Debt

So, we’re all fairly sure that the current economic crisis is something to do with the banks lending money to people who couldn’t finance their debts. We’re reasonably sure of this because we’re quite certain that the American Sub-Prime mortgage market was where the problems started and that if they’d not lent money to those people then we’d all be fine now and would be enjoying the same level of economic growth as before. How true is all this ‘knowledge’ though?

Money is debt. The available pool of cash with which to do things comes from each of our promises to finance our debts. The money you paid for your house with almost certainly doesn’t physically exist anywhere. Unless you’re in the minute minority of people who paid for their house from their earnings, then you got out a mortgage, the majority of which would have been created ex-nihilo. It exists as a string of 1s and 0s on a computer. As you pay/paid your mortgage off most of the money you gave back disappeared. It had never truly existed in the first place. The only money which didn’t disappear was the interest and the reserve deposit equivalent. That is the amount they have which they can lend from. The ‘real’ money that allows them to make fake money out of nothing more than your promise to repay. Their reserve ratio could be as high as 24:1, they could be able to loan out 25 times the real money they have.

Okay, so the bank can lend out more money than it actually has, but this fake money it creates is destroyed as it’s repaid, leaving only the real money and the interest. At a reserve ratio of 9:1 (as I understand it, a fairly low, reasonably common rate) they can collect interest on a £10,000 loan while only having £1,111.12 of real money. The interest on that £10,000 loan is theirs to keep and they only need to recover £1,111.12 to get their initial investment back, the rest of the £10k will be destroyed once repaid anyway. Of course, that £10,000 loan will be deposited somewhere once the loan’s been used for whatever it was intended for. The £10,000 loan, once deposited, can be then used to make a further loan of £9,000. That £9,000 loan can then be used to make a further loan of £8,100, and so on until we’re approaching £100,000 of loans (and the interest payments on those loans) for a £1,111.12 initial deposit. If there were only one loan made then the bank could only collect on the £10,000 initial loan. However, with dozens of smaller loans after the initial large loan the bank can collect on £100,000. Lending to lots of people wanting smaller quantities makes the bank a lot of money from nothing.

So the banks can make the huge loans that large businesses want, then use those to make medium loans that medium businesses want, then use those to make loans that small businesses want, then use those to make loans that consumers want. All of the loans made with the same initial deposit by the central bank. And the interest collected on all of the loans can then be used to make more loans and collect more interest.

Of course, no bank would get the deposits from their own loan from every stage of this process, but since the banking system is a closed system, it effectively means that, since each bank gets some deposits from every other bank’s loans, it works out to the same thing in the end.

So, the total amount of money in the system and the total amount of interest the banks can ‘earn’ is entirely dependent on the demand for debt. If you can find a way to give money to everyone demanding debt in such a way that you can get your money back in some way, with some interest, then you will. Capitalist greed demands that we do everything possible to get that extra penny of profit. It doesn’t matter if your business model is that you lend money to people to buy houses, knowing they will probably be unable to pay, because you’re gambling that their house will be worth enough to cover that by the time you come to repossess it, you will do it, collect your profit and sleep sound at night. Ethical considerations are not part of a capitalist system.

That’s a lot of explaining to essentially say that the sub-prime market was good for the economy, until the housing market started to shrink instead of grow. Once houses were starting to lose value rather than gain it the system stopped working, the gamble turned sour. Our long, sustained growth period was thanks in no small part to the extra money generated by the sub-prime market. It’s just sad that the means we chose to fend off a small deflationary period will have the effect of causing a massive deflationary period. Cest la vie.

Growth isn’t sustainable. I’ve said it many times within the course of writing entries for this blog, but I feel the need to say it once again. Growth is not sustainable. No level of growth is sustainable. No level of depletion is sustainable. It’s logically obvious that both of these statements are necessarily true. Yet, our culture doesn’t accept that logic. It says that either the conclusion is wrong or that some form of technology will appear to allow us to defeat the conclusion. The amazing tech fix.

We have been lulled into believing in the tech fix because it’s worked for so long now that we can’t perceive a time when human innovation will not provide us with new and innovative ways to continue killing the planet. We even imagine such a situation – where we can’t think of a new way to continue business as usual – as horrific. It would be terrible if we had to deal with the Earth as a partner and not as a slave! Tech fixes have been possible because of easy access to cheap energy. If peak oil strips us of our easy access to cheap energy, will the tech fixes be possible? Probably not if we’ve not done wide scale, serious investment in the alternatives prior to the peak. If, as some people argue, the world has already peaked, then we’re too late. Time to ride the roller coaster.

Food as Not-Food

One of the many options being seriously considered to halt carbon emissions is the use of bio-fuels.

One of the many options being seriously considered to halt the waste of resources represented by over-packaging is bio-plastics.

Two solutions which believe that making food into non-food is a shiny idea. Brazil leads the way on bio-fuels and is proud of this. Brazil also has a lot of people starving who have been bought or evicted off of their land by large agri-businesses so they can change the crops those lands grow into bio-fuel crops. Sounds great, huh? This is the real-time result of food for fuel.

Most people are more than willing to pay more for fuel than they are for food. A field growing bio-fuels is more profitable than any food crop the land could support. So what is likely to happen, when we already have poor people around the world, going hungry, growing cash crops on land that could feed them? These are uneducated people. They more often than not believe the corporate salesman when he tells them that they will be better off selling all of this years crop and then buying their seed for next year’s crop from the company. While they’re at it they might as well use this new fertiliser and pesticide, it’ll boost their production. Since you’re using our chemicals you don’t need to employ any of your traditional land management techniques, these products remove the need to do that. And if they’re boosting their production they might as well buy the seed for cash crop X and thus make surplus money to afford to send their children to school and to buy things they want. Sounds good, we’ll take it.

Then they might get a season or three of great growth and it might seem like they’ve made the right choice. Then they might start to see the effects of prolonged use of chemicals on their land, they might start to also see a decline in the level of growth they’re getting. They might start to think that it’s not actually so great to buy their seeds from the company and so try to save them, only to find they’re terminator seeds and don’t grow a second season, so they’re now trapped in the buying cycle and are unable to save their seeds. So, they stop buying the chemicals, their fields weren’t that bad before, they grew the food the family needed well enough. They then find out that the seed they are now trapped buying doesn’t grow or grows very poorly without the company’s fertiliser and other chemicals, so they’re locked into buying them too. Eventually they’ve ruined their fields, spoilt the environment they rely on and are almost indentured to the company, needing to buy the seeds and chemicals each year to further ruin their fields in order to keep any money coming in. Conveniently the money they may get is also dictated by the corporation which is selling them the means to ruin their way of life.

Rambling? I know. Off topic? A little. Unlikely? No. This happens and has happened for many years now.

Even as they starve, people will still export food for money. It happened during the Irish potato famine during the 1840’s and it happened during the Ethiopian Famine of the 1980’s. During both famines the respective countries were exporting food to Britain while masses of people starved in their own countries.

The invention of terminator technology was such a vile attack on life that I can’t believe it wasn’t seen for what it is. People who use technology for such gross violations of sanity should be considered criminals, not pioneers of industry. Products made to do such things should be illegal, not profitable.

Agri-fuel industrialists will bleat about how the current food prices aren’t their fault because only 2% of the food of the planet is used for fuel. This isn’t the point, honestly. The current food prices are probably because of the sharp rise in the price of oil, since food is oil now, but wanting to increase the amount of food siphoned off for fuel will have an impact on the global food prices. People consider their cars to be essential (often because they live criminally far away from their place of work), while fresh, healthy food comes in second place. Most people will live on cheap beans and cheap bread when forced to choose between fixing, fuelling and insuring their car or eating well. The choice for them is obvious.

Putting pressure on a dwindling food supply by making it into plastics and petrol when 30 countries around the world have had food riots this year alone isn’t ethical. It’s not right.

In a world where oil prices push up food prices, where climate change looks set to destroy more and more crops around the world, where the population overshoot continues apace, should we really be thinking about converting food into not-food?

Biosphere 2: The Tech-Fix

“Scientists once tried to build a sealed living world – nicknamed biosphere 2 – from scratch in a big greenhouse in the Arizona desert. They failed. As carbon dioxide levels rose within the sealed greenhouses, Biosphere 2’s human inhabitants must have reflected on the lessons they were learning as they gasped for air. Functioning ecosystems cannot be created artificially. Life keeps us alive, and we lay waste to it at our peril.” — Mark Lynas, Six Degrees: Out Future on a Hotter Planet, pg 106.

I don’t want to pick on Biosphere 2 specifically. I want more to focus on the idea that technologies are going to save us. Biosphere 2 is simply a good example of how limited our knowledge of the world around us is. We believe we are masters of all we survey, that we are special and steer our own destiny, that we are apart from other life on this planet and can therefore do with other life as we please.

We can’t use other life as we please. We don’t know the impacts of what we are doing. We often don’t accept that what we are seeing is an impact from an action we have taken. For too long there was a debate in the mass media which didn’t exist in scientific circles. As Al Gore says on the DVD, Inconvienient Truth, there were no questions against the conclusions of the scientific papers linking global climate change with human activity. Over the same time period around 50% of the articles published in mass media news stated that the findings were inconclusive or that there was a debate over the findings of these scientific reports. In other words, the mass media lied. Nothing new there.

There will not be a technological fix for the problems we are creating. For many of the problems, the really, really big problems, which we are creating, we aren’t even looking for solutions.

“Today, we are sort of in the middle of a mass experiment,” says Bralower. “With the oceans warming, we do not really know what the end result will be, but we can look to the fossil record to see how they were affected in the past. It appears that abrupt climate change affects plankton with selectivity and most of the organisms bounce right back after the change.” — Source: ScienceDaily

The article does tell us the climatic change range that the research considered: 11 degrees over 1,000 years, which is very, very fast in geological time frames. It translates into 1.1 degree every 100 years. In other words 0.11 degreed every 10 years. Mark Lynas believes we are looking at 0.4 degrees of climate change every 10 year, 4 degrees every 100 years or 40 degrees over 1,000 years. Comparable? No. Especially as one of the changes which was studied wasn’t geologically rapid climate change due to increased levels of carbon dioxide, it was the K/T boundry, the extinction of the dinosaurs due to ‘nuclear winter’ effect, or masses of dust and crap up in the atmosphere blocking out the sun.

Why is the lack of carbon dioxide related climate change important? Surely a rapid shift in climate temperature is as bad as the next? Well, no. Carbon dioxide in the atmosphere is taken out of the atmosphere in a large number of ways, one of which is disolving into the ocean. This raises the acidity of the ocean because the carbon dioxide forms carbonic acid when combined with water (H2O + CO2 = H2CO3). Acidification of the ocean makes it a more hostile environment for shell forming organisms, such as plankton.

If man-made carbon dioxide emissions cause the ocean to become too hostile for plankton then we may be looking at the total collapse of oceanic ecosystems – everything in the ocean needs these little guys for their existence, from the largest whales to smallest fish. This may not be very likely to happen, as water doesn’t disolve that much carbon dioxide and thus doesn’t become very acidic. However, the amount it disolves increases with temperature, hotter water disolves more than cold water. Also the atmospheric concentration of carbon dioxide influences how much is disolved in the ocean. As I have said previously, we are entering unprecidented levels of carbon dioxide in the atmosphere, so it’s impossible to say what will happen.