18 Months From the Collapse?

I received a call from a old buddy of mine (Jeff) ...not a text message or an e-mail, but an actual phone call such as he was worked up. Apparently he has been reading articles and listening to news program and at some point he started believing the end is near,...18 months to be specific to a collapse. He was planning on quitting his job, moving out of the East coast and basically sinking 100% in prepping.

My response was "Okay, but what is going to be the catalyst? What do you think is going to happen and how?" I have been seeing articles in the last month of so pretty much outlining the good possibility of an economic collapse within the next two years, but I wanted Jeff to articulate the facts or assumptions that are leading him to his own view. So I told Jeff, "you may be right. I certainly think things will be tougher in the next 18 months,.....commodities shortages,.....inflation if not severe inflation,......I think we'll see food riots in urban areas. And the government will not be able to do too much as their assets pool is significantly shallower than ever." But I stopped short of telling Jeff that I think the collapse will occur in 18 months. I don't want to be responsible for someone basing their survival plan on my opinion, plus I'm still really in the plan for the worst - survival prep, and hope for the best camp. Anyway, I scanned all my on-line sources and resources to see what a cross section of people are saying.

Chris Martenson wrote on his website, Peak Prosperity, an article with the title - Why Your Own Plan Better Be Different - Because the cavalry isn't coming. Pretty much summing up that the US Government is broke and will not be able to get out of insolvency. Martenson remarks that action at the individual level is your best bet right now. I think action at the individual level has always been the best bet.

When the Treasury Department estimates that the U.S. has a ~$65 trillion NPV (Net Present Value) shortfall in its main accounts, it's saying that using its assumptions, the U.S. government would need to have $65 trillion – today – in an account, earning a stated rate of interest, in order to be solvent.

Since the U.S. government don't have that have that kind of scratch, it's insolvent. But the real picture is likely worse. The Fed calculates the NPV shortfall to be closer to $100 trillion. And if you believe Lawrence Kotlikoff's math, the figure is closer to $200 trillion. Either way – $65 trillion, $100 trillion, or $200 trillion – the sum cannot be paid.

Paul Joseph Watson, from Investor's Forecaster, reports: "On Saturday (Feb 1, 2014) it emerged that HSBC was restricting large cash withdrawals for UK customers from £5000 upwards, forcing them to provide documentation of what they plan to spend the money on, a form of capital control that more and more banks are beginning to adopt. (Then) Fears of bank runs have escalated with the news that Russian lender ‘My Bank’ has banned all cash withdrawals until next week. Bloomberg reports that ‘My Bank’ – one of Russia’s top 200 lenders by assets – has introduced a complete ban on cash withdrawals until next week. While the Ruble has been losing ground rapidly recently, we suspect few have been expecting bank runs in Russia.

These banking shenanigans (or are they tests?) follow a November 2013 incident where Chase Bank also recently imposed restrictions which prevent its customers from conducting over $50,000 in cash activity per month, as well as banning business customers from sending international wire transfers. Financial expert Gerald Celente said the news was a sign that Americans should prepare for a bank holiday.

And from Italy comes the headlines that "Italy’s president fears violent insurrection in 2014 but offers no remedy as events in Italy are turning serious. President Giorgio Napolitano has warned of “widespread social tension and unrest” in 2014 as the Long Slump drags on. Thousands of Italian companies are on the “brink of collapse”. Great masses of the working people are on the dole or at risk of losing their jobs. Very high rates of youth unemployment are leading to dangerous alienation.

Bob Rinnear writes - Housing ground to a virtual stop. The non-farm payroll report was horrid. The amount of folks not even in the workforce is almost 1/3 of the entire population. Food stamps, welfare, unemployment, and other fall back systems are overwhelmed. Just Monday 3 Feb 2014), the ISM report for the US hit. It could have been worse, but it would take work to do it. We saw the overall survey fall from 55.8 to 51. Inside the report, we saw the new orders index fall from 64 to 51, a 20% drop, the biggest drop since 1980. Yes you read that right. The biggest drop in 34 years........A likely scenario is that we bottom out, put in a massive bounce that comes up well shy of the highs, and then we roll over and plunge even lower.

Doug Casey, on Market Sanity.com said "We are heading toward The Greater Depression’ said The problem that we face in the world today is that almost all – in fact I’ll go so far as to say all of the world’s governments – are actually bankrupt, and the fact is, the world’s banking system is bankrupt as well…Both governments and the big banks are like a couple of drunks standing up holding each other up. The both should fall down. The entire world has become too financialized at this point. People are concentrating not on producing real goods and services, but on trading things and paper securities and so forth. This is a giant bubble that’s going to burst.” “I’ve been saying for years that we are heading for something that I call The Greater Depression…I call it The Greater Depression because I expect it to be much worse and much greater than what we went through in the 1930′s.”

James H. Kunstler wrote a column for Peak Prosperity titled "Get Ready For Strange Days - We're in the Twilight of American Federalism" . He makes an good argument about what the immediate aftermath of a collapse could look like with the states going it alone or perhaps banding together with other another state(s) to share and trade resources - from energy to commodities to defense capabilities.

The last time the USA faced a comparable political convulsion was the decade leading into the Civil War, but this time it will be more complex and confusing and it will have a different ending.

In the 1850s, the dominant Whig party choked to death on its own internal contradictions — mainly its failure to take a coherent position on slavery — and morphed into the Republican Party. The original Democratic Party broke apart into southern and northern factions. All of the doctrinal and legal debates of the day — states’ rights, property rights, et cet. — could not overcome the growing moral revulsion against human bondage. When Lincoln was elected in 1860, seven southern slave states seceded from the Union before his inauguration. The ferocity of the ensuing Civil War — the world’s first industrial-strength slaughter fest — came as a great shock to many who had expected little more than a few symbolic romantic skirmishes on horseback preceding a negotiated settlement.

I believe we are headed now into a breakup of the nation into smaller units, but this time there will be no reconstituting the original USA as in 1865. I realize this is a severe view, but the circumstances we face are more severe than the public seems to imagine. To some degree the coming political rearrangement would appear to be the unfinished business of the 1860s. The old animosities remain, mainly in cultural rather than economic terms. But the real driving force of schism will be catabolic economic collapse expressing itself in scale reduction of all our support systems: food production, energy production, transportation, finance, commerce, and governance.

Everything is going to have to get smaller, get more local, and be run differently. Just as political rhetoric failed to contain the revulsion against slavery, all the debates of the Left and Right in our time will not overcome the geophysical limits of energy resource scarcity and its affect on the other major systems of everyday life. Environmental degradation (including climate change) will amplify the journey downward in the viable scale of human operations.