The Scariest Blog Post I Have Read All Year

Guest Post: How Hyperinflation Will Happen

Submitted by Tyler Durden on 08/23/2010 10:56 -0500

• Ben Bernanke
• CPI
• CRAP
• Exchange Traded Fund
• Fail
• Federal Reserve
• Government Stimulus
• Gross Domestic Product
• Guest Post
• Hyperinflation
• Japan
• Main Street
• Nationalization
• New Normal
• Purchasing Power
• Quantitative Easing
• Real estate
• recovery
• Smart Money
• Sovereign Debt
• Too Big To Fail
• Unemployment

Submitted by Gonzalo Lira
How Hyperinflation Will Happen
Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.
To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal “stimulus” spending—the classic Keynesian move, the same old prescription since donkey’s ears.

But the stimulus, apart from being slow and inefficient, has simply not been enough to offset the fall in consumer spending.

For its part, the Federal Reserve has been busy propping up all assets—including Treasuries—by way of “quantitative easing”.

The Fed is terrified of the U.S. economy falling into a deflationary death-spiral: Lack of liquidity, leading to lower prices, leading to unemployment, leading to lower consumption, leading to still lower prices, the entire economy grinding down to a halt. So the Fed has bought up assets of all kinds, in order to inject liquidity into the system, and bouy asset price levels so as to prevent this deflationary deep-freeze—and will continue to do so. After all, when your only tool is a hammer, every problem looks like a nail.

But this Fed policy—call it “money-printing”, call it “liquidity injections”, call it “asset price stabilization”—has been overwhelmed by the credit contraction. Just as the Federal government has been unable to fill in the fall in aggregate demand by way of stimulus, the Fed has expanded its balance sheet from some $900 billion in the Fall of ’08, to about $2.3 trillion today—but that additional $1.4 trillion has been no match for the loss of credit. At best, the Fed has been able to alleviate the worst effects of the deflation—it certainly has not turned the deflationary environment into anything resembling inflation.

Yields are low, unemployment up, CPI numbers are down (and under some metrics, negative)—in short, everything screams “deflation”.

Therefore, the notion of talking about hyperinflation now, in this current macro-economic environment, would seem . . . well . . . crazy. Right?

Wrong: I would argue that the next step down in this world-historical Global Depression which we are experiencing will be hyperinflation.

Most people dismiss the very notion of hyperinflation occurring in the United States as something only tin-foil hatters, gold-bugs, and Right-wing survivalists drool about. In fact, most sensible people don’t even bother arguing the issue at all—everyone knows that only fools bother arguing with a bigger fool.

A minority, though—and God bless ’em—actually do go ahead and go through the motions of talking to the crazies ranting about hyperinflation. These amiable souls diligently point out that in a deflationary environment—where commodity prices are more or less stable, there are downward pressures on wages, asset prices are falling, and credit markets are shrinking—inflation is impossible. Therefore, hyperinflation is even more impossible.

This outlook seems sensible—if we fall for the trap of thinking that hyperinflation is an extention of inflation. If we think that hyperinflation is simply inflation on steroids—inflation-plus—inflation with balls—then it would seem to be the case that, in our current deflationary economic environment, hyperinflation is not simply a long way off, but flat-out ridiculous.

But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same.

Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.

Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.

Right now, the U.S. government is indebted to about 100% of GDP, with a yearly fiscal deficit of about 10% of GDP, and no end in sight. For its part, the Federal Reserve is purchasing Treasuries, in order to finance the fiscal shortfall, both directly (the recently unveiled QE-lite) and indirectly (through the Too Big To Fail banks). The Fed is satisfying two objectives: One, supporting the government in its efforts to maintain aggregate demand levels, and two, supporting asset prices, and thereby prevent further deflationary erosion. The Fed is calculating that either path—increase in aggregate demand levels or increase in aggregate asset values—leads to the same thing: A recovery in the economy.

This recovery is not going to happen—that’s the news we’ve been getting as of late. Amid all this hopeful talk about “avoiding a double-dip”, it turns out that we didn’t avoid a double-dip—we never really managed to claw our way out of the first dip. No matter all the stimulus, no matter all the alphabet-soup liquidity windows over the past 2 years, the inescapable fact is that the economy has been—and is headed—down.

But both the Federal government and the Federal Reserve are hell-bent on using the same old tired tools to “fix the economy”—stimulus on the one hand, liquidity injections on the other. (See my discussion of The Deficit here.)

It’s those very fixes that are pulling us closer to the edge. Why? Because the economy is in no better shape than it was in September 2008—and both the Federal Reserve and the Federal government have shot their wad. They got nothin’ left, after trillions in stimulus and trillions more in balance sheet expansion—

—but they have accomplished one thing: They have undermined Treasuries. These policies have turned Treasuries into the spit-and-baling wire of the U.S. financial system—they are literally the only things holding the whole economy together.

In other words, Treasuries are now the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.

So this is how hyperinflation will happen:

One day—when nothing much is going on in the markets, but general nervousness is running like a low-grade fever (as has been the case for a while now)—there will be a commodities burp: A slight but sudden rise in the price of a necessary commodity, such as oil.

This will jiggle Treasury yields, as asset managers will reduce their Treasury allocations, and go into the pressured commodity, in order to catch a profit. (Actually it won’t even be the asset managers—it will be their programmed trades.) These asset managers will sell Treasuries because, effectively, it’s become the principal asset they have to sell.

It won’t be the volume of the sell-off that will pique Bernanke and the drones at the Fed—it will be the timing. It’ll happen right before a largish Treasury auction. So Bernanke and the Fed will buy Treasuries, in an effort to counteract the sell-off and maintain low yields—they want to maintain low yields in order to discourage deflation. But they’ll also want to keep the Treasury cheaply funded. QE-lite has already set the stage for direct Fed buys of Treasuries. The world didn’t end. So the Fed will feel confident as it moves forward and nips this Treasury yield jiggle in the bud.

The Fed’s buying of Treasuries will occur in such a way that it will encourage asset managers to dump even more Treasuries into the Fed’s waiting arms. This dumping of Treasuries won’t be out of fear, at least not initially. Most likely, in the first 15 minutes or so of this event, the sell-off in Treasuries will be orderly, and carried out with the idea (at the time) of picking up those selfsame Treasuries a bit cheaper down the line.

However, the Fed will interpret this sell-off as a run on Treasuries. The Fed is already attuned to the bond markets’ fear that there’s a “Treasury bubble”. So the Fed will open its liquidity windows, and buy up every Treasury in sight, precisely so as to maintain “asset price stability” and “calm the markets”.

The Too Big To Fail banks will play a crucial part in this game. See, the problem with the American Zombies is, they weren’t nationalized. They got the best bits of nationalization—total liquidity, suspension of accounting and regulatory rules—but they still get to act under their own volition, and in their own best interest. Hence their obscene bonuses, paid out in the teeth of their practical bankruptcy. Hence their lack of lending into the weakened economy. Hence their hoarding of bailout monies, and predatory business practices. They’ve understood that, to get that sweet bail-out money (and those yummy bonuses), they have had to play the Fed’s game and buy up Treasuries, and thereby help disguise the monetization of the fiscal debt that has been going on since the Fed began purchasing the toxic assets from their balance sheets in 2008.

But they don’t have to do what the Fed tells them, much less what the Treasury tells them. Since they weren’t really nationalized, they’re not under anyone’s thumb. They can do as they please—and they have boatloads of Treasuries on their balance sheets.

So the TBTF banks, on seeing this run on Treasuries, will add to the panic by acting in their own best interests: They will be among the first to step off Treasuries. They will be the bleeding edge of the wave.

Here the panic phase of the event begins: Asset managers—on seeing this massive Fed buy of Treasuries, and the American Zombies selling Treasuries, all of this happening within days of a largish Treasury auction—will dump their own Treasuries en masse. They will be aware how precarious the U.S. economy is, how over-indebted the government is, how U.S. Treasuries look a lot like Greek debt. They’re not stupid: Everyone is aware of the idea of a “Treasury bubble” making the rounds. A lot of people—myself included—think that the Fed, the Treasury and the American Zombies are colluding in a triangular trade in Treasury bonds, carrying out a de facto Stealth Monetization: The Treasury issues the debt to finance fiscal spending, the TBTF banks buy them, with money provided to them by the Fed.

Whether it’s true or not is actually beside the point—there is the widespread perception that that is what’s going on. In a panic, widespread perception is your trading strategy.

So when the Fed begins buying Treasuries full-blast to prop up their prices, these asset managers will all decide, “Time to get out of Dodge—now.”

Note how it will not be China or Japan who all of a sudden decide to get out of Treasuries—those two countries will actually be left holding the bag. Rather, it will be American and (depending on the time of day when the event happens) European asset managers who get out of Treasuries first. It will be a flash panic—much like the flash-crash of last May. The events I describe above will happen in a very short span of time—less than an hour, probably. But unlike the event in May, there will be no rebound.

Notice, too, that Treasuries will maintain their yields in the face of this sell-off, at least initially. Why? Because the Fed, so determined to maintain “price stability”, will at first prevent yields from widening—which is precisely why so many will decide to sell into the panic: The Bernanke Backstop won’t soothe the markets—rather, it will make it too tempting not to sell.

The first of the asset managers or TBTF banks who are out of Treasuries will look for a place to park their cash—obviously. Where will all this ready cash go?

Commodities.

By the end of that terrible day, commodites of all stripes—precious and industrial metals, oil, foodstuffs—will shoot the moon. But it will not be because ordinary citizens have lost faith in the dollar (that will happen in the days and weeks ahead)—it will happen because once Treasuries are not the sure store of value, where are all those money managers supposed to stick all these dollars? In a big old vault? Under the mattress? In euros?

Commodities: At the time of the panic, commodities will be perceived as the only sure store of value, if Treasuries are suddenly anathema to the market—just as Treasuries were perceived as the only sure store of value, once so many of the MBS’s and CMBS’s went sour in 2007 and 2008.

It won’t be commodity ETF’s, or derivatives—those will be dismissed (rightfully) as being even less safe than Treasuries. Unlike before the Fall of ’08, this go-around, people will pay attention to counterparty risk. So the run on commodities will be for actual, feel-it-’cause-it’s-there commodities. By the end of the day of this panic, commodities will have risen between 50% and 100%. By week’s end, we’re talking 150% to 250%. (My private guess is gold will be finessed, but silver will shoot up the most—to $100 an ounce within the week.)

Of course, once commodities start to balloon, that’s when ordinary citizens will get their first taste of hyperinflation. They’ll see it at the gas pumps.

If oil spikes from $74 to $150 in a day, and then to $300 in a matter of a week—perfectly possible, in the midst of a panic—the gallon of gasoline will go to, what: $10? $15? $20?

So what happens then? People—regular Main Street people—will be crazy to buy up commodities (heating oil, food, gasoline, whatever) and buy them now while they are still more-or-less affordable, rather than later, when that $15 gallon of gas shoots to $30 per gallon.

If everyone decides at roughly the same time to exchange one good—currency—for another good—commodities—what happens to the relative price of one and the relative value of the other? Easy: One soars, the other collapses.

When people freak out and begin panic-buying basic commodities, their ordinary financial assets—equities, bonds, etc.—will collapse: Everyone will be rushing to get cash, so as to turn around and buy commodities.

So immediately after the Treasury markets tank, equities will fall catastrophically, probably within the next few days following the Treasury panic. This collapse in equity prices will bring an equivalent burst in commodity prices—the second leg up, if you will.

This sell-off of assets in pursuit of commodities will be self-reinforcing: There won’t be anything to stop it. As it spills over into the everyday economy, regular people will panic and start unloading hard assets—durable goods, cars and trucks, houses—in order to get commodities, principally heating oil, gas and foodstuffs. In other words, real-world assets will not appreciate or even hold their value, when the hyperinflation comes.

This is something hyperinflationist-skeptics never quite seem to grasp: In hyperinflation, asset prices don’t skyrocket—they collapse, both nominally and in relation to consumable commodities. A $300,000 house falls to $60,000 or less, or better yet, 50 ounces of silver—because in a hyperinflationist episode, a house is worthless, whereas 50 bits of silver can actually buy you stuff you might need.

Right now, I’m guessing that sensible people who’ve read this far are dismissing me as being full of shit—or at least victim of my own imagination. These sensible people, if they deign to engage in the scenario I’ve outlined above, will argue that the government—be it the Fed or the Treasury or a combination thereof—will find a way to stem the panic in Treasuries (if there ever is one), and put a stop to hyperinflation (if such a foolish and outlandish notion ever came to pass in America).

Uh-huh: So the Government will save us, is that it? Okay, so then my question is, How?

Let’s take the Fed: How could they stop a run on Treasuries? Answer: They can’t. See, the Fed has already been shoring up Treasuries—that was their strategy in 2008—’09: Buy up toxic assets from the TBTF banks, and have them turn around and buy Treasuries instead, all the while carefully monitoring Treasuries for signs of weakness. If Treasuries now turn toxic, what’s the Fed supposed to do? Bernanke long ago ran out of ammo: He’s just waving an empty gun around. If there’s a run on Treasuries, and he starts buying them to prop them up, it’ll only give incentive to other Treasury holders to get out now while the getting’s still good. If everyone decides to get out of Treasuries, then Bernanke and the Fed can do absolutely nothing effective. They’re at the mercy of events—in fact, they have been for quite a while already. They just haven’t realized it.

Well if the Fed can’t stop this, how about the Federal government—surely they can stop this, right?

In a word, no. They certainly lack the means to prevent a run on Treasuries. And as to hyperinflation, what exactly would the Federal government do to stop it? Implement price controls? That will only give rise to a rampant black market. Put soldiers out on the street? America is too big. Squirt out more “stimulus”? Sure, pump even more currency into a rapidly hyperinflating everyday economy—right . . .

(BTW, I actually think that this last option is something the Federal government might be foolish enough to try. Some moron like Palin or Biden might well advocate this idea of helter-skelter money-printing so as to “help all hard-working Americans”. And if they carried it out, this would bring us American-made images of people using bundles of dollars to feed their chimneys. I actually don’t think that politicians are so stupid as to actually start printing money to “fight rising prices”—but hey, when it comes to stupidity, you never know how far they can go.)

In fact, the only way the Federal government might be able to ameliorate the situation is if it decided to seize control of major supermarkets and gas stations, and hand out cupon cards of some sort, for basic staples—in other words, food rationing. This might prevent riots and protect the poor, the infirm and the old—it certainly won’t change the underlying problem, which will be hyperinflation.

“This is all bloody ridiculous,” I can practically hear the hyperinflation skeptics fume. “We’re just going through what the Japanese experienced: Just like the U.S., they went into massive government stimulus—hell, they invented quantitative easing—and look what’s happened to them: Stagnation, yes—hyperinflation, no.”

That’s right: The parallels with Japan are remarkably similar—except for one key difference. Japanese sovereign debt is infinitely more stable than America’s, because in Japan, the people are savers—they own the Japanese debt. In America, the people are broke, and the Nervous Nelly banks own the debt. That’s why Japanese sovereign debt is solid, whereas American Treasuries are soap-bubble-fragile.

That’s why I think there’ll be hyperinflation in America—that bubble’s soon to pop. I’m guessing if it doesn’t happen this fall, it’ll happen next fall, without question before the end of 2011.

The question for us now—ad portas to this hyperinflationary event—is, what to do?

Neanderthal survivalists spend all their time thinking about post-Apocalypse America. The real trick, however, is to prepare for after the end of the Apocalypse.

The first thing to realize, of course, is that hyperinflation might well happen—but it will end. It won’t be a never-ending situation—America won’t end up like in some post-Apocalyptic, Mad Max: Beyond Thuderdome industrial wasteland/playground. Admittedly, that would be cool, but it’s not gonna happen—that’s just survivalist daydreams.

Instead, after a spell of hyperinflation, America will end up pretty much like it is today—only with a bad hangover. Actually, a hyperinflationist spell might be a good thing: It would finally clean out all the bad debts in the economy, the crap that the Fed and the Federal government refused to clean out when they had the chance in 2007–’09. It would break down and reset asset prices to more realistic levels—no more $12 million one-bedroom co-ops on the UES. And all in all, a hyperinflationist catastrophe might in the long run be better for the health of the U.S. economy and the morale of the American people, as opposed to a long drawn-out stagnation. Ask the Japanese if they would have preferred a couple-three really bad years, instead of Two Lost Decades, and the answer won’t be surprising. But I digress.

Like Rothschild said, “Buy when there’s blood on the streets.” The thing to do to prepare for hyperinflation would be to invest in a diversified hard-metal basket before the event—no equities, no ETF’s, no derivatives. If and when hyperinflation happens, and things get bad (and I mean really bad), take that hard-metal basket and—right in the teeth of the crisis—buy residential property, as well as equities in long-lasting industries; mining, pharma and chemicals especially, but no value-added companies, like tech, aerospace or industrials. The reason is, at the peak of hyperinflation, the most valuable assets will be dirt-cheap—especially equities—especially real estate.

I have no idea what will happen after we reach the point where $100 is no longer enough to buy a cup of coffee—but I do know that, after such a hyperinflationist period, there’ll be a “new dollar” or some such, with a few zeroes knocked off the old dollar, and things will slowly get back to a new normal. I have no idea the shape of that new normal. I wouldn’t be surprised if that new normal has a quasi or de facto dictatorship, and certainly some form of wage-and-price controls—I’d say it’s likely, but for now that’s not relevant.

What is relevant is, the current situation cannot long continue. The Global Depression we are in is being exacerbated by the very measures being used to fix it—stimulus is putting pressure on Treasuries, which are being shored up by the Fed. This obviously cannot have a happy ending. Therefore, the smart money prepares for what it believes is going to happen next.

I think we’re going to have hyperinflation. I hope I have managed to explain why.
http://www.zerohedge.com/article/guest-post-how-hyperinflation-will-happen


So my big question is, can anyone refute the logic presented here? Are our Treasuries really that toxic? Is our deflationary situation really divergent enough from Japan's Lost Decade that we could end up following in the footsteps of the Weimar Republic? Certainly this scenario is possible, but is it plausible?

Technocracy: Is It The Way To Change How Money Works?

My Peak Oil activism became a pleasurable social outlet a couple weeks ago when I went to The Cat & Fiddle in Hollywood for Sunday afternoon drinks with the Los Angeles Peak Oil Meetup Group. It was a very enjoyable two hours filled with intelligent conversation with friendly people. Though it was certainly a relaxing environment sitting outdoors discussing subjects as diverse as raising chickens and growing and fruits and vegetables, the levity would occasionally be augmented with the stray comment, "So, we're in agreement? We're all screwed, right?" The response would be laughter, because when you're aware of the full ramifications of Peak Oil, you have to have a sense of humor to be able to keep on living.



One of the members, Winston Hale, recently addressed the ramifications with a post on the LA Peak Oil Meetup Message Board:

Our global capitalist system has created great technological breakthroughs and better living standards. But at what cost? With these benefits we also face challenges like global climate change, overpopulation, and a peak in resource usage. All of this happening at an exponential rate. If we continue at this pace business-as-usual the world 50-100 years could potentially be a wasteland. Y'all just need to see the world GDP rate over the last 1000 years to see that in the not to distant future the bubble will burst. Neoclassical economics' one major flaw is the belief that we can have unending growth on a physically limited planet, which is impossible. This is the system which we currently live in. The problem with the system is that it is a giant pyramid scheme. More and more people will have higher standards of living, but it requires more people, resources, and energy to sustain those people above them. This system depends on population growth. An economy with a continuous negative population rate is still a theoretical field of study because it's never really happened on a long term trend in history. You can see today that population decline happens in first world developed countries because of economic security, proper infrastructure, and sex education. Whereas population growth happens in the third world because of the lack of all of the above. This is a step in the right direction, but how can our modern economies function in the long run without having to import immigrants from the third world to make up for the future labor shortages? Y'all should check out Masse Bloomfield's The Automated Society to see his conclusion to this dilemma. He proposes that in order to make up for the population shortfall in the first world, we would need to build automated machines to substitute the declining labor force. Obviously before we tackle this element to our unsustainable system we would have to have sustainable alternative energies. Also to take into account the declining population rate, we would have to assume that world GDP and resource consumption would have to decline or reach a steady state. Like permanent zero percent growth. This would mean that we would have one giant resource pie that cannot grow because the world has physical limits. In this scenario we have two options either permanent mass polarization of wealth or some system of equal access of goods and services to all, because the pie isn't growing anymore to bring more goods and services to the poorer people. Clearly, this system presents multiple problems, first is the energy problem that we currently face, and the second is the amount of material and goods that can be available. For example, in a system that tries to give everyone whatever they need, what system will determine who gets more than who. There's only so much beach front property to go around. We would need to create a system that allows status and classes, but not status based on wealth or perpetual growth. Chime in and give me some feedback.

So I chimed in:

Great food for thought, Winston Hale. It sounds to me like you're tackling the real problem that Peak Oil poses, which is an economic infrastructure predicated on infinite growth colliding with finite energy resources within the natural physical limits of our planet. That brings to mind a popular quote in the Peak Oil movement worth repeating, "Until you change the way money works, you change nothing". Which prompts the question: what's the best way to do that?

I haven't read The Automated Society, so I'm not sure what Masse Bloomfield's answer to that question is. But you know who did have an answer? M. King Hubbert. Here's a blog post I found that provides some details on it:

Hubbert: King Of The Technocrats

Posted by Big Gav in hubbert, technocracy

In the wake of the recent interview with Jay Hanson posted at The Oil Drum, there was some discussion of Hubbert's role in the Technocracy movement.

I hadn't been aware that Hubbert was a Technocrat (or that the technocrats were an organised grouping, for that matter), so in this post I'll explore the Technocracy movement and Hubbert's role in it.

The knowledge essential to competent intellectual leadership in this situation is preeminently geological - a knowledge of the earth's mineral and energy resources. The importance of any science, socially, is its effect on what people think and what they do. It is time earth scientists again become a major force in how people think rather than how they live. - M King Hubbert

Genesis of the Technocrats

M. King Hubbert joined the staff of Columbia University in 1931 and met Howard Scott, who had earlier founded a short-lived group of engineers and scientists called "The Technical Alliance". Hubbert and Scott co-founded Technocracy Incorporated in 1933, with Scott as leader and Hubbert as Secretary.

The Technocrats were influenced by figures such as Thorsten Veblen, author of "Engineers and the price system", and Frederick Soddy, winner of the Nobel Prize for chemistry in 1921 and author of "Wealth, Virtual Wealth and Debt" which looked at the role of energy in economic systems. Soddy criticized the focus on monetary flows in economics, arguing that “real” wealth was derived from the use of energy to transform materials into physical goods and services.

The world's present industrial civilization is handicapped by the coexistence of two universal, overlapping, and incompatible intellectual systems: the accumulated knowledge of the last four centuries of the properties and interrelationships of matter and energy; and the associated monetary culture which has evolved from folkways of prehistoric origin. Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely, exponential growth, which has made a reasonably stable coexistence possible. But, for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is by now almost over. The monetary system has no such constraints, and, according to one of its most fundamental rules, it must continue to grow by compound interest. This disparity between a monetary system which continues to grow exponentially and a physical system which is unable to do so leads to an increase with time in the ratio of money to the output of the physical system. This manifests itself as price inflation. A monetary alternative corresponding to a zero physical growth rate would be a zero interest rate. The result in either case would be large-scale financial instability. - M King Hubbert

Technocracy

Technocracy is form of government which is administered by scientists and technical experts administer, resulting in a form of planned economy.

The Technocracy movement aimed to establish a zero growth, science based socio-economic system, based on ideas of conservation and abundance as opposed to the usual scarcity-based economic systems.

In a technocratic system, money is replaced with energy acounting, which records the amount of energy used to produce and distribute goods and services consumed by citizens in a Technate (Technocracy based society). The units of this accounting system are known as Energy Certificates.

Energy certificates are not saved or earned, but periodically distributed among the populace, with the number calculated by determining the total productive capacity of the technate and dividing it equally after infrastructure requirements are met. Certificates not used during a period expire.

The Technocracy movement flourished for a while in the 1930's but became steadily less influential over time in broader society (writer Charlie Stross dubbing science fiction "the fictional agitprop arm of the Technocrat movement" which "carried on marching in lockstep into the radiant future even after Technocracy withered in the 1930s").

Hubbert's membership of the Technocracy movement was investigated in 1943 by his employers, the Board of Economic Warfare, who may have regarded it (not entirely unreasonably) as a form of communism - though engineers desiring political control didn't seem to do much better in the Soviet Union either.

Technocracy Inc. lists the following papers as Hubbert's contributions to Technocracy:

* Professor Hubbert was the primary author of the Technocracy Study Course.
* Man-Hours and Distribution which was derived from an earlier article, Man-Hours -- A Declining Quantity in Technocracy, Series A, No. 8, August 1936.
* Determining the Most Probable in Technocracy, Series A, No. 12, June 1938
* Some Facts of Life in Technocracy, Series A, No. 5, December, 1935.
* The ``Spirit of the Constitution'' in Technocracy, Series A, No. 6, March 1936.
* Book review: The Tools of Tomorrow in Technocracy, Series A, No. 3, Aug 1935
* Book Review: Reshaping Agriculture and Nations Can Live at Home. Technocracy, Series A, Number 7, May 1936
* Book review: An Orientation in Science in Technocracy, Series A, No. 16, July, 1939.

Technocracy Inc also has a tract on Technocracy and peak oil, which outlines a fairly utopian vision of abundant energy for all if we are willingly to become sufficiently efficient in our energy usage.

So why does Technocracy think that its proposal can "save" us from Peak Oil? Quite simply Technocracy's plan knows how to do more with less. Technocracy's design will allow all North Americans to live with a standard of living many times greater than is the average even today. Not only this, but is does so by using far less, both in terms of resources and labour. The calculations done as part of the initial study performed by Technocracy's scientists back in 1930 showed that at that time it would be possible for every citizen to have a standard of living the equivalent of a lower-upper class income, and only have to work for 16 hours per week, with 2 and a half months vacation per year, at a job that they have both chosen and were well trained for. Also included were things such as free, high-quality education and health care, indefinite maternity rights, and retirement at age 45 with no loss of income or benefits. How they could achieve this was through an ingenious reorganization of continent-wide industry, that would unleash its potential to produce this "abundance" for all. They showed conclusively how business, politics, and money were all holding back this production, and causing ever-greater need of waste of resources. The key was automation, which allows us to produce more while requiring less resources to do it, as well as less labour to operate these machines.

Today it is obvious that automation has improved many thousands of times, with the advent of the computer and industrial robotics. There in no longer any need whatsoever for anyone to have to work at a menial labor or unskilled service-industry job because it can all be performed by machines. By harnessing automation like this, we consume far less resources, including energy, and can still increase our overall standard of living. One estimate shows how by simply reworking the continental transportation system, we could operate our entire society on as little as 5% of the energy we consume today, with no corresponding drop in standard of living! Adjustments in other areas would allow us to decrease even this number, but it should be obvious that with so little energy consumption, and the enhanced abilities of scientific research allowed by a society of abundance, we would have plenty of time to devise alternative and sustainable sources of energy that would also be non-polluting.

Our ignorance is not so vast as our failure to use what we know. We are not starting from zero, wWe have an enormous amount of existing technical knowledge. It's just a matter of putting it all together. We still have great flexibility but our maneuverability will diminish with time. - M King Hubbert

http://peakenergy.blogspot.com/2008/11/hubbert-king-of-technocrats.html



Be sure to read the link for the whole post. The excerpt from the tract on Technocracy and peak oil is quite utopian, which makes me wonder how the principles of Technocracy could feasibly be adapted to a world after the peak has passed and our economies are crumbling. The Hirsch Report from the DOE in 2005 stated that we needed at least a 20 year jump on the peak in order to get a functional energy infrastructure in place without severe economic repercussions. Since it's pretty obvious we don't have that kind of time, I'm not sure if implementing the principles of Technocracy will yield positive results. But I think it would be worth attempting. Beats corporatism, if you ask me!