actually win anything. They probably did have a positive experience in terms of standing up and being counted and realizing that there are quite a few of them, but there isn’t any indication that what they set out to do actually had any effect.

Justin: What would you say to people who are just now figuring out the systemic problems we face? Many people have been preparing for quite a few years, and now that the financial, economic and energy problems that you’ve been writing about have really started showing up in ways that can’t be ignored, is it too late to prepare, or is it never too late to prepare?

Dmitry: Well, I think preparing is probably borderline useful. The thing that people don’t realize is that the sort of person they are right now—if they have the leisure, if they have the free time, the access—to actually explore these subjects and become alarmed by what’s going on—that sort of person doesn’t necessarily stand much of a chance, and the sort of person that does stand a chance is the sort of person who really couldn’t give a damn about any of this stuff because they’re too busy surviving as it is. So, there’s a bit of a disconnect there, [between] the sort of person who deliberately goes out and seeks out information on these topics and has lots of free time and access to do so, and the sort of person who’s busy surviving and who will be busy surviving no matter what happens. So the point that I want to get across is you have to be a different person. It’s not a question of preparing based on who you are today. You have to prepare to become somebody else.

Justin: So people who are poor or maybe not knowing anything about peak oil, who are just struggling to survive, or have just decided to check out of society and are wandering through the forests and living off the land, would potentially stand a better chance than someone who lives a middle class or suburban lifestyle in the United States and starts learning about all this stuff?

Dmitry: Yes. If you wander out into the wilderness somewhere you find out that there are people living under the radar all over the place, that every little ecological niche is pretty much packed with people who know how to take advantage of the environment. So it’s a bit of a disadvantage. It’s better if you head out there having some skills that you can apply within that situation, but that varies on where you are and what people are willing to accept. I think one universal is that, no matter where you go, people are willing to be entertained, and in a lot of places they’ll feed you for it. So that’s something people should keep in mind.

Seth: So learning how to play a musical instrument, or do a dance, or sing a song, is probably going to help you in the long term?

Dmitry: Well, that gets hokey after a while, but if you start out by telling stories that’s a good start.

Seth: Yeah, storytelling is one of the oldest human traditions ever, right?

Dmitry: Yeah, you can pretty much go around blowing people’s minds and they’ll feed you for it.

Seth: So you’re a professional engineer, and you work in an office. What’s it like to talk around the water cooler? Do you have conversations with your co-workers? What do you guys talk about?

Dmitry: Nothing related to what we’ve been talking about, that’s for sure.

Seth: ...and if you ever brought up these subjects at work, what do you think people would say to you?

Dmitry: I have no idea, but I’m not very curious about it, for obvious reasons.

Seth: Yeah, you get shut down real fast, I suppose.

Dmitry: Yeah, well... even if you don’t—I’m there to get something done, right? I’m not there to elucidate things not related to my job function.

Seth: Sure, but I guess if some guy came up to you and said, “Heey! I saw your book,” and wanted to talk to you about it like we’re doing right now, you’d be open to that, right?

Dmitry: After work, over a beer.

Justin: I wanted to ask about some of the mainstream news that’s been coming out recently. Are you seeing views that were once classified as “doomer” views now entering the mainstream at all, or at least being denied by the mainstream, at least being addressed in some way?

Dmitry: I think that there’s a mindset within the media, which is that there is the Important Operative Narrative that they’re charged with conveying using the public airwaves, and then, to make it interesting they have to find Crazy People, because half the audience is crazy. They know that. So they try to look for the right crazy, the right insanity. Somebody who thinks they’re Jesus Christ, that’s not good, right? That’s bad, right? But then somebody who used to work for the CIA but is suddenly spouting conspiracy theories, that’s a great bunch of fun, you know? So they’re looking for human interest angle. They’re not looking to actually explain to people what’s going on. So the way these things leak out is because certain people think that they can get their message across by going to the official media and getting interviews, etc., but really they’re just being clowns, because the official media is there to milk them for the human interest. The official media is there to put them on exhibit as a freak and then get some recognition for letting something edgy leak out, but compromising it at the same time.

Seth: Is that the same reason that more professors and educated people don’t talk about these things in school?

Dmitry: Probably a different reason. In academia a lot of people have to be very, very careful. There are very few people who don’t have to be careful in academia. The ones who can say whatever they want are tenured faculty, not attached to any grant, on their way to retirement. That’s it. Everybody else has to watch what they say.

Seth: ...and those people already have done their academic teaching and are on their way out. They’re ready for retirement.

Dmitry: It’s a personal predilection. Some people get a kick out of speaking the truth.

Justin: Actually, coincidentally, a lot of the people we speak to on our show are old, tenured professors who are on their way towards retirement, talk about the dire predicament of collapse. So it’s definitely true. You’re working on writing about the five stages of collapse now, and—could you trace those five stages out for us and talk a little bit about how we’re seeing them play out right now?

Dmitry: I wish I didn’t call them stages because they’re all going to be coincidental, but I think it’s still reasonable to tease them apart as mental constructs. But financial collapse is all the stuff having to do with the financial system being rigged to blow as soon as economic growth stops, or shortly thereafter, and then political collapse has to do with the hollowing out of the nation-state around the world, the fact that financial interests now run governments almost directly. Both of the presidential candidates in the United States are Goldman-Sachs candidates who’ll never do anything against the banks, and there’s nothing that they can do, and so what that means is that when the financial institutions go poof, the governments go poof as well. And then commercial collapse has to do with the fact that all of the supply chains around the world, for all of the consumer goods and the energy resources that we depend on, all of that has been globalized and at some point a tipping point will come when suddenly global commerce grinds to a standstill, because of mostly financial and political problems, and then there’s no way to reconstitute it. And social collapse has to do with whether there’s a tribe that can take care of you, and what happens if there isn’t. What fallback, if any, do people have? And cultural collapse has to do with what it means to be a human in this context, where one's humanity is. Where does one make a stand when all of these other things fail? And so I’ve been doing a lot of research. I have access to a good research library, so I’ve been going there a lot and going through stacks of books in everything from anthropology to psychology to history to economics and everything in between, because it’s a very interdisciplinary book. I can’t imagine a more interdisciplinary title than the one I’m working on. So that’s a good thing that I’m not doing it in the context of any an institution of higher learning. I just have a publisher. Because they wouldn’t touch it with a ten-foot pole. But it’s been very interesting.

Justin: ...and what is it that you’re looking for in all of these different fields? Just different ways that humans have reacted to difficult situations over time, or the way that they process it as it moves on?

Dmitry: Well, no. It’s more, in each case, my approach is to ask a “what if” question. “What happens if...” and then it turns out that one discipline or another will have one or two researchers from decades past, some of them (and some of the research is more recent), who actually offer a clue, who actually looked at this little pocket of interesting stuff that I’m driving at. “What happens if this happens?” Well, some researcher actually spent some amount of time with an African tribe that was going through cultural collapse. So that was interesting to me, and some of the other things that I explored were things that I had some experience with, but other people had much more. So their experience is certainly useful. There’ll be an article on the Russian mafia, and it’s an absolutely fascinating subject. I really enjoyed researching it, because it’s such a microcosm of economic evolution that went on during a ten-year period, that culminated in the creation of the modern Russian state. So that was a very interesting thing to explore.

Justin: People working right now, they might have retirement funds, they might have money in the bank. What should they be doing with that cash that they have laying around? Should they be putting that into survival gear? Buying water filters? Converting to gold? To guns? What should they be doing with that cash that they have?

Dmitry: There’s an intergenerational problem that people have, which is: older generations have investments and savings and younger generations have debt, and in some cases they’re even living under the same roof because the younger people can’t even afford to move out. So, what that really means is that they have the financial system as a middleman, robbing them. So what a lot of people can do is just de-financialize their existence. Cash out your savings, use that, across the entire family, to get rid of debt, where the entire family works as a single economic unit. Make your family a bank and make it work like that. I think if a lot of people thought in those terms, it would be helpful. Get out of money. That’s the whole point. Don’t depend on financial institutions at all. One of the things that I think people should look at is; a lot of people still have retirement funds, private retirement funds, and they’ve been doing badly for a number of years. They’re going to be doing even worse. So whatever you can do to get out of that, whatever you can do to make it so you can live without any financial outlay day to day, that’s a step in the right direction.

Justin: I was wondering what changes you’ve seen in the overall movement of people who have been becoming aware and following peak oil. What has it been like watching that group change over time?

Dmitry: I think it’s stagnated, in spite of all the official recognition that peak oil has received. It’s received a lot more exposure, but I think there’s a basic problem, which is: people within the movement can’t actually get the idea across of what it means for this to be over, and then people outside the movement can’t countenance the idea of this being over. So it’s...

Justin: It’s a hard concept to wrap your mind around, for a lot of people.

Dmitry: Yeah, it is. It’s a conversation stopper. So there’s a small number of people—it’s grown, considerably, but it’s still small. It’s less than one percent—of people who are actually clued in, and an even smaller number of those people are actually in any position to do anything about it—on the level of their personal lives.

Justin: Some people will say to me, “We’ve been saying fiat money is an illusion, and money’s been an illusion for so many years. What’s keeping central banks from just continually printing money and propping the whole system up? Why does it have to fall apart?” People have said that to me. What would your response be to that?

Dmitry: If there’s more money in the economy than the goods and services that money is supposed to be able to afford, then money stops being a store of value. It remains a medium of exchange for a short period of time, but what people try to do at that point is try to get out of money, and as soon as they try to get out of money, what happens is they call in a lot of their investments. They try to cash them in, and then they try to shift that into things that are outside the economy, that are sidelined, that are gold bullion that they’re sitting on, or bags of rice, or something that they think they can sell later on. So what that does is it bankrupts the system instantly, and then it doesn’t matter how much money the central bank prints, because when the central bank prints money, without there being any economic growth to sop it up, that bank is undermining the one thing it has going for it, which is the ability to print money. So once that gets to a certain point then printing more money becomes rather counterproductive.

Justin: Is there any emotional attachment to what society looks like afterwards?

Dmitry: Well, no. I’ve been doing this for a while. You can’t be emotional about collapse and continue to study it. That is a prescription for not being a very happy person. So, no. There’s absolutely no emotional reaction to any of this whatsoever. I think that people should work it through their heads that there aren’t any technological solutions. There is no fix, as James Kunstler has been saying in his last book (which I liked); this is a predicament. This is something you have to accept for what it is, that what we’re facing is a very different reality.

Seth: How can people find out more about your books and your website? Is there anything that you’d like to talk about?

Dmitry: Well, the book is going to be out next June, and then I’ll probably go on tour and give lectures, provided people invite me; but I’ll be available to do that next summer, and until then there’s my blog which I update every Tuesday, usually try to write up an article for Tuesday, and a few thousand people show up every Tuesday, which is a lot of fun.

Justin: Let’s say you wake up one day in the next year or two and there’s, suddenly what you were talking about starts happening. All those contracts for shipments stop being fulfilled. There’s major commercial item and food shortages. The stock market, the Dow-Jones is off fifteen hundred points in one day. What’s your reaction to that and what are those next steps right after?

Dmitry: I think I’d wait a few days and see how things go, and then make my decision based on that. I might actually go for a bike ride, like a multi-day extended bike ride and take my camera along and take pictures of people and places and figure out what happens and have an interesting time, or if things get out of hand and violent and Federal troops are moving in, etc., then I’ll probably weigh anchor and find some quiet anchorage somewhere and then wait it out there, and then maybe come back later on and see what’s going on, but I would bide my time.

Justin: ...and do you think that after all of the chaos, the realization of a lot of people that society’s breaking down, what do think emerges after that? Is it just anybody’s guess? Is it anybody’s game, completely up in the cards? Or are there any things that you’ve seen in your research that point towards what it could look like?

Dmitry: There’ll be a lot of confused people, getting hurt because they expect things to work the same way as they worked before, but now they work in a completely different way, and then there’ll be a lot of people who are just trying to assert authority, not in any official capacity, just to get things going, and some of them will succeed and some won’t, but it’ll be a different society taking shape and that is actually both dangerous and interesting to watch.

Imagine Dragons – Radioactive interlude

Justin: So that closes out our interview with Dmitry Orlov, in talking about major bank fails backed by a sovereign nation. That sovereign nation has lost all legitimacy and then the whole system just starts unwinding and; Seth, he was talking about how there’s a lot of people who are struggling. They’re fighting against unemployment, against underemployment, against the prospect that they can’t find jobs or pay off the debt that they’ve accumulated; and he brought up the point that a lot of people don’t know what it is that they’re looking at.

They don’t know that there’s this greater trend of energy that’s been fueling the economic growth of society, and they don’t understand that because we’ve depleted that energy, we’re at the peak. We’re on the way down and—we’re not even at the peak anymore. We’re—the peak was many years ago. It’s pretty much consensus now that the peak was in 2005-2006 range, and now we’re just on a plateau, and soon declining for the extraction rate of conventional oil, and so it’s no wonder that economies in Europe are unwinding and the US economy is stagnating.

So Seth, in your own life and the people you talk to, how do they deal with these economic megatrends that people are facing? Do they really see this greater collapse trend playing out, or do they think it’s the Obama administration that’s to blame or something like that?

Seth: That’s interesting that you bring up the Obama administration, Justin, because having just concluded the Democratic National Convention here in Charlotte, North Carolina, it’s just incredible to me that so many people are still caught up in the two-party capitalistic economic paradigms in which we live. Each one of the candidates, no matter what party they are, talk about more jobs, how they’re going to bring more jobs to the community, how they’re going to be helping people, how they’re going to be going back to business as usual; when the real question here is how can we even possibly go back to business as usual, because the whole game has changed. Never before have we had a situation the way it is right now. There’s nothing to look back on.

There’s no Roman times we can look back on and say, “Oh, that was a time when there was increased globalization and all the jobs went to another country,” and the increased amount of technological communication has made it so possible for people all over the world to talk to each other instantaneously. This is a situation and an unprecedented situation, and to get to your point Justin, the way that people are reacting is pretty much putting their heads in the ground and humming and trying not to pay attention to the fact that people all around their country are looking for jobs, or are underemployed, or living at home with their parents. People that are graduating from college right now are not able to find the employment they’ve been promised. People who have been working their whole lives are getting laid off, and it’s—they’re becoming lost under the carpet of unemployment.

Now, that nine percent that we see as the unemployment rate doesn’t really take into consideration all those people who have stopped looking for jobs, or just have gone off the grid. It’s a really, really, sad time right now for this country where we can’t even see what’s actually happening in front of us and we look to these men who dress up in suits and tell us that everything’s just going to be okay if we can elect them as president, when in reality, that’s not going to happen.

Justin: Yeah, and I didn’t get a chance to watch too much of the Democratic or Republican National Convention, but the parts I saw both looked the same. They were both making the same promises and saying, “We’re going to return to growth. We’re going to return jobs,” and maybe they have slightly different strategies, but that’s really the dialogue that we’re at, and on Friday, September the seventh, the latest job report numbers came out; and 368,000 people dropped out of the labor force in the United States. That means that just...

Seth: Wow. That’s incredible.

Justin: ...slightly under 89,000,000 people of the United States, a country of slightly over 300 million people, are not in the labor force. You’re starting to talk, about a third of the US population not in the labor force. And in one month, 368,000 dropped out.

Where did they go? That’s unbelievable...

Seth: Where did they go?

Justin: Yeah, but the economic collapse that we’ve been talking about for many of our episodes on this show, and that we talked about back at the beginning of the year, has really been happening throughout this entire year of 2012. You look at the rate of unemployment increases in places like Greece. It’s up one percent in a month. It’s up to 24.4%.

You’re just almost to the point where one in four people are unemployed. There’s bank runs in Spain. There’s now more deposit outflows from Spain than during the Southeast Asian crisis during the nineties. In Spain, there’s been a three-month capital outflow of 52.3% of GDP.

Seth: Holy cow...

Justin: Half their GDP money has flown out of their country in just three months.

Seth: Where’s it going?! It must be going to the bank of mattress.

Justin: It’s going to the First National Bank of Mattress on Capital Flight Airlines is what it’s doing, and what’s really incredible is the resilience of the global system in the ability to maintain a semblance of normalcy, when you see how fast these things are falling off, and in my view, I don’t really see any reason why that’s going to change anytime soon.

Seth: Why doesn’t this just fall apart? Why doesn’t it break, when half of the GDP leaves the country?

Justin: Well, the situation in North America, as bad as it is, is not as dire as it is in Greece and Spain, for many reasons that we’ve covered on our show and that we’ve talked about with previous guests and, I mean, in Italy they’re paying nine dollars, nine US dollars a gallon for gasoline. They’re paying Euro 1.93, or almost two Euros a liter. So that’s really insane, and can you imagine how different life—how much life in the United States would change if gasoline was $7 a gallon or $8 a gallon, and even though Italy is less dependent on gasoline because of the arrangement of their cities and everything then, even in the United States it still has a ripple effect through society, and when you see, for—another example, just to throw a number out there, new car sales in India fell twenty percent in August. I mean, that’s insane to see double-digit drops in consumer behavior.

In Vancouver, British Columbia, for example, we had a twenty percent drop in new home sales in one month, versus the previous month. In one month it fell twenty—more than twenty percent, and what you’re seeing is the level of contraction and the rate of velocity flow of money. It’s actually worse than it was during the Great Depression.

If you look at the velocity of M2, the money supply, it’s actually lower than it was during the Great Depression, because of the dynamics we’ve discussed with people like Steve Keen, that there’s so much debt in the world, private debt, not even the amount of debt that’s held by governments, that the global economy’s just freezing up, and I don’t see anything that’s going to change this trend, and what’s it going to look like in a year when China’s only growing four percent, or something like that, and not—and all of their municipalities aren’t able to pay back loans, or if interest rates happen to increase on US treasuries. If interest rates go up to their long-term average of five percent in the United States, on the current level of 16 trillion dollars in debt, that the United States would be spending about forty percent of its Federal budget on just interest payments alone. You’re talking about the level of what we already spend on the military we’d just be spending on interest on the debt.

So, the next few years are going to be pretty interesting economically, to say the least.

Seth: So, Justin, what is the responsibility of the media in all this? Do they have to be shouting this from the rooftops? Where do they fall into this whole system? Do they, is—are we going to start seeing figures stepping up in politics that are just going to start shouting out this stuff and saying, “Hey, we are in this situation that needs to be changed. If not, we’re done.”

Justin: Well, you already see the opposition starting to form somewhat politically. There’s people like Paul Ryan on the Republican side who are shouting about the Federal deficit, but they don’t really understand the fundamentals, and they don’t understand the role, that if there is no government role in propping up the economy, the whole thing’s just going to fall apart, and Dmitry Orlov said himself, he didn’t realize how beholden that governments were to the financial sector. You look at economies in Europe, and Germany desperately doesn’t want to transfer its entire GDP to Italy and Spain and Greece, but they’re going to do it, because if they don’t, the whole system’s going to fall apart.

Germany is just as much to blame in this situation as Greece, because having been to Greece, and having seen that country, of course it was a year ago, and I’m sure maybe it was different when they joined the Euro, but if Germany did any background checks, they would have known that Greece was not the country that you want to share a currency with, but you see the European central bank and now they’re going to stop up unlimited bond purchases to drive the rates in these countries down, and that just goes to show you that the financial system is a series of agreements that everybody is capable of changing, and changing around if the system gets dire enough, up to a point; and that’s why it’s going to take this thing quite a while to play out, because even though the actual economy’s contracting at stunning rates, the S&P and all of these major stock market indices are hitting stunning highs, because things should be a lot worse than they really are. A lot of traders are reacting to the economic numbers and saying, “Wow, this is bad, but it’s, in many ways, not as bad as we thought it would be. Everything’s not disintegrating, so why not invest? Why not buy?” And there’s tremendous ways that corporations can shift the way that they employ people.

For example, a lot of people who used to have full jobs with benefits have been moved over to contract positions with no benefits and with even more limited hours, and those are ways that corporations can continue to show profitability, even though their growth is slowing or contracting; and we spoke a few episodes ago about a piece talking about just because capitalism doesn’t have growth doesn’t mean it’s going to go away, and that’s totally what we’re seeing. Just because growth is slowing; and in a few years if the United States is contracting at a few percent a year, and embroiled in a massive debt crisis, like that of Greece except even bigger; there’s no reason to think that capitalism’s just going to go away. There’s still going to be major corporations and they’re still going to find ways to get profits, and that just means that the ways they’re going to get profits are probably going to be even more inhumane than they already do.

Seth: ...even more draconian?

Justin: Yeah, even more draconian. So I wanted to hit on one thing Dmitry Orlov has been talking about the consequences of peak oil for a long time, and it’s continually shocking to me at the poor level of literacy that people have around the issue of peak oil. I was just in a room with a lot of really intelligent people, all aspiring environmental and energy policy people, and a lot of them don’t think that 1) peak oil is an issue, or 2) some of them don’t even think that it’s occurring, or even happening; and that just blows me away, that there’s so much information and so many people who have been writing about the various aspects of peak oil, but because of shale gas, or because of fracking, suddenly people think that peak oil’s not an issue at all, or people...

Seth: ...but does it really surprise you, though? I mean we just, we were just talking about the Democratic National Convention where there’s whole groups of people who have no idea what’s going on, and they look to their leaders who just don’t even inform them. You look to the media, they, it doesn’t inform them.

How could they know if they don’t listen to shows that explain this stuff in detail? How do they know this stuff if they watch American Idol, and they watch these reality television shows. There’s no way for them to find out. It shouldn’t really surprise you, I’d say.

Justin: Yeah, I know. You’re right, and the media does a really poor job of covering anything that related to peak oil, or peak energy issues, and so people just aren’t even able to form opinions about it unless they go to tremendous amounts of work on their own to learn about it, but I thought it was interesting that Dmitry Orlov brought up the role of underground commerce, and the way that organized crime starts to build this competitive advantage, and we’re going to be getting into that in our next episode, with the author of The Stealth of Nations, and we’re going to be talking to him about the global, informal economy.

So just because the formal economy is collapsing, it doesn’t mean that there’s going to be no economy. There’s still going to be economy. People are still going to have demands, and there’s still going to be a lot of supply. It’s just not going to look anything like how it does now.

So, we’ll get into that more next episode, but there are numerous people who have seen the fragility of the global system and they’ve started to withdraw themselves, some of them specifically for that reason, or some of them for cultural or other reasons; and so that’s why we’re speaking with Lucas Foglia, a photographer who is joining us from San Francisco today, to talk a little bit about what it was like to meet so many people who have been living off the grid.


Anonymous said...

I love the blue marble analogy, there is a poetic simplicity to it.

I am continually annoyed by the idea that there is some kind of set order in which things are going to collapse and that those things are orderly and predictable. The prediction analysis or rather the search for someone who can give a reasonable sounding forecast is in some ways a distraction.
That piece of ceiling is going to cave in at some point. The decrepit old bridge will fall into the water eventually.
Knowing how it might fall may aid you, or it may not.
I really like your work Mr. Orlov but I think much of your best work is lost on many of us. Many people are too scared to see past the fact that the bridge is damaged and going to fail. The realm of " the world in which there is no bridge" may as well be science fiction.

Thanks for this post all the same.

theblamee1 said...

One of your better interviews, I think. The guys had done their homework and at times really challenged you, in a nice and respectful way of course. Having to think on your feet was reflected back in some of the irritation you displayed.

About this collapse business, I have thought this way for a lot longer than I was aware. I helped organize the first Eart Day at my high school in 1972. I did this mainly in response to feeling I had that somehow exponential growth was an impossibility. Once you built something everywhere what then?

There were all these sneaking suspicions. You simply couldn't cut down all the trees and still survive as a human being with the lungs of the earth cleaning the air gone. With a fixed suppply of the world's drinkable water (roughly 3-percent), exponential population growth would ultimately lead to running out of drinking water. Even though our home was hooked up to public water and sewer systems, when our ancient well located in our basement turned up too polluted to drink one day, I was really scared of what was coming out of the tap. Life has been pretty much downhill since then.

I don't like being a pessimist and I am not consoled with being called a realist. Today I read a very well-written article about my hometown, by someone much younger than I am. It's tough to watch your hometown, the place you grew up in, go down the tubes. He was writing in metaphor about how things keep getting worse and worse. And still I am not sure. Perhaps the jury remains out. Perhaps this what they call hope, but in truth there is nothing, no future, to replace the present with. In comparison, the way things are today, my childhood seemed like a paradise.

yvesT said...

Dmitry interviews are always very interesting, however he misses one point : Yes the USSR collapse was sealed by the counter oil shock and low oil prices. However the counter oil shock isn't about the North sea and Prudhoe bay coming on line, it is primarily about Reagan dealing with the Saudis for them to increase their prod (also an overall move in OPEC countries with Iran Iraq war especially), see for instance part 2 below starting at 21 (with Gorbatchov interview who mentions 2/3 of revenues lost) :
(unfortunately no English version of this doc to my knowlege, adapted from Eric Laurent book "la face cachée du pétrole")
And by the way the counter oil shock has been very negativ for the US domestic oil industry :

Anonymous said...

So instead of The Five "stages" of Collapse ~ the five Co-in-cidences of collapse?

I love the idea of using current retirement funds/savings to pay off extended family debt - to "bank on the family." That might work in some cultures, maybe in Greece, but as Borat would say, "in America... not so much."

Sadly, here in America most families are too busy competing with each other rather than pooling resources. Maybe when they have all lost everything, maybe then they will pool resources ? Like the Ik? ; )

gharatani said...

Incredible interview with a pretty sobering conclusion that the real survivors are already practicing. as a counterpoint I can only offer this movie clip and my highest recommendation that everyone see the movie 'Intouchables' just to cheer up.

AL said...

Thanks for the great interview, Dmitry. I enjoyed the follow-up interview with Lucas Foglia as well. Too bad that, according to you, the fact that I had time to listen bodes so poorly for my long-term prospects.

M said...

Yes, good interview, but I too was surprised to learn that anyone who is aware enough to hear your message is doomed. One of the benefits of not buying whole hog into our citizen as consumer society is ostensibly it gives you a bit more breathing room to contemplate life. (I like to call it boulevardiering, as differentiated from pure slacking.) Also, I don't think just because someone is rich they will be driven to suicide--many of the wealthiest are pretty tough cookies. I imagine ex con Martha Stewart concocting ways to present bark and insect fall stew. Many of those living paycheck to paycheck and dumpster diving, however, will find the dumpsters less of a resource and with more competition for the remaining contents.

Also, you talk about families getting out of debt together, but I recall in past writing you recommend against paying off debt (in the belief that once the financial system goes belly-up, there will be nobody to collect?). Have you changed your position on this issue? Thank you for all of your insights.

Adrian Skilling said...

Good interview. Darker than I was prepared for at the time though, late at night on my own, and I'm pretty used to hearing this stuff. Things are bad but I think Dmitry was overly negative.

He seemed almost spiteful towards the rich whom he says are likely to commit suicide. I'd feel pretty insulted if I was America. He seemed pretty detached from society in general, particularly his co-workers.

I'm not convinced by this overnight fast collapse though I accept that governments look too incompetent to do much right now. I expect catabolic collapse, ala. John Michael Greer.

Hearing that the middle class with leisure time to research this stuff are probably not well prepared struck a bit close to home! I've made more preparations most but at times I'm still deeply scared that I'm far short of sufficient preparations. I agree that Mental preparation is part of it - this is perhaps even harder than physical preparation.

Interesting what he said about convincing others. I've too found this really hard and failing to convince even your close family of the need to prepare is quite emotionally damaging. But I have managed to convince one work colleague of the madness of the financial system - its a start. I hope this can bring positive change in me rather than desperation.

neroden@gmail said...

Too -- well -- isolated, or non-communitarian, a reaction. Even though Orlov gets that community is what gets you through a collapse, he seems to have trouble seeing it as a practical solution.

The middle class with leisure time to research this stuff might well be able to *provide useful information* to the lower classes who are psychologically prepared for the collapse -- a trade, a mutually beneficial arrangement. That's one post-collapse strategy. Of course, to do that the middle-class people actually have to *know* poor people well before the collapse.