page-loading-spinner
by Chris Martenson

As several have commented on the posting below, there is now more detail on the bailout package details.

I’m not sure how much value there is in analyzing all these moves and wrinkles, in part because I think the whole situation is just too complicated to predict, and partly because I doubt we are being entrusted with the whole truth.

Still, there’s some interesting stuff here.

Joint Statement by Treasury, Federal Reserve and FDIC

Today we are taking decisive actions to protect the U.S. economy, to strengthen public confidence in our financial institutions, and to foster the robust functioning of our credit markets. These steps will ensure that the U.S. financial system performs its vital role of providing credit to households and businesses and protecting savings and investments in a manner that promotes strong economic growth in the U.S. and around the world. The overwhelming majority of banks in the United States are strong and well-capitalized. These actions will bolster public confidence in our system to restore and stabilize liquidity necessary to support economic growth

Translation:  Boilerplate all the way. Nothing interesting here, except that it reveals a bias that economic growth will return once "liquidity is stabilized."   I hold a different view.  I happen to think that we were living on borrowed money and borrowed time.  I do not believe that we can return to "the way it was" by simply restoring liquidity.

Last week, the President’s Working Group on Financial Markets announced that the U.S. government would deploy all of our tools in a strategic and collaborative manner to address the current instability in our financial markets and mitigate the risks that instability poses for broader economic growth. This past weekend, we and our G7 colleagues committed to a comprehensive global strategy to provide liquidity to markets, to strengthen financial institutions, to prevent failures that pose systemic risk, to protect savers, and to enforce investor protections.

Translation:  Okay, this is positively Orwellian in some places.  I would dare say that "protecting savers" would include not forcing them to bailout rich Wall Street banks with direct subsidies and future inflation.  Further, savers would certainly enjoy some free market interest rates (lots higher than the Fed’s fictitious rates) that are higher than inflation.  Allowing savers a positive return would be the best way to "protect savers," while negative rates would reward banks and speculators.  Virtually everything done by the Fed and the Treasury to date has been at the pronounced deficit of savers. 

And the part about "enforcing investor protections" is thoroughly duplicitous, given the recent mid-flight rule changes that the SEC has dropped on the market lately (e.g. shorting rules).  And I won’t even mention the options backdating scandal and other well-documented abuses that were never investigated or concluded. 
(more)

Bailout package details emerging and a stunning expansion of FDIC coverage
by Chris Martenson

As several have commented on the posting below, there is now more detail on the bailout package details.

I’m not sure how much value there is in analyzing all these moves and wrinkles, in part because I think the whole situation is just too complicated to predict, and partly because I doubt we are being entrusted with the whole truth.

Still, there’s some interesting stuff here.

Joint Statement by Treasury, Federal Reserve and FDIC

Today we are taking decisive actions to protect the U.S. economy, to strengthen public confidence in our financial institutions, and to foster the robust functioning of our credit markets. These steps will ensure that the U.S. financial system performs its vital role of providing credit to households and businesses and protecting savings and investments in a manner that promotes strong economic growth in the U.S. and around the world. The overwhelming majority of banks in the United States are strong and well-capitalized. These actions will bolster public confidence in our system to restore and stabilize liquidity necessary to support economic growth

Translation:  Boilerplate all the way. Nothing interesting here, except that it reveals a bias that economic growth will return once "liquidity is stabilized."   I hold a different view.  I happen to think that we were living on borrowed money and borrowed time.  I do not believe that we can return to "the way it was" by simply restoring liquidity.

Last week, the President’s Working Group on Financial Markets announced that the U.S. government would deploy all of our tools in a strategic and collaborative manner to address the current instability in our financial markets and mitigate the risks that instability poses for broader economic growth. This past weekend, we and our G7 colleagues committed to a comprehensive global strategy to provide liquidity to markets, to strengthen financial institutions, to prevent failures that pose systemic risk, to protect savers, and to enforce investor protections.

Translation:  Okay, this is positively Orwellian in some places.  I would dare say that "protecting savers" would include not forcing them to bailout rich Wall Street banks with direct subsidies and future inflation.  Further, savers would certainly enjoy some free market interest rates (lots higher than the Fed’s fictitious rates) that are higher than inflation.  Allowing savers a positive return would be the best way to "protect savers," while negative rates would reward banks and speculators.  Virtually everything done by the Fed and the Treasury to date has been at the pronounced deficit of savers. 

And the part about "enforcing investor protections" is thoroughly duplicitous, given the recent mid-flight rule changes that the SEC has dropped on the market lately (e.g. shorting rules).  And I won’t even mention the options backdating scandal and other well-documented abuses that were never investigated or concluded. 
(more)

by Chris Martenson
Thursday, October 9, 2008

In this Martenson Report, I cover the importance of the credit markets to the smooth functioning of our just-in-time economy.  If the credit markets fully seize up, it is not a stretch to state that most businesses and the flow of many goods will also seize up.

In fact, this has already happened, to a limited extent.  Should this extend further, there are a few basic precautions that you should consider as a means of mitigating the impact of a potential banking/credit lock-up.

Okay, time for a little chat about the reasons that a credit market freeze-up has the potential to change your life in sudden and dramatic ways.

Many people mistakenly believe that at some point in the distant past we moved from a barter economy to a money-based economy. In truth, we have a credit-based economy.

In a money-based, or “cash-based,” economy, the whole thing would work a lot like your debit card. Businesses would immediately swap money for goods at the point of the transaction.

But that’s not how our system operates. Instead, when goods flow between distributors, suppliers, and retailers, they do so on the basis of credit. For example, if your local grocery chain orders additional food from their distributor, credit is what gets that transaction moving right away. The grocery store has a line of credit with the distributor, which has a line of credit with their bank, which has lines of credit with other banks, one of which has a credit arrangement with the grocery store.

Typically, businesses carry 30-60-90-day terms on cash settlement for goods and services sent/received. So the lines of credit are an important ‘lubricant’ to the process of buying and selling goods, with cash settlement coming after-the-fact and often comprising a bulk payment for numerous credit-based transactions that might have occurred over a period of time.

At the larger level, credit transactions worth trillions of dollars are occurring between importers and exporters, with municipality paychecks, between nations, in stock margin accounts, and so forth. Credit is everywhere and it is how we conduct business. Without credit, we’d need to revert to a cash-based economy (hard cash or the electronic equivalent) and the simple fact is that our financial and judicial machinery are just not set up to handle a cash-based economy. They could be, I suppose, but right now they aren’t.

So we need to ask ourselves, “What will happen if the credit markets completely freeze up?Here’s an example from Tuesday (Oct 7th, 2008), neatly illustrating the confusion and stasis that results from a credit market seizure:

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don’t trust the financial institution named in the buyer’s letter of credit, analysts said.

"There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy."

In the article above there are willing buyers and sellers but believable bank credit is the missing element.

Banks are essential intermediaries in a credit-based system, and the flow of goods comes to a shuddering halt without available, and, most importantly, believable credit. Sure, I suppose it is possible for a buyer to wire over the cash money to release the goods, but that type of exchange takes a different form of trust that is very likely to be in short supply during a crisis. Who would want to send off money without a system of assurances that the products will be shipped? Where there is an entire system of checks and balances erected around credit transactions, there are fewer for cash transactions.

Think of an Ebay auction where you use your credit card vs. sending off cash in an envelope. If the deal goes bad, you have more options for recourse under the credit transaction than the cash transaction. This is also true for businesses of every size.

This is why the recent decision to allow banks to “mark (all of their toxic assets) to maturity” was a bad move. While it helped the balance sheets appear to be healthier, which I am sure made some CEOs happy, it also served to make the banks’ financial positions less transparent, causing an offsetting erosion of confidence. After this move there is now less certainty about anyone’s solvency. And so our credit markets are seizing up, and grain is not being shipped from docks. On the surface this may not seem like a huge problem, but once you understand how our entire economy is predicated on a “just in time” delivery system, the problem is obvious. A couple of examples:

  • Grocery stores typically only have 3-5 days of food on hand. The continuous arrival of new trucks on a daily basis is essential to keeping them supplied. Credit allows this to happen.
  • The US imports 17% of its daily gasoline needs from foreign refiners. Credit allows this to happen.

Literally every single supply chain in our complicated consumer network is dependent on the smooth functioning of the credit markets. (Okay, maybe not the illegal drug market, but you get the drift.) While it is possible to switch to a cash-based scheme for normal business transactions, that process will take time, possibly years, and the credit markets are currently imploding at a rate that suggests we have only a few weeks to sort all this out.

This is what is happening behind the scenes, and this is why the Treasury Department and the Federal Reserve are operating in such a panic mode.

In a larger sense, what we are seeing is the inevitable result of a fractional reserve banking system that has burned itself out. In 2003, Alan Greenspan reduced the US interest rate to the emergency level of 1% and held it there for a year. The rest of the world’s central banks followed suit, and the rest is history.

As a result, we had the greatest expansion of debt that the world has ever seen. Credit bubbles always end in a bust, and they do not end until all of the prior excesses are wrung out of the system. For the US, this presents quite a tricky bit of landscape to navigate, because we mainly financed our excesses through foreign borrowing. Plus, we still own the world’s reserve currency. Together these facts compound the difficulty of managing a successful conclusion to the crisis.

So we are now forced to admit, at least to ourselves, that it is now possible that both the dollar and the entire fractional reserve banking system could implode.

In the case of the dollar, trillions and trillions of them are now held by foreigners. In order for the dollar to merely maintain its value internationally, foreigners must keep buying it at the same pace as before. If they continue to maintain their current dollar positions, but stop buying more, the dollar will fall. If they stop buying more and decide to unload the ones they already have, then the dollar will crash.

We have, in essence, three generations of excess spending out there in the hands of foreign nations, some of them openly hostile to the US. Our future rests upon their kindness. In the case of the banking system, it is already, obviously, in terrible shape. The entire network, in aggregate, is insolvent. The damage in several key financial stocks this week has been staggering, if not frightening.

Recalling my earlier statement about “marking to maturity,” we can see evidence of the resulting level of concern by viewing the stock price of Citigroup, which holds slightly more than $1 trillion (with a “t”) of the so-called “Level III” assets, which are equivalent to the “marked-to-maturity” assets that I spoke of earlier. Here we can see that Citigroup is rapidly approaching its recent lows, having lost all of the momentum that the “no short” rule change gave it a while back:

 

 src=

 

And here are several other major insurers that are certainly going down soon. MetLife starts the ball rolling here:

 

 src=

 

That chart, my friends, is a complete disaster. Something is very broken at MET that will require a lot of fixing. MET “…offers life insurance, annuities, automobile and homeowners insurance, retail banking and other financial services to individuals, as well as group insurance, reinsurance and retirement and savings products and services to corporations, and other institutions."

And here’s Prudential Financial. This, too, is a very ugly chart:

 

 src=

 

PRU “…offers an array of financial products and services, including life insurance, annuities, mutual funds, pension and retirement-related services and administration, investment management, real estate brokerage and relocation services, and, through a joint venture, retail securities brokerage services.

And here’s Aegon, a major holding company offering insurance, pension, and financial services and products. This chart shows the complete breakdown of yet another gigantic company with financial tendrils that reach far and wide:

 

 src=

 

And here’s the last one, Hartford Financial Services (HIG – primarily an insurance company), slightly larger than AEG but smaller than MET:

 

 src=

 

These are all gigantic companies, each as large as Enron and each with charts indicating that utter failure is just around the corner. We can all hope that a financial rescue is in the works that will be able to fix all of this, but we’d be better off planning as if that weren’t going to happen.

What you can do about this

First, I want you to accept the possibility that the entire banking system could go into a form of financial cardiac arrest and fail to work properly. If this happens, uncertainty and fear will rule the day. Jobs will be lost, goods will grow scarce, and rumors will fly.

The most obvious impacts will be felt locally. Towns, municipalities, and states will have to navigate the loss of significant portions of their budgets. Services will be cut. Some stores and supply channels will not be able to operate, either because their cash flow got pinched and they went out of business as a result, or because their credit facilities dried up and prevented normal operations. Some goods will rapidly become scarce.

The first step in preparing yourself for this scenario is to understand why this has happened. By taking the Crash Course, you already know the mechanics of this situation and that everything that the Treasury and Fed are trying to fix (at least publicly) are merely symptoms. The cause was a 25-year-long credit binge that finally ran out of steam.

The second thing you can do is to adopt a highly defensive posture with respect to money and your basic living arrangements. Let me reiterate the basic Tier I actions that you should all have taken by now:

  • Trim your expenses as far as humanly possible.
  • Keep cash out of the bank. Three months’ living expenses if you can; otherwise as much as possible.
  • Do you have essential medicines that you count on? If it’s possible, keep an extra supply around the house.
  • When you can, keep things topped off around the home. I recommend keeping at least a three-month supply of food on hand, in case the trucks stop rolling for any reason. I know this may sound “out there” for some of you, and if this goes too far in your mind, simply ignore it. But for anybody who has even the slightest worry in this regard, when all is said and done it takes relatively little effort and no extra money to make this fear go away. I say “no extra money,” because you would eventually have bought and eaten the food anyways. Through all of human history, up until about 50 years ago, it would have been unthinkable for the average family not to know exactly where its food for the winter was located. Our modern dependence on just-in-time delivery is a very, very recent development, and one for which we may potentially pay a very high price
  • Hold gold and silver, physical only. How much? That depends on how many of your US-dollar-denominated holdings you’d like to be absolutely sure do not go to zero.

And here are the Tier II actions that you should consider in preparing for a potential credit market collapse:

  • Develop a sense of community and get to know the people you can count on and who will count on you.
  • Don’t take on any more purely consumptive debt for any circumstances, unless you are speculating and can manage the risks. This means you should not buy a house that is a stretch, you should make the old car go a little longer, and you should not be putting anything on the old credit card that you cannot find a way to do without.
  • Keep your job! I don’t care how much you hate your current position, keep it until and unless you have another one (or until you retire, but even then, please be very sure of how you will pay your living expenses).

Let me close by saying that I fervently hope that this whole banking crisis blows over and does not result in you needing to draw upon any of the safeguards that I have laid out above. That is my most sincere wish.

But as I see things now, the chance of a banking collapse and/or dollar crisis remains unacceptably high.

Do what you need to do. Do what you believe is right, and tune out the rest.

How the Credit Markets Affect Us All
PREVIEW by Chris Martenson
Thursday, October 9, 2008

In this Martenson Report, I cover the importance of the credit markets to the smooth functioning of our just-in-time economy.  If the credit markets fully seize up, it is not a stretch to state that most businesses and the flow of many goods will also seize up.

In fact, this has already happened, to a limited extent.  Should this extend further, there are a few basic precautions that you should consider as a means of mitigating the impact of a potential banking/credit lock-up.

Okay, time for a little chat about the reasons that a credit market freeze-up has the potential to change your life in sudden and dramatic ways.

Many people mistakenly believe that at some point in the distant past we moved from a barter economy to a money-based economy. In truth, we have a credit-based economy.

In a money-based, or “cash-based,” economy, the whole thing would work a lot like your debit card. Businesses would immediately swap money for goods at the point of the transaction.

But that’s not how our system operates. Instead, when goods flow between distributors, suppliers, and retailers, they do so on the basis of credit. For example, if your local grocery chain orders additional food from their distributor, credit is what gets that transaction moving right away. The grocery store has a line of credit with the distributor, which has a line of credit with their bank, which has lines of credit with other banks, one of which has a credit arrangement with the grocery store.

Typically, businesses carry 30-60-90-day terms on cash settlement for goods and services sent/received. So the lines of credit are an important ‘lubricant’ to the process of buying and selling goods, with cash settlement coming after-the-fact and often comprising a bulk payment for numerous credit-based transactions that might have occurred over a period of time.

At the larger level, credit transactions worth trillions of dollars are occurring between importers and exporters, with municipality paychecks, between nations, in stock margin accounts, and so forth. Credit is everywhere and it is how we conduct business. Without credit, we’d need to revert to a cash-based economy (hard cash or the electronic equivalent) and the simple fact is that our financial and judicial machinery are just not set up to handle a cash-based economy. They could be, I suppose, but right now they aren’t.

So we need to ask ourselves, “What will happen if the credit markets completely freeze up?Here’s an example from Tuesday (Oct 7th, 2008), neatly illustrating the confusion and stasis that results from a credit market seizure:

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don’t trust the financial institution named in the buyer’s letter of credit, analysts said.

"There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy."

In the article above there are willing buyers and sellers but believable bank credit is the missing element.

Banks are essential intermediaries in a credit-based system, and the flow of goods comes to a shuddering halt without available, and, most importantly, believable credit. Sure, I suppose it is possible for a buyer to wire over the cash money to release the goods, but that type of exchange takes a different form of trust that is very likely to be in short supply during a crisis. Who would want to send off money without a system of assurances that the products will be shipped? Where there is an entire system of checks and balances erected around credit transactions, there are fewer for cash transactions.

Think of an Ebay auction where you use your credit card vs. sending off cash in an envelope. If the deal goes bad, you have more options for recourse under the credit transaction than the cash transaction. This is also true for businesses of every size.

This is why the recent decision to allow banks to “mark (all of their toxic assets) to maturity” was a bad move. While it helped the balance sheets appear to be healthier, which I am sure made some CEOs happy, it also served to make the banks’ financial positions less transparent, causing an offsetting erosion of confidence. After this move there is now less certainty about anyone’s solvency. And so our credit markets are seizing up, and grain is not being shipped from docks. On the surface this may not seem like a huge problem, but once you understand how our entire economy is predicated on a “just in time” delivery system, the problem is obvious. A couple of examples:

  • Grocery stores typically only have 3-5 days of food on hand. The continuous arrival of new trucks on a daily basis is essential to keeping them supplied. Credit allows this to happen.
  • The US imports 17% of its daily gasoline needs from foreign refiners. Credit allows this to happen.

Literally every single supply chain in our complicated consumer network is dependent on the smooth functioning of the credit markets. (Okay, maybe not the illegal drug market, but you get the drift.) While it is possible to switch to a cash-based scheme for normal business transactions, that process will take time, possibly years, and the credit markets are currently imploding at a rate that suggests we have only a few weeks to sort all this out.

This is what is happening behind the scenes, and this is why the Treasury Department and the Federal Reserve are operating in such a panic mode.

In a larger sense, what we are seeing is the inevitable result of a fractional reserve banking system that has burned itself out. In 2003, Alan Greenspan reduced the US interest rate to the emergency level of 1% and held it there for a year. The rest of the world’s central banks followed suit, and the rest is history.

As a result, we had the greatest expansion of debt that the world has ever seen. Credit bubbles always end in a bust, and they do not end until all of the prior excesses are wrung out of the system. For the US, this presents quite a tricky bit of landscape to navigate, because we mainly financed our excesses through foreign borrowing. Plus, we still own the world’s reserve currency. Together these facts compound the difficulty of managing a successful conclusion to the crisis.

So we are now forced to admit, at least to ourselves, that it is now possible that both the dollar and the entire fractional reserve banking system could implode.

In the case of the dollar, trillions and trillions of them are now held by foreigners. In order for the dollar to merely maintain its value internationally, foreigners must keep buying it at the same pace as before. If they continue to maintain their current dollar positions, but stop buying more, the dollar will fall. If they stop buying more and decide to unload the ones they already have, then the dollar will crash.

We have, in essence, three generations of excess spending out there in the hands of foreign nations, some of them openly hostile to the US. Our future rests upon their kindness. In the case of the banking system, it is already, obviously, in terrible shape. The entire network, in aggregate, is insolvent. The damage in several key financial stocks this week has been staggering, if not frightening.

Recalling my earlier statement about “marking to maturity,” we can see evidence of the resulting level of concern by viewing the stock price of Citigroup, which holds slightly more than $1 trillion (with a “t”) of the so-called “Level III” assets, which are equivalent to the “marked-to-maturity” assets that I spoke of earlier. Here we can see that Citigroup is rapidly approaching its recent lows, having lost all of the momentum that the “no short” rule change gave it a while back:

 

 src=

 

And here are several other major insurers that are certainly going down soon. MetLife starts the ball rolling here:

 

 src=

 

That chart, my friends, is a complete disaster. Something is very broken at MET that will require a lot of fixing. MET “…offers life insurance, annuities, automobile and homeowners insurance, retail banking and other financial services to individuals, as well as group insurance, reinsurance and retirement and savings products and services to corporations, and other institutions."

And here’s Prudential Financial. This, too, is a very ugly chart:

 

 src=

 

PRU “…offers an array of financial products and services, including life insurance, annuities, mutual funds, pension and retirement-related services and administration, investment management, real estate brokerage and relocation services, and, through a joint venture, retail securities brokerage services.

And here’s Aegon, a major holding company offering insurance, pension, and financial services and products. This chart shows the complete breakdown of yet another gigantic company with financial tendrils that reach far and wide:

 

 src=

 

And here’s the last one, Hartford Financial Services (HIG – primarily an insurance company), slightly larger than AEG but smaller than MET:

 

 src=

 

These are all gigantic companies, each as large as Enron and each with charts indicating that utter failure is just around the corner. We can all hope that a financial rescue is in the works that will be able to fix all of this, but we’d be better off planning as if that weren’t going to happen.

What you can do about this

First, I want you to accept the possibility that the entire banking system could go into a form of financial cardiac arrest and fail to work properly. If this happens, uncertainty and fear will rule the day. Jobs will be lost, goods will grow scarce, and rumors will fly.

The most obvious impacts will be felt locally. Towns, municipalities, and states will have to navigate the loss of significant portions of their budgets. Services will be cut. Some stores and supply channels will not be able to operate, either because their cash flow got pinched and they went out of business as a result, or because their credit facilities dried up and prevented normal operations. Some goods will rapidly become scarce.

The first step in preparing yourself for this scenario is to understand why this has happened. By taking the Crash Course, you already know the mechanics of this situation and that everything that the Treasury and Fed are trying to fix (at least publicly) are merely symptoms. The cause was a 25-year-long credit binge that finally ran out of steam.

The second thing you can do is to adopt a highly defensive posture with respect to money and your basic living arrangements. Let me reiterate the basic Tier I actions that you should all have taken by now:

  • Trim your expenses as far as humanly possible.
  • Keep cash out of the bank. Three months’ living expenses if you can; otherwise as much as possible.
  • Do you have essential medicines that you count on? If it’s possible, keep an extra supply around the house.
  • When you can, keep things topped off around the home. I recommend keeping at least a three-month supply of food on hand, in case the trucks stop rolling for any reason. I know this may sound “out there” for some of you, and if this goes too far in your mind, simply ignore it. But for anybody who has even the slightest worry in this regard, when all is said and done it takes relatively little effort and no extra money to make this fear go away. I say “no extra money,” because you would eventually have bought and eaten the food anyways. Through all of human history, up until about 50 years ago, it would have been unthinkable for the average family not to know exactly where its food for the winter was located. Our modern dependence on just-in-time delivery is a very, very recent development, and one for which we may potentially pay a very high price
  • Hold gold and silver, physical only. How much? That depends on how many of your US-dollar-denominated holdings you’d like to be absolutely sure do not go to zero.

And here are the Tier II actions that you should consider in preparing for a potential credit market collapse:

  • Develop a sense of community and get to know the people you can count on and who will count on you.
  • Don’t take on any more purely consumptive debt for any circumstances, unless you are speculating and can manage the risks. This means you should not buy a house that is a stretch, you should make the old car go a little longer, and you should not be putting anything on the old credit card that you cannot find a way to do without.
  • Keep your job! I don’t care how much you hate your current position, keep it until and unless you have another one (or until you retire, but even then, please be very sure of how you will pay your living expenses).

Let me close by saying that I fervently hope that this whole banking crisis blows over and does not result in you needing to draw upon any of the safeguards that I have laid out above. That is my most sincere wish.

But as I see things now, the chance of a banking collapse and/or dollar crisis remains unacceptably high.

Do what you need to do. Do what you believe is right, and tune out the rest.

by Chris Martenson
Wednesday, October 8. 2008

The text below is from a past Crash Course seminar.  It is a very loose adaptation of Elisabeth Kübler-Ross’ "Five Stages of Grief."

Often a broad new awareness results in a series of emotional responses that mimic the grief associated with loss.  I call these the Six Stages of Awareness.

Each of us here is somewhere along this progression.  Most of us will inevitably pass through all six stages, each at a different speed, not always in order, and some will skip stages.

While we read or hear each others’ comments at this site and elsewhere, my hope is that we can find acceptance and understanding of the fact that each person is naturally at a different stage of acceptance and awareness. 

Each person needs to process the stage they are currently in (within normal bounds of civility and appropriateness, of course) and deserves the support of others as they progress at their own pace.

(The following was spoken at a seminar:)

Today is about examining data in a whole new way.   I am going to provide you with a new framework for viewing this data, a scaffolding on which to drape this data, that is probably built a little differently than the framework you already have.  The information is absolutely vital and critical to your future, but it will be worthless if we examine it in the same way that it has been presented to us by what I’ll term ‘our popular culture.’

So your first opportunity today will be the opportunity to change your thinking.

I must warn you, this will not be easy for some.  I know this from experience.  You may well find yourself progressing through something akin to the five stages of grief throughout the day and throughout the next few months.  Awareness can be troubling enough to mirror the process of grief, and knowing this can be important in grounding oneself.

So let’s now progress through some examples of what you might experience at each of the six stages.

The Six Stages of Awareness

STAGE 1:  You might begin with a series of statements to yourself, such as, “No way can this be true.  There must be alternative explanations.  This simply can’t be; I would have heard about it.”  To help speed you through this stage of denial, I offer you access to the source data so that you can check it for yourself.  Further, I only draw upon sources that I believe most reasonable people would consider to be highly credible.  If you can view all of the data that I will present and find some alternative set of explanations as to why and how all of these things will not matter, I need you to share this with me, pronto.

STAGE 2:  Next, you might find yourself full of anger, saying to yourself (and possibly your loved ones and anybody else who will listen), “Aaaaarghh!!!  Those bastards at the Fed, in the government, in media, have been hiding things from me, lying, and serving their own interests at my expense. How dare they!!!"  While anger is a perfectly normal and even healthy stage to pass though, it is also counterproductive, in the sense that anger often serves to inhibit action…and as you’ll see later, we don’t really have a lot of time to spend in the non-solution stage. So for everybody’s sake, you need to move through this phase as rapidly as possible.  This is also why you will not find me assigning blame and pointing fingers.   Blame leads to anger and often a sense of victimization – both of which serve to inhibit taking action.  Further, the "blame game" only serves to polarize people into opposing teams – and we’re all on the same team in the end.

STAGE 3:  The next stage is bargaining.  Here you might find yourself thinking such thoughts as, “If I simply change a few things in my life, perhaps that will be sufficient and I won’t have to really change.  I’ll use efficient light bulbs, buy a Prius, and save more each year.”  You will find yourself bargaining with the data for more time, a different outcome, perhaps for a miracle to emerge.  Perhaps some new technology will arise that will give us abundant and limitless energy, or we’ll elect a new president capable of speaking the truth and marshaling the considerable talents and energy of this country.  This, too, is a stage, and I’ve assembled a framework for understanding in such a way as to help you understand the critical difference between wishful thinking and realistic solutions.  Please understand that I am not going to purposely step on your hopes – I am as hopeful as anybody you will ever meet – it’s just that I want our collective hopes to be placed in the right places, where they can do us some good.  My hopes center on the tremendous reservoirs of talent, energy, and problem-solving that reside in this country, this community, and this room.  I am confident that we will pull through all of the problems that we are about to discuss and that we can do it with joy, verve, and excitement.  Misplaced hopes and defective strategies, on the other hand, will only let us down in the future, as they fail to deliver.

STAGE 4:  The next stage is fear, and it can take many shapes. “I’m going to die broke.  People will come out of the cities and eat all my food and harm my family.  The future is going to be unbearably bleak.   I might die.  I might starve.   I’m not built for a world that mirrors the dystopian nightmare of Mad Max.”  It is important to name these fears and confront them directly.  Trying to ignore or stuff them away is simply a recipe to assure that they linger deep down, infecting your dreams and fostering paralysis.  Fears are debilitating.  They will prevent you from acting and they will ultimately erode your physical well-being.  Most of these fears are grounded in the knowledge that our social, energy, and food networks are, for the most part, unnecessarily complicated and often wafer-thin.  How will they operate in a more challenging environment?   We don’t really know, and it’s that uncertainty which creates a deep sense of unease.  Our food supply is both robust and fragile.  If the continuous parade of trucks ever stopped rolling, for any reason, nearly all communities would find their store shelves stripped bare within 2-3 days.  In fact, when we peel back the covers and examine each aspect of our various support systems, we find that they are nearly all built upon the implicit assumption that the future will be pretty much exactly like today.  But what if it’s not?   For myself, the only answer was to actively take steps to address each of my most basic fears.  Imagine that you live in a maze made out of some flammable material and you have a fear of being caught in a fire in the maze.   How could you reduce your fear?  One way would be to familiarize yourself with the way out.  Another might be to leave the maze and live somewhere else.  Attempting to ignore the fear is not a strategy, because you would still know, on some level, that even though you are ignoring the fear, the risk remains…and so will the fear.   The easiest way to reduce fear is to take concrete actions to reduce risk.

STAGE 5:  The most critical stage to navigate is depression.  With a realistic assessment of our predicament, it is extremely common for people to begin to harbor such thoughts as, “Crap, we’re screwed. What’s the point?  I am powerless to do anything about this.  There’s nothing that any of us can do, anyway.”  At this stage, dark fantasies of the future begin to creep into our thoughts, and fear paralyzes our ability to think, let alone act. It is my goal to help you limit this stage to the absolute shortest possible time – perhaps we can find a way to bypass it altogether.

STAGE 6:  The final stage is acceptance.  You will know you are here when you begin to think, “However we got here is unimportant – it is what it is.  Let’s figure out how to navigate the future with the tools and advantages we’ve got, not what we wish we had.”  With acceptance comes peace, a sense of calm, and the ability to think clearly and take actions.  However, acceptance and urgency can co-exist, and I do not mean to imply otherwise. 

Working through these stages is not a one-way trip.  I, myself, cycle through stages #4 (fear) and #6 (acceptance) pretty routinely, but spend less and less time in #4 with every pass.  What I hope you take away from this is that wherever you happen to be in these six stages will almost certainly shift over time.  If you are uncomfortable with where you are in this process, know that it is temporary.  My audacious, gigantic goal is to enable you to move through each of the six stages faster and more smoothly than I did.

Lastly, please remember that everybody is somewhere along this curve, and my experience is that the people who are further along tend to catch grief from the people who are not.   I ask that you be as respectful as possible of those who are in a slightly different place with all this.  Know that where they are is right where they need to be at this moment.  We can all benefit tremendously from supporting each other through this process.

The Six Stages of Awareness
PREVIEW by Chris Martenson
Wednesday, October 8. 2008

The text below is from a past Crash Course seminar.  It is a very loose adaptation of Elisabeth Kübler-Ross’ "Five Stages of Grief."

Often a broad new awareness results in a series of emotional responses that mimic the grief associated with loss.  I call these the Six Stages of Awareness.

Each of us here is somewhere along this progression.  Most of us will inevitably pass through all six stages, each at a different speed, not always in order, and some will skip stages.

While we read or hear each others’ comments at this site and elsewhere, my hope is that we can find acceptance and understanding of the fact that each person is naturally at a different stage of acceptance and awareness. 

Each person needs to process the stage they are currently in (within normal bounds of civility and appropriateness, of course) and deserves the support of others as they progress at their own pace.

(The following was spoken at a seminar:)

Today is about examining data in a whole new way.   I am going to provide you with a new framework for viewing this data, a scaffolding on which to drape this data, that is probably built a little differently than the framework you already have.  The information is absolutely vital and critical to your future, but it will be worthless if we examine it in the same way that it has been presented to us by what I’ll term ‘our popular culture.’

So your first opportunity today will be the opportunity to change your thinking.

I must warn you, this will not be easy for some.  I know this from experience.  You may well find yourself progressing through something akin to the five stages of grief throughout the day and throughout the next few months.  Awareness can be troubling enough to mirror the process of grief, and knowing this can be important in grounding oneself.

So let’s now progress through some examples of what you might experience at each of the six stages.

The Six Stages of Awareness

STAGE 1:  You might begin with a series of statements to yourself, such as, “No way can this be true.  There must be alternative explanations.  This simply can’t be; I would have heard about it.”  To help speed you through this stage of denial, I offer you access to the source data so that you can check it for yourself.  Further, I only draw upon sources that I believe most reasonable people would consider to be highly credible.  If you can view all of the data that I will present and find some alternative set of explanations as to why and how all of these things will not matter, I need you to share this with me, pronto.

STAGE 2:  Next, you might find yourself full of anger, saying to yourself (and possibly your loved ones and anybody else who will listen), “Aaaaarghh!!!  Those bastards at the Fed, in the government, in media, have been hiding things from me, lying, and serving their own interests at my expense. How dare they!!!"  While anger is a perfectly normal and even healthy stage to pass though, it is also counterproductive, in the sense that anger often serves to inhibit action…and as you’ll see later, we don’t really have a lot of time to spend in the non-solution stage. So for everybody’s sake, you need to move through this phase as rapidly as possible.  This is also why you will not find me assigning blame and pointing fingers.   Blame leads to anger and often a sense of victimization – both of which serve to inhibit taking action.  Further, the "blame game" only serves to polarize people into opposing teams – and we’re all on the same team in the end.

STAGE 3:  The next stage is bargaining.  Here you might find yourself thinking such thoughts as, “If I simply change a few things in my life, perhaps that will be sufficient and I won’t have to really change.  I’ll use efficient light bulbs, buy a Prius, and save more each year.”  You will find yourself bargaining with the data for more time, a different outcome, perhaps for a miracle to emerge.  Perhaps some new technology will arise that will give us abundant and limitless energy, or we’ll elect a new president capable of speaking the truth and marshaling the considerable talents and energy of this country.  This, too, is a stage, and I’ve assembled a framework for understanding in such a way as to help you understand the critical difference between wishful thinking and realistic solutions.  Please understand that I am not going to purposely step on your hopes – I am as hopeful as anybody you will ever meet – it’s just that I want our collective hopes to be placed in the right places, where they can do us some good.  My hopes center on the tremendous reservoirs of talent, energy, and problem-solving that reside in this country, this community, and this room.  I am confident that we will pull through all of the problems that we are about to discuss and that we can do it with joy, verve, and excitement.  Misplaced hopes and defective strategies, on the other hand, will only let us down in the future, as they fail to deliver.

STAGE 4:  The next stage is fear, and it can take many shapes. “I’m going to die broke.  People will come out of the cities and eat all my food and harm my family.  The future is going to be unbearably bleak.   I might die.  I might starve.   I’m not built for a world that mirrors the dystopian nightmare of Mad Max.”  It is important to name these fears and confront them directly.  Trying to ignore or stuff them away is simply a recipe to assure that they linger deep down, infecting your dreams and fostering paralysis.  Fears are debilitating.  They will prevent you from acting and they will ultimately erode your physical well-being.  Most of these fears are grounded in the knowledge that our social, energy, and food networks are, for the most part, unnecessarily complicated and often wafer-thin.  How will they operate in a more challenging environment?   We don’t really know, and it’s that uncertainty which creates a deep sense of unease.  Our food supply is both robust and fragile.  If the continuous parade of trucks ever stopped rolling, for any reason, nearly all communities would find their store shelves stripped bare within 2-3 days.  In fact, when we peel back the covers and examine each aspect of our various support systems, we find that they are nearly all built upon the implicit assumption that the future will be pretty much exactly like today.  But what if it’s not?   For myself, the only answer was to actively take steps to address each of my most basic fears.  Imagine that you live in a maze made out of some flammable material and you have a fear of being caught in a fire in the maze.   How could you reduce your fear?  One way would be to familiarize yourself with the way out.  Another might be to leave the maze and live somewhere else.  Attempting to ignore the fear is not a strategy, because you would still know, on some level, that even though you are ignoring the fear, the risk remains…and so will the fear.   The easiest way to reduce fear is to take concrete actions to reduce risk.

STAGE 5:  The most critical stage to navigate is depression.  With a realistic assessment of our predicament, it is extremely common for people to begin to harbor such thoughts as, “Crap, we’re screwed. What’s the point?  I am powerless to do anything about this.  There’s nothing that any of us can do, anyway.”  At this stage, dark fantasies of the future begin to creep into our thoughts, and fear paralyzes our ability to think, let alone act. It is my goal to help you limit this stage to the absolute shortest possible time – perhaps we can find a way to bypass it altogether.

STAGE 6:  The final stage is acceptance.  You will know you are here when you begin to think, “However we got here is unimportant – it is what it is.  Let’s figure out how to navigate the future with the tools and advantages we’ve got, not what we wish we had.”  With acceptance comes peace, a sense of calm, and the ability to think clearly and take actions.  However, acceptance and urgency can co-exist, and I do not mean to imply otherwise. 

Working through these stages is not a one-way trip.  I, myself, cycle through stages #4 (fear) and #6 (acceptance) pretty routinely, but spend less and less time in #4 with every pass.  What I hope you take away from this is that wherever you happen to be in these six stages will almost certainly shift over time.  If you are uncomfortable with where you are in this process, know that it is temporary.  My audacious, gigantic goal is to enable you to move through each of the six stages faster and more smoothly than I did.

Lastly, please remember that everybody is somewhere along this curve, and my experience is that the people who are further along tend to catch grief from the people who are not.   I ask that you be as respectful as possible of those who are in a slightly different place with all this.  Know that where they are is right where they need to be at this moment.  We can all benefit tremendously from supporting each other through this process.

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