Feb 22 2009

Conversation With Long Lost Relative Regarding Stimulus

Kal @ 16:23

Recently I responded to one relative's bulk email bemoaning the expense of the Stimulus Bill. Today I got an email from a relative on the distribution list who has been out of touch for years. He did not seem to be convinced by my comments. He is retired and is probably about 80 years old now. [Correction, he is 76 years old.] This is what he wrote:

Hi Surprised ? It's me LongLost.

Let us at least be fair and remember 9/11 and katrina and and we have been free of further 9/11's so far. I am appalled at the bail out and stimulus pkg and the one that is just around the corner. Gov't should have done nothing and let time fix it. All the extra money simply extends the time of recovery. Let's hit bottom and then recover.

But it is too late. I enjoyed hearing from you guys, let me hear back. 2/22/09 It is your money too and while your at it talk to your Ca. leaders, they could sure use help. LongLost

And this is my reply:

Well, yes it was a bit of a surprise. Last thing I heard from your gang was in 2004. And the last time I heard from you directly, I think your secretary was still doing your email. Are you well? How are you filling your time? Times change, eh? Say hello to your daughter et al. please.

I do not think you are old enough to remember the great depression first hand, but you must have heard how bad it was. It just kept getting worse until the New Deal came in. Are you really prepared to see thousands of people living (or dying) on the streets? I am not.


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Category: Economics | Politics | Resource Depletion | Steady-State Economics | Sustainability

Feb 21 2009

Can Americans Learn to Cooperate?

Kal @ 21:41

This is a post that appeared in The Oil Drum written by RogerK. It talks about the objective of achieving what I have called Steady-State Economics versus infinitely expanding economics.  It is kind of long and dense, but he explores a way of organizing society in a more just fashion. And it says very well some of the things I have been thinking.

The Anti-Economy: How the Pursuit of Private Fortunes is Destroying Community Wealth

Ever since I became aware that oil depletion was a near term problem I have devoted a considerable amount time and intellectual energy thinking about possible ways to structure an economic system so that it does not require constant growth for 'healthy' functioning. If human beings are going to be around on this planet for the long term then growth in resource consumption must to come to an end. I know, of course, that many regular readers of TOD believe that economic growth and growth in resource consumption can be decoupled, if not completely so, then at least sufficiently so that we can comfortably get richer for many decades into the future without mussing the hair of the biosphere. Of course given the fact that a highly respected biologist like E. O. Wilson estimates that species extinction rates have probably already risen to 1000 times prehuman levels, one could argue that we have already gone beyond the 'mussing' stage to the 'falling out in chunks' stage with respect to the state of health of the global coiffure. However, it is not my intention in this essay to try to prove that these optimistic assessments about the extendability of the economic status quo are false. I am simply going assume that a complete decoupling of economic growth from resource consumption is impossible, so that, sooner or later we must stop expanding our total economic output.


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Category: Conventional Economics | Politics | Resource Depletion | Steady-State Economics | Sustainability

Feb 18 2009

Economic Point of View - The Answer Depends on Your POV

Kal @ 11:29

It all depends, it all depends, it all depends upon; it all depends upon your Point of View. I think that little refrain was learned on the school playground. It is even taught in one form or another in Economics 101. Everyone knows that a lot of things depend upon your point of view. Most of us ignore this knowledge and adopt the "one true" POV.

Conventional economics has its own One True Point Of View (OTPOV). Actually there are a whole series of them. People are economic units who will always act in their own self interest. Markets will adapt intelligently to changing conditions. The economy can continue to grow indefinitely. No doubt you can add to the list. It is this later one, the Continuously Growing Economy One True, that has led to most of our current problems. It is the one that got Jimmy Carter in trouble when he suggested there may be limits to growth, and along came Ronnie Reagan who helped us believe in our denial of reality (Morning in America), and in the process wupped Jimmy Carter's ass.

Now along comes "The new ecological accounting is variously called 'dynamic equilibrium', 'steady-state' or 'biophysical' economics".

In the 1970s, World Bank economist Herman Daly wrote Steady-State Economics to outline the future of ecological economics. Daly makes a distinction between 'sustainable growth', which is 'impossible', and 'sustainable development', which is natural. "The larger system is the biosphere and the subsystem is the human economy," says Daly. "We can develop qualitatively, but we cannot grow beyond the biosphere's limits."

These two diametrically opposed points of view can cause a good bit of confusion when considering priorities, as with the yesterday signed stimulus package.

On the one hand there is conventional economics, wherein getting the economy moving again by use of government spending is a good thing.

On the other hand there is Steady-State Economics, wherein much of what we have been doing should simply be discontinued and a new paradigm adopted. I wrote about this last week: Stimulus Bill Passes - Main Issues Not Addressed

Depending on my POV at the moment, the stimulus package was either: a), a good first step, or b), a monumentally stupid waste of additional resources on trying to prop up a failed system.

Sometimes I argue a case (often with myself) from one POV, sometimes from another. As a matter of convention on this blog, I will try to make that POV explicit.


Category: Conventional Economics | Economics | Politics | Resource Depletion | Steady-State Economics

Feb 18 2009

Greenspan Backs Bank Nationalization

Kal @ 08:55

From the Financial Times. Lots of people think Greenspan is a big part of the reason the banks are in trouble. I guess it is at least a little to his credit that he is willing to deal with the aftermath.

The US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman, has told the Financial Times.

In an interview, Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.

”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.”

Mr Greenspan’s comments capped a frenetic day in which policymakers across the political spectrum appeared to be moving towards accepting some form of bank nationalisation.

“We should be focusing on what works,” Lindsey Graham, a Republican senator from South Carolina, told the FT. “We cannot keep pouring good money after bad.” He added, “If nationalisation is what works, then we should do it.”

Speaking to the FT ahead of a speech to the Economic Club of New York on Tuesday, Mr Greenspan said that “in some cases, the least bad solution is for the government to take temporary control” of troubled banks either through the Federal Deposit Insurance Corporation or some other mechanism.

The former Fed chairman said temporary government ownership would ”allow the government to transfer toxic assets to a bad bank without the problem of how to price them.”

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Category: Economics | Politics

Feb 17 2009

Finally, Economists Who Know The Earth Is Not Flat

Kal @ 01:15

A story about a new kind of economics based on physical reality. The article that I saw on this is on Greenpeace International's website.

In the future, economists will return to Earth

The year 2009 will witness a tsunami of economic appeals to fix, as disgraced Federal Reserve Chairman Alan Greenspan put it, the 'flaw' in their thinking. Most will get it wrong.

The proposals for bailouts, regulations, and government spending sprees all share one tragic flaw: They assume no physical or biological limits to human growth. Most economists cling to an 18th century mechanical universe that conjured an 'invisible hand' of God, which would allegedly convert private greed into public utopia.

Indeed, a few got rich but the meek inherit an Earth featuring child slavery, sweatshops, a billion starving people, toxic garbage heaps, dead rivers, exhausted aquifers, disappearing forests, depleted energy stores, lopped-off mountain tops, acid seas, melting glaciers, and an atmosphere heating up like a flambé.

Meanwhile, a rigorous sub-culture of scientists and economists have been working to free economics from its eighteenth century quagmire by reconciling human enterprise with the laws of physics, biology, and ecology.

Their time has come. This year, 2009, will signal the birth of a genuinely innovative economics that will eventually displace the patchwork rationalisations for greed. The new ecological accounting is variously called 'dynamic equilibrium', 'steady-state' or 'biophysical' economics. 

What about technology?

Ignoring nature remains the tragic conceit of conventional economists, who presume we can grow our economies forever without regard to quantities of materials, energy, and pollution. Biophysical economics, on the other hand, acknowledges that there exist no cases in nature of unlimited growth.

Dr. Albert Bartlett, Emeritus Professor of Physics at Colorado University, urges economists to learn the laws of nature. Non-material values - creativity, dreams, love - may expand without limit, but materials and energy in the real world remain subject to the requirements of thermodynamics and biology. "Growth in population or rates of consumption cannot be sustained. Smart growth is better than dumb growth," says Bartlett, "but both destroy the environment."

What about technology? Some economists imagine that computer chips or nanotechnology will save us from the laws of nature, but every technical efficiency in history has resulted in more consumption of energy and resources, not less. Remember when computers were going to save paper? That never happened. Computers increased paper consumption from about 50 million tonnes annually in 1950 to 250 million tonnes today. Meanwhile, we lost 600 million hectares of forest.

Nor is the internet a celestial realm where ideas are exchanged for 'free'. Computers require copper, silicon, oil, toxic chemicals, massive energy for server networks, and garbage heaps for techno-trash. In every industrialised nation, energy and material consumption is increasing, not decreasing. Technology is not energy. It costs energy.


In the 1970s, World Bank economist Herman Daly wrote Steady-State Economics to outline the future of ecological economics. Daly makes a distinction between 'sustainable growth', which is 'impossible', and 'sustainable development', which is natural. "The larger system is the biosphere and the subsystem is the human economy," says Daly. "We can develop qualitatively, but we cannot grow beyond the biosphere's limits."


"We are dying of consumption," says Peter Dauvergne, sustainability advisor at UBC and author of The Shadows of Consumption. "The unequal globalisation of the costs of consumption is putting ecosystems and billions of people at risk."

To honestly achieve a "sustainable" economy, humanity must step through a paradigm shift, as profound as the transition in the sixteenth century when Copernicus showed that the Earth is not the centre of the universe. Likewise, ecology teaches us that humanity is not the centre of life on the planet. Just as the Pope's henchmen refused to look through Galileo's telescope, some economists avoid looking out the window to see what keeps humanity alive: photosynthesis, precious materials, and concentrated energy.

"Sooner or later," as ecologist David Abram puts it, "technological civilisation must accept the invitation of gravity and settle back … into the rhythms of a more-than-human Earth."

In the 21st century, human enterprise has reached the scale of the planet. We have to account for ourselves on nature's balance sheet. This is biophysical economics. It appears inevitable. Biophysical culture is what we will make of it.

[emphasis mine]


Category: Climate Change | Economics | Politics | Resource Depletion | Accounting

Feb 16 2009

Nationalize the Banks! We're all Swedes Now

Kal @ 17:27

The U.S. banking system is close to being insolvent, and unless we want to become like Japan in the 1990s -- or the United States in the 1930s -- the only way to save it is to nationalize it.


As free-market economists teaching at a business school in the heart of the world's financial capital, we feel downright blasphemous proposing an all-out government takeover of the banking system. But the U.S. financial system has reached such a dangerous tipping point that little choice remains. And while Treasury Secretary Timothy Geithner's recent plan to save it has many of the right elements, it's basically too late.

The Washington Post


Category: Politics

Feb 16 2009

Why is Acorn Getting $5 Billion? RightWingNuttery In Action

Kal @ 13:40

There seem to be two main themes to the current right wing attacks on the stimulus bill:

1) It includes spending money

2) Some of the money will be spent on poor people

Clearly both of those things are anti-American. And there seems to be a great deal of anxiety about the possibility that groups that help the poor but are not religious organizations might be tapped to spend some of that money. Acorn might even get to bid on some of the projects, how scary.

An easily influenced friend sent me a whole series of links that he said demonstrate the point. Here is a quote from one of the "sources" that I do not want to provide a link to:

· $9 billion for school construction was added back in (originally cut by Nelson-Collins)
· $5 billion increase for the state fiscal stabilization fund (originally cut by Nelson-Collins), making it a grand total of $53.6 billion
· $2 billion for neighborhood stabilization program, money for groups like ACORN
· $1 billion added back for Prevention & Wellness Programs, including STD education

I do not know if all or any of these is accurate, but most of these are too little rather than too much. I will discuss the Acorn separately. Maybe the right wing does not understand the definition of stimulus? It involves spending money. What is so difficult about that?

· Pelosi's endangered salt marsh harvest mouse is slated for $30M slice of cheese.

This one has been thoroughly debunked many places; the funds are actually for San Francisco Bay Wetlands Restoration. Even most of my right wing friends are not really against this. They like to hike around the bay too.

The $5 billion claim was referenced to Yahoo. It was a statement presented as a question:

Why does A.C.O.R.N. get $5 billion in the stimulus package?!?

Not far below the answer appeared:

ACORN is not getting $5billion.
there is money in the package targeted to community service organizations. But this money will be held up for open bid.
Yes ACORN may bid for some of this money but no they are not guaranteed those funds.
This is from Factcheck.org
Does the stimulus bill include a $5.2 billion payoff for ACORN?
I would appreciate having FactCheck.org look into whether ACORN will receive $5.23 billion from the Obama stimulus package under the guise of “stabilizing neighborhoods.” I have been bombarded by e-mails from an acquaintance about this. What can you find about this? Thank you.
A: The bill does include funds for which ACORN would be eligible to compete - against hundreds of other groups. But most is for a housing rehabilitation program ACORN says it never applied for in the past and won't in the future.
For the past two weeks, Republicans have been raising a new charge against a familiar enemy, claiming that the Democrats' stimulus bill includes as much as $5.2 billion in "goodies" for the Association of Community Organization for Reform Now (ACORN). Last fall, Republicans accused ACORN of "massive voter fraud," a claim which we said was exaggerated. The group has since become a favorite target of Republicans, so it understandably raises a few hackles when House Republican leader John Boehner's Web site proclaims that the bill provides "a taxpayer-funded bonanza" for ACORN. And Republican Sen. David Vitter goes even further, telling Newsmax TV that the provisions amount to "a political payoff." Also, the National Republican Trust PAC has taken up the issue in fundraising pitches. But these claims are wildly exaggerated and rely upon faulty logic.
There is more to the article, I suggest you read it.

You have been given inaccurate information.
By the way, how can a reasonable discussion occur, when questions are in the form of statements, and any facts from any source are automatically refuted as being lies? How do you know for sure that your "truths" aren't "lies" and my "lies" aren't "truths"?




Category: Politics

Feb 14 2009

Full Employment Revisited - Is your job poisoning the world economy?

Kal @ 16:18

Cost benefit analysis for your job

Its all about natural resources, land, water, oil, coal, steel, etc., the list is a long one. Economic activity, our businesses and our jobs, produce benefits for us, and also consume resources. Economic activity ranges in societal value from extremely valuable all the way down to zero value, and some activities even have negative value. The societal value of your job is directly dependent on the value of the economic activity that is paying your salary, and on the resources consumed in the course of your doing the job. I am proposing a simple cost-benefit analysis.

I want to be very clear, that while I think many of our jobs are counterproductive, I do not think the people that hold those jobs are less valuable. I think you are worthy of our full support,

Historical perspective

From the earliest days in America work has been how we defined ourselves. From Wikipedia:

John Smith was eventually elected president of the Jamestown council in September 1608 and instituted a policy of discipline, encouraging farming with a famous admonishment: "He who does not work, will not eat."

That principle has continued, not only unabated, but considerably reinforced over the years, until now it takes two wage earners to support most families. If one or both of these wage streams is interrupted for any reason, the typical family faces disaster. Many of us have a very small margin between paycheck and homelessness.

From our perspective as workers, a job is what it takes to survive and thrive in the modern world. From the perspective of most employers, the job is a necessary expense to make money. From the perspective of capitalistic theory, anything that makes money is equally as valuable as any other thing that makes the same amount of money. So by definition, your job is valuable and by extension, you are a valuable person. If you happen to be unemployed at the moment, it is not so clear what your value may be.


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Category: Climate Change | Employment | Guaranteed Wage | Morals | Politics | Resource Depletion

Feb 14 2009

The Climate is Getting Worse - And Still Being Ignored

Kal @ 12:48

Bruce Sterling has a whole list of serious problems that are likely to come to term in 2009. 2009 Will Be a Year of Panic

The climate. People still behave as if it's okay. Every scientist in the world who isn't the late Michael Crichton knows that it's not. The climate is in terrible shape; something's gone wrong with the sky. The bone-chilling implications haven't soaked into the populace, even though Al Gore put together a PowerPoint about it that won him a Nobel. Al was soft-peddling the problem.

It's become an item of fundamentalist faith to maintain that the climate crisis is a weird leftist hoax. Yet, since the rain falls on the just and the unjust alike, an honest fear of the consequences will prove hard to repress. Since the fear has been methodically obscured, its emergence from the mists of superstition will be all the more powerful. Unlike mere shibboleths of finance, this is a situation that's objectively terrifying and likely to remain so indefinitely.


Category: Climate Change | Politics | Resource Depletion

Feb 14 2009

Is your job a net income or a net loss?

Kal @ 12:30

Dmitry Orlov wrote a book about the parallel situations of Russian collapse in the last century and the American collapse that seems to be underway. Here are some of his thoughts as presented February 13, 2009, at Cowell Theatre in Fort Mason Center, San Francisco. He called it Social Collapse Best Practices.

But let’s take it apart. Starting from the very general, what are the current macroeconomic objectives, if you listen to the hot air coming out of Washington at the moment? First: growth, of course! Getting the economy going. We learned nothing from the last huge spike in commodity prices, so let’s just try it again. That calls for economic stimulus, a.k.a. printing money. Let’s see how high the prices go up this time. Maybe this time around we will achieve hyperinflation. Second: Stabilizing financial institutions: getting banks lending – that’s important too. You see, we are just not in enough debt yet, that’s our problem. We need more debt, and quickly! Third: jobs! We need to create jobs. Low-wage jobs, of course, to replace all the high-wage manufacturing jobs we’ve been shedding for decades now, and replacing them with low-wage service sector jobs, mainly ones without any job security or benefits. Right now, a lot of people could slow down the rate at which they are sinking further into debt if they quit their jobs. That is, their job is a net loss for them as individuals as well as for the economy as a whole. But, of course, we need much more of that, and quickly!
So that’s what we have now. The ship is on the rocks, water is rising, and the captain is shouting “Full steam ahead! We are sailing to Afghanistan!” Do you listen to Ahab up on the bridge, or do you desert your post in the engine room and go help deploy the lifeboats? If you thought that the previous episode of uncontrolled debt expansion, globalized Ponzi schemes, and economic hollowing-out was silly, then I predict that you will find this next episode of feckless grasping at macroeconomic straws even sillier. Except that it won’t be funny: what is crashing now is our life support system: all the systems and institutions that are keeping us alive. And so I don’t recommend passively standing around and watching the show – unless you happen to have a death wish.
Right now the Washington economic stimulus team is putting on their Scuba gear and diving down to the engine room to try to invent a way to get a diesel engine to run on seawater. They spoke of change, but in reality they are terrified of change and want to cling with all their might to the status quo. But this game will soon be over, and they don’t have any idea what to do next.
So, what is there for them to do? Forget “growth,” forget “jobs,” forget “financial stability.” What should their realistic new objectives be? Well, here they are: food, shelter, transportation, and security. Their task is to find a way to provide all of these necessities on an emergency basis, in absence of a functioning economy, with commerce at a standstill, with little or no access to imports, and to make them available to a population that is largely penniless. If successful, society will remain largely intact, and will be able to begin a slow and painful process of cultural transition, and eventually develop a new economy, a gradually de-industrializing economy, at a much lower level of resource expenditure, characterized by a quite a lot of austerity and even poverty, but in conditions that are safe, decent, and dignified. If unsuccessful, society will be gradually destroyed in a series of convulsions that will leave a defunct nation composed of many wretched little fiefdoms. Given its largely depleted resource base, a dysfunctional, collapsing infrastructure, and its history of unresolved social conflicts, the territory of the Former United States will undergo a process of steady degeneration punctuated by natural and man-made cataclysms. [emphasis mine]

Orlov has his list of realistic objectives; I would add education to the list, but agree that is slightly less important in the short run than food, shelter, transportation and security. I briefly spoke of this a couple of days ago in Stimulus Bill Passes - Main issues not addressed.

This is how Orlov ends his post:

As I briefly mentioned, the basics are food, shelter, transportation, and security. Shelter poses a particularly interesting problem at the moment. It is still very much overpriced, with many people paying mortgages and rents that they can no longer afford while numerous properties stand vacant. The solution, of course, is to cut your losses and stop paying. But then you might soon have to relocate. That is OK, because, as I mentioned, there is no shortage of vacant properties around. Finding a good place to live will become less and less of a problem as people stop paying their rents and mortgages and get foreclosed or evicted, because the number of vacant properties will only increase. The best course of action is to become a property caretaker, legitimately occupying a vacant property rent-free, and keeping an eye on things for the owner. What if you can’t find a position as a property caretaker? Well, then you might have to become a squatter, maintain a list of other vacant properties that you can go to next, and keep your camping gear handy just in case. If you do get tossed out, chances are, the people who tossed you out will then think about hiring a property caretaker, to keep the squatters out. And what do you do if you become property caretaker? Well, you take care of the property, but you also look out for all the squatters, because they are the reason you have a legitimate place to live. A squatter in hand is worth three absentee landlords in the bush. The absentee landlord might eventually cut his losses and go away, but your squatter friends will remain as your neighbors. Having some neighbors is so much better than living in a ghost town.
What if you still have a job? How do you prepare then? The obvious answer is, be prepared to quit or to be laid off or fired at any moment. It really doesn’t matter which one of these it turns out to be; the point is to sustain zero psychological damage in the process. Get your burn rate to as close to zero as you can, by spending as little money as possible, so than when the job goes away, not much has to change. While at work, do as little as possible, because all this economic activity is just a terrible burden on the environment. Just gently ride it down to a stop and jump off.
If you still have a job, or if you still have some savings, what do you do with all the money? The obvious answer is, build up inventory. The money will be worthless, but a box of bronze nails will still be a box of bronze nails. Buy and stockpile useful stuff, especially stuff that can be used to create various kinds of alternative systems for growing food, providing shelter, and providing transportation. If you don’t own a patch of dirt free and clear where you can stockpile stuff, then you can rent a storage container, pay it a few years forward, and just sit on it until reality kicks in again and there is something useful for you to do with it. Some of you may be frightened by the future I just described, and rightly so. There is nothing any of us can do to change the path we are on: it is a huge system with tremendous inertia, and trying to change its path is like trying to change the path of a hurricane. What we can do is prepare ourselves, and each other, mostly by changing our expectations, our preferences, and scaling down our needs. It may mean that you will miss out on some last, uncertain bit of enjoyment. On the other hand, by refashioning yourself into someone who might stand a better chance of adapting to the new circumstances, you will be able to give to yourself, and to others, a great deal of hope that would otherwise not exist.


Category: Climate Change | Politics | Resource Depletion