FerFAL: Understanding Societal Collapse

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As we write about the risks of our over-indebted economy, of our unsustainable fossil fuel-dependent energy policies, and our accelerating depletion of key resources, it's not a far leap to start worrying about the potential for a coming degradation of our modern lifestyle -- or even the possibility of full-blown societal collapse.

Sadly, collapse is not just a theoretical worry for a growing number of people around the world. They're living within it right now.

This week, we catch up with Fernando "FerFAL" Aguirre, who began blogging during the hyperinflationary destruction of Argentina’s economy in 2001 and has since dedicated his professional career to educating the public about his experiences and observations of its lingering aftermath. He is the author of Surviving the Economic Collapse and sees many parallels between the path that led to Argentina's decline and the similar one most countries in the West, including the U.S., are currently on. Since our 2011 interview with him "A Case Study in How An Economy Collapses", FerFAL has successfully relocated his family to Europe.

Given his first-hand experience with living through, and eventually escaping, economic collapse in South America, we asked him to offer his insider's perspective on the current crisis in Venezuela, as well as the devolving situation in Brazil:

The greatest points to keep in mind is overwhelming corruption. People get lost on what exactly went wrong in Argentina, in Venezuela, or what’s happening right now in Brazil. What they all have in common is that the people in charge had no real interest in doing things right; they really didn't care about destroying the country. They just cared about filling their pockets as much as possible.

Think of Venezuela this way: you have a country where water is more expensive than gasoline. What sense does that make? I mean, you had Hugo Chavez walking down the street pointing with his finger saying “Nationalize this. Nationalize that”. And when he was saying "nationalize", he was saying "Steal this". He didn’t have any great plans or political grandeur going on in his mind. He just wanted to steal as much as he could.

I know for a fact that they’re slaughtering one another in the streets right now in Venezuela. For at least three years it’s been a case of out-of-control crime and corruption over there. It’s not getting better any time soon unless something changes on a deeper level.

For the average "middle class" person in Venezuela -- educated and still holding on to a good job -- he needs two years of wages to buy a single plane ticket in his own currency. He needs to work for two full years to buy one single plane ticket -- he's stuck there. The problem is that he waited too long to leave. That's something important that I write about often: You have to know when to leave. You needed to leave Venezuela at least three or four years ago; now you’re getting to the point where you’re stuck there. The official exchange rate between the USD and Bolivar is 1 to 10, but unofficially which is the real one you experience,  is more like 1 to 1,000. So they basically are starving you to death through a completely devaluated currency which is what you’re getting paid in.

Basically need to find ways of leaving the country by any means possible. What I would do if I was in Venezuela right now is I would leave on foot. I would leave any way I could, because it’s not safe. I know people that have killed people surviving Venezuela, I actually know guys that had to do that to live. You can't even find some land and grow your own food. You cannot do that when you have the government stealing it from you. It’s a no win situation.

Click the play button below to listen to Chris' interview with Fernando “FerFAL” Aguirre (55m:03s).

A heads up: the audio quality of this podcast is not at our usual standards, due to the phone conditions in Spain where we managed to contact Fernando.

This is a companion discussion topic for the original entry at https://peakprosperity.com/ferfal-understanding-societal-collapse/

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Recently I was interacting with a colleague of mine in Venezuela and this is what she told me about the current situation in the country.

Thank you for your message. Mark your appreciation despite being abroad is true, but unfortunately the reality is even more tragic than it seems. Now in Venezuela everything is a nightmare. It is very sad and frustrating. There is a social, economical and political chaos and the country is divided into two irreconcilable political factions.

Chávez was a real leader and had a lot of followers, especially during the first years as president. Many, many people invested a lot of energy and time, put the best efforts, illusions, and confront adverse situations to construct an inclusive and a just society. Significant and revolutionary achievements were made during the Chavez government, however, his last years of government and the actual people in the power took the country to the ruin. They destroyed the structure of the majority of institutions, closed or nationalized fabrics and broke the remaining industry, established the corruption, gave the power to the army, who is involved in corruption and drug traffic, there is no food, no medicaments, no energy (Guri the main hydroelectric power was collapsed without appropriated maintaining) and allowed the violence and debase the judicial system. Today, impunity reigns in Venezuela.

In my personal point of view, the violence is one of the more difficult things to overcome and manage.

I think of this as a cautionary tale of what we may face ourselves some day.

Mark

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Didn't I just hear Chavez' family looted the country and that his daughter is now worth $4bn?   Does your friend not know or believe this to be true?  Does she think socialism simply wasn't given a fair enough shake?
All this is straight out of atlas shrugged, isn't it?  Squandering of natural resources. Starving people despite all the oil and rich farmland.  

 

 

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If anyone's interested in following the black/grey market exchange rate for bolívares to USD, check out dolartoday, which Rafa, one of my Venezuelan students, showed me.
Currently the rate is 1050 Bolívares "fuertes" to 1 USD.

P.S. Atlas Shrugged is for sophomores.  Gómez pillaged the country and squandered natural resources too, as have many other right-wing pro-business Latin American caudillos.  It's past time we graduated past Rand's didactic tales to a higher level of understanding.  

Industrial civilization is broken, and whether the government is very pro-capitalist or pure communist makes less of a difference the fact that we all share an extractive economic structure that carries the seeds of its own - and our own - destruction.

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And now the raw animal instincts kick in.  Grab what you can even if you have to harm others physically.  Certainly Chavez's "socialism" did Venezuela in.   Very few question truly the state of humans therefore the same disasters happen over and over.  I do think the human species will be the first species to intentionally extinct itself.

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Have you read Rand's stuff?  She didn't like the Right either.  

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A few weeks ago I was evacuated from the Fort Mac area. I was working at Syncrude, on a maintenance turnaround. Short term work, and as someone else's employee, but that's all I've been able to get for the last 6 months. I live in Edmonton, so I was simply sent home - after a couple of days of confusion! It was mildly exiting to fly home on a C-130 configured as a troop transport. My personal vehicle is parked at Albian Sands, and may be there for some time yet.
Now, with so many displaced workers, competition for jobs is severe. I've already been at an income level 1/3 of what I made a year ago. There is the very real possibility of my business going bankrupt in the next 2 months, perhaps personal bankruptcy as well. It is, quite simply, expensive to live here. I've reduced my debt considerably in the last few years, but it hasn't been enough. It is depressing to be stuck in the middle of a lifestyle which I understand to be essentially untenable. I am being pushed up against "emotional resilience" as I write these words. Perhaps my own personal paradigm shift has arrived, not as an intellectual notion, but a simple empty chequeing account, and too much debt.

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Admittedly, Ayn Rand's books can be a fun read, mostly for conservatives.  However, HughK has a point.  Not all industrialists are saints.  Unregulated industries do not behave all that well.

Don't forget, Greenspan was a friend and disciple of Rand's and Rand herself did not live up to her own philosophy, not even close.

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Not sure what you are on about here. She reports the facts as she knows them. There is no doubt that Chavez was very popular and energized a lot of people in the beginning of his reign. He was a leader, kind of like the Pied Piper, few understood where they were being led though. I don't know if there was ever an ounce of credibility in his intent but she reports clearly that over time the whole system went to shit under Chavez (she doesn't even mention Maduro). He created a completely corrupt system that is now collapsing. They messed up everything and the whole place is dysfunctional beyond belief. Doesn't sound starry-eyed to me. I didn't see her apologize for Socialism or espouse and other -ism at all. She did mention that the whole place is polarized between two political groups but didn't spell out who they are or favor either one.

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So the theories of Rand, put into practice by Greenspan, were finally challenged by the experience of the real-life housing bubble.  Greenspan acknowledged the (deadly) flaw after-the-fact:

Greenspan, 82, acknowledged under questioning that he had made a “mistake” in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that “a flaw in the model ... that defines how the world works.”

Oops.  Someone took a book too seriously.  Capitalism always tends towards crony capitalism, since the best use of capital involves eliminating competition via acquisition and collusion, engaging in cartel pricing, and controlling regulation through bribing the politicians.  Likewise, corporate managers compensated using annual bonuses and stock options focus on short term frauds to get their shares to pop so they get rich.  Nobody is looking at the long term.

I guess Greenspan didn't read that particular chapter of the book.  Maybe we should send him a copy of Bill Black's book, "The best way to rob a bank is to own one."

Ideally, I think capitalism is great.  So is communism, socialism, and all the other isms.  Rand seems to be no better than Marx - and no worse.  Each writer reveals truth, but I don't think any of them should be mistaken as some sort of operating manual for how to run a civilization.

 

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Granted, low income people have fewer nutritional options.  But, I simply don't buy that poverty makes obesity absolutely necessary.
Poverty and limited nutritional knowledge are a further challenge.  However, where is the line between society vs individual responsibility for obesity?

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Then again, Rand did not write about today's CEOs.  She wrote about Henry Ford and Oscar Mayer.  Both of these men knew how to build a business from scratch, create jobs and manufacture quality products that were in demand.  

They had an incentive to consider long term issues, as they wanted to pass the business they created to their children, intact and healthy.

Todays CEOs come largely from marketing careers.  As a group, their expertise is not in creating a company, or jobs or quality products.  They cannot pass the company they run on to their children.  It is not surprising that they make short term decisions with the purpose of improving their compensation package.

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Considering the implications of Aldous Huxley's "Ape and Essence"; Once replication becomes unreliable society will disintegrate.
But then, as George Dyson points out in the Q&A portion of this brilliant lecture for the Long Now Foundation,

What if replication becomes perfect and we can have anything we want? perfect child, perfect weather, perfect energy, etc?

Which is the greater nightmare/dream?

And what about Brown Brothers Harriman?

 
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IIRC Rand did not like central banking nor fiat money.  Greenspan was and is a fake person.  He has no moral compass.  Rand died in 1982.

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sometimes dave posts things that are so outrageously ass-backwards, that i assume he is trolling, or perhaps he exists in an alternate reality where up is down and black is white.
dave, in case you were not aware: central banking is the antithesis of capitalism, it is an anathema to the free market and to honest price discovery.

i'm not aware of any "theories of rand" that were put into practice by greenspan going into central banking and creating huge asset bubbles and mis-allocation of capital.

 

 

 

 

 

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Kind of a touchy bunch for a Monday morning.  It was an innocent enough question and equally innocent (and accurate) observation, perfectly capable of being ignored.  But since it wasn't:
I'm no disciple of hers but anyone who actually read Rand, even a sophomore, would know that in a nutshell she was opposed to collectivism on the left and the right, and pretty much any other subordination of the individual to the state. 

Nothing she ever said or wrote has jack to do with the housing bubble.  If you believe otherwise I submit you either do not understand her or else do not understand the housing bubble. 

I did not say Rand wrote the operating manual for civilization.  I did fairly imply that the novel had some insights and predictive force relevant to the subject matter of the podcast and that is true.  Putting cronies in charge of industries and hyperinterference in markets by government were major themes of the book just as they were in the podcast.

So feel free to lighten up.  If I had wanted to stir up trouble I'd just call Michael Mann a fraud again. :slight_smile:

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[quote=Wikipedia]

In the early 1950s, Greenspan began an association with novelist and philosopher Ayn Rand.[48] Greenspan was introduced to Rand by his first wife, Joan Mitchell. Rand nicknamed Greenspan "the undertaker" because of his penchant for dark clothing and reserved demeanor. Although Greenspan was initially a logical positivist,[56] he was converted to Rand's philosophy of Objectivism by her associate Nathaniel Branden. He became one of the members of Rand's inner circle, the Ayn Rand Collective, who read Atlas Shrugged while it was being written.

[/quote]

I believe it was Nathaniel Branden who eventually distanced himself from objectivism and apologized for his part in encouraging the "Rand Mystique."

I still think her books deserve the label of good light fiction.

For those of you who enjoy the SciFi genre, James P. Hogan wrote "Voyage From Yesteryear," when he was enamored with Rand.  It's a bit hard to find in paperback, but pdf versions can be found.

 

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P.O.W. - thanks for the update and good to hear from you.  Please use this community however you can to help maintain your bearings through the perfect storm that is visiting your chosen area.

there may be another year, possibly two, before oil seriously rebounds based on the fundamentals.  Of course anything could happen event-wise to hasten the timing of that rebound, if not spike, forwards.

Certainly the way oil is shaping up right now it looks like 2016 might be the first year where new supplies are exceeded by existing declines…a situation that will only get more severe between 2017 - 2020.

But how to hang on until then?  Or do you even want to?  Maybe this is the even-driven nudge to go in an entirely different direction?  

At any rate, best of luck!

 

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I find Dmitry Orlov's view of corruption and collapse quite interesting.  Being a Russian, he witnessed the Soviet Union's collapse first hand and thinks that things will be worst here when it happens.  He says that communism is the most efficient system at the tribal level (150 or less people).  Above that level all of the "isms" degenerate into corruption and worst.  He also had nothing positive to say about Rand.
From my point of view a similar degeneration would occur if we all formed these tribes since there would be 2 million of them roaming around Genghis Kahn style in the US thanks to exponential population growth.

I wonder what is really behind Venezuela's etc collapse.  I still remember Reagan's death squads (aka freedom fighters) that roamed El Salvador, Nicaragua, etc and the massive influx of Salvadorians into Tucson where I lived at the time.  I also knew a woman from Chile who witnessed the Kissinger coup first hand.  She thought I was an idiot for not knowing much about it at the time, thanks to mainstream media.  Does anyone remember the religious fanatic Pat Robertson pushing for Chavez's overthrow on TV?  I'm sure he was only concerned with the peoples' well being since trickle down (aka: I better not say it) economics is best for them.

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My definition of any -ism is rule by that entity. Thus, I tend to define capitalism as rule by capital. Capital, in turn, I would tend to define as invested assets/money.
As such, I would think that central banks are absolutely necessary for the binding of all governance to capital.
But I would contend that both central banks and capitalism are contrary to free markets.
Maybe you disagree. if so, do you disagree with the definitions? Or the reasoned statement?
I think that if we are to disagree in a useful way, it would be ideal to first clarify definitions.