Sacred Economics

I'm reading the Sacred Economics right now and the timing couldn't be more perfect because I've been feeling very discouraged about our future -- the time will soon come when the planet will no longer be able to support all 7 billion of us.  I'm troubled because I am complicit to this system of unfettered growth, exploitation,  over consumption and resource depletion.  And the only option that seems viable to me right now is to check-out of the system altogether -- homestead and become self-sustaining.  But without electricity how could we realistically survive?  I have no life skills.  I have office skills FFS.  I am not resilient either.  Nor do I feel that separateness is the solution. So instead I just throw up my arms and resolve to wait for my families eventual demise.

But then I started reading this book and it put forth some solutions that 'could' work.  Today's problems were created from growth which is necessary to keep money in circulation. I'm finally beginning to see the problem -- money is created from debt, so that there is always more debt than actual money in circulation.  Repayment of debt (principal + interest) means that more goods and services need to be created, regardless if we truly need it.  Hense the need for growth.  Today we live in a world where everything is for sale.  Resources have been sucked dry, chemicals have been pumped into our water and air, people have been exploited .... and yet we are not happier.  How ironic is it that more 'goods' don't actually mean more 'goodness'. Externalities, such as the environment, our health, safety and freedom are not built into the cost of anything we consume.  Corporates take their profits and everyone else pays for the mess.  This book proposes embedding the things we hold sacred into the price of goods and services.  For example, the price of strawberries from California would reflect the transportation costs (including road maintenance) to bring them here, the cost of depleting their acquifers and eroding their soil to grow them, and the emissions cost to plant and harvest them such that they would be way more expensive then local produce.  Companies would have an economic incentive to not pollute or exploit.  We would buy less things because products would be built to last, healthy food would be more affordable than junk food and people everywhere would earn a living wage.  Bliss!  A carbon tax/cap and trade system is similar, but only looks at one facet.  This system would factor in multiple externalities. It sounds complicated to implement, but it's the right thing to do.  I believe people want to know the effects of their actions, and want to take responsibility for them.  This system simply makes producers pay for what they currently take from 'the commons', thereby contributing to future sustainability.  It's kind of like an indirect tax -- you pay for what you take, not for what you earn.

The other concept is of negative interest.  Money is the only resource that grows by doing nothing.  Everything else decays.  The author's example:  if I have 12 loaves of bread, I will give you some because I can't possible use it all before it goes stale.  If in the future, you  have extra loaves, you would most likely give them to me.  This is how a gift economy works.  But with money, we have a liquidity preference to hold on to more money (hoard) and not share.  This book proposes negative interest such that money would lose it's value by holding on to it -- kind of like a depositor's tax.  Imagine having to pay to affix postage-style stamps to your money to keep it's value up.  You'd want to spend it on what you need and not accumulate what you don't need. This is a huge mind shift from the current system and sadly I can't see it ever taking hold because those with accumulated wealth stand to lose the most.  I'm just starting to read the details of such a system and have many qs.  For starters, how would the financial system work?  The author explains that banks would make money by lending at zero or negative rates which would be less than the rate of depletion (e.g. loans at -5% interest is better than -7% depletion).  Borrowing money would not create more money and growth would occur naturally rather than out of necessity (to pay down debt).  It's kind of an out-there concept, but one that's starting to make sense for me.

Looking forward to see if other share these ideas and if they have any hope of becoming a reality.  Because our current system is not working and will not last.

The End of Growth

Another great Jeff Rubin book that builds on the ideas from his first revealing book.
Rather than summarize all of it, I´m going to note a few personal learning points:

The caution siren is sounding, but nobody is listening:  I am confounded by the inability of governments to do anything that will lessen our dependence on fossil fuel.  The book mentions that the US continues to grant permits for deepwater exploration in the Gulf of Mexico for example.  After the Moacondo fiasco?  WTF.

Growth is the tenet of Economics: nobody quesitons it; it's the panecea of all economic ills

Potential growth is calculated from productivity and labour (are your factories at capacity, is your workforce growing).  The price of oil does not enter into the equation.

The good times of steady growth are over. An economy can't grow if can't afford to burn the fuel it runs on. Stimulus money and printing money not only creates a huge debt burden, but also causes inflation.

QE:  Fed buying up longer-term government bonds to bring down long-term interest rates. The lower rate of return on long-term gov't bonds, makes other investments more attractive by comparison.  Investors typically park huge sums of cash in long-term US bonds in an attempt to ride our a finacial storm. The Fed is trying to steer money to other parts of the financial system where it can do more good. Buying mortgage-backed securities also lowers mortgage rates which reduces borrowing costs for potential homeowners and hopefully stimulates the housing market.

China:  Every month, China's central bank shows up to buy US bonds (t-bills, t-notes and t-bonds) at the US treasuries auction. China buys US treasury bonds to help keep its currency from rising against the US dollar.  Their demand for treasuries is tantamont to a demand for US currency.  In foreign exchange markets, such demand is what allows a currency to hold its value. Rapacious American consumers have dined on cheap labour from China for decades.  China cycles the savings of these same workers into US treasuires so that Americans can keep buying cheap Chinese goods.    With energy scarcity, distance costs money.  Also higher Chinese wages boosts domestic economic activity which means less reliance on the US.  China is facing high inflation right now.  They can combat this by letting the value of their currency rise.  Letting the yuan rise in relation to the USD would mean that China pays less for imports (e.g. oil, corn) and gives Chinese consumers more purchasing power. China can simply turn inward to its 1.3B consumers.  Their auto market is already 50% larger than the US auto market. China could also start selling their US Treasuries -- this would flood the market, which would shrink the appetitie for buying US bonds at future Treasury auctions and sink the USD further.  In order to entice investors, the US would have to raise interest rates on their bonds.  This would affect US citizens (mortgage holders) as their interest rates would also rise.    

Admittedly, a lot of this basic info was beyond me.  What the hell did I learn at university exactly?  At any rate, the future is bleak.  And no one is doing anything about it.

Warehouse Slavery

I'm reeling from a recent article I just read on sweat-shop labour in North America. Turns out that the low-cost, free-shipping convenience of on-line shopping is once again on the backs of the poor. Long hard hours, military-style humiliation-motivation, threats of dismissal if impossible-to-meet targets aren't met, no time off --it's so inhumane that I wonder why Americans would stand for it. But what choice do they have when their children are starving. There's an endless supply of people who are willing to work, no matter how bad the conditions. These are the only types of jobs available in this god-foresaken economy. Surely the mega corporations whose goods these warehouses stock can afford to pay their workers better? Technically they are not their workers. Hell no! Warehouses are operated by other arms-length companies and staffed by further removed temp agencies. Another brilliant business model to indemnify corporations of their responsibility to treat and pay people fairly. It turns my stomach. I will never buy anything from Amazon or the like again!

Occupy Wall Street

This demonstration against corporate greed and lack of accountability both on wall street and in government makes me shudder. It's the G20 all over again. And it will produce the same outcome -- hundreds of innocent people will have their rights (rights to freedom of expression and association) stripped from them, the police will use unnecessary force to shut down dissension, the media will portray the protesters as a bunch of hippie anarchists and the rest of the world won't bat an eye. It makes me SICK.
So, what am I going to do about it? Pull my money out of the big bank? Sell my financial sector investments? Write a letter to my MP? SIGH. I will do nothing about it. My money is safer in the bank then under my mattress. The financial sector as evil as they are are make a shit load of money and are less risky then depleted resource of volatile tech companies. And I'm not even sure what I would say to my MP about commercial finance in Canada (we're more regulated thankfully). No, I suck. My heart is with those that are occupying wall street though. And unfortunately that's where my support starts and ends. Maybe I can do my part to raise awareness of what caused the financial crisis and also draw attention to the fact that no one has been held accountable for it. No one! xx

Progress

It really burns me to see people pushing their beliefs and lifestyle on others especially when what they are selling is a load of horse shit. I feel it's particularly irresponsible to convince those in under-developed countries that our way of life is the ideal. Just look at how well we've exported our plastic garbage, manufactured entertainment, and selfish profit motive overseas. In doing so, we've messed with their perception of happiness and created in them a burning desire for materialism and consumerism. And they have no idea of all the dysfunction that emanates. This is not to say that we should not be grateful for the rights, freedoms and opportunities we have. We are fortunate in so many ways. But there's also a dark side to wealth. And we hide it so well -- the waste, the debt, the exploitation, the meds, the destruction.

When I hear others singing the praises of 'progress', I want so badly to cast a spotlight on the other side. A balanced viewpoint would curb people's enthusiasm for our destructive lifestyle. Perhaps it's just human nature to want what you don't have. I just feel like they are impressionable and that we are corrupting their spirit. Instead, we are the ones that need to take a page out of their lifestyle and learn from their simplicity, connection to nature and altruism.

This isn't a particularly uplifting post tonight, but I needed to get this out of my head before I go ape shit on my French prof again. Progress is not building a 900km highway in Africa, it's feeding and educating the planet.

Knowing your stuff

I know that I've really solidified my understanding of something when I can explain it to someone else -- especially someone like my Mom or my 5 year old. Better yet, is to be so confident of your understanding that you can politely challenge someone else's thinking. I was given the opportunity to present the other side to a colleague today who is fresh out of school and got all of his economic info from his professors who sing the praises of the monetary system. I was pretty psyched to expand his understanding by showing him the harsh realities of the system. But as I started to head down that path, I started stumbling. I was all over the place -- interest rates were up, inflation was up (or is that down), foreign currency was devalued (is that a good thing). After what seemed like an eternity of incoherent babbling, I resorted to useless ad hominems -- "yeah, those fat cats on wall street are assholes, there's collusion on both sides, the whole system is fucked up". Way to go D! Important lesson today -- when you're not really sure about something, just keep your mouth shut. And if you want to know more about something, then really LEARN about it -- from others who know and by reading reliable sources, not 5 min Youtube vids.

Marshall Law

What does it take for people to change their ways -- to stop trashing the earth, end poverty, defend their civil liberties, or even help one another? Forget 'people', what would make me act instead of just talk? I care. I vote. But neither affect change. Sadly, I think the majority of us need to be personally affected by something in order to make change happen. Taken to the extreme, if a national emergency were to strike and the health and safety of my family were at risk, I would damn well sure act. Marshall Law -- is that where we are headed? I hear signs of it more frequently now, thanks to my conspiracy theorist friends. I picture stock piling food, boarding up their homes and staying locked in their basements. Is it unrealistic? Why do people have to be pushed to the extreme before they'll take a stand? Why are we so glib about all of the freedom, security and luxuries we supposedly cherish? Maybe it's because we don't really care. We already have everything we need but feel compelled to want more (à la EGO), so we cling to ideals that are impossible to attain because the basics are boring.

I can't help but think of my 'ol friend Maslow again. Sometimes I feel over-privileged and out-of-touch when I hear myself go off about privacy and the right to freedom of expression when they are people who are fighting for their right to live. My cherished civil liberties are at the top of the pyramid -- they are nice to haves. They are also the first to go when survival needs are at risk. And then again, I am resentful that we cannot have one without the other -- privacy MUST be sacrificed in the name of national security. Says who? Maybe I just have to get out of this Utopian landscape I've painted for myself. Hopefully my family and I will never live to see Marshall Law. Hopefully life will get better with each passing generation. Hopefully.

Some parenting notes

I've got to teach my kids about consumerism and the value of money. I think my partner and I do a fairly decent job by living by example. We skip commercials on the PVR, we don't give into our kid's demands for the latest plastic junk fad, we buy used clothing and toys as much as possible, and we have conversations about living within your means and investing in quality. But I think we can do better. Here are a couple other pointers I learned today:

1. Explain to kids that they are being marketed to: the toy companies don't care about you, they only care about your money. I don't think I've ever put it this way before. Makes perfect sense. Once they understand the intent behind the message, they'll be less likely to be sucked in. This one also makes me smile because it's a message I've reminded my partner of many times -- "the stripper that danced for you guys all night, she doesn't want you, just your money."

2. Show them the effects of consumerism: pictures of landfill, basements filled with shit (don't have to go far to witness that one), fat kids who ate too much MacDonald's, etc. Hell why not talk about child labour or unsafe working conditions in overseas sweat shops (k, maybe that's a bit too much, at least for now).

3. Talk about credit cards and the concept of interest. My 7 yr old is strong in math and I know he'll get this, but for some reason I hesitate to talk about the harsh realities of life. But why not be straight about it? Is this why so many ppl are are drowning in debt? Teaching the kids financial literacy is my responsibility. Maybe they are ready for it.

Economics 101

Interest rate ↓, savings ↓, but investment and spending ↑ → how does this impact the exchange rate, inflation and unemployment again?
Christ! I used to have all these economics basics down pat when I was in school. Now I just feel completely ignorant. Obviously I just memorized what I needed to know for the test rather than really learn. It's one of the reasons I ignore my investments and show no interest in financial news. I can't leave it all up to my partner either. The other day he told me that we should stay away from US investments due to 'quantitative easing'. I pretended to know what he was talking about, because I am after all a Business grad. WTF! This can't go on -- I'm almost 40. I fell like I've let parenting define my entire identity. Time to dig deep -- where's my Lipsey, Purvis, Steiner? New goal for 2011 D.

Cheap Oil

No more burying my head in the sand. I'm finally starting to inform myself about why this crisis is just around the corner ... and it's depressing as all hell.
It's more than the fact that the oil taps are running low. We all know how deep our hunger and addiction to the lifestyle oil provides goes. Here are some other things I learned from reading Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization :

Demand in developing countries is off the charts. No amount of energy savings gained by tightening our belts or 'off-peak' discipline will ever counter the amount of energy being consumed in places like China and India. They finally get to have a taste of our lifestyle ... and all the problems that go with it.

Local oil is subsidized to make oil more affordable for developing countries, but it also hurts investment in the local oil industry. With oil consumption on the rise, there is less left to export and this causes oil export prices to rise even more.

I didn't know this, but OPEC countries are burning oil to produce electricity. Rapid population and economic growth means high power demand (again, less oil to export). Saudi Arabia is also running out of fresh water because they are draining their aquifers for irrigation. This means they are burning more oil for desalination plants, which of course are energy intensive. Thanks!

And then there's also the fact that there's more money to be made with oil as a petrochemical than just burning it (like our planet needs more plastic shit).... less and less oil folks.
More and more countries are repatriating their oil and kicking internationals out (except for Canada). Yes, the tar sands ... will not save us either. Oil sand extraction is COSTLY. It also requires an enormous amount of energy to process, referred to in this book as a low energy rate of return. What will happen when natural gas is diverted elsewhere to more financially attractive demands? And if and when environmental laws finally tighten up? Bye bye tar sands.Off-shore oil is not the answer. Fast depletion rates, costly rig repairs from severe storms and environmental devastation from spills make this a non-starter.

Forget about nuclear too. Too many years to become operational + costly + lots of downtime = disappointing yields. What about bio fuel? We've already learned that stealing from our food supply to feed our cars is utterly foolish. But what I didn't know was that the energy return from producing ethanol is almost negative -- planting, fertilizing, harvesting, processing, transporting all require a lot of energy.

Hydrogen? Not unless you can afford a million dollar car. It too has a low energy return because it takes a lot of energy to produce and is expensive (and dangerous) to transport. Surely solar and wind? Nope. Energy leaks don't make either particularly efficient. Plus you'd need to install panels all across a piece of land the size of New York State just to power the US vehicle fleet. It's certainly an 'alternative', but not a replacement.

And speaking of efficiency, I found it incredibly depressing to read about the rebound effect in this book. All of the technological gains in creating energy efficiency (following the energy crisis of the 70s) has actually increased consumption. Yep. Those Rabbits of the 80s used less energy which brought oil prices down so what did that afford .... bigger more energy consuming vehicles to fuel (and bigger houses to heat/cool to boot).

So there you have it -- things are BAAAADD. The rest of the book talked about how our world will get smaller. It reaffirmed everything I've already learned. Travel, exotic cuisine, year-round produce, bargain-basement prices, over-consumption, long commutes ... these WILL be history. I really can't stop thinking about this (wait, could this be a new obsession? :-P). What can I do now, this very minute, to prepare myself and my family? How can I wean myself off this lifestyle because I really can't ignore it any longer. xx