Economic collapse

Thinking about collapse is very useful because it allows you to prepare for it. And preparing for collapse is very useful too - from the pragmatic perspective of risk management. Consider the possibilities.
  • If you prepare for collapse and it doesn't happen, then you look a tiny bit foolish.
  • If you don't prepare for collapse and collapse does happen, then you look a tiny bit dead.
Now, which would you prefer to be, foolish or dead?

This type of reasoning is very basic, and is used for such things as calculating the amount of insurance to buy or the amount of cash to keep in reserve in order to avoid being bankrupted should the worst-case scenario unfold. In order to do that, you have to have some idea of what the worst case scenario is. People seem comfortable with this kind of reasoning.

There is, however, a problem: most people don't seem to be able to wrap their minds around the concept of collapse in the sort of unsentimental, dispassionate way that is required for engaging in practical risk management activities. They can think of a nuclear accident, or a tsunami, or a hurricane, or an earthquake, or a pandemic. They might be able to think of all five at the same time, but that's a stretch for most. But the scenario that few people can react to adequately is the sort of gritty reality that is quite probable. Let's try a couple of scenarios, and see how you react.

Scenario #1

You live in a major city. Banks are closed and ATM machines are defunct. There is no electricity. Shops are closed and looted. Gas stations are burned out. There is no pumped water and toilets don't flush. There is no heat or air conditioning. Garbage isn't being collected and there are piles of it everywhere. Roads are impassable and neighborhoods are barricaded from each other with concertina wire and piles of burning tires and patrolled by armed gangs. Home invasions occur with gruesome regularity, especially in the wealthier neighborhoods where there is more to take. Police are nowhere to be found, but there are army checkpoints on all the major roads leading out of the city where people are turned back.

Scenario #2

You live out in the country. There is no electricity, no heating oil or propane deliveries. Gasoline is no longer available, and you can no longer drive 30 miles to the nearest supermarket or Walmart. In any case, these stores are no longer open for business because merchandise is no longer being delivered to them. You used to be on friendly terms with some of the neighbors, but now everybody is afraid of each other. In any case, it's too far, and too dangerous, to walk anywhere. Your drinking water used to come from a deep drilled well via an electric pump, which no longer works. There also used to be a sump pump and a dehumidifier in your basement, which is now permanently flooded and filling with black mold. Armed gangs are filtering through the landscape, looking for caches of food and other supplies. They are increasingly expert at what they do, and most people either give up their stockpile voluntarily or die trying to defend it.

Presented with such scenarios, most people react in one of three ways: denial, paralysis or panic.

Denial is where you tell yourself that these scenarios are so incredibly unlikely where you live that thinking about them is a complete waste of time. You may be right about that, but who is to say? Subjective judgments of likelihood are not particularly useful in risk mitigation.

Paralysis is where your gut feeling tells you that this could, in fact, happen, but you can't think of anything constructive that you could do about it - beyond trying to not think about it, to avoid distressing yourself to no purpose.

Panic is where you decide to act - by stockpiling food and weapons, or by developing plans to flee in some direction. Once you've done your shopping and planning, and the panic attack is over, you go back to paralysis (nothing more to be done) and then drift back toward denial (since it is mentally the most comfortable).

There is a fourth reaction worth considering, even though it amounts to an ad hominem attack on me as the messenger of doom. It goes like this: "Dmitry, your collapse scenarios are crap. They are depressing, distressing, and none of us can do anything about them except be depressed and distressed, or panic and go shopping for spam, shotgun shells and machetes. Would you please cut it out and stop bothering people with this collapse nonsense?" Sure, got me there, I'll stop.

Let's do something else instead: let's consider that nothing will particularly change, and that things will stay on the same trajectory. Let's define some scenarios that seem pretty likely to most of us, because it's the sort of gradual change we've been seeing already: the economy will continue "recovering," meaning that the rich will continue to get richer, the poor - poorer, unemployment will hold steady (as more and more people drop out of the labor force), debt levels will continue to explode, food and energy prices will continue to creep up and so on.

Security theater

We had the shoe bomber and the underwear bomber, so now the TSA makes us take off our shoes and gropes our genitals (or irradiates us with the naked body scanner). We had the wannabe jihadis who got entrapped into trying to smuggle a two-part liquid explosive on board (which, according to chemistry Ph.D.'s, wouldn't have worked anyway) so we can't bring liquids through the checkpoint (except for mother's milk, but even that has to be tested for explosive potential). Next step: somebody tries to smuggle a bomb in their rectum, and the TSA forces everyone to strip naked and subjects them to a body cavity search, prison style. Even if you can still afford to fly somewhere, would you want to?

Note that this security theater insanity only applies to flights originating from or terminating in the US, and that it has nothing to do with stopping terrorists. You stop terrorists by spotting them, and you do that by interviewing just the promising candidates. Testing for exploding breast milk is just plain idiotic.

Debt slavery

In the past year, student loan debt has grown from 1 trillion to 1.2 trillion. More and more students are realizing that they will never be able to pay back their student loans. Instead, the government, which guaranteed the loans, will garnish their wages, and eventually even their social security payments (should these still exist by the time they reach retirement age) for the rest of their lives.

Borders locked

More and more of these students will realize that their only real option is to leave the country forever. Facing a massive outflow of college graduates, the government introduces exit visas, which require a credit check, and refuses to grant them to entire families, so that a hostage is always left behind. The government also refuses to renew passports for expats who are in arrears on their government-guaranteed debt, creating a refugee crisis. Just as this happens, more and more countries, increasingly fed up with US State Dept. meddling in their internal affairs, decide that they've had enough Americans for now, and close their borders to US nationals.

Retirement cancelled

The already dire demographics, coupled with the flight of educated people mentioned above, mean that there will only be a couple of working-age unskilled workers supporting each retiree. Desperate measures, such as rolling IRAs and 401k's into the Social Security Trust Fund, postpone the inevitable somewhat. Eventually the government finds that it has no choice but to raise the retirement age to 100. The vast majority of the baby boomer generation, which did not save for retirement in any case, will find itself destitute.

Medical confiscation

Thanks to ObamaCare, people between 55 and 65 are being forced into the Medicare system. At the same time, Medicare covers fewer and fewer services, with higher and higher deductibles. Since most people lack sufficient cash savings to cover them, they are covered by placing liens on property. Adult children living with their parents (an increasingly common situation) are then forced to sell the house as soon as they inherit it (or walk away from it). The other, increasingly popular option, of course, is to forgo medical care.

Demise of the dollar

So far, because of the US dollar's reserve status, the US has been able to fleece other countries while taking on debt at an artificially low rate of interest. As more and more countries (China and Russia especially) are moving away from using the dollar for international settlements, especially in buying and selling energy, the status of the dollar continues to erode. As this process runs its course, the US government will be forced to resort to fleecing its own people. Raising taxes is politically difficult, and so instead lots of other measures will be put in place. There will be lots of so-called "bail-ins," where depositor funds are used to bail out insolvent banks. Those who own precious metals will be forced to sell them for a fraction of their market price, as has happened before. There will be a low limit on daily cash withdrawals, as has recently been the case in Argentina, Cyprus and Ukraine.


The trend is to concentrate more and more wealth and power in the hands of fewer and fewer corporate entities. To this end, the government will clamp down on small businesses (which are already suffering because of, among other things, onerous health care insurance regulations). Eventually the government will outlaw self-employment, herding all owner-operators and freelancers into minimum-wage corporate farms. It will be made illegal to buy and sell products or services except through a major corporation (good bye Craigslist). All property transactions will automatically be taxed: sales tax plus capital gains tax. The limit on gift taxes will be dropped to zero: the giver will pay the gift tax on the value; the receiver will have to pay income tax on all gifts received, plus capital gains if they are ever sold. Together with the low limit on cash withdrawals, this will make it virtually impossible for people to directly give each other money without being taxed, or breaking the law.

As the cost of living continues to go up and salaries continue to stagnate, corporations will negotiate special corporate discounts with each other in order to make it possible for their employees to continue functioning. People without a corporate job will find their access to products and services severely restricted. But what really makes it possible for more and more corporate employees to survive is the increasing use of food stamps (EBT cards). Now at 50 million, participation in the food stamps program will grow until it becomes virtually universal, while at the same time the nutritional value of the food it makes available will continue trending down, nurturing the trifecta of obesity, diabetes and heart disease.


With small businesses and private enterprise made illegal, most people will be forced to resort to illegal activities, under the watchful eye of the NSA. But since putting even more people in jail will be prohibitively expensive, a new, streamlined process of dispensing justice will be put into place: the NSA and the Justice Department will link computer systems, and verdicts of fraud and suspended sentences will be issued by a computer program, in absentia. In keeping with current practice, both the charge and the evidence will be kept secret. The newly minted felons will be dropped from voter rolls, their passports cancelled, their bank accounts confiscated, and their employment (if any) terminated. They will receive form letters informing them of their sentence but most of them will be unable to read it because functional illiteracy rates will go from the current 40% to 80-90%.

Paragon of democracy

The effect of dropping much of the population from voter rolls will paradoxically result in much higher voter participation. After a while the only people allowed to vote will be the politicians themselves, their families, government workers and contractors, corporate functionaries and, of course, the ever-richer 1%. Since those barred from voting will not be counted as voters, it will look like voter turn-out is much higher than ever before. Everyone will celebrate the health of American democracy.

Demise of public education

Public schools will become dumping grounds for mental and physical defectives - junior prisons, if you will, where students are endlessly frisked and strip-searched by heavily armed security personnel and train for life under lockdown. The more promising students will be shunted to highly profitable charter schools, many of them virtual, where students get sit in front of computers all day, training to take standardized tests, and a single unaccredited teacher oversees more than a hundred of them. Beyond studying for tests, the students will become increasingly resistant to remembering anything at all - why know things when you can Google for them?

What should our risk management strategy be in light of such probable, predictable, and rather un-apocalyptically boring developments?

Do nothing?

Well, you might not die, at least not right away, but then will your life be worth living? Even if you can't think of anything good to do, you might still consider doing something - like drinking a lot.

Prevent them?

You'd have to start with some sort of grass roots political campaign to change the entire system. Suppose you are amazingly successful at it, and manage to change the entire system. And it only takes you 30 years. Oops! Too late.

So, what do you do?

I have an idea, and it's really, really simple. What's more, it's quite cheap, and it totally works... for the time being.

Here it is:

Get the hell out of this country!