Oct 272017
 
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Salvador Dalí White calm 1936

 

It’s been a while since we last heard from longtime friend of the Automatic Earth Dr. Nelson Lebo III, New Englander living in Wanganui, New Zealand. Nelson has written a fine collection of articles on this site through the years.

Of course I thought, when I first saw this piece in my mailbox, that he would have written about New Zealand’s new prime minister, Labour’s 37-year-young Jacinda Ardern, whose first action in her new job will be to prevent foreigners from buying existing homes in her country. It’ll be interesting to see how she intends to do so while remaining inside the Trans Pacific Partnership -TPP- agreement.

Radio New Zealand has a portrait in which she says ‘I Want The Government … To Bring Kindness Back’. And obviously my first thought was: wait till you meet Donald Trump. But it would be misleading to put the lack of kindness in politics on his shoulders. There’s too much blood on too many hands.

But Nelson didn’t address her this time. I hope he will soon. Instead, and I should have known, he writes about Koyaanisqatsi, life out of balance. When I wrote The Koyaanisqatsi Economy a month ago, he said he had been thinking of the same theme.

Nelson named his article “Pura Vida trumps Koyaanisqatsi”, but I thought his emphasis on volatility is too important to not be the headline. Especially given that volatility in financial markets is at a -near- record low, while it appears blatantly obvious that this not reflect the ‘real world’ at all.

Nelson’s summary of the real world: “..hurricanes, mass shootings, hurricanes, opioid epidemics, hurricanes, people sleeping in cars, hurricanes, rising suicide rates, hurricanes, and children dying from cold damp homes..”

If that doesn’t spell volatility, what does? Forget about financial markets reflecting anything real anymore. Thanks to central banks, markets are fiddling while Rome burns.

Heeeeeere’s … Nelson:

 

 

Dr. Nelson Lebo III: Volatility is the new normal – that’s the message I gave a local Rotary Club when I spoke to members four or five years ago. I had been told beforehand the group was “worldly” and specifically instructed in the invitation to challenge them with my presentation. As a weekly columnist in the city’s paper – the Wanganui Chronicle – I was widely known for my positions on wealth inequality, climate change, and debt, as well as a wide range of practical approaches to address these issues.

Around that time it was clear that a post-GFC new normal was functioning worldwide and many writers were using the term. By then The Spirit Level (Pickett & Wilkinson, 2009) had been widely read and widely praised for its documentation of the relationship between wealth and income inequality and social problems. Additionally, peer reviewed research based on decades worth of data had shown there was a quantitatively measurable increase in extreme weather events: more big storms and more big droughts.

I thought my audience would be well on board.

Judging from the response that day, however, the brief I had been given was misguided and most club members were neither expecting nor wanting a presentation that challenged the dominant paradigm of infinite growth without consequences no matter how factual. As a mid-week midday meeting with New Zealand ‘fush ‘n chups’ on the menu the message that the-world-as-you-know-it-has-changed-forever was a bit heavy for people on their lunch break.

The response that day was, of course, perfectly ‘normal’. Almost no adult human seeks out new and different worldviews. On the contrary, we are far more inclined to cling to outdated ones, à la “Make America Great Again” than to acknowledge changing realities.

Social media allows us to reverberate in echo chambers of our own beliefs where we know we’re right because the echo told us so. Social science researchers have told us this for decades. The Internet just makes it worse and more obvious.

I’ve been writing about Trump, doubling-down and the post-truth world for two years now, and if anything I am more certain of the point I’ve been trying to make: most people are irrational. Seems there’s now a Nobel Laureate who has been arguing the same for decades. Behavioral economist Richard Thaler was recently awarded a Nobel for his study of the psychology of economics, which seeks to understand how we are irrational and the impact on traditional economic theories that have failed time and again (think 2008 Global Financial Crisis) because they don’t sufficiently incorporate human factors. (Remember Greenspan’s admission?)

In no way do I intend to single out the Wanganui Rotarians, but rather use this example as illustrative for what my community, nation, and the entire world face: volatility made worse by inertia. In other words, the longer we choose to ignore inconvenient truths the greater will be their negative impacts.

This situation usually manifests in the form of tipping points . Malcolm Gladwell defined a tipping point in his debut book of the same name as “the moment of critical mass, the threshold, the boiling point.” Everything looks fine with the economy and the climate…until it’s not. And by ‘not fine’ we are talking really NOT FINE à la Greece, Puerto Rico, Houston, etc.

Tipping points is volatility on steroids. Brace yourselves.

Well-informed leaders from President Obama to Pope Francis agree the greatest threats facing humanity are climate change and wealth inequality. I’ve written extensively about both for many years yet neither appears to get much traction locally or globally. Our ‘leaders’ ignore these issues at all of our peril because the result of each is increasing volatility in many forms: social, economic, financial, political, and an increasing incidence of extreme weather events.

Volatility is not good for social order, and where I live is a perfect example of the canary in the coalmine: a coastal, river city with high levels of inequality. It’s a tipping point waiting to happen.

Some readers may remember the 1982 film by Godfrey Reggio called Koyaanisqatsi, named using a Hopi term meaning “chaotic life” or “life out of balance.” The film is unnerving, as is much of what comes via news media these days: hurricanes, mass shootings, hurricanes, opioid epidemics, hurricanes, people sleeping in cars, hurricanes, rising suicide rates, hurricanes, and children dying from cold damp homes. And then there’s Myanmar: When Buddhists become the aggressors, you know the world is well and truly out of balance.

Okay, so the world is out of balance. What can be done about it?

Our solution to imbalance, as any regular reader of our blog knows, is called “Eco-Thrifty.” This approach to design and to life is about living better on less. Seems we have good company along these lines in the form of Costa Rica, the small Central American nation that regularly tops the Happy Planet Index published by the New Economics Foundation.

Despite per capita income one quarter that of New Zealand (ranked 38th of 140) and one fifth that of the US (108th of 140) Costa Rica matches many Scandinavian countries in terms of equality, wellbeing, life expectancy and ecological impact.

As Jason Hickel of the Guardian recently put it, “Costa Rica proves that rich countries could theoretically ease their consumption by half or more while maintaining or even increasing their human development indicators.”

“The opposite of growth isn’t austerity, or depression, or voluntary poverty. It is sharing what we already have, so we won’t need to plunder the earth for more.”

Sharing is at the heart of the permaculture ethics, where it is joined by caring for the environment and caring for people. Although we practice permaculture on our farm and in our community, we’re not dogmatic about it. What drives the eco-thrifty bus is resilience accompanied by regeneration.

Resilience, in this context, is the ability to withstand a pulse. It does not happen by accident. It can be designed, built and managed. Resilience only matters 0.0001% of the time, but when it matters it really matters. Resilient homes stand up to earthquakes and hurricanes. Resilient farms stand up to major rain events and extended droughts. Resilient communities withstand economic downturns and ‘natural disasters’.

Regeneration, in this context, is about getting better, stronger, more resilient over time. Regenerative farms grow food while building soil fertility, reducing erosion, storing carbon, managing storm water, and increasing biological diversity. Regenerative communities reduce crime, domestic violence, drug abuse, and suicide rates while keeping wealth and resources circulating locally. They improve quality of life while shrinking energy use, pollution and wealth inequality.

From these perspectives Costa Rica is a good, albeit imperfect, case study. It is, however, about the best example we can find and has the data to show long-term consistently high quality of life.

Pura Vida trumps Koyaanisqatsi.

 

 

Aug 212016
 
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Dorothea Lange Home of rural rehabilitation client, Tulare County, CA 1938

 

Our by now regular contributor Dr. Nelson Lebo III, the New Englander ‘lost’ in New Zealand, sent me another article, and it’s great (well, in my view). His title for the article may put some people on the wrong foot, but I think that’s alright.

I’ve been to New Zealand a few times, and Nicole of course has even moved there, so I was aware of how poorly constructed many homes are -and often made of wood-, but I’d never heard of ‘curtain banks’. Still, they exist all over the country. Turns out, lots of New Zealand homes are so damp and moldy that curtains can literally save lives, and certainly make them more comfortable/bearable. But many people are too poor to be able to afford curtains. Hence the curtain banks. I’d be curious to know if similar initiatives exist anywhere lese on the planet. Do let me know.

Nelson’s second ‘bank’ is made of/filled with water. Agriculture, in particular the one-trick pony of the dairy industry, has caused the land to deteriorate so badly that water washes off the hillsides and the land without natural barriers like trees and shrubs left to stop and naturally regulate it. In other words, there is no ‘water bank’ or ‘stream bank’ left. I really like Nelson’s comparing this velocity of water to the velocity of money in a financial system.

 

 

Dr. Nelson Lebo III: Banks…what is there to say that hasn’t already been said? If you read the Automatic Earth, if you watch Max Keiser, if you’ve followed The Crash Course, there is no comment about financial institutions I can make that would add to the critique. That’s not my gig anyway. My gig is to offer realistic, achievable, grass roots, no-excuses alternatives to the dominant neoliberal consumerist paradigm. One approach I’ve gravitated toward over the years goes by the name of permaculture.

Permaculture has been around for decades. You’ve probably heard of it but do you know what it is? Yeah, that’s the problem. My observations are that the eco design methodology known as permaculture suffers in two fundamental ways: a confusing name and dogmatic application by inexperienced converts. The name is the name – no changing it at this point – and there is no antidote for dogma. But for a general audience of readers I’d like to lay out the ethics and practice of permaculture in the clearest ways possible – by using concrete examples.

 

Example One: The Permaculture Ethics

When engaging with permaculture as a design methodology, practitioners are bound to follow a simple code of ethics: care for the environment; care for people; and, share surplus resources. I appreciate this ethical code because it helps distinguish a permaculturist from anyone else who may be involved in some aspect of the ‘sustainability movement’ such as an organic farmer, recycler, green builder, eco-entrepreneur or local currency advocate.

This is not to say that a permaculturist cannot engage in all of these (indeed they do), but that anyone who practices one or more than these is not necessarily engaging with the permaculture ethics. Think of large-scale organic farms in California that truck in “certified organic” inputs and ship out bags of lettuce thousands of miles to the East Coast. Not permaculture.

People may take a permaculture course or buy a permaculture book for various reasons, but these do not necessarily make them a practicing permaculturist. I like to make the point that the difference between a permaculturist and a survivalist is 100 cases of baked beans and a gun. If you ain’t sharing, it ain’t permaculture.

I also appreciate the ethics because they are an integral part of the design process. In other words, the ethics can be used to help shape a larger project. An example of this is the ‘curtain bank’ that we recently opened in our community.

 

 

Those unfamiliar with curtain banks can be forgiven as many developed countries around the world have decent standards for housing that include high performance windows and central heating. But most of the New Zealand housing stock has been variously described as “sub-standard”, “abysmal”, “horrid”, and “a joke.” Mind you, that’s a bad joke instead of a funny one.

The majority of homes in this country are so cold that curtains must be used as a serious way to reduce heat loss. It is not uncommon for overnight indoor temperatures to drop into the mid-single-digits Celsius and daytime indoor temperatures to barely reach double-digits. I’ve heard stories of frost on the inside of windowpanes.

To add insult to injury, we also suffer from wealth and income inequality that make the purchase of new or even second-hand curtains out of reach for many families. As a result curtain banks have popped up in cities around the nation to redistribute second-hand curtains free of charge.

 

Applied Permaculture Ethics

Sharing surplus resources : People of means replace their curtains for various reasons, but most often for aesthetic ones. If the curtains are still in good condition and free of mould, they can be dropped off at the curtain bank, which makes them available for other households. Like any bank it accepts deposits and grants withdrawals. No fees. No contracts. No interest rates.

While traditional banks have the privilege to ‘lend money into existence’ we cannot lend curtains into existence, although it would be nice. We rely on donations from good people in our community to be passed on to other good people in our community. Which brings us to the next ethic.

Caring for people : It’s no secret that there is a link between sub-standard housing and illness in New Zealand. Sadly, most of the housing in our city is cold and/or damp. These unhealthy homes are especially hard on children and seniors. Many lack adequate curtaining.

Getting properly installed curtains, insulating blinds and window blankets into as many homes as possible helps make the occupants more comfortable and healthier. This is straight up caring for people by addressing some fairly basic needs.

Care for the earth : Improving the ‘thermal envelope’ of a home is the best way to save the energy required for heating and cooling. Saving energy is generally considered good for the environment by reducing carbon emissions or reducing the number of rivers dammed or even reducing the number of solar panels that need to be manufactured.

In these ways curtain banks tick all of the boxes for the permaculture ethics.

 

Example Two: Applied Eco-Design

The other example I’ll share is a direct application of eco-design: imitating nature to develop or reestablish robust ecological systems. The latter of these is sometimes called ‘regenerative design’.

Most of New Zealand is plagued by a legacy of bad farming practices most easily described as overgrazing steep slopes and allowing stock to foul streams.

We took possession of our small farm two years ago and have been working persistently to – dare I say it – ‘heal the land.’ Currently we are in the process of reestablishing a wetland and protecting the streams from stock. Additionally, we are planting native trees and poplar poles on steep hillsides to prevent slips, reduce erosion and provide bee fodder.

We are doing all this because that’s what nature wants. In other words, that’s the way the land was 1,000 years ago (less the non-native poplars) and given enough time that’s what it would revert to after the permanent removal of large hooved mammals. Our work just speeds up the process and allows for a continued agricultural function, which we are still figuring out.

All of this work is supported by our amazing Regional Council, which offers expert advice, low-cost poplar poles, and matching funding for fencing and native plantings. I cannot speak highly enough of these programmes. Horizons Regional Council does a fantastic job of looking at the big picture and applying holistic solutions. Unlike most government bodies and agencies, they get it.

 


Lake Horowhenua Planting Day

 

Forests and wetlands play important roles in moderating seasonal water flows across large land areas. In other words they store water high on the landscape during wet periods and release it slowly during dry periods. It works like a bank by accepting deposits and granting withdrawals.

Much of the farmland in our region suffers from extreme weather on both ends – wet and dry. Neither is good for stock, nor good for farmers, nor good for water quality, nor good for anyone living downstream. It’s a lose-lose-lose-lose situation and the reasons are clear: not enough trees on hillsides and streamsides. That’s basically it.

The solution is to build resilient waterways by imitating nature. Projects like ours are the best way that landowners and supportive communities can directly address the extreme weather events associated with a volatile changing climate.

The restoration work on our farm will help – to a tiny degree – everyone who lives and works downstream and downriver from us by keeping water out of the system during peak rain events. This is critical to our community that already faces tens of millions of dollars in repair bills from the last two major rain events that occurred just 13 months apart.

Given enough farmers with enough will and enough government assistance there is no reason we could not fence off all the streams in our region and plant all the steep hillsides to appropriate species. It’s much cheaper than cleaning up over and over again after serial flood events.

 

Alternative Banking

So what this is all about is developing alternative banking systems – stream banks and curtain banks among others – and getting communities involved. This is what resilience is all about (see also Resilience is The New Black and Climate, Energy, Economy: Pick Two)

This is the heart and soul of permaculture design thinking, and it is the best way to address the two biggest issues facing humanity: wealth inequality and climate change.

When I dip my toe into the financial news media on occasion I hear this phrase: “the velocity of money” as it pertains to the “health of the economy.”

I thought of the phrase the other day while meeting with a client on managing storm water on their large rural property after they had already done everything wrong. Yes, they had done absolutely everything wrong and I was trying to get them to understand that channelizing water only makes it go faster and cause more damage. The damage was obvious after the last major rain event – that’s why they called me in for an assessment.

As I explained the biological – rather than engineering – solutions, I felt we were going around in circles because they did not really want to hear what I had to say. They just wanted to be rid of the water. Sorry, but that’s not an option without over half a million dollars to spend on massive underground drains, which don’t solve the problem but simply pass it on to everyone downstream. And besides, they don’t have the money anyway.

Finally, I simply said, “The only possible solution is to slow the water and spread the water. It’s the only way to stop the damage.”

And that has me thinking. Should we apply the same approach to dollars?

I reckon a critical piece of the puzzle for neglected rural economies like ours is to slow and spread the flow of money as much as possible before it inevitably drains back to the major centres of power and wealth.

 

 

Dorothea Lange wrote about the photograph at the top, back in November 1938:

“Home of rural rehabilitation client, Tulare County, California. They bought 20 acres of raw unimproved land with a first payment of 50 dollars which was money saved out of relief budget (August 1936). They received a Farm Security Administration loan of $700 for stock and equipment. Now they have a one-room shack, seven cows, three sows, and homemade pumping plant, along with 10 acres of improved permanent pasture. Cream check approximately 30 dollars per month. Husband also works about ten days a month outside the farm. Husband is 26 years old, wife 22, three small children. Been in California five years. ‘Piece by piece this place gets put together. One more piece of pipe and our water tank will be finished’. From Shorpy.

 

 

Jun 062016
 
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Jordan Osmond and Samuel Alexander Image from ‘A Simpler Way: Crisis as Opportunity’ 2016

On July 27 2015, I posted a 2-hour interview with Nicole Foss that was recorded when we were in Melbourne in April that year. The interview -though not the full two hours of course- was always meant to be part of a documentary by our friends Jordan Osmond and Samuel Alexander. The documentary is now out.

Below, you can find the trailer, the full documentary, as well as a re-run of the full interview with Nicole. I haven’t had time to watch the documentary, just got the mail from Sam, but I will later today. No doubt, it’ll be worth your while and mine. I remember complimenting them on the sound- and picture quality of the interview last year. Plus, get the likes of our dear friend Dave Holmgren together with Nicole and Ted Trainer, amongst others, and you can’t very well go wrong, can you?

(NOTE: Saw some rushes, and it may contain a tad much hippieness and/or reality-TV semblance for some)

The trailer:

With the text published with it:

The overlapping economic, environmental, and cultural crises of our times can seem overwhelming, can seem like challenges so great and urgent that they have no solutions. But rather than sticking our heads in the sand or falling into despair, we should respond with defiant positivity and try to turn the crises we face into opportunities for civilisational renewal.

During the year of 2015 a small community formed on an emerging ecovillage in Gippsland, Australia, and challenged themselves to explore a radically ‘simpler way’ of life based on material sufficiency, frugality, permaculture, alternative technology and local economy. This documentary by Jordan Osmond and Samuel Alexander tells the story of this community’s living experiment, in the hope of sparking a broader conversation about the challenges and opportunities of living in an age of limits.

The documentary also presents new and exclusive interviews with leading activists and educators in the world’s most promising social movements, including David Holmgren (permaculture), Helena Norberg-Hodge (localisation), Ted Trainer (the simpler way), Nicole Foss (energy and finance), Bill Metcalf (intentional communities) and Graham Turner (limits to growth).

The full documentary:

Then the text I included back then:

The fimmakers about their project:

The purpose of the documentary is to unflinchingly describe the overlapping crises of industrial civilisation and explain why a ‘simpler way’ of life, based on material sufficiency not limitless growth, signifies the only coherent response to those crises. The dominant mode of development today seeks to universalise high-consumption consumer lifestyles, but this is environmentally catastrophic and it has produced perverse inequalities of wealth. Even the privileged few who have attained material affluence rarely find it satisfying or fulfilling, because consumerism just leaves people feeling empty and alone. Consequently, our forthcoming documentary seeks to show why genuine progress today means rejecting consumerism, transcending growth economics, and building new forms of life based on permaculture, simple living, renewable energy, and localised economies.

But what does that mean? And how should we go about building a new world? Mainstream environmentalism calls on us to take shorter showers, recycle, buy ‘green’ products, and turn the lights off when we leave the room, but these measures are grossly inadequate. We need more fundamental change – personally, culturally, and structurally. Most of all, we need to reimagine the good life beyond consumer culture and begin building a world that supports a simpler way of life. This does not mean hardship or deprivation. It means focusing on what is sufficient to live well. The premise of our documentary is that a simple life can be a good life.

One of the main concerns driving this documentary, and the Wurruk’an project more generally, is the uncomfortable realisation that even the world’s most successful ecovillages have ecological footprints that are too high to be universalised. In other words, even after many decades of the modern environmental movement, we still don’t have many or any examples of what a flourishing ‘one planet’ existence might look. This is highly problematic because if people do not have some understanding of what sustainability requires of us or what it might look like, it will be hard to mobilise individuals and communities to build such a world. A Simpler Way represents an attempt to envision and demonstrate what ‘one planet’ living might look like and provoke a broader social conversation about the radical implications of living in an age of limits.

We hope that this documentary will challenge and inspire people to explore a simpler way of life and to begin building sufficiency-based economies that thrive within planetary limits. If you feel this is a worthwhile film for social change, please support our project by donating here [link coming soon] and sharing the link with your networks.

And finally, the Nicole interview I posted last year, of which significant parts are in the documentary.

Apr 212015
 
 April 21, 2015  Posted by at 9:20 am Finance Tagged with: , , , , , , , , ,  8 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


DPC Betsy Ross house, Philadelphia. Birthplace of Old Glory 1900

Robert Merton: QE Makes Everything Worse (PiOnline)
ECB Is Studying Curbs on Greek Bank Support (Bloomberg)
Investors May Be Ignoring Potential ‘Collateral Damage’ From Greece (MarketWatch)
Creditors Chase Consensus With Greece to Unlock More Aid (Bloomberg)
Greece Orders Public Entities to Store Cash in Central Bank (WSJ)
Greek Mayors to Protest Government Decision to Seize Their Cash (Bloomberg)
Herr Schäuble’s Foibles: The Eurozone Rebalancing Conundrum (Parenteau)
Chinese Economic Outlook “Skewed Heavily To The Downside”: BNP (Zero Hedge)
Major China Real Estate Developer Kaisa Defaults On Its Dollar Debt (Bloomberg)
Does Collapse of Chinese Developer Kaisa Signal More Defaults? (Bloomberg)
Change They Don’t Believe In (Jim Kunstler)
EU To Launch Military Operations Against Migrant-Smugglers In Libya (Guardian)
Embargo Relief? Russia Tests Food From Greece, Hungary and India (RT)
How ‘The Guardian’ Milked Edward Snowden’s Story (Julian Assange)
Political Murders in Kiev, US Troops to Ukraine (Ron Paul)
EU To Charge Russia’s Gazprom With Market Abuse (Reuters)
Canadian Home Prices Inflated By More Than 25%, Economist Magazine Warns (G&M)
Sydney’s Housing Roulette Wheel: Are You Feeling Lucky? (SMH)
Australia Central Bank Fights Resurgent Carry Trade In Aussie Dollar (SMH)
One Million Australians ‘Entrenched In Disadvantage’ (Guardian)
Permaculture In Malawi: Food Forests To Prevent Floods And Hunger (Guardian)

” This may call for central banks to use a different set of policy tools than manipulating long-term rates, and may even argue for the Fed to actually raise long-term rates faster than what is recommended by traditional monetary policy.”

Robert Merton: QE Makes Everything Worse (PiOnline)

[..] … while QE has increased absolute wealth, it has simultaneously lowered relative wealth for a large class of investors. This could lead to the opposite of the desired effect for this group of investors. Lower relative wealth means investors need to save more to improve their funded status, especially where regulations are strict, and it results in less consumption and investment, and may not remove the deflationary overhang. [..] An alternate, more sophisticated approach to explaining why QE may not work to stimulate aggregate consumption is, perhaps, because the demographic mix of the U.S. (and most parts of the developed world) has shifted toward older people. Unlike 30 or 40 years ago, the enormous baby boomer generation, and even retirees, are much wealthier (including human capital) than in the past, and they are wealthier than current generations earlier in their life cycle.

So the wealth effect does not lead to an increase in consumption and, potentially, has the opposite outcome. [..] When baby boomers were in the sweet spot for housing needs, expenditures on children and cars, etc. 30 to 40 years ago, the effect the central banks were expecting from QE might have worked better, as they expected it would, but that need not be a reliable prediction under the changed current demographic and wealth distribution. [..] We believe it is imperative for central banks and academia to examine this perspective immediately and develop a new monetary policy toolkit, because it would be tragic if the central banks’ attempts to improve economic security with the current orthodoxy leads, instead, to less consumption, less investment and greater retirement insecurity. [..]

A recent study by the Center for American Progress shows that millions of Americans (as high as 50% of households) are in danger of retiring with insufficient money to maintain the standard of living to which they are accustomed, and the problem is getting progressively worse. Your previous editorial argues that QE by the central bank may impose unintended costs on pensions, at both the institutional and retail level. This suggests more research needs to be conducted to examine how monetary policy affects relative wealth, not just absolute wealth, and whether traditional approaches are outdated given the current retirement landscape. This may call for central banks to use a different set of policy tools than manipulating long-term rates, and may even argue for the Fed to actually raise long-term rates faster than what is recommended by traditional monetary policy.

Read more …

The ECB as a political party will not work out.

ECB Is Studying Curbs on Greek Bank Support (Bloomberg)

The European Central Bank is studying measures to rein in Emergency Liquidity Assistance to Greek banks, as resistance to further aiding the country’s stricken lenders grows in the Governing Council, people with knowledge of the discussions said. ECB staff have produced a proposal to increase the haircuts banks take on the collateral they post when borrowing from the Bank of Greece, the people said, asking not to be named as the matter is private. While the measure hasn’t been formally discussed by the Governing Council, it may be considered if Greece’s leaders fail to quickly convince euro-area finance ministers they can reform their economy and secure bailout funds, one of the people said.

Greek lenders are mostly locked out of regular ECB cash tenders while the country’s government, which holds talks with euro-area partners in Riga this week, tussles with its creditors over the much-needed aid payments. Instead, the banks currently have access to about €74 billion of emergency funds from their own central bank – an amount that has been rising and which will be reviewed this week. There’s “no doubt” that the ECB is losing patience with Greece, said Frederik Ducrozet, an economist at Credit Agricole CIB in Paris. “Greek banks will need more funding before long, so in a way larger haircuts or a lower ELA cap are equivalent.”

Read more …

Does Q€ make Greece’s position weaker?

Investors May Be Ignoring Potential ‘Collateral Damage’ From Greece (MarketWatch)

Investors aren’t really sweating the potential for a Greek exit from the eurozone, a prospect that had the markets on the verge of panic just a few summers ago. Are market participants too relaxed? Only time will tell for sure, but here’s a look at what’s happening and why some analysts think investors are underplaying risks while others remain relaxed. While Greek bond yields continue to jump and the German 10-year bund yield moves ever closer to zero on safe-haven flows, the yields on other seemingly vulnerable eurozone countries aren’t showing much stress. Italian and Spanish government-bond yields jumped at the end of last week as Greek fears were revived, but remain near historic lows.

After retreating on Friday, inspired in part by Greece as well as moves by China and other factors, European stocks rebounded on Monday, with Wall Street also bouncing back. Major indexes in both regions aren’t far off record highs. The euro fell versus the dollar, but is holding above recent lows below $1.06. It wasn’t that long ago that fears over contagion sent Italian and Spanish government debt yields soaring, briefly stretching above 7% for 10-year bonds—a level seen as unsustainable. That added to a vicious circle as investors worried that banks, carrying large amounts of government debt, would take massive hits, requiring bailouts from those same governments. The ECB’s subsequent creation in 2012 of a bond-buying program, though never used, reassured investors that a sufficient backstop was in place, allowing Italian and Spanish yields to fall back from crisis levels.

Now, the ECB is buying €60 billion of bonds a month as part of its quantitative-easing program—a move that has driven yields lower across most of the eurozone. Large chunks of the yield curve in Germany and other so-called core countries are now in negative territory, meaning bondholders pay for the privilege of parking money with those governments. Erik Nielsen at UniCredit Bank in London argued, in a note, that the ECB’s quantitative-easing program is part of the reason why markets aren’t—and probably won’t be—rattled by the threat of a Greek exit. “Markets are strong enough (yes, we’ll get volatility, but that would be a buying opportunity), the ECB’s toolbox is good enough and QE is already in place,” Nielsen wrote.

In fact, Greek politicians who think the threat of contagion gives them a bargaining chip may be misleading themselves, he said, because “whatever leverage they think they might have within the European context has been suspended by QE.”

Read more …

I doubt that everyone involved feels that way.

Creditors Chase Consensus With Greece to Unlock More Aid (Bloomberg)

Greece and its creditors remained at loggerheads with time running out to unlock aid and avert a default. The sides haven’t even set 2015 budget targets, let alone on policies to meet them, an official representing creditors said Monday, asking not to be named as talks aren’t public. Euro-area finance ministers said in February that a list of measures must be agreed upon by the end of April. European leaders want Greece to do more to revamp its debt-burdened economy, with progress to be reviewed on April 24 in Riga, Latvia, when finance ministers from the currency bloc meet. European Commission Vice President Valdis Dombrovskis said in an interview in Washington that creditors might need to wait until mid-May to see what Greece can deliver.

“The situation with Greece needs to be resolved soon,” Cypriot Finance Minister Harris Georgiades said in a Bloomberg Television interview Monday. “It would be a negative development if no progress is made at the meeting in Riga.” Dutch Finance Minister Jeroen Dijsselbloem, who chairs meetings of his euro-region counterparts, said in Washington on Saturday that a deal won’t be ready by the Riga gathering. Greek bonds fell as yields on three-year notes rose 115 basis points to 27.9% as of 2:45 p.m in Athens. With the country running out of cash, credit-default swaps suggested there is about an 84% chance of Greece being unable to repay its debt in five years, compared with about 67% at the start of March, according to CMA data.

A default on the country’s €313 billion of obligations and an exit from the euro would be traumatic for the currency area and plunge Greece into a major crisis, ECB governing council member Christian Noyer told French newspaper Le Figaro in an interview published Monday. “The ball is in the court of the Greek government,” he said.

Read more …

“Deputy Finance Minister Dimitris Mardas had warned that such a move was coming. “Similar provisions already exist in Holland, Portugal and England..”

Greece Orders Public Entities to Store Cash in Central Bank (WSJ)

Greece’s government issued a decree Monday requiring public bodies such as state-owned companies and public pension funds to transfer their cash reserves to the central bank as the country’s cash reserves continue to dry up. The decree, published in the government gazette late Monday, came as no surprise, the government having telegraphed the move last week. But it still represents evidence of an escalating cash squeeze amid renewed concerns of Greek default. Greece’s parliament has recently passed a bill allowing the Greek government to borrow funds held by state bodies and social-security funds via repurchase agreements, or repos, and has borrowed money from entities such as the central bank and the country’s job centers.

But this decree makes the transfer of state bodies’ cash reserves to the Bank of Greece compulsory, excluding the country’s social-security funds. “This practice already exists in several countries of the European Union,” a senior government official said Monday, adding that the state has the ability to borrow cash from state bodies that don’t have an immediate need for it, but for no more than 15 days. Greece needs a deal to secure billions of euros in bailout aid to avoid defaulting on its debts by this summer and potentially tumbling out of the euro. But the overhauls that creditors want, including further pension cuts and tax increases in a country reeling from years of drastic austerity, could split or bring down the government of radical-left Prime Minister Alexis Tsipras, which was elected in January on an anti-austerity ticket.

In remarks to journalists last week, Deputy Finance Minister Dimitris Mardas had warned that such a move was coming. “Similar provisions already exist in Holland, Portugal and England,” Mr. Mardas said last week. “It is one of the possibilities.” In Paris, French finance minister Michel Sapin said Monday that Greece’s decision to pool the cash reserves of public entities at the central bank was only an emergency solution and the country needs to move faster on economic overhauls. “Greece is dealing with an emergency,” Mr. Sapin said in an interview on French television channel BFM TV. “But that is not sufficient because it’s not just a question of urgency, it’s a question of getting down to the fundamentals.”

Read more …

But an act that raises many questions, nevertheless.

Greek Mayors to Protest Government Decision to Seize Their Cash (Bloomberg)

As Greece struggles to find cash to stay afloat, local authorities say they oppose a government decision to use their reserves for short-term financing. “The government’s decision to seize our reserves not only raises legal and constitutional issues, but also a moral one,” said George Papanikolaou, mayor of Glyfada, the third-largest municipality in the metropolitan region of Attica after Athens and Piraeus. “We have a responsibility to serve our citizens,” Papanikolaou said by phone on Monday. Glyfada has about €16 million in cash reserves, he said. Running out of other options, Greek Prime Minister Alexis Tsipras ordered local governments and central government entities to move their cash balances to the central bank for investment in short-term state debt.

The decree to confiscate reserves held in commercial banks and transfer them to the Bank of Greece could raise as much as €2 billion, according to two people familiar with the decision. The money is needed to pay salaries and pensions at the end of the month, the people said. “It is a politically and institutionally unacceptable decision,” Giorgos Patoulis, mayor of the city of Marousi and president of the Central Union of Municipalities and Communities of Greece, said in a statement on Monday.“No government to date has dared to touch the money of municipalities.”

The Athens city council and the union of municipalities and communities in Greece will convene tomorrow to debate the order, a press officer of the mayor’s office said. “Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece,” according to the decree posted Monday on a government website said. The “regulation is submitted due to extremely urgent and unforeseen needs.” The additional funding may be only enough to pay salaries and a €770 million tranche owed to the IMF on May 12, the people familiar with the decision said.

Read more …

“It is, in other words, not inconceivable there may be a Germexident before there is a Grexident..”

Herr Schäuble’s Foibles: The Eurozone Rebalancing Conundrum (Parenteau)

[..] recognition of the shifting composition of Germany’s trade surplus may also hint at some of the reasons why German policy makers may not be terribly interested in Ponzi financing the external liabilities of peripheral Eurozone governments much longer. After all, the periphery no longer appears to be where the main customers of their tradable goods companies dwell. It is, in other words, not inconceivable there may be a Germexident before there is a Grexident, as Germany has less to lose with respect to its neo-mercantilist growth strategy now if the peripheral economies are left to fend for themselves in servicing their existing external debt loads. Recall also, as depicted in a recent piece called Draghi’s Doom Loops, that the profitability of Germany’s banks and insurance company is also being undermined by the ECB’s PSPP initiative.

For the time being, however, the result of the rabid pursuit Austerian policies has essentially made somewhat obsolete the hand-wringing over the Eurozone current account recycling mechanism design flaw that can be found in places like Yanis Varoufakis’ masterful treatise, The Global Minotaur. We will simply have to wait with bated breath for the second edition to be scribbled and released once the Troika has insured the current Greek Finance Minister will have much more free time on his hands.

This brings us to what we can and should recognize as Herr Schäuble’s Foibles. For you cannot possibly ask a country that has pursued a neo-mercantilist growth strategy to just drop it. You especially cannot expect a warm, favorable response from said country when key policy authorities and their key economic advisors, believe the whole world can (and should) follow in its virtuous footsteps by also running trade surpluses – a bold challenge to the rest of the world which unfortunately ignores the small algebraic fact that global trade balances have to net to zero. At least, that is, until we open up trade with Martians and Venusians.

You especially cannot expect to get anywhere by asking a neo-mercantilist nation to just drop it and take steps to deliver a trade deficit, if the policy makers of that nation also believe it is equally virtuous to maintain a fiscal balance near zero. Simply put, if you take away their trade surplus as a driver of growth, that means they can only get growth if their domestic household or business sectors are willing and able to deficit spend in perpetuity.

Read more …

“Iron ore prices have collapsed by close to 50% since last July and over 65% since the beginning of 2014. Falls have accelerated in recent weeks, almost becoming a rout, with prices down over 30% year-to-date.”

Chinese Economic Outlook “Skewed Heavily To The Downside”: BNP (Zero Hedge)

With the country’s tough transition to a service-based economy being made all the more difficult by the hit industrial production will likely take as Beijing ramps up efforts to fight a pollution problem that was thrust back into the spotlight early last month thanks to a viral documentary, it’s reasonable to suspect we’ll be seeing a lot more of the idle cranes, empty construction sites, and half-finished abandoned buildings that greeted Bloomberg metals analyst Kenneth Hoffman who returned from a tour of the country earlier this month. Ultimately, Hoffman’s assessment was that metals demand in China is collapsing and isn’t likely to pick back up for the foreseeable future.

This is bad news for the Chinese economic machine and it’s also bad news for any iron ore miner out there whose marginal costs aren’t low enough to stay profitable in the face of a protracted downturn in prices because if you can’t convince the big guys that your price collusion idea will pass regulatory muster, well, they’ll likely take the opportunity to keep right on producing despite the slump and run you out of business. With the stage thus set, we bring you the following from BNP who explains why iron ore prices aren’t likely to rebound any time soon, and why the economic outlook for China is indeed “as bad as the data looks, if not worse” (to quote Mr. Hoffman). Via BNP:

Global commodity prices have fallen sharply since last summer, dragged down by a cocktail of fading Chinese industrial demand, surging supply and a strong USD. Oil has inevitably garnered the majority of headlines but iron ore prices have fallen even further. Iron ore prices have collapsed by close to 50% since last July and over 65% since the beginning of 2014. Falls have accelerated in recent weeks, almost becoming a rout, with prices down over 30% year-to-date.

Read more …

“It’s been a canary that has been chirping for some time..”

Major China Real Estate Developer Kaisa Defaults On Its Dollar Debt (Bloomberg)

Kaisa Group became China’s first real estate company to default on its U.S. currency debt, capping a month of distress in bond markets amid an anti-corruption probe and fueling concern that losses will spread. The default coincides with the expiration of a 30-day grace period on $52 million of missed interest payments on two dollar-denominated bonds, according to a Hong Kong stock exchange statement Monday. Kaisa, based in the southern city of Shenzhen, is struggling to service 65 billion yuan ($10.5 billion) of debt owed to both onshore and offshore lenders while becoming embroiled in President Xi Jinping’s crackdown on graft.

The developer’s problems have rippled across the region’s debt market, where investors starved of yield elsewhere in the world have swooped in to boost returns. As the government’s anti-corruption probes widen, it’s raising concern that defaults will spread after overseas noteholders bought a record $21.3 billion of bonds issued by Chinese property companies. “It’s been a canary that has been chirping for some time,” Gary Herbert at Brandywine Global in Philadelphia said. “This is the beginning of an adjustment period in China that will see a lot of credit investors, who were chasing the promise of higher yields, ultimately disappointed.”

Kaisa’s default follows the surprise return of founder Kwok Ying Shing last week. The developer’s woes started late last year when the Chinese government blocked approvals of its property sales and new projects in Shenzhen, said to be linked to an investigation of the city’s former security chief Jiang Zunyu. Kaisa “is focused on facilitating the release of its 2014 audited financial results,” according to its statement. Following that release, the company “will continue its efforts to reach a consensual restructuring of its outstanding debts.”

Read more …

The whole housing sector is collapsing, so yeah, more defaults are certain.

Does Collapse of Chinese Developer Kaisa Signal More Defaults? (Bloomberg)

Kaisa Group captivated Wall Street by minting fortunes from troubled real estate in China. Now the developer is in trouble itself – and the question is how far the pain will spread. On Monday, the news came that many had been dreading for months: The company, caught up in an anti-corruption probe, is buckling under its debts as a slumping real estate market drags down the entire Chinese economy. After missing $52 million in interest payments, Kaisa, once a stock market darling, now confronts an uncertain future. It’s a remarkable comedown for a company that burst onto the scene in 2007 as billions poured into Chinese real estate. Its troubles, long in coming, have set investors on edge and have many asking if Kaisa is a one-off or the start of something worse.

Just last week, Standard & Poor’s warned that “more defaults cannot be ruled out,” saying it’s concerned about how profitability in the Chinese property sector is faltering. “More than one big developer is going to go under,” said Erik Gordon at the University of Michigan. “Busts follow booms. There’s no reason for it to be any different in China.” While there was no immediate reaction in Chinese markets to the default Monday, the saga has sparked jitters among the country’s corporate bond investors on multiple occasions over the past several months. So while China’s equity market has been booming – the result of optimism that government stimulus efforts will shore up the economy – high-yield corporate bonds have posted almost no gains since the end of November, having sold off in January before rebounding in recent weeks.

Kaisa’s benchmark dollar bonds, meanwhile, are hovering at prices that show investors anticipate the company will saddle them with losses of more than 40% when a restructuring offer is made. Its stock has been suspended in Hong Kong since March 31 after sinking 48% in four months. The default, the first ever by a Chinese developer on dollar bonds, is in part emblematic of the slowdown in China’s property market. The real-estate market is helping drag down the economic expansion to its slowest pace since 1990 after serving as a key engine of outsized growth rates over the past five years. The average home price has fallen 6.1% in the past year, the steepest decline on record, according to the National Bureau of Statistics.

Read more …

“Mostly, though, she has no idea where history is taking us, in case you’re wondering at the stupefying platitudes offered up as representative of her thinking.”

Change They Don’t Believe In (Jim Kunstler)

The unfortunate consequence of not allowing the process of “creative destruction” to occur in banking and Big Business is that the historic forces behind it will seek expression elsewhere in the realm of politics and governance. The desperate antics of central banks to cover up financial failure can’t help but provoke political upheaval, including war. It’s a worldwide phenomenon and one result will be the crackup of economic relations — thought by many to be permanent — that we call “globalism.” The USA has suffered mightily from globalism, by which a bonanza of cheap “consumer” products made by Asian factory slaves has masked the degeneration of local economic vitality, family life, behavioral norms, and social cohesion.

That crackup is already underway in the currency wars aptly named by Jim Rickards, and you can bet that soon enough it will lead to the death of the 12,000-mile supply lines from China to WalMart — eventually to the death of WalMart itself (and everything like it). Another result will be the interruption of oil export supply lines. The USA as currently engineered (no local economies, universal suburban sprawl, big box commerce, despotic agribiz) won’t survive these disruptions and one might also wonder whether our political institutions will survive. The crop of 2016 White House aspirants shows no comprehension for the play of these forces and the field is ripe for epic disruption.

The prospect of another Clinton – Bush election contest is a perfect setup for the collapse of the two parties sponsoring them, ushering in a period of wild political turmoil. Just because you don’t see it this very moment, doesn’t mean it isn’t lurking on the margins. This same moment (in history) the American thinking classes are lost in raptures of techno-wishfulness. They can imagine the glory of watching Fast and Furious 7 on a phone in a self-driving electric car, but they can’t imagine rebuilt local economies where citizens get to play both an economic and social role in their communities. They can trumpet the bionic engineering of artificial hamburger meat, but not careful, small-scale farming in which many hands can find work and meaning.

The true genius of Hillary is that she manages to epitomize every failure of our current political life: the obsessive micro-manipulation of image, the obscene moneygrubbing, the tired cronyism, the entitlement masquerading as sexual equality. Mostly, though, she has no idea where history is taking us, in case you’re wondering at the stupefying platitudes offered up as representative of her thinking.

Read more …

“Right now, people desperately seeking a better life are drowning in politics. We have to restart the rescue – and now.”

EU To Launch Military Operations Against Migrant-Smugglers In Libya (Guardian)

The European Union is to launch military operations against the networks of smugglers in Libya deemed culpable of sending thousands of people to their deaths in the Mediterranean. An emergency meeting of EU interior and foreign ministers in Luxembourg on Monday, held in response to the reported deaths of several hundred migrants in a packed fishing trawler off the Libyan coast at the weekend, also decided to bolster maritime patrols in the Mediterranean and give their modest naval mission a broader search-and-rescue mandate for saving lives. A summit of EU leaders is to take place in Brussels on Thursday to hammer out the details of the measures hurriedly agreed on Monday.

The 28 EU governments called for much closer cooperation with Libya’s neighbours, such as Egypt, Tunisia, and Niger, in an attempt to close down the migratory routes. But senior political figures and EU officials conceded this would be difficult and also voiced scepticism about the emphasis on targeting the traffickers. Following the reported deaths of around 1,300 migrants in three incidents in less than a fortnight in the waters south of Sicily, the pressure was on the EU and its member states to come up with new policies addressing headlines branding the incidents “Europe’s shame”. “I hope today is the turning point in the European conscience, not to go back to promises without actions,” said Federica Mogherini, the former Italian foreign minister who is the EU’s chief foreign and security policy coordinator and who chaired Monday’s meeting.

The meeting “identified some actions” aimed at combatting the trafficking gangs mainly in Libya, such as “destroying ships”, Mogherini said. Dimitris Avramopoulos, the European commissioner for migration issues, said the operation would be “civil-military” modelled on previous military action in the Horn of Africa to combat Somali piracy. The military action would require a UN mandate. No detail was supplied on the scale and range of the proposed operation, nor of who would take part in it. But European leaders from David Cameron to Angela Merkel and Matteo Renzi, the Italian prime minister, were emphatic on Monday in singling out the fight against the migrant traffickers as the top priority in the attempt to rein in a crisis that is spiralling out of control.

[..] Save the Children accused the EU of dithering as children drowned, after they failed to agree immediate action to set up a European search and rescue operation in the Mediterranean. Save the Children CEO Justin Forsyth said: “What we needed from EU foreign ministers today was life-saving action, but they dithered. The emergency summit on Thursday is now a matter of life and death. “With each day we delay we lose more innocent lives and Europe slips further into an immoral abyss. Right now, people desperately seeking a better life are drowning in politics. We have to restart the rescue – and now.”

Read more …

“One way countries could get around the sanctions is to set up joint ventures with Russian companies.”

Embargo Relief? Russia Tests Food From Greece, Hungary and India (RT)

Russia began quality control fruits and vegetables from Hungary, Greece, and India in order to begin imports, said Aleksey Alekseenko the head of Russia’s food inspector Rosselkhoznadzor. Next week products from Cyprus will undergo similar tests. “Approximately two dozen companies in Greece will be tested, the same number in Hungary, and four or five in India. Due to technical reasons, Cyprus asked for a small ‘time out’, so testing will begin on April 27 where we will check six to eight companies,” Alekseenko told Russian media Monday, Rossiskaya Gazeta reported. EU countries Greece, Cyprus, and Hungary have all asked Russia to cancel or reduce the food import embargo they face.

However, during Greek Prime Minister Alexis Tsipras’ visit to Moscow two weeks ago, Russian President Putin dismissed the possibility. One way countries could get around the sanctions is to set up joint ventures with Russian companies. Inspection should be finished by April 30, and the preliminary results will be published immediately, with the final results a few days later, according to Alekseenko. Russia’s agricultural food import ban on EU countries doesn’t expire until August, a year after the restrictions were imposed in response to Western sanctions. The ban also applies to the US, Australia, Canada, Japan, and Norway and includes meat, fish, chicken, cheese, milk, fruit, and vegetables.

Researchers at the Gaidar Institute, the Russian Presidential Academy, and Russian Academy of Foreign Trade and Economic Development calculated that Russia has reduced its agriculture imports by 40%, and exports have decreased by 25-30%. The measure was taken as a counter to sanctions imposed by Western countries on Russia, but is also believed to boost domestic agriculture. By banning imports, Russian farmers would have to boost production and in theory start producing better products.

Read more …

Well written.

How ‘The Guardian’ Milked Edward Snowden’s Story (Julian Assange)

The Snowden Files: The Inside Story of the World’s Most Wanted Man by Luke Harding is a hack job in the purest sense of the term. Pieced together from secondary sources and written with minimal additional research to be the first to market, the book’s thrifty origins are hard to miss. The Guardian is a curiously inward-looking beast. If any other institution tried to market its own experience of its own work nearly as persistently as The Guardian, it would surely be called out for institutional narcissism. But because The Guardian is an embarrassingly central institution within the moribund “left-of-center” wing of the U.K. establishment, everyone holds their tongue.

In recent years, we have seen The Guardian consult itself into cinematic history—in the Jason Bourne films and others—as a hip, ultra-modern, intensely British newspaper with a progressive edge, a charmingly befuddled giant of investigative journalism with a cast-iron spine. The Snowden Files positions The Guardian as central to the Edward Snowden affair, elbowing out more significant players like Glenn Greenwald and Laura Poitras for Guardian stablemates, often with remarkably bad grace. “Disputatious gay” Glenn Greenwald’s distress at the U.K.’s detention of his husband, David Miranda, is described as “emotional” and “over-the-top.” My WikiLeaks colleague Sarah Harrison—who helped rescue Snowden from Hong Kong—is dismissed as a “would-be journalist.”

I am referred to as the “self-styled editor of WikiLeaks.” In other words, the editor of WikiLeaks. This is about as subtle as Harding’s withering asides get. You could use this kind of thing on anyone. The book is full of flatulent tributes to The Guardian and its would-be journalists. “[Guardian journalist Ewen] MacAskill had climbed the Matterhorn, Mont Blanc and the Jungfrau. His calmness now stood him in good stead.” Self-styled Guardian editor Alan Rusbridger is introduced and reintroduced in nearly every chapter, each time quoting the same hagiographic New Yorker profile as testimony to his “steely” composure and “radiant calm.” That this is Hollywood bait could not be more blatant.

Read more …

Quelle coincidence!

Political Murders in Kiev, US Troops to Ukraine (Ron Paul)

Last week two prominent Ukrainian opposition figures were gunned down in broad daylight. They join as many as ten others who have been killed or committed suicide under suspicious circumstances just this year. These individuals have one important thing in common: they were either part of or friendly with the Yanukovych government, which a US-backed coup overthrew last year. They include members of the Ukrainian parliament and former chief editors of major opposition newspapers. While some journalists here in the US have started to notice the strange series of opposition killings in Ukraine, the US government has yet to say a word. Compare this to the US reaction when a single opposition figure was killed in Russia earlier this year.

Boris Nemtsov was a member of a minor political party that was not even represented in the Russian parliament. Nevertheless the US government immediately demanded that Russia conduct a thorough investigation of his murder, suggesting the killers had a political motive. As news of the Russian killing broke, Chairman of the House Foreign Affairs Committee Ed Royce (R-CA) did not wait for evidence to blame the killing on Russian president Vladimir Putin. On the very day of Nemtsov’s murder, Royce told the US media that, “this shocking murder is the latest assault on those who dare to oppose the Putin regime.” Neither Royce, nor Secretary of State John Kerry, nor President Obama, nor any US government figure has said a word about the series of apparently political murders in Ukraine.

On the contrary, instead of questioning the state of democracy in what looks like a lawless Ukraine, the Administration is sending in the US military to help train Ukrainian troops!] Last week, just as the two political murders were taking place, the US 173rd Airborne Brigade landed in Ukraine to begin training Ukrainian national guard forces – and to leave behind some useful military equipment. Though the civil unrest continues in Ukraine, the US military is assisting one side in the conflict – even as the US slaps sanctions on Russia over accusations it is helping out the other side! As the ceasefire continues to hold, though shakily, what kind of message does it send to the US-backed government in Kiev to have US troops arrive with training and equipment and an authorization to gift Kiev with some $350 million in weapons? Might they not take this as a green light to begin new hostilities against the breakaway regions in the east?

Read more …

As Gazprom CEO Miller is visiting Athens today…

EU To Charge Russia’s Gazprom With Market Abuse (Reuters)

The EU will launch a legal attack on Russian gas giant Gazprom this week, ramping up tensions with Moscow, when antitrust agents will accuse it of overcharging buyers in eastern Europe, EU sources told Reuters on Monday. The state-controlled company, a vital supplier of energy to Europe despite frequent political disputes, could receive a full charge sheet from European Competition Commissioner Margrethe Vestager on Wednesday, one source said. More than two years after Brussels started investigating Gazprom, the move comes just a week after the new EU antitrust chief charged U.S. tech giant Google with abusing its market power after five years of hesitation by her predecessor. Vestager has appeared determined to challenge big corporate powers since taking on the powerful post in November, regardless of past offers of compromise from both Google and Gazprom.

Despite the Danish commissioner’s insistence that she would look at only the legal merits of a case that focuses on Gazprom pricing policies differentiating between customers, the accusations will do nothing to ease EU frictions with Moscow over Ukraine in which gas supplies have played a major role. The sources said Vestager was likely to send the charge sheet, known as a statement of objections, to Gazprom once she returns from a trip to the United States, where she arrived within hours of charging Google. Such a document sets out concerns about possible anti-competitive practices. A source close to the Russian company said Gazprom had always wanted to find an amicable solution, so a statement of objections now “would not be a welcome move”.

Gazprom tried to settle the case last year by offering concessions to Vestager’s predecessor but talks floundered over its refusal to cut prices for eastern European customers. The EU antitrust chief is taking a tougher line than her predecessor despite the political ramifications of some cases, said Mario Mariniello, a former economist at the Commission and now an expert at Brussels think tank Bruegel. “Vestager is sending a message that her mandate is not about settling cases. If she has a solid case, she will push ahead with charges,” he said. “Sending a statement of objections to Gazprom now would be her way of saying that she will focus on the substance of the case regardless of the political implications.”

Read more …

It took a few years, but that never made it any less real.

Canadian Home Prices Inflated By More Than 25%, Economist Magazine Warns (G&M)

A fresh look at global house prices underscores the Bank of Canada’s angst over the Vancouver and Toronto markets. The magazine, which tracks prices in 26 markets, warned in its most recent report that homes are more than 25% overvalued in seven of those regions, “notably in Australia, Britain and Canada,” rising on every measure. Canada, of course, is not one market, but rather several regional ones that can differ markedly. Just last week, the Bank of Canada, which has pegged overvaluation at between 10% and 30%, again predicted a “soft landing” for the national market. But, as The Globe and Mail’s Tamsin McMahon reports, it warned that the oil hit to Alberta and the “continued robust price growth” in Toronto and Vancouver threaten “a correction in these markets.”

The Economist uses two ”yardsticks,” one of which is the ratio of home prices to rent, which is not deemed the best measure among some observers. But it also looks at the ratio of prices to after-tax income, a measure of affordability. Which in some ways backs up the Bank of Canada’s warning that “elevated house prices and debt levels relative to income continue to leave households vulnerable.” Bank of Montreal economist Robert Kavcic also tracks the Canadian markets, and his latest report, released last week, raised a red flag for Vancouver, in particular. The senior economist looked at average prices, resales, sales versus their 10-year average, and what he called the “historical market balance,” or conditions measured against the 20-year average.

Read more …

Canada, Australia, New Zealand, plenty housing corrections coming up.

Sydney’s Housing Roulette Wheel: Are You Feeling Lucky? (SMH)

How you perceive the state of the Sydney rental market depends on who you are. Sydney tenants might think rents are steady or rising, but they’re falling for Sydney landlords. And that feeds into a bigger question about how close the Sydney housing price boom is to topping out and a yet-bigger question about how much longer housing construction can carry the Australian economy without a correction. Sydney auctions set a clearance rate record over the weekend with the market increasingly looking like a feeding frenzy – would-be owner-occupiers with FOMO (fear of missing out) and investors knowing no fear at all. Basically, after such a strong run, would-be players of housing investment roulette have to very carefully ask themselves if they’re feeling lucky.

Net rental yields are often miserable and, no, prices don’t keep galloping ahead at the present rate indefinitely. The latest Domain rental survey found rent for the average house in the nation’s real estate hot spot rose from $500 to $520 last year. So that provides a headline about rents rising despite increased supply. To keep the maths simple, let’s say a property renting for $500 a week a year ago was worth $800,000. That means a gross rental yield of 3.25%. The average increase in prices means a new landlord buying the property today would pay $907,200 (before the outrageous stamp duty) and collect $520 a week rent – a gross yield of 2.98%. Include 5% for stamp duty and a little conveyancing, the purchase price is more like $953,000 and the yield falls to 2.83%.

There are a number of estimates of rental yields around, none of them especially authoritative. In a comprehensive assessment of the state of the housing boom, AMP chief economist Shane Oliver put the gross rental yield of housing at about 2.9%, which, after costs, comes down to a net yield of around one%. Pre-tax, post-tax, negatively geared or whatever, that’s lousy. You can get more from a bank deposit. (My suspicion is that most punters aren’t very good at considering all the costs before joining the landlord class. As a rule of thumb, maintenance, agent’s fees, body corporate fees and sundries will always be greater than expected, while gaps between tenancies will be longer and rent and rent increases will be lower.)

Read more …

“Finance companies get paid to borrow money for a month in euros and yen in international markets and can use that cash to buy 10-year Aussie sovereign debt yielding 2.35%.”

Australia Central Bank Fights Resurgent Carry Trade In Aussie Dollar (SMH)

Add a resurgent carry trade to the list of things keeping Reserve Bank Governor Glenn Stevens from getting a weaker Aussie dollar. A widening yield advantage on the nation’s debt amid a drop in currency volatility is luring investors back to the strategy. Borrowing equally in yen and euros to buy Aussie earned 1.6% this month, after the same trade lost money in the first quarter. Expectations for swings in the Aussie are approaching the lowest levels this year as there is some speculation of the timing of any US or Australian rate changes. “In a world of zero and negative yields, Aussie stands out as king – or if not king, certainly a member of the royal family,” said Robert Rennie, Westpac’s global head of currency and commodity strategy.

“Carry is here to stay for the foreseeable future.” Finance companies get paid to borrow money for a month in euros and yen in international markets and can use that cash to buy 10-year Aussie sovereign debt yielding 2.35%. The RBA has raised concerns that central bank bond-buying will prop up the Aussie at a time when the local exporters need depreciation to cope with slumping prices of iron ore, the country’s biggest export earner. The local dollar headed for its strongest two- week gain in a year as Germany’s average yields dropped below zero for the first time. Japanese investors bought a net 345 billion yen ($3.7 billion) of Australian sovereign debt in February, the most since August 2011, Japan’s Finance Ministry said.

Excluding debt held by the RBA, central banks owned 29% of Australia’s public debt as of December 31, according to the International Monetary Fund. Overall, foreign investors owned 67% of the total, a level Barclays calls “very high.” “Japanese and European investors still stand out,” said Kieran Davies, Barclays’s Sydney-based senior economist. “Relative to other currencies, our interest rates are quite attractive.” The premium offered by Aussie debt over its triple A-rated peers rose to 1.59 percentage points last week, the most in five weeks, and was headed for its biggest monthly increase since November 2013.

Read more …

“6% of the population – or 1.5 million people – were classed as living in entrenched poverty..”

One Million Australians ‘Entrenched In Disadvantage’ (Guardian)

More than a million Australians are “entrenched in disadvantage”, with many of them having little hope of getting out of poverty, research released before the federal government’s budget has found. Despite two decades of economic expansion in the country, up to 6% of the population – or 1.5 million people – were classed as living in entrenched poverty, the Committee for Economic Development of Australia report said. Before the launch of the report on Tuesday, the Ceda chief executive, Prof Stephen Martin, said it was time to “tear up the rulebook” on the way the government approached poverty. Any policy aimed at curbing disadvantage had to also tackle issues such as education and social exclusion, he said, identifying them as key areas for government intervention.

“Labour market programs – essentially using a big stick to tell people they’ve got to get a job or face even further financial disadvantage – should not be the primary policy instrument for this group of people,” Martin wrote in a piece accompanying the report. “It is absolutely clear that labour market policies have not worked because they fail to tackle the heart of the problem and yet it seems they are the only approach successive governments are willing to focus on. “The main problem often isn’t that people don’t have a job, but the consequence of a range of other issues including education levels, mental health, social exclusion or discrimination. “It may well be that welfare spending may have to increase but the payoff longer term is potentially significant.” Martin said it was a waste of taxpayers’ money and short-sighted to continue to spend welfare money without having effective policies in place to help people move out of poverty.

Read more …

The future of the world.

Permaculture In Malawi: Food Forests To Prevent Floods And Hunger (Guardian)

As January’s floods showed, Malawi’s climate is challenging. We have seven to eight months without rain, followed by torrential downpours pounding our parched landscapes. Climate change may make things worse, but the pursuit of charcoal and firewood, and the wholesale destruction of indigenous forests in favour of maize, has left the country vulnerable. Forests regulate water flow and protect topsoil. Restore the forests and you will go a long way to preventing flooding. Design the forests along holistic permaculture principles and you will achieve much more: water harvesting, fuel wood, high-quality timber, indigenous forest restoration and highly diverse food production.

In a country where almost half the children under five are malnourished and chronic hunger is common, any holistic solution must consider food sovereignty. One solution is forest gardening, an approach to food production based on the fact that forests are resilient and highly productive systems that have existed for thousands of years. Natural forests do not need pesticides or chemicals to ensure their yields, but rather exist in a constant flow of production and recycling. Permaculture has adopted this concept to create “food forests”, systems designed along the same principles as natural forests but with more of a focus on multipurpose plants and animals of direct benefit to humans.

A natural forest consists of roughly seven layers: the rhizosphere, ground covers, herbaceous layer, shrub layer, climbers, lower canopy and climax layer. While the species in a natural forest might not be of direct use to humans, in a food forest they are. Imagine a dense forest of mango trees, acacias, citrus trees, coconut palms, guavas, moringas, towering tamarinds and mahoganies. Climbing up many of these trees are passion fruit, air potato, loofa and shushu. Pigeon pea, cassava, the purple flowering tephrosia, hibiscus, amaranth and the big yellow flowers of cassia alata, occupy the shrub and herbaceous layers. Turmeric, arrow root and ginger grow in abundance. Aloe vera grows here and there and cow pea, sweet potato and watermelon crawl along the forest floor or edge.

The ground is strewn with a thick layer of decomposing leaves which serve to build rich, healthy soils and maintain the link with microorganisms. A mass of flowering species create excellent environments for bees and other beneficial insects. The system is self-replicating, has great commercial value and is highly beneficial to the health of all creatures that interact with it. Such forests can flourish in Malawi, and I believe it is our duty to provide these beautiful and plentiful systems for future generations. Indeed there are a number of successful examples of similar systems here already. Lukwe in Livingstonia is one of the best examples of well-established passive water harvesting systems in Malawi.

Read more …

Mar 162015
 
 March 16, 2015  Posted by at 12:09 am Finance Tagged with: , , ,  19 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Jack Delano Atchison, Topeka and Santa Fe, Sibley, Missouri 1943

Let me give you a quick update on our adventures down under: it’s already a month ago that Nicole was a key speaker at the Great Debate during the Melbourne Sustainable Living Festival. Time flies ever faster. I arrived a week later, and we spent two weeks in Melbourne in the granny flat of our friends Daryl, Lucy, Maggie and fierce border collie Sirius (Serious?) Black. Nicole and I hadn’t seen each other in almost two years, and that’s a long time when you try and run a company together.

Then, 10 days ago, we flew to Tasmania for the Australasian Permaculture Convergence, where Nicole was one of the keynote speakers, along with the very gracious David Holmgren and oldtimer permaculture pioneer Stuart Hill, whom I managed to squeeze a tap dance out of.

The Convergence took place in a little town named Penguin, on Tasmania’s north coast, which of course has a big statue of a penguin on the main road along its beach. It’s also sort of the birthplace of permaculture. Lovely part of the world. Do go see it when you get a chance. Great place to live too! We were invited to stay for the whole week with the very kind and generous Tom and Jerry (no, Jenny) in Burnie, a somewhat larger town half an hour away. Tasmania is quite a large island, with its own indigenous plants and animals, where only half a million people live in total.

The Convergence was a jam-packed 5 days with 200 people attending, with the everlasting challenge to find internet connection, much of which had to be done by tethering my phone. It is occasions like this that allow us to meet lots of people we would never otherwise have the opportunity to talk to, and there’s a lot of bright ideas in the permaculture movement. They just mostly need to be updated on the finance aspect of their world, and its consequences for everyone involved, and that’s sort of where we come in. Because David Holmgren, the guru of permaculture, is such a big fan of both Nicole’s message and my writing, people in the movement pay close attention to what we have to say.

It’s always a fantastic and at the same time humbling experience to arrive somewhere in the middle of nowhere at (for me) the other side of the world, and be invited to come stay with people who then tell you they’ve been reading you for years and consider themselves your biggest fans. That’s what happened when after the Convergence we were invited to spend two days with Phil and Lyn and stonedeaf Irish setter Rosie.

Wonderful people, and it’s at moments like this that you fully realize that the flipside of meeting all these fantastic people on your travels is that you have to leave them behind again at some point. In this case two days was definitely way too short. Traveling the way we do would not be possible if we had to stay in hotels etc., that would be a big energy drain. Staying with readers, with real people, on the other hand, keeps that energy flowing.

We flew back to Melbourne yesterday, where right now, as I write this, Nicole is doing an interview in the back yard of Sam, Helen and Laurie’s home for a documentary Sam and his cameraman Jordan are shooting on the theme: ‘What Can One Do In The Face Of The Crash?’. Tomorrow, we’re back on the road, or rather the air, to go to New Zealand, Nicole’s new home country. She’s moving soon to Wellington on the north island, so we need to get her stuff there from the south island. It looked for a while as if cyclone Pam, which devastated Vanuatu and other south Pacific islands, was perhaps going to disrupt plane traffic tomorrow, the 17th (it’s 15 hours later here than EDT), but the latest is that it’ll be alright. Not for all those who lost their homes on the islands, mind you.

We know there will be talks in the Bay of Islands area (details to follow), but other than that nothing’s carved in stone. So if you’re in New Zealand and you want to meet us or you want to organize events, drop us a line either by email or in the comments section. The internet (I like saying the Interwebs) is a great means of communication, and it allows us to do what we do, but meeting our readers face to face adds a whole, and very gratifying, dimension to the whole thing. So don’t be shy! We want to meet you too!

Jun 142014
 
 June 14, 2014  Posted by at 3:17 pm Finance Tagged with: , , , ,  1 Response »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


DPC Whirlpool Rapids (Grand Trunk Railway) Bridge, Niagara Falls, NY 1899

The Automatic Earth’s Nicole Foss will be doing a speaking, teaching and workshop tour of Australia with Oz native permaculture co-guru David Holmgren, from June 29 to July 19. You can see the agenda in this post, as well as in the left side bar of The Automatic Earth, where it will be updated as more details become available. There is of course no need to mention that if you’re around any of the places they visit, or even if you’re not, this is definitely an opportunity you do not want to miss. I’ll be lazy for only this once and leave you with Dave’s own blurb for the tour.

Nicole Foss and David Holmgren Speaking Tour: Strategies for a Changing Economy – Survive and Thrive

We are approaching many limits to growth over the next several decades, and are consequently facing many challenges in our immediate future. Finance, energy, environment, resources and climate will all impact on the single-minded, one-dimensional trajectory human society has been on in our era of growth imperative. Our current path is unsustainable. It cannot and will not continue, so we must adapt our societies in order to build a new future.

The first challenges are being presented by the ongoing global financial crisis, which is far closer to its beginning than it end, and by the geopolitics of energy. Events in Europe, particularly in Cyprus, Detroit and latterly the Ukraine, represent a major wake up call that financial crisis is about to resume in earnest and that energy issues are moving towards criticality in many places. We must anticipate and navigate a period of rapid economic contraction and increasing risk of resource conflict, punctuated by the emergence of geopolitical wildcards.

Building resilience in an era of limits to growth

Nicole Foss will explore the links between the converging pressures facing us — economic contraction, peak energy and geopolitical stress. She will outline the implications for our everyday lives and share practical solutions she has observed from around the world.

Permaculture surfing the property bubble collapse

Drawing from 30 years of permaculture teaching, designing and demonstrating rural and urban agriculture food production systems for sustainable living, Transition activism and by personal example, David Holmgren will outline practical strategies to help households and communities survive, thrive and contribute to a better world.

Permaculture co-founder and the author of Future Scenarios, David Holmgren toured the country with Richard Heinberg in 2006 informing the public of the threats of imminent peak oil and the permaculture responses. Eight years on, more people have installed insulation and solar, started growing food, raising chooks, and buying from local producers.

Eight years on, the peak of conventional oil is already in the rear view mirror and the first stage of the second Great Depression is pulling apart economies and nations around the world. The mining boom has allowed Australia to dodge the worst, but the signs are not good. Government plans for austerity highlight the need for households and communities to increase their self reliance.

David’s updated presentation uses permaculture design principles to interpret the signs and show how getting out of debt, downsizing and rebooting our dormant household and community non-monetary economies are the best hedges that ordinary citizens can make. The idea that these household and community economies could achieve unprecedented growth rates if the monetary economy takes a serious dive is a good news story you won’t hear from mainstream media.

The shift of metaphor from ‘retrofitting’ to ‘surfing’ suggests a stronger role for positive risk taking behaviour change without the need for expensive changes to the built environment; that few will be able to afford. Returning to Aussie St, David shows how the permaculture makeover and behaviour change is progressing through the second Great Depression. Aussie St is not only surviving but thriving through the “dumpers” that property bubble collapse, climate chaos and geopolitical energy shocks have unleashed on the lucky country. It’s an endearing, amusing and gutsy story of hope for in-situ adaptation by the majority of Australians living in our towns and suburbs.

On this tour Holmgren is joined by Nicole Foss, leading system analyst, who explains how the deflationary dynamics that always follow finance and property bubbles, will rapidly impact individuals, families and communities, while the longer acting forces of Peak Oil and Climate Change will determine and limit the nature of any economic recovery. Nicole will paint a comprehensive picture of where we stand today globally, how our human operating system functions, how and why it is acutely vulnerable, and what we must do about the predicament in which we find ourselves.

The focus will be financial, social, and geopolitical, reflecting the priority of impacts likely to be felt in the relatively short term. The critical factors for change will be highlighted, with an outline of the possibilities that exist within the scope of the emerging reality. We must plan to restructure our societies from the bottom up, so that both the transition period and our eventual recovery from the coming upheaval can rest on a solid foundation. That foundation requires the resurgence of resilient communities and the development of true human capacity.

Her succinct and riveting presentation sets the scene for the positive permaculture strategies. More than just an affirmation of what many are already doing, Foss’s systemic perspective is a wake up call for those concerned about environmental and social issues to understand how their own exposure to financial collapse will determine whether they can shape a better future for themselves, their children and their communities.

The two will inform Australians how it’s possible, although not inevitable, to weather the coming storms with grace, rebuild community solidarity and provide a bulwark against the worst expressions of fear, blame and zenophobia that naturally arise in times of hardship. Most importantly, it will highlight how a small but significant minority following a path of enlightened self interest, and informed by permaculture design principles, may have a more powerful and positive influence than mass movements demanding their rights from weak and ineffective governments.

Humanity stands on the edge of a precipice, and where we go from here is in our own hands. There is both considerable danger, and the opportunity to address what is arguably the most challenging situation in human history constructively.

Survive and Thrive, with Nicole Foss and David Holmgren

(For up to date info, please see the Event page on our webiste.)

~~~~~

Nicole Foss, also known as ‘Stoneleigh’, is a Canadian sustainability, energy, and finance expert. She is best known for her works at her website, The Automatic Earth. Nicole was editor of the Oil Drum Canada website where she wrote on the connections between energy and finance. On this tour she will further explore the links between the converging pressures facing us (peak oil, financial crisis, climate change), the implications for our everyday lives, and solutions. She is a permaculture teacher as well.


David Holmgren is best known as the co-founder of permaculture, possibly the most successful export of ideas from Australia. As a permaculture author, his 2002 book, Permaculture: Principles and Pathways Beyond Sustainability is considered to be the benchmark literature when discussing sustainability. His books and essays have sparked many discussions amongst people seeking solutions for peak energy and climate change. David will focus on solutions, updating and extending his "retrofitting the suburbs" theme. He will also discuss the important role of the "informal economy", the household and local economy, which do not show up in official GDP calculations.

May 132014
 
 May 13, 2014  Posted by at 7:55 am Finance Tagged with: , , ,  65 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Arthur James Northwood Maori woman with catch of fish on Northland coast, New Zealand 1910

Atamai Village in New Zealand is an ambitious project aimed at providing its villagers’ basic needs, food, water, shelter, once the global economy and its energy resources start running dry. Changes to the climate are also on many people’s minds. The idea is to build a community that has an internal economy, with people buying each other’s products, in which permaculture plays a major role, while others work outside the village as long as that is viable. Since it’s expensive to set up a project of this scale, we’re talking a few hundred people, it’s not cheap to purchase a plot of land and/or a home. That is a problem in and of itself, because it selects for those with a certain amount of wealth, who will on average be “older”, while a good age balance is vital. It’ll be interesting to see how Atamai, and other projects of its kind, deal with that issue. Still, you have to start somewhere.



Atamai director Ben van der Wijngaart speaks with Nicole Foss, renowned expert on financial instability and limits to growth. They discuss some of the features and benefits of living in Atamai, and the best responses to the coming uncertainty.


Atamai is actively searching for new people to join. If a project such as this appeals to you, and you possess a skill set that you think would fit in with what’s required to make it run well – or better -, do read through the info provided at the Atamai site and contact the village.

NB: As you can see in the video, Nicole has joined Atamai and moved from Canada to New Zealand. That does not mean that she’s bought land or a home there. In fact, The Automatic Earth is on the verge of bankruptcy, we’re awfully underfunded. Nicole provides advice and skills for Atamai, in exchange for which she receives lodging. But the work for Atamai also means that you have seen less of her here at The Automatic Earth lately (though she’ll be back soon, don’t worry). That’s a vicious circle that only you can break by funding us through donations and purchases. Nicole and I don’t mind surviving on little, in fact that’s exactly what we signed up for, but we do still need to survive.




For more info on Atamai Village, visit: atamaivillage.com
See also this ad that we have been running for a while now in our right hand sidebar:


Feb 022014
 
 February 2, 2014  Posted by at 8:34 pm Finance Tagged with: , ,  7 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Marion Post Wolcott “Grocery store in Negro section, Homestead, Florida” January 1939

Nicole talks extensively (do have a seat available) in a very recent interview with Alex Smith at Radio Ecoshock about the discussion surrounding David Holmgren’s Crash on Demand: Welcome to the Brown Tech Future Crash on Demand, Nicole’s own reaction to it at The Automatic Earth, Crash on Demand? A Response to David Holmgren , the fact that many people apparently didn’t understand what she was trying to say (especially the line ”The best way to address climate change is not to talk about it” came under fire), and finally what we at The Automatic Earth think needs to be added to Holmgren’s paper, and why we insist that the financial crisis is such an important topic for everyone, including those in the environmental movement. It’s about time.


This article addresses just one of the many issues discussed in Nicole Foss’ new video presentation, Facing the Future, co-presented with Laurence Boomert and available from the Automatic Earth Store. Get your copy now, be much better prepared for 2014, and support The Automatic Earth in the process!




Jan 092014
 
 January 9, 2014  Posted by at 1:44 pm Finance Tagged with: , , , , ,  33 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Dorothea Lange “Mr. Dougherty and kid. Warm Springs, Malheur County, Oregon” October 1939

David Holmgren, for whom I have the utmost respect, is best known as one of the co-originators of the permaculture concept. Permaculture is an ecological design method for regenerative agriculture, where the principles of natural systems are employed in order to create a self-sustaining means for food production while building soil fertility.

I am increasingly involved with permaculture (teaching it in Belize this February), as it represents one of the most important paths towards building workable life-support systems in our era of limits to growth. We are rapidly running out of options as we deplete our natural capital worldwide. While we badly need to make some informed hard choices, we collectively do not, as our consumptive system has tremendous inertia. As we reach the limits that lie in our not too distant future, permaculture can be of tremendous use, for those who implement it, in mitigating the impacts and facilitating rebuilding from the bottom-up.


David Holmgren’s Future Scenarios

Aside from his main body of work, Holmgren has also devoted significant consideration to exploring possible future energy descent scenarios, grounded in the twin threats of peak oil and climate change. See Future Scenarios from 2009. His thought modelling looks at how these limiting factors might intertwine with sociopolitical responses to create four classes of potential outcome.



The Brown Tech scenario was seen as one of modest energy supply decline combined with rapid climate change, in a centrally controlled, corporatist context emphasizing the development of unconventional fossil fuels and nuclear power. The impact of climate disruption and other discontinuities would lead to a greater need, and support, for large-scale government intervention. This scenario summarized as top down constriction of consumption.

The Green Tech route was envisaged as gradual energy descent, gradual climate impact, and would be typified by a controlled powerdown based on a shift towards renewable energy and electrification. The minimally disruptive move towards smaller-scale, relocalized, and distributed adaptations was seen as leading to greater egalitarianism.

Earth Steward describes a situation of rapid energy supply decline leading to economic collapse and major upheaval, reducing emissions sufficiently to address climate change, but eliminating larger political power structures. A rebuild from the bottom up would be required and would allow for design principles such as permaculture to be applied.

The final scenario – Lifeboats – involves both rapid energy supply collapse and severe climate impacts. Violent collapse would result in civilizational triage in isolated locations, with small-scale attempts to preserve knowledge through a long dark age.

Holmgren points out that these scenarios operate at inherently different scales in terms of energy density and organizational power, with Brown Tech operating at national scale, followed by Green Tech at city state scale, Earth Steward at the level of local community and finally Lifeboat at household scale. As such they can be described as nested. This is interesting as it is analogous to the nested adaptive cycles inherent in a fractal view of human and natural systems that we have described at The Automatic Earth . Scale is indeed a critical factor, and is primarily a function of energy availability. Holmgren argues that to some extent all scenarios are emerging simultaneously, operating at their different scales.



The initial scenario work was followed up in 2010 by a new essay, Money vs Fossil Energy: The battle for control of the world, looking at the financial system, and its interactions with the energy sector, as an additional important and limiting factor in models of how the future might play out in practice.  This perspective has recently been combined with an updated version of the scenario paper in Crash on Demand: Welcome to the Brown Tech Future. In this latest essay, Holmgren acknowledges he draws on our work here at The Automatic Earth, particularly in relation to projections for the global financial system and its role as a driver of global economic contraction. As such it seems appropriate to respond in order to extend the discussion.

In his recent essay, Holmgren says that he had initially been expecting a more rapid contraction in available energy, and with it a substantial fall in greenhouse gas emissions. Instead, new forms of unconventional fossil fuels have been exploited, sustaining supply for the time being, but at the cost of raising emissions, since these fuels are far more carbon intensive to produce. Holmgren understands perfectly well that unconventional fossil fuels are no answer to peak oil, given the terribly low energy profit ratio, but the temporary boost to supply has postponed the rapid contraction he, and others, had initially predicted. In addition, demand has been falling in major consuming countries as a result of the impact of financial crisis on the real economy since 2008, further easing energy supply concerns. For this reason, the Green Tech and Brown Tech scenarios, based on modest energy decline, appear more plausible to him than the Earth Steward and Lifeboat scenarios predicated upon rapid energy supply collapse. However, Green Tech would have required a major renewable energy boom sufficient to revitalize rural economies, and he recognizes that there appears to be no time for that to occur. Nor is there the collective political will to take actions to power-down or reduce emissions.

He concludes that the Brown Tech scenario appears by far the most likely, and is, in fact, already emerging. Rather than geological, biological, energetic or climate limits striking first, he suggests, in line with our view at TAE, that perturbations in the highly complex global financial system are likely to shape the future in the shorter term. As such he has become far more interested in finance, recognizing that the world has been pushed further into overshoot by throwing money at the banks, while transferring risk to the public on a massive scale, which is setting us up for a major financial reset. In combination with the climate chaos Holmgren anticipates that governments will need to assume control, moving from a market to a command economy.


Finance, Energy and Complexity

There is much I agree with here, most notably the primacy of financial collapse as a driver of short term change. The situation we find ourselves in is at such an extreme in terms of comparing the enormous overhang of virtual wealth in the form of IOUs with the actual underlying collateral that the reset could be both rapid and devastating. This could produce a number of cascading impacts on supply chains in a short space of time, as Holmgren acknowledges in citing David Korowicz’s excellent essay on the subject – Trade Off. This is likely to make governments choose to take control, but also likely to make that very difficult, and therefore very unpleasant. In some places control may win out, leading to a Brown Tech type of outcome after the dust has settled, and in others a more chaotic state may dominate, leading to more of a Lifeboat scenario. The difference may not hinge on energy supply alone, although this may well be a significant factor in some places.

It is our view at TAE that for a time energy limits are not likely to manifest, as lack of money will be the limiting factor in a major financial crisis. At the present time, with modestly increasing energy supply, the delusion of far greater increases to come, and falling demand, energy is already ceasing to be a pressing concern. As liquidity dries up, and demand falls much further as a result of both lack of purchasing power and plummeting economic activity, this will be even more the case. The perception of glut lowers prices, and this will hit the energy industry very hard due to its rapidly increasing cost base, and therefore its dependency on high prices. As prices fall and the business case disappears, much of the expensive supply will dry up, including most, if not all, of the unconventional fossil fuels currently touted as the solution.

Prices are likely to fall faster than the cost of production, leaving profit margins fatally squeezed. While money remains the limiting factor, few may worry about the energy future, but the demand collapse will lead to a supply collapse in the future due to lack of investment for a long time, the concurrent decay of existing infrastructure no one can afford to maintain, transport disruption due to a lack of letters of credit, and the impact of intentional damage inflicted by angry people. Financial crisis takes the pressure off temporarily, but a the cost of aggravating the energy shortfall, and the impact of that shortfall, in the longer term.

Producing energy from “low energy profit ratio” energy sources requires a financial system capable of providing copious amounts of affordable capital, and is dependent on the availability of cheap conventional fossil fuels in order to supply the up-front energy necessary for what are highly energy intensive processes. In energy terms, low energy profit ratio energy sources are nothing more than an extension of the current high energy profit ratio conventional fossil fuel era, which is what sustains the current level of socioeconomic complexity. The financial system is one of its most complex manifestations, and therefore one of its most vulnerable.

Once the financial system has the accident that is clearly coming, we will be looking at a substantial fall in societal complexity, but that fall in complexity will eliminate the possibility of engaging in such highly complex activities as fracking, horizontal drilling, exploiting the deep offshore or producing solar photovoltaic panels and inverters. “Low energy profit ratio” energy sources cannot by themselves maintain a level of socioeconomic complexity necessary to produce them, hence they will never be a meaningful energy source.

This is true of both unconventional fossil fuels and renewable power generation. The development of low energy profit ratio energy sources rests largely on Ponzi dynamics, and Ponzi schemes tend to come to an abrupt end.

Once this becomes clear, the gradual fall in supply is likely to morph into a rapid one. As the ability to project power at a distance depends on energy supply, and that may be compromised, perhaps within a decade, maintaining any kind of large scale command economy may not be possible for that long. However, consolidating access to a falling energy supply at the political centre under a command scenario, at the expense of the population at large, may sustain that centre for somewhat longer.

Seen through an energy profit ratio and complexity lens, a Green Tech scenario appears increasingly implausible. Green Tech – the use of technology to capture renewable energy and convert it into a concentrated form capable of doing work – is critically dependent on the fossil fuel economy to build and maintain its infrastructure, and also to maintain the level of socioeconomic complexity necessary for it, and the machinery it is meant to run, to function. A renewable energy distant future is certainly likely, but not a technological one. One can have green or tech, but ultimately not both.


Scale, Hierarchy and ‘Functional Stupidity’:

A substantial point of agreement between Holmgren’s work and ours here at TAE is that the scale Brown Tech would operate on in a constrained future would be national rather than international. There are many who worry about One World Government under a fascist model. This may have been the trajectory we have been on taken to its logical conclusion, but if crisis is indeed proximate, then we are very unlikely to reach this point. We have likened layers of political control to trophic levels in an ecosystem, as all political structures concentrate wealth at the centre at the expense of the periphery which they ‘feed upon’:

The number of levels of predation a natural system can support depends essentially on the amount of energy available at the level of primary production and the amount of energy required to harvest it. More richly endowed areas will be able to support -more- complex food webs with many levels of predation. The ocean has been able to support more levels of predation than the land, as it requires less energy to cover large distances, and primary production has been plentiful. A predator such as the tuna fish is the equivalent, in food chain terms, of a hypothetical land predator that would have eaten primarily lions. On land, ecosystems cannot support that high a level predator, as much more energy is required to harvest less plentiful energy sources.

If one thinks of political structures in similar terms, one can see that the available energy, in many forms, is a key driver of how complex and wide-ranging spheres of political control can become. Ancient imperiums achieved a great deal with energy in the forms of wood, grain and slaves from their respective peripheries. Today, we have achieved a much more all-encompassing degree of global integration thanks to the energy subsidy inherent in fossil fuels. Without this supply of energy (in fact without being able to constantly increase this supply to match population growth), the structures we have built cannot be maintained.

The international level of governance is comparable to a top level predator. When the energy supply at the base of the pyramid is reduced, and the energy required to obtain it increases, as will inevitably be the case in this era of sharply falling energy profit ratios, the system will lose the ability to support as many layers of ‘predation’. We are very likely to lose at least the top level, if not more levels on the way down as energy descent continues. A national level of Brown Tech may last for a while, but as energy descent continues, so will the diminution of the scale and complexity at which society can operate.

Living on an energy income, supplemented with limited storage in the form of grain or firewood or water stored high in the landscape, and also limited ability to physically leverage effort with slavery or the use of draft animals, does not provide the same range of possibilities as living on our energy inheritance has done. Without fossil fuels, the technology of the ancient world (Rome for instance) is probably the most that an imperial degree of energy concentration can provide. Greater concentration is possible when a wide geographical area comes under a single political hegemony and feeds a single political centre at a high level of political organization. Lower levels of political organization (ie during the inter-regnem in between successive imperiums) would provide for less resource concentration and therefore would sustain a lower level of socioeconomic complexity and ‘technology’.

Energy is not the only factor determining effective organizational scale, however. The functionality of the financial system is a major determinant of the integrity of supply chains, and hence social stability. Societal trust is vital, and can be extremely ephemeral. The more disruptive a future of limits to growth, across a range of parameters, the further downward through Holmgren’s nested scenarios we are likely to go.

In building scenarios, I would add rapid versus gradual financial crisis as a separate parameter. Personally, I believe a rapid financial crash combined with an initially slow, but then increasingly rapid fall in energy supply is the most likely scenario. Financial crisis can cause many of the effects Holmgren discusses in his scenario work in relation to energy and climate impacts.

This article addresses just one of the many issues discussed in Nicole Foss’ new video presentation, Facing the Future, co-presented with Laurence Boomert and available from the Automatic Earth Store. Get your copy now, be much better prepared for 2014, and support The Automatic Earth in the process!

As for the climate change portion of the analysis, Holmgren points out that mainstream policy is shifting from mitigation to adaptation, in recognition of the failure to achieve any kind of progress on emissions control at the international level. Substantive action to reduce emissions is seen, for obvious reasons, as precipitating economic contraction, and no government is prepared to take that risk, especially when so many are on the edge financially in any case. Holmgren also addresses the growing realizations that reductions in emissions in one region may be bought at the expense of increases in another, with no net decrease overall, and that no decoupling between resource use and economic growth is feasible.

This is very much a position I would agree with. Decoupling is nothing but an illusion. There has always been a very close correlation between energy use in particular and economic growth. In the era of globalization we claim to have reduced the energy intensity of our developed economies, but we have in fact merely displaced the energy used to the new manufacturing centres. We import goods manufactured on some other economy’s energy budget (and water budget and other resources as well). The prospects for any kind of international agreement on emissions reduction, or any kind of efficacious top-down policy response at all, seem to be bleak to non-existent.

Internationally, no one party will agree to disadvantage itself in a competitive global economy when it does not trust that others will do the same. Nationally, policies favour growth and profit. Even policies ostensibly conceived to increase energy efficiency and reduce emissions may well be implemented in a manner having the opposite effect because some aspect of that implementation was profitable for some well connected party. For instance, a policy mandating high-tech smart metering for electricity requires complex manufacturing facilities a great cost in terms of both money and energy, but can deliver only minor load shifting, leading likely to a net increase in both energy use and emissions. Low-tech metering with consumer feedback could achieve far more in terms of energy savings at far less energy cost up front, but is less profitable, and so is not implemented.

Expecting governments to deliver any improvement whatsoever in this regard appears to be quite unrealistic. Governments achieve the exact opposite of their stated policy goals with remarkable regularity, all too often making bad situations worse as expensively as possible. Dimitri Orlov quotes, and further develops, a convincing explanation for this phenomenon or large scale ‘functional stupidity’:

Mats Alvesson and André Spicer, writing in Journal of Management Studies (49:7 November 2012) present “A Stupidity-Based Theory of Organizations” in which they define a key term: functional stupidity. It is functional in that it is required in order for hierarchically structured organizations to avoid disintegration or, at the very least, to function without a great deal of internal friction. It is stupid in that it is a form of intellectual impairment: “Functional stupidity refers to an absence of reflexivity, a refusal to use intellectual capacities in other than myopic ways, and avoidance of justifications.” Alvesson and Spicer go on to define the various “…forms of stupidity management that repress or marginalize doubt and block communicative action” and to diagram the information flows which are instrumental to generating and maintaining sufficient levels of stupidity within organizations.

Hence any meaningful change will need to come from the bottom-up.


Climate

I do not focus on climate change in my own work, partly because top-down policies vary between useless and counter-productive, and partly because, in my opinion, the science is far more complex and less predictable than commonly thought, and finally because success in generating a genuine fear of climate change is likely to produce human responses that achieve far more harm than good.

Many people seem to believe there is a linear relationship between carbon dioxide as a driver and increasing temperature as the result, but if there is one thing we know about climate it is that it is not linear. The models, while complex, have not been accurate predictors of the current situation and are therefore incomplete. As for the future, the models do not include factors such as the impact of an economic collapse or a large fall in energy use. There are multiple complex feedback loops that are not well enough understood, all of which interact with each other in highly complex ways. There is also a very long term cycle of natural forcings (note the time scale in thousands of years) providing the backdrop to anthropogenic impacts, and that is also not well enough understood. The net effect of the the very long term natural cycle and the much shorter term anthropogenic impacts is unknown. Global dimming, due to particulate matter in the atmosphere, affects incident solar radiation reaching the Earth. This could change on a much faster time scale than carbon dioxide, which has a very long residence time in the atmosphere, under conditions of economic collapse. This is also not adequately modelled.

In my view the situation is too complex and chaotic to make reliable predictions. In some ways what we think we know, on the basis of assuming a system to be simpler than it actually is, can be more dangerous than what we acknowledge we do not know, as we may take entirely the wrong actions and end up compounding the problem. See for instance Allan Savory’s excellent lecture on the attempt to reverse desertification (a major source of greenhouse gas emissions) through culling fauna, finding it had the opposite effect, and now attempting to remedy the situation while haunted by regret. His talk illustrates both a very important, but mostly ignored, factor in relation to climate change, and also the dangers inherent on relying on received wisdom. Overly simplistic models are often flawed, and applying them can easily cause, or fail to avoid, substantial harm that may then be difficult to reverse.

Apocalyptic predictions of near term human extinction have been made by some commentators, and drastic ‘solutions’ proposed as a result. I would regard such predictions as unlikely, disempowering and dangerous, in the sense that they could, when fear is in the ascendancy anyway, provoke a disproportionate fear response that could in itself be very destructive. When people become collectively fearful, they tend to over-react as a crowd, potentially causing more damage through that over-reaction than might have been caused by the circumstance itself. Fear can be exploited to provide a political mandate for extremists who would then be able to wreak havoc on the fabric of society. Fear needs no encouragement at such times. It will get more than enough traction, and do more than enough damage, all by itself. Actively undermining it is a better approach, as may keep more people in a constructive headspace.

If fear of apocalyptic climate change did grab the collective imagination, there are a number of outcomes which seem particularly plausible. All of them are counter-productive in some way. The first we have already seen – carbon trading system ponzi schemes. This involves financializing yet another aspect of reality, when over-financialization, and the consequent ballooning of virtual wealth, are what have led to our current debt crisis. Financialization is popular with the powerful, because it generates substantial, and concentrable, profits, feeding greater central control by Big Capital. It would probably also generate far more greenhouse gas emissions. Carbon trading allows the wealthy to continue business as usual while paying the poor to address the problems caused, but there is no guarantee that doing so would be effective. Perverse incentives would probably see the funds used for very different purposes.

The second predictable action is massive infrastructure investment in adaptation, which could consume large amounts of finite resources and generate substantial emissions. Large scale public procurement contracts are profitable, secure sources of on-going corporate income and are highly sought-after, as we have seen in Iraq for instance. Companies able to exploit the fear could benefit very handsomely today by building things that may or may not have any value in the future. They would have an incentive to play up the fear in order to extract contracts, and this would be harmful in itself.

The third possibility is widespread geo-engineering – the deliberate release of particulate matter into the atmosphere in order to increase global dimming. This amounts to interfering in a complex and delicate system with a blunt instrument, but it fits with the prevailing technological hubris and would probably generate substantial profits for someone, hence it is all too likely to catch on. The mentality behind it is that the problems of complexity can always be addressed with greater complexity, or in other words, business as usual must continue at any price, and the consequences can always be dealt with through technological intensification. Those consequences are unpredictable and could be disastrous.

The fourth plausible response is eco-fascism, along the lines of Holmgren’s Brown Tech scenario, but with a greenwash. Times of economic contraction tend to be times when people seek control over others, and control over access to the remaining supply of resources. Any excuse will do as a pretext for establishing command and control. Eco-fascism is simply fascism at the end of the day – a mechanism for depriving the masses and consolidating, and generally abusing, tight control in the hands of the few. It would make quality of life immeasurably worse and probably not reduce carbon emissions significantly, as control mechanisms are energy intensive.

Finally, we could see a mood of collective self-flagellation take hold, with the impulse to destroy what we have built on the grounds that it is purely destructive of the natural world. Being destructive in order to remedy destructiveness seems perverse, but is already being presented as a serious imperative in some circles. If implemented it would probably lead to the general demonization of environmentalists and the full range of ideas they propose, as well as do great harm to those least able to get out of the way.

Given that these five possibilities seem the most likely responses to real fear of climate change, and that all of them are likely to make the situation worse in some way, generating fear of climate change seems to be a counter-productive strategy. We could even see several of them at once, for a truly ghastly outcome causing harm on many fronts, and at many scales, simultaneously.

Where awareness is raised without visceral fear, climate change still does not seem to be a motivator for the kind of constructive behaviours that might make a difference in the aggregate. The scale is too large for people to feel that individual actions could ever be useful, which is disempowering. The time-frame is too remote, leading to complacency, and the consequences are not perceived as personal. As humans we are not typically very good at addressing problems which are neither personal nor immediate.

The economic contraction that is coming is very likely to have a far more substantial impact on emissions than any deliberate policy or collective action. The combination of this contraction and constructive collective action could be very powerful indeed, but achieving the latter action is not best done on the grounds of climate change. The same actions that would best address climate change in the aggregate are also the prescription for dealing with financial crisis and peak oil – hold no debt, consume less, relocalize, increase community self-sufficiency, reduce dependency on centralized life-support systems.

The difference is that both financial crisis and peak oil are far more personal and immediate than climate change, and so are far bigger motivators of behavioural change. For this reason, addressing arguments in these terms is far more likely to be effective. In other words, the best way to address climate change is not to talk about it.


Grass Roots Initiatives

Holmgren argues that time is running out for bottom-up initiatives to blunt the impact of falling fossil fuel supply. While simpler ways of doing things at the household and community level could sustain a less energy dependent world, uptake is limited and time is short. Holmgren points out that during the Soviet collapse, the informal economy was the country’s saving grace, allowing people to survive the collapse of much of the larger system. For instance, when the collective farms failed, the population fed themselves on 10% of the arable land by gardening in every space to which they had access. This kind of self-reliance can be very powerful, but the ability to adapt is path-dependent. Where a society finds itself prior to collapse – in terms of physical capacity, civil society and political culture – determines how the collapse will be handled. Dale Allen Pfeiffer’s excellent book Eating Fossil Fuels, comparing the Cuban and North Korean abrupt loss of energy supplies, makes this point very clearly. Cuba, with its much better developed civil society and greater flexibility was able to adapt, albeit painfully, while the rigidly hierarchical North Korea saw very much larger impacts.

Dimitri Orlov has argued very persuasively that the Soviet Union was far better prepared than the western world to face such circumstances, as the informal economy was much better developed. The larger system was so inefficient and ineffectual that people had become accustomed to providing for themselves, and had acquired the necessary skills, both physical and organizational. Their expectations were modest in comparison with typical westerners, and their system was far less dependent on money in circulation. One would not be thrown out of a home, or have utilities cut off, for want of payment, hence people were able to withstand being paid months late if at all and were still prepared to perform the tasks which kept supply chains from collapsing.

The economic efficiency of western economies, with very little spare capacity in a system operating near its limits, is their major vulnerability. As James Howard Kunstler has put it, “efficiency is the straightest path to hell”, because there is little or no capacity to adapt in a maxed out system. The combination of little physical resilience, enormous debt, substantial vulnerability even to small a small rise in interest rates, the potential for price collapse on leveraged assets, a relatively small skill base, legal obstacles to small scale decentralized solutions, an acute dependence on money in circulation and sky high expectations in the context of widespread ignorance as to approaching limits is set to turn the collapse of the western financial system into a perfect storm.

Time is indeed short and there will be a limit to what can possibly be accomplished. However, whatever people do manage to achieve could make a difference in their local area. It is very much worth the effort, even if the task at hand appears overwhelming. Given that a top-down approach stands very little chance of altering the course of the Titanic, we might as well direct our efforts towards things that can potentially be successful as there is no better way to proceed. Reaching limits to growth will impose severe consequences, but these can be mitigated. Acting to create conditions conducive to adaptation in advance can make a difference to how crises are handled and the impact they ultimately have.

Holmgren argues that collapse in fact offers the best way forward, that a reckoning postponed will be worse when the inevitable limit is finally reached. The longer the expansion phase of the cycle continues, the greater the debt mountain and the structural dependence on cheap energy become, and the more greenhouse gas emissions are produced. Considerable pain is inflicted on the masses by the attempt to sustain the unsustainable at any cost. If we need to learn to live within limits, we should do so sooner rather than later. Holmgren focuses particularly on the potential for collapse to sharply reduce emissions, thereby perhaps preventing the climate catastrophe built into the Brown Tech scenario.

He raises the possibility that concerted effort by a large enough minority of middle class westerners to convert from dependent consumers to independent producers could derail an already over-stretched and vulnerable financial system which requires perpetual growth to survive. He suggests that a 50% reduction in consumption and a 50% conversion of assets into building resilience by 10% of the population of developed countries would create a 5% reduction in demand and savings capital available for banks to lend.

This article addresses just one of the many issues discussed in Nicole Foss’ new video presentation, Facing the Future, co-presented with Laurence Boomert and available from the Automatic Earth Store. Get your copy now, be much better prepared for 2014, and support The Automatic Earth in the process!

An involuntary demand collapse is, in any case, characteristic of periods of economic depression. Conversion of assets from the virtual wealth of the financial world to something tangible would have to be done well in advance of financial crisis, as the value of purely financial assets is likely to evaporate in a large scale repricing event, leaving nothing to convert. There are far more financial assets that constitute claims to underlying real wealth than there is real wealth to be claimed, and only the early movers will be able to make a claim. This is already well underway among the elite who are aware that financial crisis is approaching. In a world where banks create money as debt at the stroke of a pen, a pool of savings is not actually necessary for lending. Lending rests to a much greater extent on the perception of risk in the financial system. The impacts of proposed actions would not be linear, as the financial system is not mechanistic, meaning that quantitative outcomes would not necessarily be predictable. Holmgren recognizes this in his acknowledgement that small changes in the balance of supply and demand can have a disproportionate impact on prices.

Holmgren realizes the risks inherent in explicitly advocating such an approach, both at a personal level and in terms of the permaculture movement as a whole. These concerns are very valid. Permaculture has a very positive image as a solution to the need for perpetual growth, and this might be put at risk if it became associated with any deliberate attempt to cause system failure. While I understand why Holmgren would open a discussion on this front, given what is at stake, it is indeed dangerous to ‘grasp the third rail’ in this way. This approach has some aspects in common with Deep Green Resistance, which also advocates bringing down the existing system, although in their case in a more overtly destructive manner. In a command economy scenario, which seems at least temporarily likely, such explicitly stated goals become the focus, regardless of the least-worst-option rationale and the positive means by which the goals are meant to be pursued. A movement best placed to make a difference could find itself demonized and its practices uncomprehendingly banned, which would be simply tragic.

Decentralization initiatives already face opposition, but this could become significantly worse if perceived to be even more of a direct threat to the establishment. While they hold the potential to render people who disengage from the larger system very much better off, on the grounds of increased self-reliance, they also hold the potential to make targets of the early adopters who would be required to lead the charge. Much better, in my opinion, to continue the good work with the declared, and entirely defensible, goals of building greater local resilience and security of supply while preserving and regenerating the natural world. While almost any form of advance preparation for a major crisis of civilization would have the side-effect of weakening an existing system that increasingly requires total buy-in, there is a difference between side-effect and stated goal.

The global financial system is teetering on the brink of a major crisis in any case. It does not need any action taken to bring it down as it has already had easily enough rope to hang itself. Inviting blame for an inevitable outcome seems somewhat reckless given the likelihood that many will be casting about for scapegoats. Holmgren argues that, as those who warn of a crash are likely to be blamed for causing it anyway, they might as well be proactive about it. Personally, I would rather not provide a convenient justification for misplaced blame.

Holmgren discusses the case for seeking disinvestment from fossil fuel industries, citing the report Unburnable Carbon 2013: Wasted Capital and Stranded Assets. The premise of this report is that 60-80% of the fossil fuel reserves on the books of energy companies could become worthless stranded assets if governments implemented decisive action on climate change. If this perception caught on, the authors suggest it might cause investors to dump the sector rapidly, causing a proportionate loss of share value as a result. Financial markets do not work this way. Prices are not based on the fundamentals, and the prevailing positive feedback dynamics cause disproportionate reactions in both directions. Shares in fossil fuel companies will never be valued rationally in accordance with the supposedly predictable impacts of government regulation. Just as they are over-valued at times when commodities are prices peaking on fear of imminent shortages, they become undervalued in the following bust. First they are bid up beyond what the fundamentals would justify, then they crash to far below.

Personally, I regard the probability of governments acting to actually constrain emissions as negligible in any case, for reasons already discussed. Comprehensive regulatory capture has ensured that Big Capital writes the rules by which it is regulated. It is not going to impose controls which harm its own profitability. Energy is inherently valuable, and will only become more so in an energy constrained future. (However, the value of energy and the value of energy companies are not the same thing.) While low energy profit ratio energy sources are only a manifestation of the current bubble, and will eventually be abandoned out of necessity, remaining high energy profit ratio energy sources are highly unlikely to be left underground in the longer term, whatever the impact of burning them might be.

Their exploitation may well be delayed during a period of economic depression where demand would be low, financial risk would be high as price would fall faster than the cost of production, and economic visibility would be low. Very little investment occurs during contractionary times, but as the economy eventually moves into a form of limited recovery, demand would pick up and resource constraints would reassert themselves as limiting factors. At that point, anything which could be exploited almost certainly would be, and there may well be conflict over the right to exploit resources. Oil remains liquid hegemonic power and adequately accessible reserves will never become stranded assets.

In a world of short term priorities, longer term considerations are not taken into consideration, and the destabilization inherent in a period of crisis only aggravates short-termism by causing discount rates to spike. Unfortunately, environmental concerns are longer term.

Holmgren emphasizes the need to prioritize local investment in the real economy, with which I very much agree. He points out that affluent nations have a long history of extracting wealth from the informal household and community sectors for the benefit of the formal, monetized economy, but that we have little experience of reversing that trend. Michael Shuman’s excellent book Local Dollars, Local Sense makes the case for the substantial benefits that could be achievable if such a shift were to take place. Of course, as already discussed, time is short, but still, any informed action taken in advance of crisis could have disproportionately beneficial effects later on. For instance, promoting business entities with a cooperative structure can be a powerful tool for maintaining relatively local control.

One way to promote local spending is to introduce a local currency. While it may well be impossible to persuade people to spend national currency only locally if it meant paying more or limiting choices, a local currency must be spent locally as it would not be accepted elsewhere. Every monetary unit spent, and therefore circulating, locally has far more beneficial effect than one spent outside the area. External spending siphons wealth away from communities, and we have been encouraged to spend almost everything externally in recent years. Cheaper alternatives operating with economies of scale have deprived local business of a market for their goods and services, often eliminating those local options over time. This is how the centre thrives at the expense of the periphery. Reversing this trend may well require instituting a monetary system which removes the option to spend it elsewhere. This, if it can persist for long enough, should act as a driver for the provision of local goods and services.

Local currencies can run in tandem with national currencies and can act to expand the money supply in a defined area. As such they can be particularly useful to address the artificial scarcity of a liquidity crunch, where people and resources still exist, but cannot be deployed for lack of money in circulation. Local currencies can be designed to depreciate, which acts as an explicit support for the velocity of money. However, this may cause difficulties if local and national currency are convertible and the national currency does not depreciate. On the other hand, lack of convertibility could make it more difficult to confer value and full acceptability on the local currency. An alternative currency which can be used to pay local taxes will have a distinct advantage in terms of acceptability as was the case in the classic example – the depression-era Austrian town of Wörgl.

Of course a money monopoly is a very significant power, and as such is very likely to be defended, as indeed it was in depression-era Austria. This limits the prospects, and likely the duration, for alternative currencies, but they nevertheless achieve a great deal while they operate, as they currently are doing in Greece. Eventually, in a period of sufficient upheaval, a money monopoly may be impossible to sustain, then local currencies would be freer to operate. They would still be subject to distortions for political gain, money printing and ponzi dynamics over the longer term, given that they would still be operated by corruptible human beings, but at least these would exist on a smaller scale, not representing systemic risk as the flaws in the larger financial system currently do. Essentially there is no such thing as an inflation-proof, peer to peer system which would be expected to be stable over the long term, as monetary systems move in cycles of boom and bust. It is our job to navigate the waves of expansion and contraction which we cannot eliminate.

Any initiative which reduces our dependence on national currency in circulation is going to be useful in this regard, including barter networks, time-banking, tool and seed libraries, and gifting. There are already well established barter networks in some countries operating at a national scale, for instance Barter Card in New Zealand and the WIR network in Switzerland. Additional networks at a local scale could also be very useful, although more inherently limited in scope. Time-banking, libraries and gifting are more profoundly local, and act not just as means of exchange without the need for money, but also as mechanisms to build trust and community cohesiveness. This is a tremendous benefit in its own right, as a major boost for local resilience.

Holmgren points out that holding cash under one’s own control, outside of the banking system can greatly increase resilience by reducing dependency on the solvency of middle men. This is very much in accordance with our position at TAE, as cash is king in a period of deflation. People who spend in cash tend to spend less as it feels more like spending than electronic payments do. They tend therefore to be less likely to be overstretched and vulnerable to a financial collapse.


Building Parallel Systems

Holmgren stresses the urgent need to opt out of the increasingly centralized and destructive mainstream though building parallel systems prior to the advent of a Brown Tech future, which he feels could last many decades before descending further into a low-energy Lifeboat scenario. He points out that at the moment we have the luxury of keeping one foot in each camp, so that we have the opportunity to develop alternatives before we have to rely on the results. We can experiment, but with a safety net.

I am in agreement, with the exception of the timeframe for the longevity of a Brown Tech system. The scale of the coming disruption, albeit initially due to financial rather than energy crisis, is likely to be large enough to shorten the length of time the political centre can maintain the ability to project power at a distance. Learning curve time for opt-out solutions, short as it may be, could be very valuable. Unfortunately, attempting to straddle two worlds simultaneously can involve all the work of both with few of the benefits of either, hence moving over as far as possible to concentrate on the opt-out position is probably more adaptive.

As Buckminster Fuller said, “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” In other words, change comes incrementally and organically from the bottom-up, rather than by fighting to change top-down policies. Initially, pushing for grass roots change can require considerable human energy input, but once a critical mass is reached the movement can take on a life of its own very rapidly, especially if it suddenly coincides greater advantage as prevailing circumstances shift. The proactive phase is difficult, as people rarely prepare in advance for approaching change, but proactive can become reactive as the change is reached, and the earlier effort can help to shape the direction that eventual reactive response will take.

Ideas that hit the zeitgeist can become fashionable, and this imparts much greater momentum. For instance, the tiny house movement is making it a matter of pride to live in smaller and simpler dwellings, with greater emphasis on good design than physical space. More and more young people are choosing to opt out of the path taken by their peers, as that path towards debt slavery becomes ever more obviously disadvantageous. The non-passive portion of this  group is looking for direction, and is prepared to find it in non-mainstream places. Providing this could amount to seeding very fertile ground.

Being beneath the notice of larger powers hoping to maintain monopolies and control can be protective. Hence working at small scale, but in many locations simultaneously, could allow systems conferring greater local independence and resilience to become established with a lower likelihood of being suppressed as a threat by the powers-that-be.  

Permaculture should be a major building-block of any kind of system reboot following the operating system crash that a financial crisis represents. After all, once we navigate that period of artificial scarcity, we will have to address the real scarcity inherent in looming resource limits. We will have to deal with the fact we are far into overshoot in comparison with the carrying capacity of the Earth, even with the artificially boosted carrying capacity we have thanks to fossil fuels (where about half of the nitrogen in the food supply comes from the artificial fixation of nitrogen from fossil fuels for instance). We have been strip mining soil fertility with intensive agri-business, disrupting the critical nitrogen cycle and poisoning the soil micro-organisms critical for fertility with pesticides such as round-up. We will have to undo all of the damage, but it will take us a very long time, and in the meantime we have over 7 billion mouths to feed. Permaculture, with its emphasis on soil regeneration, is the best possible way (click for video) to do this. If we are ever to approximate, at least temporarily, an Earth Steward scenario (in the distant future, once the dust has settled), this is the path we must take.

As Holmgren says, “A permaculture way of life empowers us to take responsibility for our own welfare, provides endless opportunities for creativity and innovation, and connects us to nature and community in ways that make sense of the world around us.” Motivated by enlightened self-interest, and operating at a manageable human scale, we can apply our knowledge of natural and human systems in the real world, without being overwhelmed by the task of feeling we are personally responsible for saving the whole world. It can be difficult to let go of the top-down approach, to stop putting all our efforts into trying to change government policies or get the ‘right’ people elected, as if this would somehow solve our problems.

We need to get down to the business of doing the things on the ground that matter, and to look after our own local reality. We can expect considerable opposition from those who have long benefited from the status quo, but if enough people are involved, change can become unstoppable. It won’t solve our problems in the sense of allowing us to continue any kind of business as usual scenario, and it won’t prevent us from having to address the consequences of overshoot, but a goal to move us through the coming bottleneck with a minimum amount of suffering is worth striving for.


This article addresses just one of the many issues discussed in Nicole Foss’ new video presentation, Facing the Future, co-presented with Laurence Boomert and available from the Automatic Earth Store. Get your copy now, be much better prepared for 2014, and support The Automatic Earth in the process!