Citizen Action Monitor

MUST READ – Dr. Nate Hagens’ masterly synthesis of the Big Picture implications of the coronavirus crisis

Prof. Hagens’ overview captures the complexity of our deadly predicament, a systems synthesis unmatched by other commentators.

No 2607 Posted by fw, March 29, 2020 —

To access links to other posts by Nate Hagens about The Human Predicament, click on the Tab titled Teachings of Dr. Nate Hagens about The Human Predicament – Links to Posts

“Alas, the world, and particularly this virus and the response to it, has accelerated the timeline a bit, and we are now amid a dress rehearsal (hopefully that only) of the larger events I see unfolding before 2030. Given all the unknowns – rather than put a % on various outcomes and make a slew of predictions – I’d prefer to provide what I see as the context for our coming challenge, hoping we can avoid the worst and steer towards the best. Below is my assessment on our systemic situation along with some brief suggestions of ‘What to do’.”Dr. Nate Hagens, Resilience

Dr. Nate Hagens

Nate Hagens is a well-known speaker on the big picture issues facing human society and currently teaches a systems synthesis Honors seminar at the University of Minnesota ‘Reality 101 – A Survey of the Human Predicament’. Previously Nate was President of Sanctuary Asset Management and a Vice President at the investment firms Salomon Brothers and Lehman Brothers. Nate’s presentations address the opportunities and constraints we face after the coming peak of global economic growth. On the supply side, Nate focuses on the interrelationship between debt-based financial markets and natural resources, particularly energy and the unique (and so far unplanned for) risks from the coming ‘Great Simplification’.  Nate has appeared on PBS, BBC, ABC and NPR, and has lectured around the world. He holds a Masters Degree in Finance with Honors from the University of Chicago and a PhD in Natural Resources from the University of Vermont.

In his Conclusion, Nate writes:

“These suggestions are just a tiny beginning. My thinking is evolving on all of the above. But finance and social inequality will be the most important near-term hurdles.  We need systemic response informed by systemic knowledge ….This is the collaborative opportunity of our time. The knowledge I have regarding our growing predicament does not reduce my anxiety, but explaining it and sharing it somehow makes me braver. Understanding all the above is no panacea, but I hope it might increase our capacity to engage with these issues and make better decisions.”

Nate’s systems synthesis, along with some brief “What to do” suggestions, are presented initially in 12 categories. As an afterthought, he added another 8. Here’s a list of all 20 categories — 1/ We are part of a system; 2/ The virus; 3/ The real health epidemic; 4/ The economy; 5/ Finance; 6/ Supply chains; 7/ Inequality; 8/ Energy; 9/ Environment; 10/ Geopolitics; 11/ Governance; 12/ What to do? – AFTERTHOUGHT categories – 13/ Government; 14/ Finance; 15/ Food system/Agriculture; 16/ Education; 17/ Politics / Governance; 18/ Community; 19/ Culture; 20/ Individuals.

My 14-page repost of Nate’s information-rich article will be a cognitive challenge for most people – it was for me. But the intellectual investment is worth the knowledge payoff. His use of categories will offer readers the option of reading selectively. (I highly recommend not-to-miss categories  4/ The economy and 5/ Finance). I also recommend that you keep Nate’s article on file as a reference tool for repeated refresher updates, and as an aid to informed decision making.

My slightly edited repost, below, includes my added subheadings, bulleted reformatting to enhance readability, added definitions of terms, added hyperlinks, and some text highlighting.

And, please, do refer my repost of Nate’s article to family and friends.

You can also read Dr. Hagens’ article on the Resilience website by clicking on the following linked title.

**********

An Overview of the Systemic Implications of the Coronavirus by Nate Hagens, Resilience, March 25, 2020

With the exception of some public talks, I’ve largely been quiet the last five years on social media and other venues with respect to describing our societal situation, despite having strong opinions on what is happening and what is going to happen. I’ve mainly been working behind the scenes on responses to the coming end-of-growth situation and have chosen to not be a perpetual buzz-kill to real people I care about who (mostly) prefer to ‘watch a different movie’.

The coronavirus pandemic has precipitated a “dress rehearsal” for larger events to come, before 2030

Alas, the world, and particularly this virus and the response to it, has accelerated the timeline a bit, and we are now amid a dress rehearsal (hopefully that only) of the larger events I see unfolding before 2030.

What follows is an assessment of our “systemic situation” along with some “What to do” suggestions

Given all the unknowns – rather than put a % on various outcomes and make a slew of predictions – I’d prefer to provide what I see as the context for our coming challenge, hoping we can avoid the worst and steer towards the best.  Below is my assessment on our systemic* situation along with some brief suggestions of ‘what to do’. [*system — a set of things working together as parts of a mechanism or an interconnecting network; a complex whole]

[Summary of Hagens’ five key points]

  • We are part of a system. The virus’s impacts on human health is but a small part of the impacts from SARS-Cov-2* (COVID-19) on human civilization and [the] future. [*SARS: Severe Acute Respiratory Syndrome; SARS-CoV-2, is actually the virus that causes COVID-19 (the disease).]
  • While we might one day surpass 2019 GDP levels, we will never get back to what was recently considered normal in our interactions, expectations and lifestyles.
  • The impact from the cure (shutting down economies) may be worse – and possibly much worse – than the disease. Because of this, the central banks need to now guarantee everything – for citizens and businesses, until the crisis is passed.
  • We can use this external throttling down of our [civilization’s] metabolism* as an opportunity – as individuals, as society, and as a species – to arrive at a more sustainable, less crazy way of interacting with each other and the planet. But we first need to navigate the financial crisis. [*metabolism – the processes that occur within a living organism in order to maintain life]
  • Government, corporations, philanthropy, and communities are comprised of individual humans. Take good care of yourself; be Kind and Good — These things can also be contagious.

 

1/ WE ARE PART OF A SYSTEM

Hagens identifies “problems” with features of our “system” that the global pandemic has exposed

We are in the midst of a global pandemic. But SARS-Cov2 is only the proximate risk. Ultimately, the virus is laying bare many of the problems that have built up over decades:

  • chasms of inequality,
  • the use of virtual debt to paper over physical world problems,
  • ecological / systems’ ignorance,
  • addiction,
  • obesity,
  • globalized just-in-time (and fragile) supply chains (especially for basic needs), and
  • fractured political governance— all in service of the growth dynamic, as described in this paper, and this video.
  • We have chosen economic efficiency over resilience.
  • We have substituted technological stimulation and money for social interactions.
  • We have substituted dopamine and supernormal stimulation (most of us, including me) for physical health. 
  • The game has been the plan, and the game has changed so rapidly that we have no plan.

 

2/ THE VIRUS

“LOTS more people have this virus than are being tested or even who are sick, or even who are symptomatic”

I have somehow arrived at middle age with a load of intelligent friends. Which is a gift that I treasure. But never in my life have I had so many smart people in my network disagreeing on the order of magnitude on the [pandemic] numbers.  My *sense* is that a) the mortality rate from SARS-Cov2 might be overestimated because b) the morbidity (how many people have it) is vastly underestimated. LOTS more people have this virus than are being tested or even who are sick, or even who are symptomatic. I won’t waste space here speculating on the eventual number of deaths from this virus. Because whatever that number is, unfortunately, it’s worse than that.

 

3/ THE REAL HEALTH EPIDEMIC

Despite being wealthy, millions are unhealthy, the nation is not medically well prepared for this virus

SARS-Cov2 is much more lethal for a) older humans and b) those people with existing health conditions like high blood pressure, diabetes, heart disease, and obesity.  Unfortunately, wealth, comfort and prevalent access to cheap (but profitable) food and the siren-song of supernormal stimuli shouting louder than outdoor activities has resulted in

  • a nation (ours) with 100 million(!) citizens overweight and 39% obese!
  • We now have 5% of the world population but are recipients of 50% of world’s medical prescriptions, including
  • an enormous number of people with mental health issues.
  • Despite being one of the richest countries on earth (in total, not average) we are not medically well prepared for this virus.
  • We possess a very unhealthy population, with only 2.87 hospital beds per 1,000 people, and too few ventilators/ICU beds.

This is the healthcare/medical backdrop.  But it [the situation] is much worse than that.

 

4/ THE ECONOMY

The economic news is bad, very, very bad if shelter in place rules stay in effect into June the economy will fall 20% or more, rivaling 1930s 

Economic growth [GDP] is a measure of the goods and services consumed during a period. Just like a shark needs to keep swimming to run oxygen through its gills, our economic metabolism can ‘slow’ but if it slows too much it goes into stall—a.k.a. a nose dive, from which even the best pilots in the world can’t make it recover.

  • With the recent shelter-in-place announcements and shutting down of commerce in most places, we are approaching such a situation of no economic ‘oxygen’.
  • As of March 22 we are already in a depression, my guess is that in 2020, GDP will be down 10% at least, and if shelter-in-place rules stay in effect into June the economy will be down 20% or more, rivaling the early 1930s.
  • The longer and wider the shutdowns are, the steeper this drop will be, and the less likely it will recover to the way it was.
  • The risk here is that the US (and world) economy goes into the abyss. And if shut downs and shelter-in places continue for more than a few weeks, individuals, corporations and institutions will not be able to stay afloat.

If we get out of this, less economic growth might be a good thing as long as basic needs are met, far more equitably

(And let’s be clear: the old normal sucked for many/most people, so ‘less GDP’ might be a good thing as long as basic needs are met, and far more equitably, while replacing what was (frivolous) consumption with well-being tethered to natural and social capital. But first things first).

 

5/ FINANCE

As a systems-blind culture, we just assumed economic growth will continue indefinitely

Society swims in finance like a fish swims in water. As an energy-blind/systems-blind culture, we have assumed that growth is a natural law—that ingenuity and technology will naturally result in more growth in the future.

But in recent decades, that growth has been massively subsidized by credit (debt)

For the past 50 years – and especially the last twelve – our ability to afford goods and services has been massively subsidized by credit.

For example, in the 2008/09 crash, the credit largely went to Wall Street, not Main Street

This credit, instead of going to Main Street in 2008/09, largely went into financial assets and has blown the Biggest Asset Bubble in History.

Worldwide, today, we have hundreds of trillions of claims on an 80-trillion real economy, about to drop 10-20%

Globally, we now have hundreds of trillions of dollars of financial claims on a real economy of around 80 trillion dollars, which is about to drop by 10-20%+.

For the last decade, corporations borrowed at 2% interest, and used it to buy back their own rising stocks

The story in 2008 was about residential mortgages. In 2020 it will (at least) be corporate credit, as we have just ended a ten-year period of extraordinary leverage by corporations borrowing at 2%, using the proceeds to buy back their own stock.

Financing the pandemic fallout will cause a massive decline in corporate balance sheets

Now there is going to be a massive decline in corporate balance sheets and many (50%?) of companies could be rated junk, which would mean insurance companies and pensions can’t own them (unless rules are changed).

Many trillions of corporate bonds will be unloaded, leaving central banks as the buyers of last resort

The ‘exits’ would be way too small for all the liquidations that people would have to make as we move into a deflationary depression, and these liquidations would then have a reflexive impact on the real economy.  The central banks would be the only buyers of last resort, because so many trillions of bonds will be unloaded that no hedge fund or wall street bank or insurance company would be able to absorb them.

RESULT – Stocks and corporate bonds will have huge negative returns, leaving major central banks on the hook

What does this all mean?  Stocks could be down 40-70% and bonds (other than Treasuries) would also have negative returns. The FED [US Federal Reserve] (and ECB [European Central Bank], and BOJ [Bank of Japan], and BOC [Bank of China], and BOE [Bank of England] and…) will massively expand their already massively expanded balance sheets. Eventually they’ll get approval to buy corporate bonds, and even stocks.

Bailout funds are not unlimited – Choices will have to be made about which companies to save and which to sacrifice

There will be limits. We can print money, but we can’t print energy, resources or productivity.  We got a clue in markets last week as US treasury yields backed up by 60 basis points when they announced $1 trillion stimulus. In other words, the amount of funds available to bail out society is not unlimited before market participants call uncle on the funding of it.  This is a massive liquidity crunch and, in same vein as the virus itself, there are only bad options.  We must choose the ‘less bad’.

What criteria do we use to choose MUST SAVE from LET FAIL?

Personally, I do not think society gets great benefit from Carnival Cruise lines and related frivolous use of long term scarce resources. Of the tens of thousands of companies that will fail without government financial bailouts, we could make a list of those that are important, useful, marginal or better off left to fail.

The choice will not be so simple – For example, should we let Carnival Cruise Lines fail?

[NOTE: Hagens adds to this example in a comment he makes to his article. A copy of his comment appears at the bottom of this post].

But if we – to take one example – let Carnival Cruise Lines fail,

  • there are billions of dollars of bonds owned by pension funds and institutions that go to zero.
  • And there will be tens of thousands of people out of work from this one company.
  • The ripple effects on supply chains, basic services and financial architecture of letting companies go under will be massive, and uncontrollable.

And what if the “cultural institution of finance” itself ends? Near term, we would risk a 30% drop in GDP

Last but not least, there is a real risk here that the cultural institution of finance – where we take for granted that we (or a company or country) – can borrow via getting a loan, ends. This is the risk I have been professionally working on and have thought might happen circa ~2025. The near-term result of the debt bubble bursting could be a 30% drop in GDP and headed lower after that.

The shocking truth is laid bare – we created “financial representations of reality” and treated them as reality

I think this could (obviously) now possibly happen this year, but I suspect not this go around because leaders (and people) are focused on a virus and their physical health, and thus their attention is not on the health of the financial architecture. However, the core truth remains: we created too many financial representations of our reality and treated them as reality. The pandemic may unmask those risks.

Financial assets will likely go up again, but the financial system will be severely weakened

We will recover from this (probably) and financial assets will eventually go up again, but the system will be severely weakened with central banks and governments having used most of their monetary/fiscal ammunition.

The next shock to the system will likely mean the end of the use of credit to facilitate growth and a major economic reset

So, in my opinion, the next ‘event’ will likely mean the end of our ability to use credit – and central bank backstops – to facilitate growth and a major economic reset.  I strongly hope we will use what’s going to happen in our economy the next few months as a ‘dry run’ of this real thing (more on that below).

Privatizing gains and socializing losses has been the “American way of life” for decades, and turbo-charged since 2008

**Note regarding our financial situation:  For those who are antagonistic towards the concept of ‘socialism’, I hope you understand after reading the above that we have socialism in the USA right now but it’s socialism for the rich/large banks/corporations. The FED has continued to support and bailout the financial asset owning class—and it will continue to have to in order to buy us time.  Privatizing gains and socializing (onto the general populace and unto other species) the losses has been the ‘American way of life’ for decades, and this model has been on turbo-charge since 2008.

 

6/ SUPPLY CHAINS

Globalization in blind pursuit of economic efficiency is not fit for purpose in a world battling a pandemic

Finance and economic numbers aside, the global complexity we’ve built up in pursuit of economic efficiency (lowest cost) has created a quite fragile global Rube Goldberg machine of just-in-time commerce.

  • In 2009, Ford had to stop producing trucks because the pigment used in painting them was only made in Fukushima, Japan.
  • We are only in early stages of figuring out which components are made overseas that are about to stop arriving.
  • We do know that 70% of drug APIs [Active Pharmaceutical Ingredients] globally are made in China, so drug shortages are already starting and will probably get worse.
  • The bigger question is what sort of unknown critical components will we need but will be unavailable if the lockdown continues? For the want of a nail.

 

7/ INEQUALITY

“The biggest risk I see from this pandemic is the laying bare of inequalities…”

I think the virus will pass, the economy will (probably) recover and the financial guarantees will ultimately hold—at least for a few more years. The biggest risk I see from this pandemic is the laying bare of inequalities created during the past 50 years of unfettered growth.

In the coming weeks/months we will witness a bifurcated economy—

  • those well-off people who can comfortably work from home (like me)
  • and those people who work in hourly/gig economy, who have spent their meager savings already and have no recourse.
  • Even before this crisis, roughly 40% of Americans didn’t have enough savings to handle a sudden $400 expense.
  • How governments / communities support the lower one-half (and over time, the lower three-fourths) of society will be the challenge of this crisis and eventually of the next decade.
  • Perhaps the idea championed by Andrew Yang (a Universal Basic Income of $1,000 per month for all American adults) can now become a reality, but sending $1,000 to every American is not remotely going to cut it.

If the severity of wealth and income inequalities is not solved, there will be a revolution

The ‘good news’ is that many more people of all political stripes are now recognizing the severity of our wealth and income inequalities. If this isn’t solved, there will be a revolution and no one will have much of anything. (Note the lines in your own town at the gun stores. We have more guns than citizens and by far the highest number of guns per capita in the entire world.) The gap between the haves and have nots is about to get real serious real fast. We are all in this together and need to start acting like it—locally and nationally.

 

8/ ENERGY

This pandemic has put us in the worst possible situation for our energy future

This is the worst possible situation for our energy future.

1) This likely cements November 2018 as global “peak oil”*, because there will now be very little upstream investment to offset existing ~6% underlying decline rates. [* ‘Peak oil’ defined: The oil trapped beneath the surface of the earth exists in a limited supply. It is non-renewable and therefore its supply is finite. Because the amount of oil under the earth is limited, eventually readily available oil supplies will decrease. As these supplies decrease, it becomes more expensive to extract oil from the earth. As the amount of oil available to humanity becomes harder to extract, it will lead to declining oil production. Declining oil production will make each barrel of oil more expensive, due to increasing global demand for oil. Higher prices will hurt the global economy and will eventually require the globe to discover and implement alternative energy sources.]

Rising costs, supply chain disruptions and, now, a serious lack of capital, means renewable energy is on life support

2) With $25 per barrel of oil and $1.5 per cubic foot of natural gas, supply chain disruptions, and (about to be) a serious lack of capital, scaling [up] of renewable energy is now likely on life support.**

**If you read my superorganism paper, you’ll see we never were going to fully ‘replace’ fossil carbon with renewables, so this exogenous throttling down could inform new scenarios and plans marrying the two in smart ways.

Public and politician worries about financial depletion will overshadow concerns about oil depletion

3) And worst of all, with energy at rock bottom prices (not costs) it means the general public and politicians will not recognize the centrality of fossil energy depletion as a central cause of our ecological overshoot situation, nor that the viability of our societies in 10-20 years needs to use our remaining one ‘wish’ (the other 2 we wasted), to use this fossil magic towards some longer-lasting higher-purpose cultural objectives.

Why oil and gas prices will fall – Watch for gas prices at the pump under $1 a gallon

In any case, even though global oil production has now peaked, financial depletion will be steeper than oil depletion and so for the foreseeable future advanced economies will be awash in oil and gas. Don’t be surprised to find gas prices under $1 a gallon coming to a town near you. What a horrible signal for what we need to do and where we need to go.

 

9/ ENVIRONMENT

Of all the critical issues we face, Nate cares most about “the web of life and Earth’s ecosystems”

As those who have been following my work for the last decade plus, you know that of all the issues we face, I care most about the web of life and Earth’s ecosystems.

“The growth assumptions in climate models are wildly disconnected from our money/energy/growth nexus”

On the climate side, we like already have 1.5ºC warming built in, but I’ve always believed the growth assumptions in the climate models are wildly disconnected from our money/energy/growth nexus.

“Human economic growth – and related emissions – will likely end this decade”

Human economic growth – and related emissions – will likely end this decade. This is actually good news if [effectively] managed.

The good news is the SARS-Cov 2 (COVID-19) pandemic provides an opportunity for making better systemic choices

With the pandemic allowing for more systemic awareness, better choices on how to build our infrastructure, our national goals, and what sort of energy mix we use during energy descent might be made.

The bad news is the environmental movement could take a big blow as funding/jobs and surplus devoted to that sector shrink 

Sadly, the environmental movement could take a big blow as funding/jobs and surplus devoted to that sector are now going to shrink.

Our largest task as a culture is to nurture a beneficial economic descent for the common good

Yet it is still our largest task as a culture to midwife some benign trajectory during economic descent.

In the process, we risk forgetting we share Earth with ten million other species

For the other 10,000,000 species we share this planet with and for future generations of us and them. Unfortunately, this will be on very few people’s minds for the moment.

 

10/ GEOPOLITICS

Danger ahead — pandemics expose economic faults, economic faults expose geopolitical faults, and geopolitical faults result in conflict

Geopolitically this is a very dangerous situation, as many countries in the Middle East, Latin America and elsewhere are now facing serious fiscal deficits with leadership vacuums and uncertainty at high levels.

This provides the opportunity for various state and non-state bad actors to act up either opportunistically or to divert internal pressure towards social or economic unrest.

This is increasingly one of my core worries: virus exposes economic faults, economic faults expose geopolitical faults, and geopolitical faults result in… boom.

 

11/ GOVERNANCE

In US, clashes in federal / state policies could undermine unified action at a national level

This morning (March 24, 2020)  President Trump announced the possibility of re-opening the lockdown after 15 days. Setting aside the health care implications of such a decision, it highlights another core risk of this situation: widening the political divide. State Governors have ultimate authority on curfews, and if large states like CA and NY (with significant populations and economic influence) maintain curfews against Federal mandate we begin to have a bifurcated economy, geographically and politically. This is a crisis that requires leadership uniting to implement the above supports for our society.

It’s time for Americans to ask “What is an economy for?”

Which gets to the deeper question: can our fractured political system work in a de-growth environment? Because it depends on a much deeper question – what IS an economy for anyways?

Surely, the real health of an economy is the well-being of its people, its land and its future — not stock market peaks

I fear many Americans have come to equate it with the level of the stock market — when the real health of an economy is the well-being of its people, its land and its future.

Will this pandemic teach us anything that will take us beyond crippling political partisanship?

These things can’t easily be compressed into a financial number, which should be one core lesson we learn after this crisis is passed. Can the lesson and vision be shared beyond traditional political boundaries?? An open question.

 

12/ WHAT TO DO?

Four key points

I could go on, but I think I’ve made enough of my point, which is:

  • this virus is uncovering many problems that finance and a growing economy papered over.
  • We face a systemic crisis that will remain after the virus risks have passed.
  • We live as part of a system and it’s high time we start speaking about how to go forward as civil, reasonable people choosing ‘less bad’ options in the near term,
  • while considering inspired choices for the future post-crisis.

In answering, “What to do?” there are two timelines: 1) What do we need to do right now to navigate this crisis, and 2) Longer term policy/behavior/cultural changes to work towards and adopt after the crisis is passed.

 

AFTERTHOUGHTS

Here are some key categories (that I thought of Sunday morning):

13/ GOVERNMENT

Increasingly there are two giant risks and no easy solutions.

Risk One — US needs government-mandated stay-at-home / shutdown order to drop infection rates

First, epidemiologists tell us we need to flatten the curve using extreme social distancing. Because in the U.S. (and in many other countries) we waited too long to impose social distancing measures and have feeble testing, contact tracing, and quarantine measures for those likely exposed, some kind of widespread, government mandated stay-at-home/shutdown order is required to drop infection rates and buy us time to set up containment systems.

Risk Two — Downstream economic impact of long-term shutdowns – more deaths and chaos

Second is the downstream economic impact of these shutdowns, because if they go on for long, we will create 1-2 (3?) orders of magnitude more deaths and chaos from the other risks mentioned above (financial blow-ups, revolutions, supply chain breakage, lack of affordability, and other systemic risks).

I suspect that in coming weeks, as this becomes more apparent, and as the morbidity rates (as % of those tested) decreases, we will increasingly hear leaders suggesting lifting the economic headlock—calling for creating safe spaces for the people at risk, but announcing the virus is unstoppable (but hopefully manageable, e.g., Singapore*) and choosing the lesser of two bad choices. [*Singapore is a sovereign nation state with a UN estimated population of 5,819,770 (2018). Re its virus response, Singapore quickly set up systems to try to identify and treat every case in their territory. The prime minister called for calm and assured residents that all health care related to the disease would be free. Singapore continues to find a few new cases each week, but they’ve avoided the explosive outbreaks that have occurred elsewhere. When comparing Singapore and the US in their respective handling of the outbreak, take into consideration the differences in population size and total areas.]

What we need to do is:

  • Support all failing businesses with direct cash injections (or guarantees) without discriminating between “important” and “not important” (something Democrats don’t like to do), and
  • Support all out-of-work people with significant direct cash handouts (something Republicans don’t like to do) for the entire duration of the curfews.

Right now we need national support of everything.

  • The government needs to backstop a significant amount of private payrolls (they are doing this at 75% in Denmark).
  • We need to keep people fed, housed, and healthy. Guarantee these things with the financial kitchen sink.
  • While at same time preparing longer term blueprints for a different, more sustainable pathway.
  • This could be the moment to democratize our basic needs: water, electricity, internet, food, health care, etc.
  • There will be time for a massive New Deal to transition millions of Americans currently working for zombie companies in dead end industries to public good/conservation corps projects like in 1930s and 1940s.
  • But we need to get oxygen to the veins and arteries of our economic body.

 

14/ FINANCE

IMPORTANT — To nationalize the economic risk, we must nationalize our basic needs

We now have to nationalize the economic risk that was created from nationalizing financial risk at a time when we need the nationalization of basic needs. A systemic pickle.

Don’t repeat the 2008/09 mistake – we bailed out the banks, let Main Street flail

We have painfully sharp memories from 2008/09 via TARP and other programs, when we bailed out banks and other companies while letting Main street flail.

Right now we must bail out both companies and people

But we now have to do it again, at a larger size. Democrats don’t want to bail out companies. Republicans don’t want to bail out people. But right now we need to do both, and fast, and large, otherwise we risk a social collapse.

“Two bad options. One (much) less bad”

Despite our feelings, this is not the time to discriminate on who we bail out—

  • we have to bail out nearly EVERYTHING, perhaps using special purpose vehicles wherein the FED takes temporary ownership position, or something similar.
  • We now either 1) get destruction [very bad] or 2) [less bad] we make government guarantees using borrowed money. Two bad options. One (much) less bad.
  • [The goal is] to get back to stability, with enough time and insight to change the system towards something more sustainable.

Federal Reserve must take equity positions of $15 trillion or more in thousands of companies

This means a FED [Federal Reserve System] balance sheet increasing from $5 Trillion to ~$15 Trillion+, or a lesser amount with US Govt taking equity positions in thousands of companies. Yes, this will have consequences, but it is necessary.

 

15/ FOOD SYSTEM/AGRICULTURE

In this pandemic, America’s large commercial food system is at risk of freezing up before 2020 crops are planted

Most food in countries like the U.S. is grown by large, commercial farms who rely on —

  • functioning credit,
  • supply chains, and
  • a mobile labor force (often foreign).

These are all at risk of freezing up before most 2020 crops get planted. It is imperative that what is described above under [the] Finance [heading] be done to ensure food production for later in the season.

Now is the time for Americans to start buying from local farmers

Because of difficulties with border crossings happening now, migrant labor is already in short supply, which means crops such as fruits and vegetables are at the greatest risk now. Families may want to ramp up their gardening to supplement purchased food. Locally organizing ‘garden boxes’ of seedlings to be delivered to people with yards. Canning/preserving seminars, etc. can only help. If you don’t already know and buy from local farmers, now is the time to start doing so, and in doing so you create a network of social capital to boot.

“Over the longer term, the entire food system needs to be overhauled”

Some of my colleagues have already written extensively about this, as over the longer term, the entire food system needs to be overhauled to be less complex, more locally oriented, and attuned to the realities of soil, energy and nature.

Like everything [else], our future agriculture system can be informed and improved by this crisis, but we first need to navigate the crisis.

 

16/ EDUCATION

This virus could be the death knell for our current university/education system and/or curricula

This virus – even if it resolves in next month or so – could well be the death knell for our current university/education system:

a) Many small/mid-sized liberal arts colleges will fold up, due to endowments shrinking, a lack of affordability from students, and a lack of interest.

b) Half of the stuff we teach at universities is divorced from any coherent map of human futures and is so much trivia relating to a unique non-repeatable period of growth in human history. We will still need scientists and systems generalists, but we also are going to need plumbers, welders, and technicians of all kinds. The virus will pop the university bubble. We need new educational models commensurate with the reality of coming decades: a more local, less materially consumptive, more ecologically aligned existence.

 

17/ POLITICS/GOVERNANCE

For as long as this crisis lasts, America needs political leaders to postpone the blame game

I vote Democratic, but have many friends in all political classes. I consider myself a centrist not because my views are ‘centrist’ but because I believe the coming Great Simplification is going to affect all of us and we are truly lost unless we work hand in hand, mind in mind, with all kinds of stakeholders—rich/poor, black/white, urban/rural, left/right, young/old, etc.  Until this crisis is passed (and that may be for a long time) we need leaders on both sides to postpone the blame game.

The primary challenge now is to build trust nationwide so we are united and prepared for any catastrophe

I am hopeful this crisis might break the frozen political partisan iceberg, but many questions and risks remain.  Before this crisis one of my biggest projects was to get people to prepare for this kind of economic growth-decimating scenario. I wasn’t trying to get people to consume less, or re-localize, or buy renewables or any of that. All I was trying to do is get people talking to each other—building nodes of social capital and communication so that relationships existed. Therefore, when strange things happened there was trust, knowledge, and a collective that would respond locally – across the country – to the emergent risks.  I still think this is a vitally important direction for us to go.

Yes, we need “spatial distancing”, but, above all, with “social bonding”

I really hate the term ‘social distancing’—we need spatial distancing, with social bonding. Yes, we identify as conservative or liberal but we are also a) all Americans, b) all citizens and c) all humans.

Find some plans or projects you can collaborate on locally

And above all we are certainly not merely ‘consumers’.  During this crisis, reach out to people who politically disagree with you and break (virtual for now) bread, find common ground, and find some plans or projects you can collaborate on locally in an apolitical collective that makes the future of your city/neighborhood better.

This is one of those times when there is no natural leader to do these things. So, if not you, WHO?

 

18/ COMMUNITY

Now is the time for YOU to begin PHONE conversations with neighbors, which will reduce stress and build trust

Now is the time to get on phone with people that live near you and begin conversations. Even if you don’t come up with concrete action plans this serves two purposes: 1) we are social creatures, so even with no resolutions, socializing reduces cortisol and stress responses, and 2) it builds trust, alliance, and cooperation that will be a central backbone of authentic community now and in the future.

Brainstorm ideas for what is needed in your community

What is needed in your community? Maybe it’s creating garden boxes of seedlings to be delivered door-to-door after social distancing is loosened, so people can plant gardens and grow a bit of their own food. Or maybe canning workshops and makerspaces, tool sharing libraries, and older citizens sharing knowledge with younger ones.

Support and expand the commons

Have the haves in your community use their digital surplus to support and expand the commons. Don’t wait for government bailouts; do it locally. This can include community land trusts, hoophouses, protecting ecosystems, and protecting prime agricultural land from development. Start a local currency – not as an alternative to the dollar, but as a way of building social networks.  Let’s not let this crisis go to waste.

 

19/ CULTURE

Here is the hope.

  • The disconnect between our physical reality and what people assumed to be our reality has now been cut in half.
  • A good % of Americans now (possibly for the first time) realize we live in a physical world.
  • We have so many amazing pro-social responses happening now—taking care of health care workers, donating masks, delivering food to the elderly, sharing knowledge, accelerating intellectual collaboration/peer review on the science of SARS-Cov 2.

How do we keep and expand on this emergent altruism in our culture?

Start by asking – What is an economy for? Surely it’s for the common good, not just for the 1%

  • A return to 1970s-1990s level per capita GDP in advanced economies this coming decade is HIGHLY LIKELY, in my view.
  • But keep in mind that we, in the USA, consume 50 times the goods and services as the average human in the year 1800.
  • Being mentally prepared for this is a first step.
  • What makes us happy?
  • What do we value?
  • Do all of us really NEED to drive to work 5 days a week? Or are other arrangements possible?
  • Do we want a cultural goal of maximizing GDP or minimize suffering and maximize well-being of our citizens and ecosystems?

 

20/ INDIVIDUALS

What would you like to do the rest of your life?

You may now realize that the days of ‘normal’ are gone, so what is it that you’d like to do the rest of your life?

Mental resilience is going to be extremely important. Increasingly I hang out with people that meditate daily, because it empowers them to be present with the real (crazy) world in a calm and balanced way.  I made a ‘Dopamine Sarcophagus’ (a used ginseng container) to house my phone each night before I go downstairs.  I expect we will have 24/7 access to news and craziness, perhaps from here on out, so it’s important to create time to disconnect from media entirely and live life at a normal human pace.

We are now in cultural triage. Nearly every decision that is made is going to piss someone off, since we’re left with only ‘less bad’ decisions. Let’s be smart, civil, and tolerant. Change some tiny habits in your own life today. Today. If you’re reading this, you most likely have the time. Instead of focusing on stockpiling toilet paper or whatever else, consider instead how you might be of service to your broader community— call someone and talk, make plans, form committees for local triage, offer your help to local civic organizations, help someone without them knowing, widen your circle of empathy and compassion, and be kind to yourself.  If you have physical/mental health and resources, please contribute to making your community better/stronger. If you have significant resources, please make significant contributions – not just money, but building the network of real capital where you live.

 

CONCLUSION

“We need a systemic response informed by systemic knowledge…”

These suggestions are just a tiny beginning. My thinking is evolving on all of the above. But finance and social inequality will be the most important near-term hurdles.  We need systemic response informed by systemic knowledge—a clearinghouse of ideas and projects that work at various scales and timelines.  This is the collaborative opportunity of our time.

Deep understanding of our human predicament might increase our capacity to make informed decisions

The knowledge I have regarding our growing predicament does not reduce my anxiety, but explaining it and sharing it somehow makes me braver.  Understanding all the above is no panacea, but I hope it might increase our capacity to engage with these issues and make better decisions.

Don’t underestimate what people are capable of

I recently told a colleague that we vastly underestimate what young people are capable of. His response was, ‘Nate, we underestimate everyone’.  That hit pretty hard, because I immediately realized it’s true.  A crisis is here, seek out your better self and play a role.

Let collective intelligence inform near- and intermediate-term mitigation of this pandemic

Let’s create a living open source project—where collective intelligence informs near and intermediate term mitigation, one that helps us as a culture navigate the narrow path between fantasy and doom.  When we see gasoline this summer under $1 per gallon let’s not waste that moment in a Caligula-like orgy of consuming like we used to, but rather, reflect, imagine, and resolve to make America good again.

That’s All Folks! Good Luck!

COMMENT by Nate Hagens

NJ Hagens JRiverMartin3 days ago • edited

thank you JRMartin re bailing out, let me clarify:
There are many people out there – who are understandably feeling/saying a) that we shouldn’t bail out companies that gamed the system, b) or companies that have no future business model in a lower throughput economy or c) oil and gas or carbon intensive companies etc.

While well intended – this knee jerk (political) reaction would be an absolute disaster, if it were implemented. First off, lets say we discriminate between good companies and bad companies. If only a few of the ‘bad’ companies go under there will be an economic chain of events resulting in a) the bonds of the company going to zero, resulting in pensions and endowments going to zero (this is manageable as you say we can bail out or make whole the pensions, but not in the few week time frame we have available), b) relatedly, that will beget more selling to raise cash which will cause the financial leverage to cascade – (and we are now in FAR worse position than 2008) – today the D announced a 4.54 trillion dollar buy program for muni bonds and corporates on top of all the existing QE – this is 40% of the market!!) c) all the millions of people working at the ‘bad companies’ will be out of jobs d) most importantly – all the components and services provided by the ‘bad companies’ will gradually or suddenly go away causing systemic collapse, and many more reasons, not the least of which, we need this bailout NOW. And the logistics and complexity of who should fail and who shouldn’t are too difficult to be decided by political pork.

Our lives – and infrastructure – and expectations just got hit by an asteroid — and we’re going to use this opportunity to claw back injustices? Not the time – the famous quote attributed to Milton Friedman – ‘never let a crisis go to waste‘ might have an * – *and don’t turn a crisis into a death spiral’.

Btw – this is a privileged perspective and conversation to even have. Half of America is taking a respite from the rat-race, working from home, drawing down their freezers, talking to their parents more, etc. It’s a pause that refreshes and is refreshing. The other half is wondering how they are going to eat this weekend. and how they are going to pay their mortgage on 3/31. Not doing an open and massive bailout risks violent revolution 3-4 weeks out, not to mention the associated suffering.

We need to change the system but can’t change to a sustainable economy in 6 weeks or even 6 months. What can happen (and actually might) is the bailouts from governments will be SO massive (much, much bigger than in 2009) that govts will have to take ownership stakes in many/most businesses via SPVs [Structured Finance Transactions] – and that is a path that opens up other opportunities. In the future we will lose 30-50% of what is now privately owned as it is shifted to the government. Stealth nationalization is about to happen — and it’s not political but necessary to navigate this crisis.

The biggest hurdle I see is too many people will try to put their longer term ideologies into the mix, thus freezing the system. The stimulus package announced this morning is too small – they will have to come back for more in coming weeks. As I wrote, the writing is now plainly on the wall if/when we navigate the virus/economic crisis — The day when banks and governments can bail out anyone will be over.

But energy, complexity, healthy ecosystems etc. will all be post peak. As such, perhaps we should distinguish between Great, Greater and Greatest Depressions. We all know about the 1930s Great Depression. What’s coming this decade might be thought of as the Greater Depression – what’s coming the rest of the century might be considered the Greatest Depression, as we ride down the carbon pulse towards a lower throughput existence, hopefully in creative, compassionate and collective ways.

My main point is — This opens people’s minds (and maybe hearts) to the larger backdrop, but we can’t micromanage what we want to happen in a few short weeks or perhaps nothing will be saved.
kindly – Nate

p.s. Carnival Cruise lines might not be a great example as this will really be a horrible business model going forward – my main point is – in the short run we can’t discriminate, less that complexity gum up the response. It’s like a patient is in intensive care and we change his diet and exercise regimen while still on life support. Massive change is needed, but there is a sequence..

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