Why Economic Collapse Will Precede Climate Collapse

It’s encouraging to see that the terms “climate crisis” and even “climate collapse”, which even five years ago were ridiculed as doomerism, are now considered perfectly reasonable descriptions of our current state. That doesn’t mean there is any consensus on how to address it, or any widespread willingness to change our lifestyle to match this new worldview. And it certainly doesn’t mean that climate collapse can be avoided or significantly mitigated. Still, it’s a start.

Lost in this new awareness, however, is that our global industrial economy is once again teetering on the edge of what will be a long drawn-out but ultimately permanent collapse. That’s a concern because if the more pervasive effects of economic collapse come first, there’s a good chance climate collapse will once again be ignored as our attention focuses on the more immediate existential crisis of economic suffering.

And it is very likely that the first dominoes of global economic collapse are, as a recent NYT article highlighted (sadly, behind a NYT paywall), about to fall. And the reasons for this are even more complex and even less understood than the reasons for climate collapse. Here are a few of them:

  1. This economy is built on faith in perpetual growth: faith that rapid and accelerating economic ‘growth’ can and will somehow continue indefinitely, so that investments in the future will continue to make sense. If that faith is shattered — if people begin to doubt that investing now in stocks, bonds, loans, real estate, commodities, and businesses will not yield a positive return commensurate with the risk in the intervening period — then the market value of those goods and securities will crumble, in some cases (like with stocks) to zero. No one will pay money for common stocks, which are the riskiest and lowest-ranking (in the case of insolvency or bankruptcy) securities, unless they believe that the present value (discounted at a rate that reflects the risk of the return being lower than expected) of future cash flows (dividends and sales proceeds) from that investment exceeds the current price. That means the price is hugely vulnerable to changes in perceived future cash flows (profit increases) and to perceived risk. There have been many recessions and depressions precipitated by nothing more than just such a change in perception. And to some extent that change in perception is self-fulfilling.
  2. The value of ‘fiat’ currencies is built on faith: the currencies on which our economy is dependent no longer have any underlying collateral other than the ability and willingness of the issuing government to redeem them at face value. These governments have incurred (especially over the past four decades under conservative governments that have cut corporate and high-worth individual taxes and accelerated ‘defence’ spending and subsidies to corporate friends), colossal levels of indebtedness, and the annual deficits and accumulated debts levels are accelerating every year. Guess what the acceptability and continuance of such debt levels is based on? The ability of future governments to increase revenues, based on accelerating personal incomes and corporate profits. When faith in this ability drops, currencies collapse. See Argentina, Russia, Venezuela etc etc to see how fast and profoundly this happens, and the economic consequences of it.
  3. Economic growth is dependent on ever-accelerating amounts of debt. The economy needs people to continue to consume at ever-increasing rates, which requires most of us to borrow more and more money so we have it to spend. If citizens were to (wisely) decide to repay their debts and live within their means, it would collapse the already-leveraged money supply and bring down the economy. Unfortunately for most citizens, they don’t have the luxury to hold the line on new debts, let alone repay the existing ones. The same thing would happen, incidentally, if the banks decided to become more careful (responsible) about their lending, instead of their current practice of hard-selling gullible customers on incurring additional debts they can’t afford, at usurious repayment rates, and lending money recklessly on the strength of the ‘value’ of wildly-overpriced collateral, or simply to generate more profits and commissions.
  4. Governments and banks are deliberately suppressing interest rates far below current rates of inflation. They are doing this to encourage ever-more borrowing and spending, and to force investors out of bond and other ‘fixed income’ investments into stocks (and real estate), so that the illusion of perpetual increases in stock (and real estate) values (necessary to prevent economic collapse) is continued. This is now hugely difficult to do: Interest rates in most places are near or even below zero, a nightmarish situation for those on fixed incomes, and for pension fund managers prohibited from investing all their funds in stocks. This means that, to avoid the wrath of investors and plunging values, fund managers have to buy extremely-high-risk ‘junk’ and ‘near-junk’ bonds to get any return at all, and have to take higher and higher risks on stock investments. It means listed companies are buying back their own stock to make the remaining shares more valuable on a per-share basis, because they simply can’t keep generating more and more profits-per-share any other way. It means that banks have to furiously fight anti-usury laws that would block them from charging 29% interest on credit card balances while they’re paying the same customers 0.5% on their ‘savings’ accounts — without usurious interest rates on such loans to the poor, they could not generate the needed double-digit increases in profits every year to keep their shares from collapsing and to avoid insolvency and bankruptcy. This ‘tax on the poor’ is a large part of the reason net worth for the vast majority of citizens is now negative and declining, while essentially all wealth accrues to the 1% (tax cuts for the rich also contribute to this). As income and wealth disparity soars, it tears at the very social fabric our economy is supposed to be supporting.
  5. Most citizens are now a few months’ income away from bankruptcy, homelessness, and even hunger. Secure full-time jobs with benefits have disappeared by the millions (they’re too ‘expensive’ for profit-obsessed corporations to offer), leaving most citizens no choice but to work multiple low-paying, insecure jobs, perpetually caught in the two-income trap. While life expectancy has flat-lined, healthy life-years for the poor have fallen due largely to poor diets (they are too busy working to have time to cook healthy food), chronic anxiety and stress, and decreasing access to essential health care (whose costs continue to skyrocket year after year), leading to more and more people who are unable to participate in the labour force and hence dependent on other family members, or rendered homeless. And the population is aging rapidly, facing accelerating health-care costs and sick days, and mostly unable to even think of retiring before they die.
  6. Governments, politicians and corporations are consciously lying about the real rates of inflation and unemployment. Factoring in the soaring costs of health care and housing in affluent nations, true inflation rates are 6-10%, and true unemployment rates are 20-30%. When the typical citizen is paying 8% more per year for essential goods and services, and paying 16% interest on their borrowings (the average for lower-income earners, per the Two Income Trap), while receiving average wage increases of only 2%, and earning just 0.5% on their savings, while facing a high risk that they, or their spouse, will become unemployed in any particular year, the situation is unsustainable and potentially explosive.
  7. Our economy is totally dependent on inexpensive, affordable fossil-fuel energy, water, minerals, construction materials and other resources. The claims that economic growth stems from innovation, efficiency, ‘consolidation’, globalization, and ‘economies of scale’ are complete bunk. All of the growth in our industrial economy over the past century has been due to one factor: the use of cheap energy and resources. Many studies have confirmed there is an almost perfect correlation between energy production (and consumption) per capita and GDP per capita, whether measured over time or between countries. Over that century, cheap fossil-fuel energy constitutes an amazingly-consistent 80+% of that energy, and there is abundant evidence that the only thing that will change that is if (when) available fossil-fuel resources become too expensive for consumers to afford (eg if there is an economic collapse). There is likewise an almost perfect correlation between total energy production (and consumption), total GDP, total stock market value, total world population, total world imports & exports, total resource consumption, and total CO2e emissions. They have all risen, and will all fall, in lock-step.

When economic crises are local, or when there are ways to re-jump-start the economy by correcting the underlying causes that led to the recession or depression, there are levers that can be used to intervene and restore the economy to health. But we used up the last of our available levers in 2008, and we are once again at the tipping point, and this time we are looking at a permanent and global economic collapse. We are finally going to have to face that our perpetual-growth, high-resource use, environmentally-ruinous, debt-faith-dependent economy was never sustainable, and was destined to collapse sooner or later. We will soon (probably in fits and starts over the next three decades or so) be forced to return to a radically relocalized, low-tech economy of sufficiency. It will not be a graceful transition.

In short, while climate collapse will render centralized, high-tech, high-energy use civilization unsustainable, and make much (and possibly all) of the planet uninhabitable, economic collapse will likely make our lives radically different, and will do so well before climate collapse weighs in with full force.

The collapse of our global industrial civilization will have two chapters. The economic collapse chapter will come first. The climate collapse chapter will just be the final blow. It’s unlikely that the survivors, by the end of this century, will be able to read this forecast, and it’s unlikely they will care about why or how it happened. They will be otherwise occupied.

Charts above from OurWorldinData.org CC-by-SA via Sustaining Capabilities blog 2018. Note that the recent drop in proportion of CO2e emissions in affluent nations corresponds to their offshoring much dirty industry to Asia, whose proportion of emissions grew commensurately.

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23 Responses to Why Economic Collapse Will Precede Climate Collapse

  1. Dr Scanlon says:

    Thanks Dave. Below is a non pay walled link to the NYT article and a link to a tutorial on how to get around them, by Caitlin Johnstone.

    Only the Fed Can Save Us



    How To Deprive Mainstream Media Of Revenue And Get Around Their Paywalls


  2. Dave Pollard says:

    Thanks Doctor. The archive.is solution works perfectly, when someone has created one.

    Unfortunately the “incognito” browser window solution no longer works — NYT now blocks it on Chrome and Firefox with a new message that says:

    “You’re in private mode. Log in or create a free New York Times account to continue reading in private mode.”

    So you then have to log into a NYT account, which then starts counting the number of articles you can read free and thereafter blocks you. You essentially are not permitted to be “incognito” on these sites.

    The “Reader” mode has also recently been blocked, which used to allow you in various ways (with or without a browser extension) to read a text-only version of the article which did not get counted in your ‘free’ article count.

    I haven’t tried any of the ‘free’ no-fee newsreader services, since I don’t particularly want to sign up (and be on the public record) for a service that is quite that blatant; it’s just not that important to me to access these services, when services like the CBC and BBC provide essentially the same information without a fee.

    The paywall option is particularly irksome when an important article like this is published and the author is prohibited from cross-posting it on their own site. If NYT and WaPo etc want to stop people getting their whole firehose of information free without limit I don’t particularly care, but blocking special articles like this and not allowing anyone else, even the author, to publish it outside the firewall, even after an embargo period, is effectively a form of censorship — only those with money for firewalls get this news, while the crap from Faux News is available free for all. As a result, the reading public is getting more misinformation than true information, and organizations like NYT are directly responsible for that. They desperately need to find a better business model, but seem to lack the imagination to do so.

  3. angus sterland says:

    Very interesting indeed but when we look at the world debt it’s almost like the human race is asleep walking

  4. Thomas petrie says:

    I am in the solar business and it’s sad to know and sadder to admit solar is making only a little bit of difference in “saving” this planet. Still, I will continue to try the best I can. Meanwhile, that was a very good article! Thanks!

  5. Pingback: ral's notebook » Blog Archive » Important read…

  6. TR says:

    Everyone knows that all we have to do is print more fiat & debt never has to be repaid. I’m so looking forward to the Black Swan so one can hear: “What happened?”

  7. Alastair McGaw says:

    The answer is simple. Nuclear Power so everything can be heated, grown and moved as now

  8. mike muse says:

    The only reason the technologies appear not to be working/address the problems caused by fossil fuels is simple: these technologies are being blocked by governments, witheld by corporations, principally because they have too much invested in fossil fuel extraction and usage and are making shedloads of money from it. The all electric car is minimally utilised on this account; battery technology exists at much greater levels of efficiency than has been revealed, solar tech based on perovskite cells is maybe 25-40% more efficient than can be bought by the man in the street. I could go on and on. All these technologies and more are being prevented from usage/entrainment, because goverments and corporations have too much invested elsewhere and too much to lose. And don’t get me started on medicine and public health: the same considerations apply as those outlined above. The big contradiction is this: it’s not possible to have a practical, realisable, environmental policy framework, without enforceable population management policies and frameworks. Then we get to the root of all these issues:education. Education in the US, UK and elsewhere is designed to turn out compliant, easily managed consumers, who can be fed a diet of pap by the media, so that they can be ‘played’ at every turn, whatever the needs of the hour, whatever the needs of the ruling class at any point in time. Reality TV? That’s the last thing it is; rather it’s an important cog in the anaesthetisation of the population at large, so that they become receptive to and stay on message, whatever that happens to be. By and large the foregoing article accurately summarises where we are and where we’re headed, but it’s not because the means for alternatives don’t exist: it’s because, as a matter of policy, they’re not available.

  9. Anonymous says:

    Gas, diesel, vehicles spew 4 tons of CO2 per year, that’s the average.
    Electric Scooter $3000
    Electric bicycle $700
    Electric Auto $25,000 and up

    So do we kill the World? OR, make a friggen difference of 4 tons of CO2 yearly ???

  10. Matthew says:

    Hi Dave
    This is a great summary and explanation of the arguments for economic fragility, but I don’t think your central thesis (in the title) is supportable.
    Indeed you make many unsupported statements – here’s one
    “But we used up the last of our available levers in 2008, and we are once again at the tipping point, and this time we are looking at a permanent and global economic collapse.”
    I’ve been reading articles saying the economy is on the brink every day since the failure of 2007/8, and I’ve come to believe the economy is an exercise in brinkmanship. The crashes, when they happen, will always surprise most of us, because we don’t have access to the critical information about how the economy works.
    Also when you assert that one thing will happen before another, you imply that each is a discreet event with a date, which is too simplistic.
    One idea of mine is that next crash will not be the same as the last one because ‘they’ will have learned lessons. I believe the next crash could be hushed up out of mutual interest between government and banks, and kept out of the headlines, and diffused into future indebtedness / inflation perhaps using shadow banking and accounting techniques on the edge of the law. Or perhaps the quantitive easing is acting as a steam valve already – certainly it can’t be considered an emergency measure any more, but a part of the economic machine.

  11. Richard Ewels says:

    How long is the planet earth forecast to exist for? The exponential growth in human activity in recent times may lead to a economic and environmental collapse that humans may or may not survive. Maybe these things are inevitable but the planet will still exist and life, of some sort, will almost certainly exist, evolve and adapt.

  12. Expat says:

    @Richard Ewels
    The planet will almost certainly exist for billions of years. The sun will expand to about the orbit of Mars in 5.4 billion years at which point the earth will be dragged into the sun and destroyed. Prior to that, it is likely that the sun’s radiation will kill off life as its output increases.
    More likely, since we are talking about billions of years in the scenarios above, life will be destroyed by a collision with an asteroid. Life has survived several major strikes in the past but barely in a few cases (66 million years ago the Cretaceous Mass Extinction killed 2/3’s of all species). A major strike which will obliterate the surface and destroy all possible life is highly likely prior to Sol turning into a red giant in 5.4 billion years.

    So, there is still plenty of time before we get crisped by the sun but a distressingly little time before we get hit by dangerous asteroids. Sky surveys indicate that life extinction events are unlikely in the near future but, to quote Armageddon, “it’s a big ass sky”. Realistically, we probably have a few thousand to a few tens of thousands years before a very large strike looms. By then, assuming climate change has not destroyed us, we will likely have the technology to protect ourselves. Then we have five billion years to move out to Jupiter and beyond or perish.

  13. Bruce says:

    I think it’s unfortunate that dire warnings have been issued for so long and the consequences haven’t yet been felt. I’ve been hearing/reading about all of these things for years (decades even) and here we are.

    BTW, ironically, I think a massive global financial crisis that ends the status quo will automatically help the environment.

  14. Derek says:

    I really enjoyed the concise summary of the present status quo. I also however disagree that we have used all the last levers to restore the economy, I think that when the situation becomes dire then governments will resort to extreme measures. One example I read of from the UN is removing religion in its entirety and sequestring their possessions, to which belongs a huge amount of wealth.
    Anyways these will be just temporary solutions, at the end I fully agree with your assessments. The present ecomical system is unsustainable, and it depends on and at the same time has depleted the Earth’s resources. In the process it generated climate changes that have passed beyond the point of no return. And here lies the bigger problem, no matter what we do now, we cannot reverse the effects. The only question remaining is how quickly will the effects take place? Observing the natural tendencies of humans thus far I can only believe that we will continue to accelerate climate change independently of all the well intentioned ones trying to make a difference.

  15. Ian Munroe says:

    Two solutions:
    1) Thorium. Safe and there’s enough to supply a thousand years of human energy needs. Every country has its own supply so it would end energy wars.

    2) International debt relief targeted at the creation of sustainable economies and climate change resolution.

  16. Dave, I’ve been reading your blog for years because of your wisdom. I have only one issue with your present article. IMO, your account of fiat money is not complex enough and, for that reason, may contribute to the negativity you show. The key here is whether the govt “debt” is in its own currency or that of another country. The US is the present world hegemon, so its “debt” is in US dollars–its own currency. Also, the Japanese and Chinese govt’s “debts” are both mainly in their own currencies. Your examples of countries that have collapsed from govt debt all had most of their debt in dollars, not their own currency.

    Here’s a good article explaining how fiat money can be used to “pay for” the Green New Deal. (The theory Stephanie Kelton uses is called “Modern Monetary Theory,” although she doesn’t mention the name in this article.) In this case, fiat govt “debt” in the US, if used wisely, can both help avoid economic collapse and diminish climate change. But, it requires educating people on how fiat money can work in the US because of its present hegemonic position. https://www.huffpost.com/entry/opinion-green-new-deal-cost_n_5c0042b2e4b027f1097bda5b

    Background to Kelton’s points in the Huffpost article is given in this wonderful lecture: https://www.sandersinstitute.com/blog/the-public-purse

  17. KansasCrude says:

    You lost me at CO2 what a crock of manure. Yes the climate will change but its the SUN cycles in force. Not the miserably tiny amount of the atmosphere that is the plant respirator know as CO2. We are most likely at or nearing peak CO2.

    Check out the GRAND SOLAR MINIMUM which is now actively impacting our planet. Venture into Adapt 2030 and The Ice Age Farmer websites. Watch how the Chinese are building infrastructure into the deserts that are re-blooming due to the increased precip. Marvel at the 400 year cycle know since pre-Roman times that increases seismic and volcanic activity which cools the planet. See how we are already experiencing the cooling in parts of the globe as well as the increased volcanic and seismic activity. The magnetic polls are already shifting and crop losses already mounting. Quit falling for the global elites BS CO2 agenda. Your just a search away from the truth….or you can just keep buying the crap they are spoon feeding us. Its already cooling. You need to get with producing some of your own food.
    Sheesh get a clue.

  18. KansasCrude says:

    Thanks Dave lots of common ground here but the CO2 story is not in play IMO

    Check out the GRAND SOLAR MINIMUM which is now actively impacting our planet. Venture into Adapt 2030 and The Ice Age Farmer websites. Watch how the Chinese are building infrastructure into the deserts that are re-blooming due to the increased precip. Marvel at the 400 year cycle know since pre-Roman times that increases seismic and volcanic activity which cools the planet. See how we are already experiencing the cooling in parts of the globe as well as the increased volcanic and seismic activity. The magnetic polls are already shifting and crop losses already mounting. Quit falling for the global elites BS CO2 agenda. Your just a search away from the truth….or you can just keep buying the crap they are spoon feeding us. Its already cooling. You need to get with producing some of your own food.

  19. Dave Pollard says:

    Thanks for the comments. I wouldn’t plan to respond to questions or criticisms, since I think they are addressed better and more thoroughly by the authors of the 5 links in my article than I could do justice trying to answer in a comment thread. And I’m not an economist, and there are plenty of economists making the same points I make here.

    Suffice it to say, though, that while I acknowledge (and haven’t deleted) opinions above that I find completely implausible, I think it is unfortunate that so many earnest caring people are still caught up in a combination of denial of the data and belief in conspiracy theories and magical solutions. If it were untrue, there wouldn’t be such a compelling professional consensus otherwise. If it were a conspiracy of deceit it would have come unwound (hell, governments can’t even keep their lies straight among themselves). If it were simple it would have been tried. The above is simply a recap of years of research and data, which those who agree may find useful in understanding how many of us have come to this conclusion, and those who don’t will inevitably find unconvincing.

  20. Jim Oresko says:

    KansasCrude you are so right! I’ve been studying this global warming BS for years. I too have been following David DuByne (Adapt 2030) and Christian (Ice Age Farmer) for years. They and others present facts that can be verified. People like David Pollard are unwilling to look at these sites and do research on their own to actually see what’s happening to the planet. Just like you stated people need to know the truth and prepare for the colder climate we are entering. This is a cycle. It’s happened before and will happen again.

  21. Dave Pollard says:

    It seems that despite an overwhelming consensus of hundreds of expert client scientists from all over the world, who have nothing to gain and everything to lose from deceiving people, some people will choose to believe the utterly debunked ravings of — a commodity trader! Telling, but a bit sad.

    Like the woman from NOW, out demonstrating for freedom of choice recently said: After all these years I can’t believe we’re still fighting this shit.

  22. Grey says:

    In general, this article is correct and well written. Very much aligns with Kunstlers “Long Emergency” theory. We will by necessity move to local based agriculture and take a step back … so to speak. Paper money in unlimited supply is an evil that government cannot stop abusing. Politicians really are the worst kind of people.

  23. Helen C. Grond says:

    As a geologist, studying and following climate for over 40 years, I’m continually dismayed how restricted a perspective, the narrative on climate change has become. All without any significant evidence. The major source of any warming we have seen in the last 50 years, has been night time warming due to the urban heat effect. The far more significant risks are related to solar cycles and these have repeatedly cause great hardship through their effects on global climate that overshadows anything we humans could do. I wish that Peakprosperity, who I respect on many levels would catch up to the relevant science.

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