Posted on 19th July 2013 by Administrator in Economy |Politics |Social Issues


I started reading Dimitri Orlov’s The Five Stages of Collapse – Survivor’s Toolkit this week. He seems like an extremely rational fellow who understands the big picture. Here are his 5 stages of collapse:

  1. Stage 1: Financial Collapse. Faith in “business as usual” is lost. The future is no longer assumed to resemble the past in any way that allows risk to be assessed and financial assets to be guaranteed. Financial institutions become insolvent; savings wiped out and access to capital is lost.
  2. Stage 2: Commercial Collapse. Faith that “the market shall provide” is lost. Money is devalued and/or becomes scarce, commodities are hoarded, import and retail chains break down and widespread shortages of survival necessities become the norm.
  3. Stage 3: Political Collapse. Faith that “the government will take care of you” is lost. As official attempts to mitigate widespread loss of access to commercial sources of survival necessities fail to make a difference, the political establishment loses legitimacy and relevance.
  4. Stage 4: Social Collapse. Faith that “your people will take care of you” is lost, as social institutions, be they charities or other groups that rush to fill the power vacuum, run out of resources or fail through internal conflict.
  5. Stage 5: Cultural Collapse. Faith in the goodness of humanity is lost. People lose their capacity for “kindness, generosity, consideration, affection, honesty, hospitality, compassion, charity.” Families disband and compete as individuals for scarce resources. The new motto becomes “May you die today so that I can die tomorrow.”

These are not pre-destined to occur. He uses the Soviet Union collapse as an example. They were able to arrest the collapse at Stage 3. The stages don’t necessarily have to follow in order. The stages can occur simultaneously. You can recognize various elements of the 1st three stages in the United States today.

We are clearly deep into Stage 1. Our economic and financial system is no longer based on free markets or capitalism. They are propped up by Ben Bernanke and built on a foundation of accounting fraud. Our largest financial institutions and our government are as insolvent as Detroit.

We are in the early portion of Stage 2. Faith in the markets is deteriorating. Small businesses are folding up their tents. Only the mega-corporations who have bought off the politicians are still making money. They are doing it by cutting workers and using accounting gimmicks. Revenues are declining as consumers are sucked dry by higher prices for everything they need to live in their day to day lives. The Commercial collapse will gather momentum in 2014.

Stage 3 – political collapse is well under way. The political establishment has lost its legitimacy. The recent revelations from Edward Snowden about the government spying on all Americans and the Gestapo like tactics of the state in locking down Boston while searching for a wounded teenager has been a tipping point. The President is despised by over 50% of the people. Congress is scorned by 90% of the people. The bankruptcy of Detroit is an early warning that government will not take care of you. The government is broke. They are grasping at straws. They don’t have the answers. The government is corrupt to its core. It will need to be destroyed and rebuilt.

Orlov and many other critical thinking people realize we are in the midst of a collapse. But we do not know when it will turn nasty. Some people think we have decades of slow decline. I doubt it. The numbers point to a financial collapse within the next five years. This fits with the Fourth Turning timing. The future is not bright. Anyone with an ounce of common sense and a functioning brain should be able to see this. The existing social order will be swept away. What it is replaced by is up to us. We don’t want to reach Stage 5.

The Five Stages of Collapse – Survivor’s Toolkit

  1. OUTTAHERE says:

    EXCELLENT BOOK! Well written and right on target. Highly recommend it as well!

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    19th July 2013 at 2:39 pm

  2. Persnickety says:

    Been reading the book for over a week now and am about halfway through. Good book so far! I recommend it.

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    19th July 2013 at 3:15 pm

  3. Persnickety says:

    The future looks quite bright to me.



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    19th July 2013 at 3:16 pm

  4. platoplubius says:

    Stage 5 “Cultural Collapse” has been occuring for decades! When a “critical mass” is reached of individuals who feel and see the same way about the flaws in our CURRENT consumeristic “look at me,” status symbol and prestige driven society then TSHTF!

    Survival Instinct and the “reptilian brain’s” evolutionary, yet instinctive, behavior will dominate! Then the ol’ saying when discussing nature, does come true, “Survival of the fittest!”….nay BEST ADAPTED! You better not be a “reactionary” in this time and have some sort of plan(s)! Only you know what that might be!

    The Extreme of Stage 5 would be ANARCHY in your neighborhoods with the poor, disabled, and sick left to defend themselves from reactionaries who have not prepared due to their ignorance, laziness, ineptitude, and to the clever system of tantilizing distractions found in their homes, cars, out in public, and ultimately, in their minds! Because that’s what this is all about in the end isn’t it? A battle for the “hearts and minds” of us?! Behavior modification is the end game through totalitarian control mechanisms created and enforced through technological means!

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    19th July 2013 at 3:25 pm

  5. Stucky says:

    STAGE 6: Going Postal

    Not yet …… not yet ………… but it’s coming

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    19th July 2013 at 3:38 pm

  6. dave says:

    orlov is a scary motherfucker. entirely to accurate in his forcasts for my comfort

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    19th July 2013 at 3:43 pm

  7. AWD says:

    Prepare, prepare, prepare.

    I was just having this discussion with my nurse. I’m trying to convince her to buy a gun to protect herself and her kids, and stock up on some food. I think my rants are finally getting through.

    I’m not sure where all out war fits in the 5 stages, but I can’t help but feel there will be war, in the Middle East or versus China. When they go to a gold standard with their currency, and the U.S. loses reserve currency status, and everyone dumps their dollar assets, it’ll be financial Armageddon for the U.S., and I don’t see how the criminals in Washington can allow that to happen. The only way to fix it would be to go to war with China. We already have 70,000 troops in Korea and Japan. We’re already in a de facto state of cyberwar with China now. Wouldn’t take much to make to go hot.

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    19th July 2013 at 3:55 pm

  8. Olga says:

    Loved it!

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    19th July 2013 at 3:58 pm

  9. DC.SUNSETS says:

    Cycles of optimism and pessimism drive all of this, as I see it.

    People became manically optimistic to the point that they believe rulers can make candy rain from the sky if given enough power to coerce everyone. They embraced the notion that extending credit to people so they can borrow to consume is the basis for a functioning economy. They believe almost everything they are told if it comes from celebrities who read telepromptors.

    This level of shared optimism has never been recorded over this long a period (3 stock manias in just 13 years), suggesting this is a peak of even more significance than a once-in-three-century event.

    As forecasted by Prechter, this has elements of Tulipmania, the South Sea Bubble and John Law’s Mississippi Scheme all rolled into one and then raised to the tenth power.

    Today people mostly have exchanged the wealth they produced for “claim checks” for wealth, and their wealth has been completely squandered (see Japan for the worst of this, but essentially all countries have played the game).

    When the vast game of musical chairs ends and the music stops, not only are there no chairs left, the hall is about to burn down and most of the exits have been locked from the outside.

    The desperation we should expect may have a lot in common with a zombie apocalypse.

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    19th July 2013 at 4:21 pm

  10. DC.SUNSETS says:

    No one is going to “dump” their US dollars or Treasuries.

    What has happened every other time this sort of thing happens is that, at the margin, people who previously were buying treasuries get nervous and hold back. As the bid evaporates, prices begin to drop on treasuries, causing a reciprocal rise in interest rates.

    This causes vast sums of value in treasuries to disappear.

    No on dumped them. All it takes is for a loss of faith.

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    19th July 2013 at 4:33 pm

  11. AWD says:

    Yes, a loss in faith, but who wants to hold dollar assets that are worth 1/10 of their original value? When petrodollars are meaningless? When global trade is conducted in Yuan instead of dollars? Yes, the repatriation of dollars, buying up everything that is not nailed down, but utterly devalued and almost worthless dollars….

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    19th July 2013 at 4:37 pm

  12. platoplubius says:

    Are you an “OBEDIENT WORKER” DRONE? like George Carlin once said? Cuz if you’re not then your behavior does not “fit” within the acceptable parameters (profile) of an average citizen.


    I wonder if there will be more moments like this?

    “One of these lives has a future and one does not”

    Stuck, was this what it was like when the good ol’ boys asked you to come down to the station?

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    19th July 2013 at 4:55 pm

  13. Stucky says:


    Somewhat. neither one of them ever smiled. They took their jobs vewy vewy seriously. After all, they had a potential terrorist on their hands. They mostly asked leading questions. “You CAN see how that’s a terroristic threat, don’t you?”. “You CAN see why Mr. “X” feared for his life, don’t you?” “If YOU received those threat you would be scared too, wouldn’t you?”

    Nope. Nope. Nope. Even the 2nd and 3rd time they asked. I guess they thought I was a fucking moron. Fact is … they were.

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    19th July 2013 at 5:14 pm

  14. DC.SUNSETS says:

    AWD, no one in his right mind would jump from the dollar drying pan into the yuan fire. If you’re bothered by the mismanagement of the dollar, are you more sanguine about just another currency (please don’t refer to China buying gold and backing their currency; doing so would rip their loosely stitched together regions apart as their experiment with zero-capital banking went nuclear)?

    The world is awash in debts denominated in USD. As those debts are defaulted upon (see Detroit, Cyprus, etc.) the ocean of dollar credits will drain, prices for stuff should collapse (just like in 1930-1932) and those who can maintain their hold on their dollars will be relatively better off (this is part of how the Kennedy clan moved from bootleggers to Martha’s Vineyard Royalty).

    Right now holding any asset OTHER than dollars is a bet on eternal can-kicking.

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    19th July 2013 at 5:30 pm

  15. DC.SUNSETS says:

    Frying pan, not drying pan. I HATE iPads and I DETEST Apple, inc.

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    19th July 2013 at 5:31 pm

  16. platoplubius says:

    DC Sunsets,

    Your comments need to be addressed in a guest post. I’d like to hear of what you think, in more detail, specifics (in relation to the dollar debt drying up and the decreased price correlation that you believe would occur like 1930-32)….is the climate the same? Do derivatives play a role in this and what effect would they have on today’s crisis considering derivatives weren’t even around in the 1930s?

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    19th July 2013 at 5:43 pm

  17. Roy says:

    This is a ten or more year old statistic; there were $800 billion in Federal Reserve notes in circulation two thirds of which were offshore. Think MF Global and/or Force Majeure about non physical possessed legal tender.

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    19th July 2013 at 6:05 pm

  18. DC.SUNSETS says:

    Platopublius, I have to be careful not to overtly plagiarize the guy whose analytical perspective on this mostly informs mine.

    The preeminent “Deflationist” analyst today remains Bob Prechter. I originally found his work in his 1995 book, At the Crest of the Tidal Wave (which I still think is perhaps my favorite of his) and while I learned that no one, including Bob, has a crystal ball, and therefore should NOT be on what one trades real money, I find his basic explanation for the eventual (yet to come, but inevitable) denouement of a credit bubble utterly compelling.

    While I no longer hold a paid subscription to his publications, I pay for a month once in a while for entertainment’s sake.

    Much of the work he and his colleagues have done on the mechanism of deflation in a credit bubble burst is available for free if you sign up for their (nakedly promotional) “Club EWI” at It is also an entire chapter in his 2002 book, Conquer the Crash.

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    19th July 2013 at 7:12 pm

  19. DC.SUNSETS says:

    Much of what I still think is found in an essay I published in 2009:

    The bottom line is that we’re living through the most widespread financial mania in recorded history. Never before have large groups of people pyramided debt on credit-pumped asset values in an upward spiral lasting decades and decades.

    In the 1920′s there was a fraction of this level of credit growth and when the shared optimism feeding it turned sour, people realized that far too much credit had been extended to ever be repaid. The outstanding debt formed part of the money supply, and when the trust in that debt collapsed, so did its value and contribution to the total supply of dollars. The Fed desperately tried to increase the money supply but if people won’t borrow and spend, none of the Fed’s credit is turned into money. The money supply crashed, the velocity of money collapsed, political intervention in the private economy skyrocketed and owners of private capital withdrew it from the economy in an effort to protect themselves from FDRs asshole “brain trust” leftists.

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    19th July 2013 at 7:26 pm

  20. DC.SUNSETS says:

    Today we have asset prices in the stratosphere because it is so easy to borrow vast sums of credit-money that its an upward spiral: someone borrows $100k to buy a 1600 sq.ft. house, then the holder of the mortgage uses that “asset” to borrow $1,000,000 and extend that credit to more borrowers, who in turn bid the price of 1600 sq.ft. homes ever higher.

    New debt is turned into an Asset, which is more collateral for MORE DEBT!!!!

    As the prices of homes, stocks, bonds, etc are driven higher by this revolving cycle of debt-collateral-more debt, people feel wealthier. In their minds they have more “money.” This became a feedback loop, but it’s a positive feedback system, and everyone knows that such systems always spiral out of control.

    Today, most asset prices are held aloft by ASTONOMICAL amounts of collaterized debt. What is a house worth if the GSEs stopped supplying 98% of the credit used to buy them? What happens if Uncle Sam can’t sell the next installment of his 1.2 trillion in borrowing at <4% yields?

    When the Fed holds trillions of $ of 10-year t-notes and the interest rate jumps from 2.6 to 3.6%, something like $200,000,000,000 worth of value just DISSAPEARED! This occurred in the last TWO MONTHS!

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    19th July 2013 at 7:41 pm

  21. DC.SUNSETS says:

    No one alive today was old enough in 1930 to now recall what a credit collapse looked like from the inside.

    All we have experienced our entire lives is one inflationary spiral after another. They seem like a permanent fixture.

    I suggest otherwise. We’re finally seeing the signs of apogee. In Japan they are embracing full insanity and completely destroying all of the savings of a nation of savers. QE, the direct debasement of money in a credit-driven economy, is an act of pure desperation. It is similar in extremity to cranking up the printing press in a banknote-based economy, but it has dissimilar outcomes.

    Debasing the monetary unit with NEW credit cannot avoid eventually threatening the value of preexisting credit, which we must realize is the bulk of the money supply. If they push too much incremental credit out the door, the markets will eventually panic and demand a higher coupon to offset the debasement. The higher coupon does not just apply to new, incremental debt, it applies to the ocean of preexisting bonds and notes as well.

    They might monetize 85 billion next month and watch 200 billion evaporate from the money supply as the interest rate rises in the market.

    I await the day when we turn down from this manic, historical period of shared optimism. When that day arrives the debt spiral that used leverage to pump up both prices and the supply of credit-money will reverse, and the money supply will collapse at the SAME RATE OF LEVERAGE AS IT ROSE. Bank accounts will be repudiated, mortgages will be called, and most of what people think is “their wealth” will turn out to be uncollectable IOUs.

    Imagine the whole world as one big Cyprus, in political chaos.

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    19th July 2013 at 7:57 pm

  22. ecliptix543 says:

    DC Sunsets – Question: In the event of a rapid attempt to repatriate USD from foreign UST holdings trading out for Yuan, do you think that this influx will result in overall deflation or overall inflation, taking into consideration the levels and breadth of accounting and control fraud committed by the same institutions that would be responsible for clearing the transactions? I see that many of the theories being dicussed predict deflation due to cascading credit destruction but others predict hyperinflation due to sudden repatriation of vast dollar-denominated assets into an essentially illiquid (consumer debt-based) market. Does anyone think that the Fed and TBTF’s wouldn’t bar the proverbial gates and lie their asses off to cover an escape plan by trying to “regulate-by-committee” this scenario? It seems to me that placing much faith in any theory of economics is a bit short-sighted unless the discussion also includes integration of the endemic corruption standing between theory and reality. Most of the best essayists and economics writers out there are all pretty much standing around with their hands out saying, “I dunno why it hasn’t all burned to the ground yet. It should have by now…”

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    19th July 2013 at 8:00 pm

  23. sensetti says:

    When TPTB start getting desperate, long before the dollar collapse, they will take us into a major war. They will spill Millennals blood and steal other country’s treasure.

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    19th July 2013 at 8:02 pm

  24. Novista says:


    Srsly? This springs to mind …

    Glendower: I can call spirits from the vasty deep.

    Hotspur: Why, so can I, or so can any man;
    But will they come when you do call for them?

    Context: When TPTB’s mouthpiece declares a war, who will come? It’d take something far worse than Pearl Harbor, bigger than 9/11 to trigger any response from the people. Given the current state of lack of trust in the government, what parent of cannon fodder would wave the flag?

    I can see a lot of downsides in a war scenario and no cakewalks.

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    19th July 2013 at 11:11 pm

  25. Part_Time_Troll says:

    I am a troll. Fuck Millenials.

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    19th July 2013 at 12:05 am

  26. Reverse Engineer says:

    If you like Dmitry, you will LOVE David Korowicz.

    Part II of David’s Podcast now UP on Diner Podcasts in conjunction with his recent publication
    Catastrophic Shocks in Complex Socio-Economic Systems—a pandemic perspective. Link to the paper available on the blog.

    Scheduled today for recording, Ugo Bardi of Cassandra’s Legacy on the Seneca Cliff and other topics we end up jawboning.


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    19th July 2013 at 5:38 am

  27. DC.SUNSETS says:

    Ecliptix, I come at this from a far less mechanistic perspective.

    Ultimately, what I believe governs all of these things is mass psychology. Mass psychology is the basis of why people are most bullish at tops and bearish at bottoms. It’s why large institutions like “government” are the last fools to book passage on the doomed ship.

    I honestly don’t know the exact mechanisms by which interational money flows, FX moves, and various central banks will jockey for position during a period of credit collapse. My view is not really an “economic theory,” it’s more of a general description of what usually follows a condition such as that we see today.

    This is why it has been ABYSMAL for timing. It’s simply far too general to forecast with high confidence what is going to happen WHEN.

    If I was certain of the future I’d be far more confident of my own actions today in preparation. Instead I’m terribly anxious about things, and constantly searching for a better approach. That I’ve not yet found one does not mean none exists. I work hard to keep an open mind, though this is difficult.

    Today, the last fools willing to access the Fed’s unlimited credit tap are those running the FedGov and their TBTF cronies who figure they bear no risk of eating their losses should the system blow up, and as long as it remains they are reaping (raping) vast wealth each week.

    No one else is able or willing now to access the credit tap. This is analogous to an F-18 in a vertical climb…where one engine has flamed out due to oxygen starvation and the remaining engine is sputtering. When the engine of the FedGov’s “drunken sailor in a whorehouse” spending burns out, the airplane is at apogee, doing a hammerhead stall.

    The credit engines won’t restart on the descent.

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    19th July 2013 at 1:49 pm

  28. platoplubius says:

    Don’t forget all the people who can’t find jobs and are going back to school on government grants/loans…..That should continue the inflationary spiral upwards and increase the velocity of credit and fees generated (positive for the FIRE industry, i.e. Wall St)

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    19th July 2013 at 8:23 pm

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