Saturday, April 10, 2010

What To Do About It.
So the situation is worse than I thought. Simply staying where I am might not be the best solution.
I can plan to go down one of three possible paths – do I plan to:
1. Bug Out
2. Bug In, or
3. Build a Doomstead?
The answer is: If possible, I will prepare all three responses! Why? Because each will be the optimal action in a particular set of circumstances.
So let us review the possibilities and consider how they might be approached:
1. Bug Out.
To traditional survivalists this involves having a backpack ready and when the time comes you simply strap it on and “get out of dodge”. Usually there is some sort of plan or destination associated with the Bug Out strategy – though in some cases the plan is simply “I got me a gun. Anythin’ I need I can get with the gun.”

This plan might work in an apocalyptic future of Mutant Zombie Bikers (MZBs), but in the scenario of a slowly-developing crisis involving steadily-worsening economies, growing international tensions, slowly declining living standards, growing crime rates and increasing ethnic tensions, this simplistic plan doesn’t look like it will stack up well. I need bug-out plans that can cope with a sudden tsunami of Mutant Zombie Bikers, but also work for a slowly-emerging deterioration of day-to-day life.
To achieve this, the bug out plan could be a journey to a known destination or it could be that travelling is the plan - travelling as a sustainable lifestyle. Certainly Gypsies did it.

Numerous authors have commented that in times of dislocation the ability to move goods from where they are made to where they are needed is often a path to riches. Transportation is obviously the key. If we are assuming that fuel is hard to obtain, then having a viable form of transportation may mean that going on the road is a valid lifestyle choice. The Gypsy lifestyle or the life of a travelling tinker may be a future possibility.

Here are some transport options:
1. Campervan/caravan/etc. Pros: Comfortable and easy. Cons: You would need to keep a fuel cache somewhere. Petrol does not store well, so your vehicle would probably need to be diesel and you would probably need to have many hundreds of liters of diesel stockpiled. The cost of vehicle and stockpiled diesel will be significant.
2. Pushbike and tent. Pros: No fuel required and less up front expense. Bikes and bike trailers are sold at Kmart! Cons: Hard work. Slower. Your physical security may be more at risk.
3. Boat. Dmitry Orlov proposed this in a recent article (
Pros: A sail boat provides you with a bed, stove, table, chairs, etc. You have the comfort of a campervan with the fuel use of a pushbike.
Cons: Most serious boats (the kind that stay in the water, not the kind that you move on a trailer) require constant maintenance. If I buy one I will have to put in the work and money to maintain it, even if I’m not using it. Dmitry Orlov lives on his boat, so this effort is justified. I have toddler-age children. Toddlers and water aren’t a good combination, so living aboard is not an option for me. If I don’t intend to live on the boat, and I don’t have money to throw away on maintaining a boat that I don’t live on, then some compromise may be required. A trailer sailor might be a reasonable compromise.

Of course a traveler may be more vulnerable and subject to threats, extortion or robbery than someone who simply chooses to stay home. This strategy is not without risks. The risks will depend on where you travel, how you travel, how prepared you are, and who you deal with.

Regardless of what form of transport I choose, ultimately a backpack is still a viable last recourse. In a worst-case scenario I still might need to walk to my destination.

So, in addressing the “How do I do it” question, I will need:
• Packs (24 hour pack and 72 hr pack)
• Bikes and bike trailer?
• A boat on a trailer?
• Some way of addressing the issues of water, food, shelter and physical security.
2. Bug In.
I have talked about this option in other posts, so I will just summarize the high points:
• If you are “Bugging In” (staying where you are during a crisis), you don’t need to lay in provisions for an indefinite stay – you only need enough provisions to last a few months longer than everyone else. At that point either the crisis ends, or everyone leaves, and you inherit the resources of the neighborhood.
• Since most people only have a few days worth of supplies in their pantry, and shops run just-in-time inventories with only a few more days of supplies, all I really need is 6 months of simple calories and a garden that grows some fruit and vegetables.
• Sadly, “Bugging In” is not always an option. Fire, flood, war and civil conflict are just some of the things that might force me to Bug Out.

Addressing the “How to” question - for "bug in" I will need:
1. Enough calories for 6 months.
2. Access to a garden with fresh fruit and vegetables.
3. Some way of addressing the issues of water, waste management and physical security.

3. Build A Doomstead.
I am not a rich man. But I am a fairly well-paid professional who does not smoke, gamble, entertain expensive women, or otherwise fritter away money. My wife is equally boring, so we normally finish the week with a little extra money. I would like to spend my excess money on a swimming pool and nice holidays. But I’m starting to think that I need to spend the money on a “Holiday Home” that could double as a Doomstead. I can tell you that I would far prefer the nice holiday in Cairns or Fiji, but we don’t always get the future we want do we?

So I have started the process of:
1. Selecting a site
2. Building a doomstead (Off grid)
3. Stocking the Doomstead with enough stuff to create a nucleus community.
4. Identifying people that I would like to share it with.

Each of these tasks deserves a post – so more on each later.

Friday, March 26, 2010

The Step-Wise Descent Scenario

I am trying to put together a coherent account of my thoughts behind an ongoing cyclical downturn. Here it is in a nutshell:
1. Starting in around 2004 oil production reached a plateau, and a decline in energy availability (due to declining EROEI and declining energy availability per person) reduced per capita global economic production.
2. Hank Paulson and other officials in charge of monetary policy around the world failed to understand the root cause of the GDP decline and attempted to address it by increasing liquidity, in the expectation that increased liquidity would lead to increased production. Unfortunately, there was no way to provide an increased oil supply in order to support an increase in production of real, tangible goods. The liquidity had to go somewhere so this liquidity created a market for illusory production, and was absorbed by the phantom "production" of financial vehicles, such as CDOs, SIVs, CDSs, etc.
3. The economic decline really kicked in when the unreality of the financial "products" was unmasked. When the market started valuing these products at what they were worth hundreds of billions of dollars simply vanished, and the economy started to decline to the level of our real productivity.
4. Unfortunately, this economic decline reduced activity and thus reduced energy consumption, masking the problem - which is our reduction in per capita energy availability.
5. However the recent economic decline didn't just reduce energy consumption - it limited investment in energy exploration and production, thus undermining our ability to produce energy over the next few years. This, in conjunction with natural decline rates and a gradual economic rebound will soon lead to another round of energy insufficiency.
6. This next round of reduced energy availability per capita will further decrease per capita economic production and lead to another economic step down.

Where does it end? I have said before that markets are about perception. It ends when the magnitude of the problem is perceived by enough people. What happens then? In my view, people will act to protect their own interests. There will be winners and losers.

Sunday, February 28, 2010

A New Plan

I have decided that it may be time for a change in strategy, a new plan. As part of the process I am going to review a lot of what I had previously assumed to be true, and decide if it is still true.

Usually, when developing a new plan, I divide my thoughts into three sections: why, what and how. So I will divide this post into three parts: Why Do I need a New Plan? What Will I Do? How Will I do It?

Why do I need a new plan?

Late in 2004 I wrote a series of scenarios, including what I considered to be my Worst Case. I now believe that my Worst Case was not the worst that can happen.

Allow me to summarize my Worst Case scenario and review where I went wrong. In summary, it looked like this:
• Sometime between 2007 and 2011 a financial/economic crisis will occur. This will undermine mitigation strategies that would have been undertaken to address the Peak Oil problem.
• Sometime between 2012 and 2025 Peak Oil will occur. Mitigation action will be completely inadequate. The impact of Peak Oil will reverse the nascent economic recovery, plunging the world into economic chaos once again. The world will be forced down pathways that will be CO2 intensive and destructive to the environment (Coal-To-Liquid, development of tar sands, etc). Mitigation of the Climate Change problem will be rendered almost impossible.
• Sometime between 2020 and 2040 Climate Change will start to impact. This will place more strain on already depleted resources and lead to compounded emergencies and ultimately trigger the outright collapse of entire nations.
• As a consequence we could experience an event comparable in severity to The Great Depression and the war that followed.
• On the positive side – Australia is self-sufficient in food and rich in resources. We import about half our oil, but given time we could adapt to using less oil. I have said many times that Australia is the place to be. (here, here, here, here. and here).

I still think Australia is a better place to be than almost anywhere else, but I'm not sure that my self-assured bug-in strategy is good enough to cope with a Worst Case. So where did I go wrong?

1. I assumed that the problems would occur one at a time, allowing us to at least partly respond to one problem before facing the next.
2. I assumed that we would definitely respond urgently to the problems when they occurred, attempting to address them in some kind of meaningful way.

So what has happened in the last 5-6 years and how have our leaders responded? Three trends stand out:

Trend 1. As we know, the financial crisis occurred. The exact causes will probably be discussed for some time, but certain things are safe to say:
• Instead of basing wealth on increases in production of real goods, wealth was “created” through speculation based on debt. (Some might suggest that a reduction in the availability of energy made an increase in production of real goods more difficult to achieve. A failure to achieve this increase would have triggered a decrease or flattening in GDP and thus a recession. Seeing the warning signs of a possible decline in GDP, the financial Powers That Be blew a series of bubbles by making debt-based liquidity easily available.)
• Debt was allowed to blow out at every level.
• Regulations controlling the irresponsible use of this liquidity were removed allowing this liquidity to be used to create completely illusory increases in wealth (and thus increases in GDP).
• This upside-down pyramid of debt eventually collapsed. Inflated valuations of illusory financial “products” such as CDOs and SIVs were eventually written down to their true worth – nothing.
• When they realized that there was no intrinsic worth inherent in the financial products that they owned and traded, the financial markets became paralyzed.

So what did our beloved leaders do in response to this debt-fueled crisis?
• They created “stimulus packages” to get money moving again. They funded these packages with ….errrr….. more debt.
• They created new committees and new official positions to establish new rules, structures and governance to steer us through this crisis. And they staffed these positions with …..errrr…. the same blood-gorged parasites who gamed the system to create the crisis in the first place.

You are probably thinking that a concussed work-experience student who has left his Ritalin at home could come up with policies that better address the underlying problem. So did I.

In defense of our leaders, I should point out that a drug-deprived, concussed work-experience student won’t be seeking re-election, so he has fewer limitations than our politicians. A politician has about as much chance of enacting fiscal policy purely because it is an important thing to do as the fan belt in my car has of driving the overhead cams purely because it is an important thing to do. They are both part of an overall machine. The machine decides what they do, and if they want to fit in, they do it.

Trend 2. Constraints in the supply of cheap, easily accessible oil started to bite.
Oil hit $147/barrel, then oscillated wildly. Starting in 2007, the IEA warned repeatedly of a supply crunch. These warnings were still being repeated in 2010

Between 2005 and 2010 numerous governments and NGOs created Peak Oil task forces of various types and these task forces delivered their warnings. The most recent such warning came from a group of UK Businessmen that included Richard Branson ( ). This group warned that Oil shortages, insecurity of supply and price volatility will destabilise economic and social activity potentially by 2015.

Here in Australia a number of task forces delivered similar reports, the most recent being Queensland Government’s Oil Vulnerability report.
So our leaders have been busy implementing all of the mitigation actions recommended in these reports right? Of course not! What on Earth was I thinking when I wrote those scenarios?

I assumed that when the crisis was so clearly upon us we would have a war-level response. Wrong. You only get a war-level response when the war has already started. Let us not forget that we were still shipping steel to Japan just prior to WWII, despite the clear warnings that the Japs would send it back to us as gift wrapping for high explosives.

In summary, the Australian Government response to Peak Oil has been essentially nothing.

Trend 3. Climate Change.
Drought and firestorms in Victoria. Melting in the arctic. The first commercial passage through the North West passage of the arctic. Acidification of the oceans. Do I need to continue?

So what did our leaders do about it? Well they rushed off to Copenhagen and held crisis meetings for a week and decided to do …. nothing.

Why I Need A New Plan – Summary.
If you had told me when I wrote my scenarios in 2004 that within 6 years entire nations would be technically bankrupt and defaulting, that oil would hit $147/barrel and that the arctic would be melting. Well, I would have laughed at such an improbably-compressed timeline.

If you then asserted that governments would respond to these events by doing nothing I would have dismissed such a notion as utterly implausible.

My Worst-Case Scenario assumed that these events would be spread over decades and that governments would respond. I speculated that despite the responses, the consequence could be an event of the same magnitude as The Great Depression and the war that followed.

However, in reality things are unfolding faster than I expected, and governments are doing less than nothing. The result will not be fun.

Benign scenarios are still possible, but for my Worst-Case Scenario I am now forced to ask: What is worse than The Great Depression and WWII?