Wednesday, February 09, 2011

Hedging for the End of Civilization, Part II

While we're talking about the collapse of the global economy, and civilization in general, I should also mention that there are a lot of people who do expect something along these lines to actually happen. Perhaps not surprisingly, many of them can be found talking about it on the internet.

For instance, there's Wendy, the Surviving the Apocalypse in the Suburbs blogger, who lives and writes from somewhere near me in southern Maine, and is trying to transition her family to a more "self-sufficient" lifestyle.

Architect Andres Duany thinks that peak oil and escalating food prices should convince real estate investors to build hobby farm collectives instead of golfing communities. For a million-dollar investment, your post-collapse future can look just like Tuscany! From "New Urbanism for the Apocalypse," by Greg Lindsay for Fast Company.

And I'm especially fond of the Urban Self-Sufficientist in Atlanta. He raises rabbits and grows veggies in the backyard of his in-town bungalow, but the best posts are about practicing falconry in local parks in order to enjoy homemade, free-range squirrel stew.

It's interesting how these different people pursue "self-sufficiency" in different ways. Wendy, for instance, makes much of growing her own food, but she still lives in a suburb where she's forced to pay for two cars and their fuel in order to acquire basic necessities. How's she going to find enough refined oil to fill her cars' tanks after civilization collapses?

Meanwhile, the Urban Self-Sufficientist takes an opposite tack, living in the middle of an urban neighborhood. If gasoline disappears, he won't be too put out - but won't his neighbors start taking an unsavory interest in the fruits of his backyard farm?

And architect Duany talks up economic collapse even while he tries to get real estate investors to build his planned communities, which will presumably be financed by 30-year mortgages. At least he's talking with people who ought to be experts in economic failure.

So even people who are planning for disaster clearly have different expectations of what it's going to be like: different people hedge for the end of civilization in different ways. Some believe that through the wreckage we'll figure out some way to keep our cars; others believe that we'll figure out a way to maintain a financial system.

I have my doubts on these counts - you're going to put more faith in American car culture than in America itself? - but then again, I also don't think it's much worthwhile to plan for any kind of collapse. Even if it does happen, it's going to be unpredictable.

Besides, I'm not much interested in self-sufficiency for its own sake. I'd rather rely on my neighbors for some things - there are plenty of people who are better farmers than I am, for instance, and I'd rather let others do the things they do well rather than try to do everything half-assed by myself. Specialization of labor is one of the innovations that got humanity out of the stone age, and even if civilization did collapse, I would hope that we wouldn't need to leave that idea behind - that we'd still be able to rely on our neighbors, families, and friends to help each other out.

Still, I do enjoy how the idea of self-sufficiency leads people to think about the places and the resources that provide their necessities for living. It's a roundabout way of thinking about our day-to-day relationships and dependencies on the natural resources that sustain us, and for some (like the falconer in Atlanta) it's a way to bring a little wildness home with us, even if we live in the middle of the city.

Self-sufficiency will not be any fun if it's forced on us. But as long as it's an elective activity, these bloggers make it clear that it can be a rewarding pursuit.

Monday, February 07, 2011

Hedging for the End of Civilization, Part I

Tell me, would you trade 22 pounds of gold for this shoddily-built suburban confinement unit?

(creative Commons-licenced photo by David Shankbone, via his Flickr page).
Ever since the global financial crisis of 2008, when our mirage of real estate wealth dissolved faster than a mold-infested McMansion, and thousands of major employers looked into their bank accounts and realized that they wouldn't meet the weekend payroll without a bailout, it's become apparent to most people that "money" is only as valuable as everyone else thinks it is.

The paper bills we carry in our wallets are ultimately just paper. But they're valuable to us as a convenience of modern society: a means of exchange whose value we all agree on by consensus.

A few weeks ago, This American Life broadcast another great show from the economist-reporters at Planet Money all about the fiction of money. It made the point that money's value is a collective act of faith: we all trust that every store, bank, and employer will be more or less in agreement about the value of our dollar bills.

But societies have lost faith in the value of their currencies before - many, many times. When it happens, people are forced to rely on theft and barter in order to feed themselves. Faith in money is closely bound with the cohesion of civilization itself. If people can't trust their neighbors to value their currency, then they are less likely to trust their neighbors in general.

So far, because money is convenient and civilization is important to people, societies have invariably come back to trust money once again - no matter how badly it burned them before. It helps that, for the last century, the United States Dollar has lorded over everything as the world's papal currency. It's been the one kind of money that everyone could have faith in and rely on. Even when pesos and rubles collapsed, Argentines and Russians could still use tattered U. S. dollar bills as a trusted means of exchange.

But recently, the world has been questioning even its faith in the dollar. Which is not to say that anyone is losing faith in money: they're just looking for a new idol. And guess what it's made of?

In the past five years, the price of gold has more than doubled. Right-wing radio propagandists are making "money" hand over fist by sowing doubt in their followers' faith in dollars, and selling them overpriced gold as a "safe" alternative.

Gold has always been used as currency. It's compact, relatively rare, and impossible to counterfeit. It's still widely used as a reserve for the world's national treasuries - here's a great field report on Manhattan's Federal Reserve Bank gold vault, where 7,000 tons of gold are stored under the streets of the financial district in order to shore up our faith in the financial stability of national governments.

But if we're questioning our faith in the value of dollars, shouldn't we also question our faith in the value of gold? At the end of the day, it's just a shiny metal. Gold can't feed anyone, or generate energy. Just like paper bills, it's only valuable if lots of other people think that it's valuable. And if we really come to a circumstance where the dollar collapses and the world's economy comes crashing down, I can't see how a gold brick is going to do anyone a damned bit of good, unless you're using it to smash windows in a looting spree.

I don't consider that a realistic possiblity by any means, but it's an interesting thought experiment to consider what kinds of currencies would actually be valuable in that kind of situation. How about solar panels? If the dollar collapses, then utilities would lose the means to buy up supplies of natural gas and other fuels from overseas. Blackouts could become widespread. Homegrown electricity would be more valuable than gold in such a situation.

So if there's a real risk of that happening, then solar panels should be very, very valuable for anyone who's hedging their investments against the end of civilization, right?

Well, that's not happening: solar panels are actually getting less expensive, largely thanks to improved technology.

This tells us two things:
  1. The market doesn't seriously expect civilization and the dollar to collapse. And, as a corollary: the price of gold, which has more than doubled in four years, is an asset bubble just like McMansions and stock in Instead of a real estate craze or an internet craze, we're going through an Apocalypse craze.
  2. Glenn Beck's listeners would be much better off if they started buying bought renewable energy while it's still cheap, instead of overpriced gold coins.