The Crash Course

SUBHEAD: Ready to learn everything you need to know about the economy?

by Chris Martensen and finished 22 October 2008 and updated as needed http://www.chrismartenson.com/crashcourse

The Crash Course is a condensed online version of Chris Martenson’s “End of Money” seminar. This is truly excellent, top of the line material: comprehensive, yet concise; informative, yet entertaining; and best of all, jam-packed with useful data. This series explains the consequences of having a monetary system that 'must grow' linked to an energy system that 'can't grow.'

image above: Still from online video presentation of Crash Course".

From http://www.chrismartenson.com/crashcourse/chapter-1-three-beliefs How long will it take? Chapters are between 3 and 20 minutes in length. All 20 sections take 3 hours and 23 minutes to watch in full. You will learn about: Chapter 1: Three Beliefs (Time: 1:46) Chapter 2: The Three "E"s (Time: 1:38) Chapter 3: Exponential Growth UPDATED! - November 3 (Time: 6:20) Chapter 4: Compounding is the Problem (Time: 3:06) Chapter 5: Growth vs. Prosperity (Time: 3:40) Chapter 6: What is Money? (Time: 5:55) Chapter 7: Money Creation (Time: 4:19) Chapter 8: The Fed - Money Creation (Time: 7:13) Chapter 9: A Brief History of US Money (Time: 7:14) Chapter 10: Inflation (Time: 11:48) Chapter 11: How Much Is A Trillion? (Time: 3:28) Chapter 12: Debt (Time: 12:32) Chapter 13: A National Failure To Save (Time: 12:06) Chapter 14: Assets & Demographics (Time: 13:41) Chapter 15: Bubbles (Time: 14:10) Chapter 16: Fuzzy Numbers (Time: 15:52) Chapter 17: PART A: Peak Oil (Time: 17:52) Chapter 17: PART B: Energy Budgeting (Time: 12:15) Chapter 17: PART C: Energy And The Economy (Time: 7:05) Chapter 18: Environmental Data (Time: 16:22) Chapter 19: Future Shock (Time: 8:02) Chapter 20: What Should I Do? (Time: 19:48) An interview with Chris Martenson on 19 September 2008 Please give a little background on yourself and how you got involved with the ideas discussed in your interesting Crash Course series. I think it’s important that you understand who I am, how I have arrived at my conclusions and opinions, and why I’ve dedicated my life to communicating them to everyone. First of all, I am not an economist. I am trained as a scientist, having completed both a PhD and a post-doctoral program at Duke University, where I specialized in neurotoxicology. I tell you this because my extensive training as a scientist informs and guides how I think. I gather data, I develop hypotheses, and I continually seek to accept or reject my hypotheses based on the evidence at hand. I let the data tell me the story. It is also important for you to know that I entered the profession of science with the intention of teaching at the college level. I love teaching, and I especially enjoy the challenge of explaining difficult or complicated subjects to people with limited or no background in those subjects. Over the years I’ve gotten pretty good at it. Once I figured out that most of the (so-called) better colleges place "effective teacher" pretty much near the bottom of their list of characteristics that factor into tenure review, I switched gears, obtained an MBA from Cornell (in Finance), and spent the next ten years working my way through positions in both corporate finance and strategic consulting. From these experiences I gather my comfort with numbers and finance. The ideas presented in the crash course had been developing in my mind for a long time and I finally realized that there were some important converging trends that I felt needed to be presented in a single spot, all at once. 2: Please give a summary of your site and crash course video series. I’ve built the course around the Three “E”s; the Economy, Energy and the Environment. It weaves together enough economic history and base concepts to allow a pretty complete romp through the current data. After going through how money is created in our system, our national failure to save, debt, demographics, asset bubbles and our propensity to lie to ourselves with our economic numbers, I tie the Economy to the other two “E”s before establishing the urgency of our situation and some possible solutions. I built the course because I believe that we cannot solve any of our problems in isolation. For instance, drilling for more oil helps our current energy supply situation but accelerates our depletion of a critical resource. Heroically expanding our economy with new government borrowing only puts more pressure on stagnating energy supplies and leaves us with debts that we have to pay later. In each case, it is not unlike squeezing a balloon – making it smaller in one place only makes it larger in another place. The Crash Course seeks to make these interconnections as clear as possible. Given that over 250,000 people have viewed it in the past 3 months tells me that it’s a good effort and that people all over the world are interested in hearing these facts at this time. 3: Is there any way our country can fix the broken monetary system or is it too late for change? There are two ways to address this. The first is “can we get our economic system back on track to operate like before?” and the answer to that is no. The basic problem is that the past 25 years have been predicated on a constantly expanding debt bubble and that has burst. Much of our lifestyle and economy was illusory in the sense that it was built on borrowed money. At least, history does not offer us any examples of bubbles that have repaired themselves and carried on after their bursting. So while I will allow that anything is possible, this is not likely. The second feature of that question centers on our money system itself. Ours happens to be debt-based meaning that all money is loaned into being, at interest. This has some pros and some cons. The downside to this system is that it pretty much requires continual exponential expansion in order to operate. This is in conflict with a world of natural limits. In that sense, it is not worth fixing. 4: Do you see the government do as they did before and seize all gold from its citizens due to this growing crisis? No, I see this as very unlikely. Remember, when gold was seized in 1933 it was money. All paper money of that time was actually a demand note entitling people to physical gold upon demand. The gold was the money, while the paper money was a claim on the gold (today the exact opposite is true). This means that when the government seized and forcibly devalued gold in 1933 it was actually performing this operation on the money supply of the time. Today gold is very much not a component of the monetary system. No money is backed by it and the total value of all the gold in the world is a tiny fraction of the total amount of paper money floating around. In 2001 when the government of Argentina needed to seize monetary assets to help right their ship of state, they went after what they could most easily identify as money – US dollars held in Argentinean’s domestic bank accounts. Well before we see any attempts at outright seizures of gold in this country, we’ll most certainly see other forms of confiscation, for example higher “one-time” taxes on 401K holdings. 5: Do you expect we will experience hyperinflation and if so when? At the time of this writing (September 15, 2008) we are in the midst of a deflationary collapse. Nearly all asset classes are being hit ranging from stocks to commodities to corporate bonds. This has the very real chance of becoming an institution-destroying event that could topple the entire banking system. Before this happens I fully expect the Federal Reserve to replace defective bonds and equities and other impaired assets held by failing institutions with fresh, newly created cash. When this starts in earnest, that’s when I expect a general, even disorderly, decline in the dollar internationally. We will experience this as first inflationary and then hyperinflationary. I foresee this happening at some point over the next 0-3 years. 6: What is the best way one can protect their financial assets before this crisis get too big to stop? Unfortunately I see no place to hide in financial assets right now. The entire game is now, more or less, rigged against small time investors. The mechanism here is that the rules are being constantly changed, for example this weekend the Federal Reserve summarily announced that they will be buying equities from banks even though this is clearly well outside their actual mandate. Further, the computers that run Wall Street can now exploit the tiniest of asymmetries in the market meaning that prices now rise and fall in accordance to position limits and not necessarily due to fundamentals. If too many people are long a particular stock, then the computers begin shorting that stock to grab the gains away from those who currently hold them. It is a wild, unrestrained world where the regulators are either outmatched, have a revolving door relationship with the firms they are supposed to be overseeing, or both. Instead, I think it is time to consider moving assets out of the financial system altogether. Productive land, cash-flow positive enterprises, and valuable non-paper assets (gold, silver, oil, etc) are my favorites. I say this because I have lost faith that our markets are any longer providing useful and meaningful price signals and because I have no faith that our main currency, the dollar, is being managed well. The risks are simply unacceptable at this time so I prefer to stand aside. I will get back in at some point when I judge that the markets are running fairly enough that an individual such as myself has a decent prospect of getting an equal chance at the table. 7: Do you think it is time for people to looking into goods for bartering over investments? I do and I have begun to do this myself. I’ve found the Collapse Gap by Dmitry Orlov to be an especially convincing view of how a superpower economy can (will) devolve into smaller units during a time of crisis. In such moments, who you know becomes as important as how much wealth you have. In times of low cash, trading of goods and services is an important way of filling the gap. For instance in Zimbabwe, it is very difficult to conduct business because the value of money changing constantly. But farmers are still bringing their sacks of wheat to the mill which then takes a cut. There’s no uncertainty in this process, it works just like it always has because it is based on the relative value of the services and goods. Those don’t change, and neither do needs, it is only the money that fails. 8: With the economy, energy and the environment being all tied to oil; do you see any hope for innovation and political will to solve this crisis? Yes on the innovation, and no on the political will. First, we will adapt to the new reality, that much cannot be disputed. In a thousand years, there will be people living where I live, eating and drinking and having fun. Just how many and how much fun is open to question. My belief is that we actually do not need any new technological breakthroughs, although those would be welcome, because everything we need already exists. We can already build zero energy footprint houses, yet we do not. We can already live, eat and play near where we work yet, by and large, we do not. Cars getting 75+ mpg are already for sale in Europe, but not yet here in the US (perversely for emissions considerations of all reasons). We could easily live lives that use 50% less energy in the US and we’d basically be living the same, pleasant lifestyles as other Western countries. So the idea of waiting or hoping for a big technological breakthrough is actually a cop-out. If we can already do these things, how will new technologies help us begin something we have not yet begun? This brings us to political will. It is important for people to realize that exactly zero great social movements began in Washington DC. Civil rights, women’s suffrage, the environmental movement – all were brought kicking and screaming to the marble halls of power before any change happened. That’s just how our system works. So hoping that DC will begin leading the effort to realign our consumptive lifestyles with the reality of depleting resources is not just a low-probability hope, it is entirely without precedent. To me, this means that the necessary realignments must occur as a result of a social movement. Instead of people waiting for a 75 mpg car to be developed inside the US, we should be making a serious fuss about being allowed to import the ones that already exist. It means that we should each be figuring out how to dial back our use of energy and other resources while demanding that our local communities support a walk-able, bike-able lifestyle. It means that we need to think for ourselves, assess the risks and challenges, formulate a plan and bring it kicking and screaming to the halls of power. This is how it has always been done, and this is what is needed again. Either We The People lead this movement, or it will not happen. Because Washington DC lacks the capability to act responsively or responsibly, those actions belong to you and me. 9: Of the potential alternative fuels and energy out there, which do you feel has the most promise and why? Conservation. Period. As long as we allow ourselves to think there is a magic technology out there that will permit us to live the exact same lives we are living today, we are fooling ourselves. If we can reframe the question to ask, “while we are scaling back our use of energy, which technology(ies) offers the best hope of a gentle slope down the backside of oil?” my answer would be “electricity”. If we had a sufficient and modern electrical grid with distributed cogeneration and solar/wind electrical sources, would be an enormous step forward. However, this will require a gigantic investment that really ought to have been started a few years back. Next, biomass and other biofuels can play a role with the very important caveat that a system of closed loop mineral replacement exists in the cycle. Because otherwise soil depletion assures these are not sustainable practices. Such things as the disastrous corn-ethanol program favored by Congress are not part of this model. 10: What plan of action do you feel the average American should do to prepare for the emerging crisis? Begin the journey of doing more with less. The changes that are coming are quite large and will require implementing changes in thinking and practices that take a long time to put in place. The longer each of us gives ourselves to make these changes, the more gradual the transition will be. Waiting until you read about the problem on the front page of the newspaper assures that you will be caught short and due for an abrupt, possibly unpleasant, transition period. If I were younger and back in college, I would think very carefully about using that time to acquire skills that make sense given the probable needs of the future. To pick one example for illustration purposes, I would give more weight to an opportunity to become an mechanical engineer with a specialty in energy systems than I would to being a communications major. If I were nearing retirement and wanted to preserve my wealth, I would take the Crash Course to better appreciate the profound risks that now stalk our financial landscape. This is no time for either complacency or believing the soothing “buy and hold” mantra of a financial industry beset with conflicts of interest. Lastly, everybody needs to read about, and assess for themselves, what is currently going on. This is a terrible time to rely on the messages being spun out of Washington and Wall Street because they are designed to mollify and mislead. A little critical thinking can go a long way during key turning points in history. We are at one now.