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Page added on June 4, 2018

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Waiting for Korowicz

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The first named storm of the Atlantic Hurricane Season took out our power briefly, and while nothing we experienced can compare to the outage still being suffered in the Caribbean from the last hurricane season, this one, Alberto, was enough to remind us of the Korowicz Crunch.
We have a standalone PV system on the ecohostel, although we are considering dropping the expensive and toxic battery bank in favor of grid-tie. There are massive solar arrays by the horse barn that feed power from The Farm into TVA’s supply, and in a long-duration power drought the community could quickly and painlessly disengage from our neighbors (and the government) and use our collective 150 kW to power essential needs, assuming TVA did not call in the Tennessee National Guard to take the power back and secure the site.
In that way, I suppose, having large PV arrays is a little like having massive oil reserves or an emergent nuclear weapons program. You may think those things are going to do wonders for your security but actually they do quite the opposite; they could mean you have to parse White House tweets to see if it is going to be safe to send the kids out to play that day.
Because of our solar roof, we often have power when our neighbors in the county don’t, but we get internet from a tower at the county seat and when they lose power, we lose internet. This time we also lost cellular service — never very good out here to begin with.
It is great not being tethered to an office, until you lose connectivity and realize that there actually was a tether and being untethered is not all it’s cracked up to be.
When Nicole Foss and I were teaching permaculture in Ireland a few years ago we stayed in the Dublin home of David Korowicz, a mutual friend through the FEASTA network. Korowicz has devoted much time to parsing the coming years and the Seneca Effect that eventually overtakes our overstretched economy.

“It would be some consolation for the feebleness of our selves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid.” 

— Lucius Annaeas Seneca (c. 4 BC — AD 65)

In the introduction to his 56-page white paper, “The Tipping Point” (2010), Korowicz laid out our predicament:

…a case is made that our civilisation is close to a critical transition, or collapse. A series of integrated collapse mechanisms are described and are argued to be necessary. The principal driving mechanisms are re-enforcing (positive) feedbacks:

A decline in energy flows will reduce global economic production; reduced global production will undermine our ability to produce, trade, and use energy; which will further decrease economic production.

Credit forms the basis of our monetary system, and is the unifying embedded structure of the global economy. In a growing economy debt and interest can be repaid, in a declining economy not even the principal can be paid back. In other words, reduced energy flows cannot maintain the economic production to service debt. Real debt outstanding in the world is not repayable, new credit will almost vanish.

Our localized needs and welfare have become ever-more dependent upon hyper- integrated globalised supply-chains. One pillar of their system-wide functioning is monetary confidence and bank intermediation. Money in our economies is backed by debt and holds no intrinsic value; deflation and hyper-inflation risks will make monetary stability impossible to maintain. In addition, the banking system as a whole must become insolvent as their assets (loans) cannot be realised, they are also at risk from failing infrastructure.

A failure of this pillar will collapse world trade. Our ‘local’ globalised economies will fracture for there is virtually nothing produced in developed countries that can be considered truly indigenous. The more complex the systems and inputs we rely upon, the more globalised they are, and the more we are at risk from a complete systemic collapse.

Another pillar is the operation of critical infrastructure (IT-telecoms/ electricity generation/ financial system/ transport/ water & sewage) which has become increasingly co-dependent where a systemic failure in one may cause cascading failure in the others. This infrastructure depends upon continual re-supply; embodies short lifetime components; complex highly resource intensive and specialized supply-chains; and large economies of scale. They also depend upon the operation of the monetary and financial system. These dependencies are likely to induce rapid growth in the risk of systemic failure.

The high dependence of food on fossil fuel inputs, the delocalisation of food sourcing, and lean just-in-time inventories could lead to quickly evolving food insecurity risks even in the most developed countries. At issue is not just food production, but the ability to link surpluses to deficits, collapsed purchasing power, and the ability to monetize transactions.

Among the alt-econ theorists, this Singularity-like scenario of cascading consequences has come to be called the Korowicz Crunch. Of course, the one thing neither Korowicz nor anyone else can predict is timing. We are at, or just barely past, the peak of a great arc of history, a golden epoch, and to ignore the benefits this moment has brought to freedom, medicine, science and the arts would be a pity. It would be equally remiss to ignore at whose expense most of those advances were purchased.
Still, as each year extends the untenable overreach of biophysical limits and the Ponzi scheme that is fracked methane underpinning the globalized economy, we notice how even greater fragility is being designed into the system, either by architects and economists unaware of Korowicz or by factors to which little attention is paid.
Not long ago — and still in many places in the world — homes would be only a short walk or bicycle ride from a market where groceries and other essential wares could be purchased. Then came the big box stores and these markets were consolidated, often to the peripheries of population centers, into shopping malls accessible by public transport if you are lucky, otherwise only by private automobile. Along comes Amazon’s purchase of Whole Foods and the stage is set for online purchasing and same-day delivery of your groceries, and everything else.
So much for the Bishop’s Storehouse, in the Mormon tradition, where a seven-year supply of food for the entire community was scripturally ordained.
Not long ago every community had one or more theaters or opera houses and on weekends everyone would attend, like a church service, to socialize before (in line), during (noisy galleries) and after (the corner pub). Then came Blockbusters with rental VHS and DVD and theaters moved into living rooms. Then came Netflix, and once more, Amazon, with view-on-demand services as long as you have the bread and the bandwidth. Much the same can be said for music, although live performances will always be with us in some way.
Not long ago, the bank would give you a passbook that showed, in handwriting, how much money was in your account. Then they went digital, and now even your monthly statements are online. With banks adopting cryptocurrencies, your readily-exchangeable wealth will soon be entirely on the blockchain.
I am old enough to remember backing up my data to 400 kB diskettes. They were called floppies even though they were hard plastic because before Sony shrunk them to 3 1/2-inch squares they had been flexible Teflon-coated magnetic disks storing up to 80 kB on every 8-inch platter. Now you can misplace a terabyte thumb drive if you are not careful. No worries! Storage and backups are all moving to the Cloud.
That is a good name for it — the Cloud. Wispy. Ephemeral. At its essence, just vapor.
I still have a functioning computer that loads CP/M instructions from a 5 1/4-inch floppy every time it boots, but I don’t think those are coming back any time soon.
Even though the coming of the Korowicz singularity cannot be Post-It’d to a particular date on the calendar, it’s wise to keep a foot in the prepper camp. A wall calendar, for instance.
Know where your water comes from. Have an antifragile supply of food — like the shiitake mushrooms that come after a big storm. They are a complete protein. Have back-up power that does not involve fossil fuels. Be able to cook. Keep your tools sharp and well-oiled. And have a good idea what you will do with your time when the internet goes away suddenly and permanently.
In the meantime, we are at the pinnacle of a gilded age. Be sure to enjoy it while it lasts.
The Great Change by Albert Bates

9 Comments on "Waiting for Korowicz"

  1. JuanP on Mon, 4th Jun 2018 10:21 am 

    “In the meantime, we are at the pinnacle of a gilded age. Be sure to enjoy it while it lasts.” That is sound advice. Carpe diem!

  2. onlooker on Mon, 4th Jun 2018 11:03 am 

    Perhaps I can summarize in a way that is more clear to the lay reader. This is a defining treatise on the now palpable fragility of our modern industrial civilization. Resources shortages EROEI and specifically Oil now stand to permanently short circuit any semblance of modern Capitalism and the ways our modern economies function. The weak points are various and they all threaten a chain reaction because of the manner in which our economic and trade system is dependent and interrelated. JIT and monetary credit and confidence are especially vulnerable to systemic failure. If, suppliers lose confidence in being paid or credit is withheld it threatens cascading defaults and seizing upon or freezing of economic trade and activity. Not to mention, how stock markets another critically weak point can initiate herd mentality and create a rapidly explanding dysfunction in our monetary system. So, these are structural deficiences getting ever more deficient. This is NOT some unlikey event or series of events. So the question is not if but when.

  3. Ghung on Mon, 4th Jun 2018 3:40 pm 

    Keep it small, keep it all, and fly under the radar.

    The biggest liability “The Farm” has is all the attention they’ve brought to themselves over the years while trying to make a difference….

    …. and I see nothing gilded about this so-called gilded age. One must ignore too much to believe it is so.

  4. baha on Mon, 4th Jun 2018 6:01 pm 

    Drive yourself to the farmers market and you have avoided 90% of that complexity.

  5. dave thompson on Mon, 4th Jun 2018 7:08 pm 

    This is a good article. Not to heavy on the gloom. But making the reality plain. As silly as it sounds, the butterfly effect, is always, in force.

  6. Davy on Tue, 5th Jun 2018 5:45 am 

    I have all of Korowicz stuff. He is a great guy. I contacted him a few times by email and his was approachable. Korowicz has significantly impacted me intellectually in recent years although he has not produced anything new for some time. Systems Analysis is the best way to deal with what we are and where we are going. I like the unemotional nature of it. Too many deep and angry feelings about what has happened and fantasies on what will happen. If we are going to get to the reasons for what has happened and the meaning behind it then we must leave the personal emotions aside. There will be plenty of time for that when the actual pain and suffering begin in the effort to survive.

    This will not be pretty nor easy. This is where emotions and heroics enter the equation. Emotions form the basis of morale. It is well known a smaller army that has great morale can defeat a larger less motivated one. So in this sense we should not dismiss emotions. Yet, in the pursuit of wisdom which is the knowledge of what knowledge to have, we should rise above emotions. What we have today is emotions directing what knowledge to have and use. Instead of morale we have blame and complain, which is failure. There is little understanding of sacrifice anymore. It is about personal satisfaction and the whine of victimization. How long this can go on is an open question.

    I point back to 08 often because that is when I was fooled. I thought I was so smart riding the crest of the wave that saw the coming crisis only to fool myself. I have learned some of my best lessons from fooling myself. Society is fooling itself now but I am afraid it does not have the luxury of a lesson. You as the individual and your community can navigate this coming crisis. When I say community I mean small group to a large group but today I would place an upper limit on community of a few hundred. Above that community splinters. Keep this in mind then when you plan and lead your people through the coming crisis.

    We can’t transcend crisis but you can use it to survive it. Start collapsing now in place and with dignity. The dignity is the self-respect of proper living for the time and this time is of less. Use the status quo to leave it ever so slowly. Acknowledge we are on the slope downwards as a civilization and from here on out problems will multiple. Acceptance with an attitude of survival needs to be your morale. This is the basis of meaning and it is meaning that provides morale. The details are diverse because there are so many locals and ways of life. Take your talents and where you live and transform it.

    I say this for those who can. Many of you can’t because life has boxed you in or you are boxed in yourself. We are our own worst enemies. We are all going to face death so leave the denial of death. Death will return as a dominant force as it was modernism. Time can be on your side instead of a demon. Science and history have shown that civilizations end. No ecosystem has ever survived intact. No species have survived. There has been evolution and extinction and this is how life survives. Our collective end may be part of our survival but that is beyond our comfort as individuals. The species may survive the coming collapse but many of us won’t.

    Time is amazing for a mortal. We slowly boil down in a rendering process from what grew up. It is respect for time that should sober us up. Time is something that cannot be changed or owned. Science cannot crack its secrets. In this sense it is about coming to terms with time. Nothing stays the same but for mortals 2 decades is an eternity or a short breeze once it passes. We may have some time left. If you can then do something. If you can’t find peace of mind in the proper attitude. If you can make a difference for others as a leader then now is the time to realize your heroics. If you are truly wise then do what needs to be done now. What needs to be done is the human challenge of survival. Do the heavy lifting for your significant others. If you are a leader of a group start now doing the sacrifice to prepare.

    You will have to be subtle about your calling because the status quo will dismiss you and discredit you. The status quo is not about the alternative to the status quo. With dignity do less and live stoically. Do this in a relative way. Relative sacrifice means there is no right level of sacrifice. You are living in your own unique station in life. Sacrifice for a wealthy man will be different than a poor man. Since you have to use the status quo to leave it this means through your place in life do less. It should be understood a rich man has much further to fall potentially but a poor man is closer to the abyss relatively. The metaphysics of being is quite different than the practicality of living. In this case understand that some people have more innate personal strength. Here relative sacrifice is no different some have deeper character so can make greater sacrifices than others.

    What is ahead is pain and suffering but the timing and the duration is unknown. Embrace it now and you will be ahead of the game. If you choose to ignore a future of pain and suffering then I say enjoy life now and don’t whine. Luck will play out here. Some of you will be blessed with luck. Luck can be enhanced and now is the time to enhance your future.

  7. Davy on Tue, 5th Jun 2018 6:12 am 

    Central Banker Observes Sudden “Evaporation” Of Dollar Funding, Warns Of Global Turmoil

    “That’s the message from the current Reserve Bank of India, Urjit Patel, who writes that “unlike previous turbulence, this episode cannot be attributed to the US Federal Reserve’s moves on interest rates, which have been rising steadily since December 2016 in a calibrated manner.” But does that mean that the Fed is not to blame for what increasingly looks like another budding EM crisis? Not at all: according to Patel, the dollar funding shortage “upheaval” stems from what he sees as the confluence of two significant events of which the Fed’s balance sheet reduction is one, while the second is the dramatic increase in US Treasury issuance to pay for Trump’s tax cuts; what is notable is that both events are drastically soaking up dollar liquidity. As a result, Patel blames a lack a coordination between the Fed and Treasury on the adverse flow through across global funding markets as a result of this decline in dollar liquidity, and writes that “given the rapid rise in the size of the US deficit, the Fed must respond by slowing plans to shrink its balance sheet. If it does not, Treasuries will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.”

    “Both are terrible news for Emerging Markets, which are in desperate need of reversing the ongoing dollar outflows; however as long as Trump continues to make America great, and funds said stimulus with excess debt issuance, emerging market turmoil is virtually guaranteed. As Patel further explains, this unintended coincidence has proved to be a “double whammy” for global markets, and especially emerging markets, largely as a consequence of one key event: the evaporation of dollar funding, not only from sovereign debt markets but in short-term funding markets as well as the recent spike in the Libor-OIS spread showed.”

    “Patel’s advice? Immediately taper the tapering, or rather, the Fed should “recalibrate its normalisation plan, adjusting for the impact of the deficit. A rough rule of thumb would be to reduce the pace of its balance-sheet contraction by enough to damp significantly, if not fully offset, the shortage of dollar liquidity caused by higher US government borrowing.”

    “The irony: one look at the Fed’s balance sheet shows that it has barely declined, and already reputable foreign central bankers are demanding the Fed stop the pain. One can only imagine the chaos and turmoil in EMs (and then DMs) in four months time, when not only the peak of the Fed’s monthly shrinkage hits some time in October, but when for the first time since the financial crisis, global central bank liquidity will shift from a net injection to a net drain and then accelerate as both the ECB and BOJ proceed to taper their own Fed monetization.”

  8. Davy on Tue, 5th Jun 2018 6:14 am 

    I posted this article because this represents an economic departure from the earlier period of the post 08 new normal. We now feel collectively habituated to this new normal. Here on this forum we had many more doom based comments back a few years ago. Peak oil and economic collapse were strongly represented. That has quietly disappeared with the changes in the oil markets and the ongoing status quo of central bank economic management. The sense of alarm is gone like it was but should it be? The economic aspect of this appears to be drawing to an end or will this just be an attempt to fix the results of central bank hubris? Can we even go back to what was being done with quantitative easing? Rates can’t drop much more. Negative rates are really not negative when you consider they just represent a transfer of wealth. Where is this going and what will be the impact to the energy markets and renewables. With the energy markets we might see demand destruction from recession or worse. This will likely also curtail the renewable transformation so important to so many. I see this time right now as a new test. We are leaving the new normal post 08 into a new normal of the limits of debt. Will we survive? Will this just be more of the slow death of modernism of market based capitalism and debt? I don’t know anymore but I do see and inflection. The numbers are showing a new direction. Should we be concerned?

  9. MASTERMIND on Tue, 5th Jun 2018 6:17 am 

    Peer Reviewed Study: Financial System Supply-Chain Cross-Contagion: Global Systemic Collapse (Korowicz, 2012)

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