Monday, August 17, 2009

The US and the old USSR - the inevitable collapse of empires

We received an interesting and somewhat disturbing comment in response to a recent post called How can the housing market be stabilizing? $1.55 trillion of new government funds, that's how. (posted on Seeking Alpha).

Here is the comment in full from someone named De Graaf:
"But for now get that cheap conforming mortgage, use the tax credit and go buy a home."

I'm sorry to say: But this is the worst piece of advice I've heard in current circumstances. The argument is flawed in you understand the real problem in America. Consumption by borrowing.

You say people always need homes. I don't concur with that statement as people need shelter. Shelter comes in many forms when a government defaults on its liabilities.

In Soviet Russia for instance, homes were centralized and mostly apartment blocks, easily heated with relatively low cost pipelines for basic needs.
In the US of today, we have a decentralized situation. When finance for (underground) electrical grids and water supply become scarce, as well as lacking maintenance for sewage etc, your newly acquired home will continue to diminish in value.

Also, when the CRE collapse endures in the coming years, communities will have less amenities and this will put more pressure on the housing prices across regions.

And that's just some examples. Have you even considered the increasing crime level that is going to struck America in the coming decade? With so many weapons around, an depressive army force retreating to the States that lacks the proper Healthcare solution, you can bet you ass that there will be a revolt for basic necessities.
Cops and army personnel might look patriots now, but when they lose everything they got, you better prepare for their skills.

They won't all be supporting a rebuild of their communities as they are scrambling for their own survival after homecoming into...into what exactly? Wasteland II?

The 'great recession' will soon show to be a real 'depression'. America is falling apart and some of you out there aren't seeing that yet. Whether it is ignorance or lack of judgement, get those puppets in Washington out now, or face the consequences.


In particular, the reference to centralized housing in Soviet Russia as a much cheaper alternative was interesting. The argument is that decentralization of housing in the US is inefficient and will ultimately cause housing price depreciation. Also scary is the comment on the anarchy that comes after the collapse with the military and the police having the upper hand. This is not the first time such dire a comparison between the US and the old Soviet Union has been made. In 2006 Dmitry Orlov published (in Energy Bulletin) his speech called Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US. Here is the crux of Orlov's speech:

From what I've seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won't be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.

It's a bit disturbing given both the thesis and the timing of the publication - definitely worth a read. Orlov argues that the US and the old USSR actually have a great deal of similarities that precede a collapse, such as military/industrial complex, need to spread ideology globally, political and economic control over other nations, etc. He lists some of the problems that the US faces that also contributed to the Soviet collapse ("one of the best known facts about empires is that they do collapse. No exceptions"):

... huge, well-equipped, very expensive military, with no clear mission, bogged down in fighting Muslim insurgents. Such as energy shortfalls linked to peaking oil production. Such as a persistently unfavorable trade balance, resulting in runaway foreign debt. Add to that a delusional self-image, an inflexible ideology, and an unresponsive political system.

Below is his slide on the "cascaded" economic failure:

Remember, this was presented in 2006!

Orlov then proceeds to discuss the frightening post-collapse environment, which resonates nicely with some of the Armageddon thinkers, and sounds eerily similar to the de Graaf's comment. It fact it wouldn't be too surprising if De Graaf and Orlov are actually the same person.

All this may come across as being a bit far fetched to some, but there is definitely some truth in it, and it certainly warrants a good discussion.

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