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Today's contributor is Fernando "FerFAL" Aguirre. Many of our readers have expressed interest in hearing accounts from those who have lived through economic collapse. FerFAL experienced the hyperinflationary destruction of Argentina's economy in 2001 and continues to blog about his experiences and observations of its lingering aftermath. His website and his book Surviving the Economic Collapse offer windows into the probable outcomes to expect during a collapsing economy. Note: Our site's What Should I Do? Guide offers specific guidance relevant to a number of the steps FerFAL recommends below.
“How can I prepare for an economic collapse?” is one of the most common questions I get. It usually takes me a second to start to explain how complex such a question is. It’s like asking an auto mechanic, “Say, how do you build a car?” or asking a computer engineer, “What’s all that stuff inside my laptop?”
I do have some first-hand experience in this matter, though. The economy in my country, Argentina, has gone through various crises, but none as large as when the economy collapsed in 2001 after a decade of apparent prosperity. The currency devaluated, and Argentina defaulted on its USD$132 billion debt, the largest default ever. The middle class took to the streets after bank accounts were frozen, and the president was forced to resign, escaping the presidential building in a helicopter.
What I’ll do is, provide five quick foundational steps, based on what I know, for you to follow so as to be better prepared if something like what happened in my country ever happens in yours.
Step #1: Secure a percentage of your savings in bullion.
Five years ago, even the most paranoid person claimed you would never see “nationalized” banks in USA. The gung-ho survivalists claimed the entire country would go up in flames and open revolts would start before something as insane as a $700+ billion bailout to save the "too big to fail" rich elite was laid on the backs of the American working class. Yet here we are.
When I try to explain this very important issue to my American friends, they tell me that banks would never steal people’s money because there are laws against that in the USA. Their money is insured. We had those same laws in Argentina, but still it happened. We had a constitutional right to private property. Yet the constitution mattered little during the collapse. Go right ahead -- sue the government of the United States if something like that ever happens. Maybe you’ll get some of your savings back in a few years. If they feel like returning it.
What people don’t understand is that laws are written by men, not some greater power. As soon as those running the show feel an emergency decree or law is in order, existing laws are simply rewritten. They may even be ignored all together! What do you do if something like that happens? You may complain, you may sue, but you’re not changing the cold hard fact that as of right now that bank door is closed, that ATM has no money in it, and you still have to survive. This is something Argentines have experienced and know very well. Hundreds of thousands of us have banged the doors of our banks, for years, without a penny being returned. You still sued, and waited, and spent the little money you had by hiring a lawyer. You lose, they win…unless you have some of that money at hand before they decide to steal it.
Every single Argentine wishes he could go back in time, close his bank account, and put that money into gold. We would all do that if we had a time machine. Since you can't guess the future, all you can do is estimate what can happen and play the odds in your favor. In the event of a full economic collapse, if you have 20% of your savings in physical gold and silver, that’s a percentage of your savings that is spared. It's not an investment; don’t go crazy over gold and silver going up or down a few dollars, just be content that it's not getting any lighter as it sits in your safe. If the economy collapses or even if there’s simply inflation (as there clearly will be), that percentage of your savings in precious metals is safe and will likely go up in price beyond its standard purchasing power as things get worse.
During the first stages of a severe economic crisis, you will see ATMs running out of money fast, and many stores won't be accepting credit cards. As the saying goes, “Cash is king” during those times. Your precious metal can be sold to a dealer, but you better keep that stored for now. When everyone is running around looking for an ATM with a few bucks in it, having a month's worth of expenses in cash means you won't be one of them. Why not more than a month´s worth of expenses? Because if the economy fully collapses, that paper money will lose its value within hours. It may drop 50%, 60%, or 75%, as happened in Argentina. Who knows? All you know is that as the currency loses value, the value of the precious metals you have stored goes up in proportion. Still, during those first days, a wad of cash gets you what you need.
So, step one is acquiring precious metals (I generally recommend 20% of your savings but each person is a separate case) and a month’s worth of expenses in cash, kept safe at home.
Step #2: Stock up on food.
The more you have, the better. There may be periods of civil unrest like the ones we saw where stores are being looted and closed after that. There may be problems with resupply because of logistical complications. It's better if you already have 6 to 12 months worth of food in your expanded pantry. Also, keep in mind the food you buy now will be considerably cheaper compared to post-inflation prices.
This large supply of food will bring peace of mind in case of job loss, as well. Who knows how long it will be before you find another source of income? After the 2001 collapse, some people genuinely spent YEARS looking for a job without finding any. I can’t emphasize enough the peace of mind it brings knowing you still have some time, and that you can, in fact, put food on the table the following night.
The food should be long-term storage type, requiring little or no cooking, at least for some of it. Water is also essential, so having a two-week supply is advised. The minimum amount is a gallon per person per day, and you should double that for flushing toilets and taking an elemental bath in case the water service is interrupted.
Step #3: Acquire the essentials by putting together a survival/emergency kit.
This will include your typical camping gear: a tent, sleeping bags, a stove (have enough fuel for it in case services are disrupted), first aid kit, medicines, LED flashlights and several spare batteries. Depending on how bad civil unrest gets, there may be problems with the infrastructure. After the economy collapsed in Argentina, the power company simply couldn’t afford the repairs needed, and it hadn’t planned for something like this, either. Rolling blackouts became common, and having LED lights and rechargeable batteries was a blessing. You could easily spend two or three days without power during summer. At one time, downtown Buenos Aires was left without power for five days. Imagine the complications this brings. If natural gas service is interrupted, you may need other ways of cooking. A camping stove and enough fuel will get you through it.
Step #4: Improve your personal and home security.
If you ask any Argentinean what concerns him the most, 9 out of 10 people will have the same answer: security. In second place is the economic situation. Ten years after the economic collapse, things are nothing like they used to be. Half of the middle class became poor, and its standard of living has decreased considerably. We’re still a high-risk economy, and it shows. Inflation is still rampant and can be anywhere from 5% to 10% per month, usually hitting the middle class the worst. But that’s something we’ve grown used to. That’s something we can live with.
What concerns Argentineans the most is the crime problem, and the out-of-control violent crime we suffer is the major legacy of the 2001 economic collapse. Poverty sure didn’t help, nor did social segregation. But the greatest cause responsible for the crime levels we suffer is our own government. The liberal government that took control after the collapse considers criminals to be poor victims of brutal capitalism. The unofficial stance is that criminals have a right to steal, murder and rape - in their view, it's how the “poor” get back at the rich and middle class who thrived during the 90’s. Of course, with a government like that, the crime problem just keeps getting worse.
During the first days after the economy collapsed, civil unrest, rioting and looting was out of control. A state of siege and military law was declared, enforcing curfew hours after 10 pm. This lasted a few months, and for months after that, while order was recovered in the capitol district, there were still occasional revolts and looting. The sense of lawlessness extended way beyond the visible accounts depicted by the TV and general media. It's during times like these that you realize you must have means of defending yourself and your family.
My advice is to make your home as secure as possible against criminals that may take advantage of the lack of control during the worst of the rioting. After that, a better security plan for the entire family must be worked out. As things get worse, you understand that you can no longer afford to be lax about your personal and home security. Those that are quickly become vicitims. With a more secure home, you may want to consider having a weapon to defend yourself. Certainly not an easy decision, and one you must be extremely serious about. If you have the self-control and maturity to handle one, having a firearm and getting the minimum training to know how to use (it if it ever comes to that) is something you should consider doing.
Crime and insecurity will be one of the greatest threats people all across USA will suffer, and very few will be ready for it. It won't happen one dark gloomy night after watching the latest horror movie. It will happen in the Walmart parking lot at 3 pm, with plenty of people around (people who will hurry out of the way, pretending not to see anything). You’ll be thinking about what you just bought, that you maybe should have bought Lucky Charms instead of Corn Flakes. That’s when the nice-looking person with two other buddies, all well-dressed (with neat hair cuts, too), pulls a gun on you. Developing a sense of awareness will be the most important part, as well as making the rest of your family comprehend that times have changed and you can no longer be careless regarding security.
Step #5: Embrace a different mindset.
When Argentina went through its economic collapse, people handled it differently. Maybe the most common response was denial. The “I can't believe this is happening “ attitude was pretty popular. Others complained, but you soon understood it changed nothing: It only made you feel more miserable, more stressed, and that was something you could do without. Others just ended their misery. Suicide rates doubled after the collapse, with people sometimes jumping under the train at early rush hour in a desperate attempt to make their misery noticed by others.
What you need to do is become more positive, more active. Be someone who, while accepting those things you can’t change, does something about the things you can. Get involved now, do what I just recommended right now, it will bring you peace of mind. Remember to stay positive and put every problem into perspective. Complain less. You’ll have enough to complain about when inflation gets worse. Soon you'll understand that material things can be replaced, and you become more grateful for what you have instead of worrying about what you don’t.
It's essential to keep a positive attitude. Being someone that gets easily depressed will be the end of you as the economy worsens. Problems much worse that what you are used to will be a daily occurrence. You’ll just have to roll with it and learn to cope with the new world you live in. Reinforce your relationships with people. Fight stress by finding a hobby you enjoy, hopefully one that has a practical side as well. After the collapse, lots of people started their own businesses when they realized there were no jobs to be found. It would be better if you get started now, just in case you ever need it in order to earn a living.
These are my recommendations. I know many people could have used such advice back when our economy collapsed.
Some common questions regarding hyperinflation
How quickly does it happen?
These events occur fast, but there are warning signs: lack of investment; higher interest rates; unemployment. When banks start coming up with excuses so as to not give you your money right away when closing an account, that’s usually not a good sign.
As for inflation and hyperinflation, they happen right in front of your eyes. It actually happened to me that the price of an item I picked in a store almost doubled in price by the time I reached the cash register. The employee just placed the sticker with the new price over the old one (no time to remove them) Employees rushed around changing prices several times a day, all day long during the ongoing crisis. It was fun to peel back the stack of stickers with the different prices and see how they had gone up in a matter of hours. Rioting happens fast, too. Once the banks close rioting is just minutes away.
What happens to your savings/investments?
I didn’t have much but managed to close my account just a day before the banks closed their doors. My parents are accountants and saw the signs mentioned earlier. When we went to the bank a nice lady told us they didn’t have USD$1,000 in the bank. Our jaws just dropped. That same day we went to the main branch and closed the account my sister and I had. The next day all banks closed, the accounts where frozen.
As for real estate, that was a pretty safe investment. Eventually rents went up so as to compensate for the devaluation. Of course you were much better of with your money in bricks and mortar than in a bank account.
How does the populace react?
Violently, as you’d expect when your life savings are stolen from you.
What is the government saying/doing?
Laws were changed to make everything nice and legal. The excuses the then-president Fernando De La Rua came up with in his speeches during the crisis just made everything worse.
Just days before the bank holidays they promised none of that would happen. Same thing before the devaluation. They swore on their mothers's names they wouldn’t do such a thing, then did it the following day. Politicians tend to do such things, and they are all similar worldwide.
What happens to the capital markets?
The stock market dropped like a rock, then shut down. What surprised you the most was how everything was simply frozen in expectation. No one wanted to spend a single cent, not even to buy half a gallon of paint for a work site because you just didn’t know what would happen in a matter of hours, let alone next week. The biggest investors had sold and left the country months before everything went down. Another sign to look for.
Does violence and crime become an immediate concern?
Yes it does. While stores were the more common targets, houses were looted, too. The best thing to do was stay home, have a defendable position and be armed. I had looters not 20 yards away from my home. What do you do if they rush your home? Can you just open fire on them? What will they do when/if you do? All these things flash into your mind.
A significant amount of people behave because they believe there’s a punishment if they do otherwise. Once that fear is removed because the authorities have clearly lost control, you see the worst of people’s nature. It's not a pleasant thought, but it's better to be ready.
Take care,
Fernando “FerFAL” Aguirre.
This What Should I Do? blog series is intended to surface knowledge and perspective useful to preparing for a future defined by Peak Oil. The content is written by ChrisMartenson.com readers and is based in their own experiences in putting into practice many of the ideas exchanged on this site. If there are topics you'd like to see featured here, or if you have interest in contributing a post in a relevant area of your expertise, please indicate so in our What Should I Do? series feedback forum.
If you have not yet seen the other articles in this series, you can find them here:
- A Case Study in Creating Community (SagerXX)
- Peak Certainty, Food Resilience, and Aquaponics (Farmer Brown)
- Creating Healthy Snacks from Your Garden (EndGamePlayer)
- The Essential Gardening and Food Resilience Library (Old Hippie)
- Installing A Solar Energy System (rhare)
- The Keys to Transitioning Healthcare: Empowerment, Education, & Prevention (suziegruber)
- A Quiet Revolution in Bicycles: Recapturing a Role as Utilitarian People-Movers - Part 1 (Cycle9)
- A Quiet Revolution in Bicycles: Recapturing a Role as Utilitarian People-Movers - Part 2 (Cycle9)
- Practical Survival Skills 101 - Fire Starting (Aaron Moyer)
- Raising Your Own Chickens (Woodman)
- Dealing With a Reluctant Partner (Becca Martenson)
- Making the Urban-to-Rural Transition (joemanc)
- Prepping on a Shoestring (Amanda)
- Practical Survival Skills 101 - Water (Aaron Moyer)
- Small-Scale Beekeeping (apismellifera)
- Making Soap (maceves)
- Woodworking (bklement)
- Practical Survival Skills 101 - Obtaining Shelter (Aaron Moyer)
- Extending the Harvest in Your Home Garden (Woodman)
- Problem Solving: Improvise, Adapt, Overcome (Mooselick7)
- Cultivating Inner Resilience in the Face of Crisis (suziegruber)
- Protecting Yourself Against Crime and Violence (thc0655)
- Managing Pain Without Meds (JAG)
- How to Explain the Current Economic Situation to Friends & Family (rhare)
- Practical Survival Skills 101 - Understanding Emergencies (Aaron Moyer)
- Quick Primer on Contamination Control Measures (Dogs_In_A_Pile)
- Food Storage Made Easy (Adam)
- Fortifying Yourself And Your Home Against Crime (thc0655)
- How To Increase The Energy Efficiency of Your Existing Home (zeroenergy21)
- Buying a House in Today's Market (Patrick Killelea)
- Preparing for Economic Collapse (FerFAL)
This series is a companion to this site's free What Should I Do? Guide, which provides guidance from Chris and the ChrisMartenson.com staff on specific strategies, products, and services that individuals should consider in their preparations.
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Comments
To all CM.com visitors:
All the signs are in place, the stage is set, and the clock is running. You pay for insurance every day for far less probable events. Awareness without action results in deep regret. We are too far down the road to turn this around through political action or letters to the editor. Get your family ready whether they like it or not.
Thank you Fernando.
When you finally get outraged enough, grab your rifle and run outside. If you're the only one there, its not time yet.
This is terrific. I knew FerFAL would be good, but he exceeded my expectations. I consider him the best source available for this type of information.
Travlin
You can always trust your government -- to do anything necessary to preserve itself. Travlin
I have been reading your book and most of the articles on your site. Thanks for taking the time to make an article for this site.
You are right that your version of the "grey area" collapse is much more shocking to most of us than the "zombie shooting gallery TEOTWAWKI" scenario.
I, for one, am not looking foward to a situation where the danger from crime has risen 500% but the authorities still pretend that they are in control and will be coming to second guess and probably arrest you after an event has occurred.
If things are just going down hill and you still have to go to work, who will guard your house while you are gone. I am surprised more break-ins do not happen now with so many people off to work every day with a very predictable schedule.
Thanks again Fernando.
Joe
You pay for insurance every day for far less probable events. Awareness without action results in deep regret. We are too far down the road to turn this around through political action or letters to the editor. Get your family ready whether they like it or not.
"You pay for insurance every day for far less probable events." Paradigm shift. Wow! I had never thought about it this way before. So true. I spend over a thousand dollars each year for auto insurance. I spend a few hundred each year for renter's insurance, etc. We do pay for insurance every day for far less probable events. And yet I think of it as money well spent, because I know of people who have gotten into more serious accidents, people who have lost their homes. I think next time someone starts questioning me, I'll ask them how much they pay for home or auto insurance, and whether they've had to use it in the past several years, and whether they think the money is well spent anyway.
Well in Argentina, they lost their economy! And we've have real examples of what has happened in other countries. The writing is on the wall for America as well!
Pyramid Shift
On a related topic: To those of you who may not have read it, I want to quote a very relevant passage from another essay that "FerFAL" wrote a few years ago, emphasis mine:
It’s 1:06 AM over here. I just finished showering and my wife and son are asleep. I was putting shampoo on my hair, thinking about what I wrote today on this post, and remembered the exact moment when I realized along with several other people, not only that TSHTF (that we all knew) but that the world we once new no longer existed, and that this was not a hurricane, this was an ice age period, it wouldn’t just go away.
We understood it the same way a kid understands photosynthesis: Because a teacher coldly explained it to us, even used graphics. I slept 5 hours yesterday, 2 hours the day before yesterday. Saturday night I didn’t sleep at all. I’m already used to it. Deadlines at the University, staying late at night, drawing in CAD 3D, waiting until Renders are ready. It’s a competitive world out there, and no one sympathizes with what you are going through, they just want you to perform as expected, and the standard is always high
It happened 4 years ago, almost a year after the December 2001 crisis. It was a social studies class and this teacher, don’t remember if it was a he or a she, was explaining the different kinds of social pyramids. God! Now I remember more! We even had a text book with those darn, cruel pyramids!
The first pyramid explained the basic society. A pyramid with two horizontal lines, dividing those on top (high social class) those in the middle (middle class) and the bottom of the pyramid (the poor, proletarian). The teacher explained that the middle of the pyramid, the middle class, acted as a cushion between the rich and the poor, taking care of the social stress. The second pyramid had a big middle section, this was the pyramid that represents 1st world countries. 1 which the bottom is very thin and arrows show that there is a possibility to go from low to middle class, and from middle to the top of the social pyramid.
Our teacher explained that this was the classic, democratic capitalist society, and that on countries such as Europeans one, socialists, the pyramid was very similar but a little more flat, meaning that here is a big middle section, middle class, and small high and low class. There is little difference between the three of them.
The third pyramid showed the communist society. Where arrows from the low and middle class tried to reach the top but they bounced off the line. A small high society and one big low society, cushioned by a minimal middle class section of pyramid.
Then we turned the page and saw the darned fourth pyramid. This one had arrows from the middle class dropping to the low, poor class.
“What is this?” Some of us asked.
The teacher looked at us. “This is us”
“It’s the collapsed country, a country that turns into 3rd world country like in pyramid five where there is almost no middle class to speak, one huge low, poor class , and a very small, very rich, top class.”
“What are those arrows that go from the middle to the bottom of the pyramid?” Someone asked.
You could hear a pin drop. “That is middle class turning into poor”.
I won’t lie, no one cried, though people rubbed their faces, held their heads and their breath.
No one cried, but we all knew at that very moment that all we thought, all we took for granted, simply was not going to happen.
“You see, the income from the middle class is not enough to function as middle class any more. Some from the top class fall to middle class, but the vast majority of the middle class turns into poor” Said the teacher.
I don’t know how many people in that room suddenly understood that he/she was poor.
The teacher continued “You see, we have a middle class that suddenly turns to poor, creating a society of basically poor people, there is no more middle class to cushion tensions any more. Middle class suddenly discovers that they are overqualified for the jobs they can find and have to settle for anything they can obtain, there for unemployment sky rockets, too much to offer, too little demand. You see they prepare, study for a job they are not going to get. You kids, you are studying Architecture because you simply wish to do so. Only 3 or 4 percent of you will actually find a job related to architecture.”
We all sat there, letting it all sink in. After a few months, it all proved to be true. Even the amount of students that dropped out of college increased to at least 50%. They either saw no point in studying something that would not make much of a difference in their future salaries, had no money to keep themselves in college, or simply had to drop college to work and support their families.
The essay/thoughtstream by "FerFAL": is published in various places throughout the web, so it is easily found. Below is one of the locations where it has been posted with permission:
http://www.jcharper.net/index.php?option=com_content&view=article&id=155:voice-of-experience-argentina-collapse&catid=14:stuff-happens&Itemid=12
Book
I highly recommend "FerFAL's" book, "The Modern Survival Manual: Surviving The Economic Collapse". While self-published, and English is not his first language, the material is very engaging, easy to read, and goes into much more detail.
Web Sites
"FerFAL" has many blog posts and YouTube videos as well:
Older, but still active blog: http://ferfal.blogspot.com/
New web site: http://www.themodernsurvivalist.com/
Poet
Look at this link on Argentina's Gold Reserves. http://www.24hgold.com/english/stat_country_detail.aspx?titre=Central%20Bank%20Gold%20Reserves%20(in%20Ounces)&pays=Argentina&deid=19576B1670
Looks like the Gold left the country a little ahead of the problems also. Looks to me like Gold is always pretty valuable in a man made world.
Argentina SOLD ALL ITS GOLD RESERVES at the bottom of the market in December 1997 - and reportedly bought U.S. T-Bonds at their high.
Thanks everyone for the comments and nice words.
These are times to be cautious yet realistic. Some common sense preparedness will go a long way.
As Rector well said, you pay for insurance for things that are far less likely than losing your source of income during an unstable economy. Even getting mugged or suffering a home invasion is becoming more and more common.
Yet so many people think that stocking up on food or having precious metals is a waste of money.
Sometimes people say they are down on their luck and can't afford to stock up food. Its specially those people that can't afford not to!
FerFAL
As a Brazilian, reading this fine article was like reading a memoir. Brazil followed a similar path for over 20 years.
Although inflation had been a common plague in the 20th century in Brazil, in the 70's it reared its head to not put it down again until the mid 90's. However, before getting there, the 80's were particularly rocky as inflation reached triple digits.
In order to control inflation, but never addressing the root, many economic shocks were inflicted in the population. Since the root was public deficit and its financing by printing money, inflation was actually the goal in order to wipe it out.
At first, major currency devaluations were pursued in the attempt to blatantly inflate the public debt out of existence. Instead, the newly minted money was regarded as a new opportunity to increase the size of the state, increasing the public deficit even more. This cycle went on for a few years with the obvious effect of raising the inflation levels year after year.
It didn't take long for people to lose any notion of prices, since the most common sound in grocery stores was of the labeling machines (I can only imagine how more convenient bar-codes are in an inflationary environment). Therefore, seeking a "stable" monetary reference, the informal unit of accounting became the dollar and its exchange rate was mentioned on the radio throughout the day, which people used to do quick mental calculations when shopping to compare prices among vendors.
I remember that the price of gold was always mentioned at the end of the day when the newscasts would assess the damage by inflation on that day. However, it was quite difficult to buy gold, since one had to go through dealers which operated in the mercantile exchange and the minimum quantity was rather large, excluding but the very wealthy to protect their savings.
As a consequence, even though no other currency could be used as legal tender, the dollar became the de facto currency for major transactions between private people, like paying in for an used car or even real estate. As a matter of fact, assets became the only way to store one's wealth, leading to an even higher inflation in them, when it was quite common that an used car would be sold for a profit even a couple of years later.
As inflation kept on going up, the government resorted to heterodox economic shocks, or economic experiments on a whole population of fancy economic theories by scholars with titles from Ivy League universities or prestigious European universities. These scholars, whose academic credentials placed them among the very wealthy, having never hold a job in the real world and much less balanced a checkbook to budget their groceries expenses, had the bad habit of accepting nominations to become economy ministers.
They tried everything between Cambridge and Chicago, from Keynes to Friedman, controlling variables of economic equations on an entire country and seeing what happened. They tried government spending to raise the GDP, but it didn't work; then price controls, just to make the shelves in the grocery stores empty; then freezing bank withdrawals to limit the velocity of money, just to collapse consumption and cause massive unemployment.
And all along, no law mattered. Arbitrary taxes were slapped on items under the guise of their being consumed by the "rich", like new cars, but quickly everyday items were taxed too, like makeup and gas. Sometimes they weren't called taxes, but some sort of patriotic fee, which some people decided to sue against, only to get laughable, inflated-away amounts back years later.
And flight was not an option, for until the early 80's, a compulsory deposit of $1000 (worth months income) was required for trips abroad. Capital controls were brutal, and capital expatriation had to be done via the central bank as a way to create an impossibly long bureaucratic delay. I remember that even to subscribe to foreign magazines it was necessary to file several forms to justify the conversion of funny money into dollars (Brazilians were allowed to have transactions in foreign currency in credit cards only ion the 90's).
In my experience, an economic collapse doesn't happen suddenly. It's a very slow process akin to the proverbial boiling of a frog. Inflation doesn't happen suddenly either; it's always surreptitious at first, but steady. When it reaches high levels, only then does it quickly rises and may reach hyper-inflationary levels, but it took Brazil almost two decades to go from double-digit annual rates to four digits.
Rather, the economy is destroyed in slow-motion. First, the Brazilian industries were regulated until they choked. Then, import controls rewarded inefficient and corrupt industries. With public deficit mounting up, the government became the only creditor, drying up capital from the financial system, since it was the only creditor able to pay loans back with freshly minted money. At the same time, this squashed industries, unable to turn out profits equivalent to an incredible inflation rate, which, unlike banks, had to actually produce something to gain income and to keep their operations. It goes without saying that without access to capital, industrial innovation died completely.
The need to turn huge profits quickly in a market with a quickly dwindling middle-class led industries to turn to the only entity with money to spend: the government. Government contracts were sought after violently - literally, but more commonly with liberal application of "grease". The effect was that corruption became the norm in a country where it had never been tame.
And this is perhaps the worst effect of the economic collapse, ultimately by design by an irresponsible profligate government: the morals were corrupted by the need to turn a quick buck no matter the cost, bribing whoever needed to get a contract. Virtual business gangs were formed, especially by former government officials and members of the - ruling - military, who had government contacts and intermediated the bidding process between corrupter and corrupted for a nice fee.
But not only in the business sphere, the moral corruption spread throughout the Brazilian society. Frustrated with the government and seeing how corrupt it was, impotent to change anything, the same modus operandi was adopted by the average Brazilian. Nothing else mattered, especially life, which became quite cheap, just a black hole of ever more expensive food. Crime gangs came up with violence never seen before. Many became pirates on land, robbing trucks, trains and barges, no matter the merchandise and killing even those who didn't pose a threat to them, like truckers and engineers.
The prevalent moral code was: do what thou wilt and everyone else be damned. What used to be a quaint, peaceful country, with a harmonious living of many races and ethnicities, became a crime war zone on the streets, a corrupt business place and a treasonous personal environment.
Brazilian culture, which enjoyed high quality in literature and the arts, became a cauldron of soap operas. The crassness became the norm and any higher cultural expression was sneered at as useless. The former president, Luis Lula da Silva, who dropped out of middle-school, boasted for not being able to speak Portuguese correctly, making it a virtue, though most of the population was much farther ahead of him (to illustrate this, imagine if in a decade everyone spoke like rappers).
Unfortunately, America today seems to me very much like Brazil in the late 70's. America is following exactly the same path, but finds willing accomplices to convince the people that it will lead to a different destination. As an immigrant, a refugee from economic and criminal insanities who found a comfortable and peaceful life to raise my family in America, my heart is torn at the dishonesty in the American politicians, an all too familiar dishonesty.
However, thanks to the Internet I have access not only to invaluable resources like this site, but I can also protect my meager savings from collapse by being able to diversify away from the dollar into assets. Neither I nor my father had access to the same information and diversification that I can now have back in Brazil. So, while this time it is not different, I am confident that I and my family will fare differently.
One of my biggest concerns is the violent crime and corruption that will grow out of our economic collapse. FerFAL and Augustine have lived through it and they both highlight it. Most people largely obey the law because of fear of being caught by the police and punished by the criminal justice system. They also obey the law because of the strong disapproval of their family, friends and neighbors. But the coming desperation of the common person, the corruption they see all around them (especially among the wealthy and powerful), and the obvious fact of how overwhelmed the police and courts are will cause them to feel released from these social constraints and commit crimes and engage in corruption they never would have before such a sea change in society. A healthy society can cope with the criminal actions of the 2-5% of people who are, under normal circumstances, committed to a corrupt and/or criminal lifestyle. No society can handle 40-60% of the people committing theft, burglary, robbery and all manner of scams, frauds and ripoffs out of desperation to survive or just plain anger and greed. This effect which is coming our way could be greatly diluted if there were a large number of successful prosecutions and public shaming of the people who most contributed to our problems and profited from them. But it looks like nothing like this is going to happen, and we are therefore doomed to a dog-eat-dog future until our society is burned nearly to the ground and starts to rebuild. On the other hand, America has seen two great spiritual awakenings in our past and we can always hope for something like that again. I'll be hoping and praying, while making preparations for the far more likely and dismal outcome.
The huge storm cloud, all black and furious, approaches relentlessly, too hideous to be faced by more than 1 in 10,000. Philadelphia, PA
Thanks Augustine fo sharing that. We south Americans are unfortunately a steap ahead in events. After what happened with the economy, they are going after what's left of the middle class and conservative values. We're becoming this liberal socialist blur with no sense of decency.
Brute illiterates are much easier to control I suppose. For example, we're now seeing our government unnoficialy making durg abuse legal, along with a strong media campaign. The motto seems to be " Who didn't do drugs at least once?" If a reporter says he didn't he is quickly mocked and shunned as if not having done drugs before makes you a fool. Its like an elementray school in the bad part of town all over, but with adults with political charges.
Why on earth would our own government so outspokenly approve the use and abuse of illegal drugs?
Maybe iliterate isn't enough any more, they want the mass to be junkies too.
FerFAL
I think the US will experience a deep crisis, but it wont be as bad as what we have experienced in SA. I know what I'm talking about, because I'm from Venezuela. I saw my comfort world crumble after the riots of 1989 that were a prelude to Hugo Chavez first coup attempt. After 20 years a lot of water has passed below the bridge and now Venezuela, an oil producing country that bought all argentinian debt after Kirshner went into power, has more weekly violent deaths than, Irak, Afganistan & Pakistan combined and is under military leftist rule, on the road to and oil rich Cuba. The US does not have the huge shantytowns around cities and monoproducing limited output of a third world nation. The middle class is large and they do have a lot of natural resources, structures in place and everyone owns a gun. In Venezuela only the bad guys carry weapons....That in itself should be enough to restrain social misfits and the apocalyptic future explained here.... Things will be bad in the US but never like ours, because their starting baseline is different...They already suffered a depression and were able to cope.....And if thats starts to happen in the US no place will be safe around the world and we might as well kiss our collective asses goodbye. right now, I'm living in Spain and even when things are real bad, normal people aren't rioting over here like greece or the middle east. Balanced people understand that bad times are xoming again and only astrong social network will cope. As to avoid another civil war...The problem we experienced in SA were greedy corrupt politicians and lack of education that foster extreme poverty..... I think the middle class in the US is better informed so I see no point in scaring people....I'm sure there will be some sort of unrest but I think people will behave and prevail in the long run...this web site is an example of preparedness of US society. I never saw anything like this in the years previous to the ascent of crazy chavez to power in 1998