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Looming Financial Crisis?

 
  

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sine
04:57 / 15.12.07
I took a look around and I haven't seen anything addressing this, so...

I've been following news around the economy pretty closely and what I'm seeing is, frankly, chilling. After the credit upsets spawned by the subprime mortgage fiasco, we've just seen unprecedented transnational efforts by various banks to inject liquidity into the system, and it doesn't seem to be making a dent. The effect is already spilling over into the plastic markets, and that's likely to get worse by the analyses I'm reading. Bill Gross, the head of Pimco, is talking about the breakdown of the modern banking system. With the sheer number of inflation bubbles presently popped, popping or about to pop, and the monstrously large debt that has built at the personal, corporate and government levels in the American economy - are we looking at something much more serious than a routine recession? Should I be dusting off my crossbow? Thoughts?
 
 
Closed for Business Time
10:16 / 15.12.07
What I think is interesting is what might this do for people's trust in the modern banking system. I don't think fractional reserve banking with its parallel system of futures, derivatives and credit markets as such is going to collapse, but I wonder whether people will start doubting the wisdom of the financial wizards in much the same way as they are doubting the scientific establishments.
 
 
eye landed
00:15 / 17.12.07
this crisis is happening because china is sitting on most of the worlds dollar supply. i dont doubt that it is fully intentional, and that the rest of the world will soon be bailed out in exchange for...i dunno, taiwan?
 
 
Jack Vincennes
16:51 / 17.12.07
Do you have any references for that, 3110700101? Most of the commentary I've been reading suggests that China is thinking of moving its currency reserves from the dollar (FT, New York Times) and that this would cause much greater problems for America and hence, potentially, the world's economy, than their keeping their reserves in USD.

It tends to be better rather than worse for a currency issuer if countries keep their reserves in the issuer's currency. Central banks need to invest in stable currencies and it's a sign of confidence in USD that it is, generally, the reserve currency of choice.
 
 
*
01:20 / 19.12.07
Or was.

I don't understand much about economics, but it looks bad to me.

I'm interested in thinking about how this, and the energy and climate crises, are going to work together to affect standards of living in the next ten years. Realistically, what could we be doing to prepare now? (Saving USD in boxes under our beds doesn't seem like a very god suggestion right now.)
 
 
Lagrange's Nightmare
03:41 / 22.12.07
this crisis is happening because china is sitting on most of the worlds dollar supply. i dont doubt that it is fully intentional, and that the rest of the world will soon be bailed out in exchange for...i dunno, taiwan?

Hmm, yes this does sound a little odd, this crisis is the US' own fault isn't it? That theory sounds similar to one of the standard "China is a threat" rants, however it normally goes in the opposite direction. The theory is that in retaliation (for anything) China could dump its reserves of the $US as punishment. That of course doesn't really work as it would hurt the Chinese just as bad, since you couldn't dump the currency fast enough and the drop in value would hit the Chinese reserves.

So in 3110700101's situation what does China have to gain from lowering the value of the US dollar? Not only does it reduce the value of China's reserve it also runs the risk of a US recession. For China, a country that is seeking internal stability through continuing economic growth (in a large part driven by US consumption) a US recession wouldn't be very desirable would it?
 
 
Not in the Face
09:08 / 24.12.07
Yeah, the idea that China would somehow use up its dollar reserves (accumulated because the US forces the chinese to sell them plastic goods) to 'buy' Taiwan is pretty laughable, not least because Taiwan is one of the biggest sources of investment into China and the Taiwanese themselves might have a thing or two to say about being 'sold' that would cripple that investment along with a good portion of the Chinese army/navy. As the NYtimes article points out dumping loads of dollars on the market will lower the price of the dollar making chinese products more expensive.

However I don't think that the problems will cause the collapse of the modern banking system. For one thing there is still a lot of money around elsewhere in the world. Despite my comments about China, they and other cash rich nations like Saudi Arabia may seek to buy up stakes in the various banks (source- Guardian) to solve their liquisity problems.

Whether this can be managed if, as was reported earlier this year, 1 million homeowners in the UK are in fact using credit cards to pay their mortgages, or if interest rates rise again in 2008 I don't know.

The most likely outcome is that some of the big banks get taken over and sold off (which explains the rhetoric coming from the current heads of those banks perhaps) with their losses being written off by the involvement of national governments to protect the system and the buyers, while those further down the chain will get thrown to the wolves by repossessions and the use of their taxes to cover those losses.

National governments may insist that banks return to previous levels of debt/asset ratios but as this limits the more wilder aspects of speculation from which a small group of people make a lot of cash I think this will be unlikely to happen because of pressure from the 'experts'.
 
 
eye landed
11:40 / 31.12.07
here are some explanations that will get the same response as my last post (no cites, conspiracyism):

~china is holding currency reserves to reduce liquidity of financial markets, because a commodity-based economy (rather than a banking-based economy) currently benefits their exports. their undervalued RMB wouldnt be possible without foreign reserves.

~2007s mortgage/credit crisis was partially due to the 'black hole' in china, which creates incentive to borrow and invest, creating a bubble. the solution to this is probably in progress right now.

~im sure theres something about how the scale of global lending affects the inflation risk of that same loan, but im not an economist so i dont understand that.

~the bit about taiwan was a joke. in realpolitikal terms, its just a distraction, like fighting over a pawn in the middle of the chess board.

~of course china isnt going to dump its reserves as anything less than a declaration of war. i cant really explain the idea. a simile i can evoke is the greed of chinese emperors, demanding taxes and tribute to the point where their vassals collapse and rebel. yes, this sounds like a racist, flailing rant, but millennia of repetitive history cant be wrong.
 
 
ONLY NICE THINGS
13:49 / 31.12.07
It's certainly a good thing that no European leader has ever overtaxed his or her subjects. Ever. I'd say that _does_ kind of make us the superior race. That's not racism. It's just factism.
 
 
Not in the Face
01:29 / 01.01.08

~china is holding currency reserves to reduce liquidity of financial markets, because a commodity-based economy (rather than a banking-based economy) currently benefits their exports. their undervalued RMB wouldnt be possible without foreign reserves.

While an undervalued RMB does benefit Chinese exports, financial markets are where commodities are traded, notably purchasing of raw materials that China needs (like petrol, rated in dollars meaning it is also worth China keeping a massive reserve to buy more fuel with). Also Chine is looking to inject liquidity into markets by buying up shares of banks and other financial markets (unless of course basic racism gets in the way to block it)

~2007s mortgage/credit crisis was partially due to the 'black hole' in china, which creates incentive to borrow and invest, creating a bubble. the solution to this is probably in progress right now.

Really? How partially? More so than the decision of western governments to relax the asset to debt ratios of banks allowing riskier loans or of mortgage agents to promote deals that earned them a commission.

~im sure theres something about how the scale of global lending affects the inflation risk of that same loan, but im not an economist so i dont understand that.

None of which is to do with China

~the bit about taiwan was a joke. in realpolitikal terms, its just a distraction, like fighting over a pawn in the middle of the chess board. Meaning that you realised you couldn't defend your quite stupid comment so now you want to minimise what you said while slyly saying it still has a role to play?

~of course china isnt going to dump its reserves as anything less than a declaration of war. i cant really explain the idea. a simile i can evoke is the greed of chinese emperors, demanding taxes and tribute to the point where their vassals collapse and rebel. yes, this sounds like a racist, flailing rant, but millennia of repetitive history cant be wrong.

Mmm, the sekret cabal of foreign types who control everything behind the scenes irrespective of revolution really don't seem to learn from their mistakes. Next they'll be buying opium from the UK
 
 
eye landed
00:12 / 08.01.08
While an undervalued RMB does benefit Chinese exports, financial markets are where commodities are traded, notably purchasing of raw materials that China needs

i think i mean fungibility instead of liquidity, and securities markets instead of financial markets. once again, im not an economist and im coming at this from a political and historical angle. its harder to trade fictions like stocks and currency in an atmosphere of political uncertainty, but commodities with inflatable value will remain liquid.

More so than the decision of western governments to relax the asset to debt ratios of banks allowing riskier loans or of mortgage agents to promote deals that earned them a commission.

firstly, lending was encouraged because of the profits to be made in the chinese investment network. also, lost fungibility due to currency backlog requires use of credit to maintain market mobility (by which i mean the amount of trade going on in the market, which is vital for taxes and growth). third, smaller western investors like corporations need easier loans to compete with the chinese state conglomerates (who have access to huge currency reserves).

(i said) im sure theres something about how the scale of global lending affects the inflation risk of that same loan, but im not an economist so i dont understand that.

normally a lender worries about how inflation will affect his asset once he collects it from the borrower. is he getting back the same value he lent out? this is mostly the case for a money loan, as a commodity will inflate itself. it has to do with china because their USD reserves are changing in value, partially due to their having such big reserves. but to tell you the truth, i understand that point even less now than when i wrote it.

not sure why i deserve those weird attacks at the end, not in the face. i think the taiwan issue is one of the more confusing geopolitical itches, but my mention of it in the first post really was a joke, albeit a cynical one. i dont think taiwan is the ultimate goal of the PRC, but its definitely an issue that comes up when dealing with them.

and im not invoking secret cabals, just noticing that geography and genetics have a role in holding culture constant over time, even as political revolutions come and go. england had a revolution, but theres an english character and culture that can be seen before and after.

europes overtaxed citizens can be 'liberated' by a neighboring kingdom when taxation becomes uncompetitive. china, like egypt, seems to favour a chronological homeostasis instead, where periods of centralized government alternate with periods of schisms and rearrangements.
 
 
*
19:37 / 09.01.08
Some recent news stories and opinion pieces:

Merrill Lynch and Goldman Sachs have announced that they think the US is already in recession. Barbara Ehrenreich is unimpressed:

"Recession? Who Cares?" in The Nation

Now if those great and solemn economic indicators--growth, productivity and employment rates--have become de-coupled from most people's lived experience, then there's something wrong with the economists, the economy, or both. The clue lies in the word "most." We have become so unequal as a nation that we increasingly occupy two different economies--one for the rich and one for everyone else--and the latter has been in a recession, if not a depression, for a long, long time. Not all economists can bring themselves to admit this.

I suspect that America's fabulous growth in productivity is another illustration of the disconnect between economic measures and human experience. It's been attributed to better education and technological advances, which would be nice to believe in. But a revealing 2001 study by McKinsey also credited America's productivity growth to "managerial innovations" and cited Wal-Mart as a model performer, meaning that we are also looking at fiendish schemes to extract more work for less pay. Yes, you can generate more output per apparent hour of work by falsifying time records, speeding up assembly lines, doubling workloads, and cutting back on breaks. Productivity may look good from the top, but at the middle and the bottom it can feel a lot like pain.

When employees are squeezed hard enough, then you have the possibility of a genuine recession as technically defined. People buy less, so growth declines, to the point where even the economic over-class has to sit up and take notice. This is happening in Japan, where a recent Wall Street Journal headline announces: "Growing Reliance on Temps Holds Back Japan's Rebound: Firms Increasingly Add Part-Time Workers; Spending Power Lags." The US, where consumer spending accounts for 70 percent of the economy compared to a little more than half in Japan, is even more vulnerable to a downturn in personal consumption.


So what strategies might we see to alleviate the effects of a recession? If Ehrenreich is right, only a serious reconsideration of the perpetual growth model to address the disparity between the US' two economies will have a lasting effect. I don't think that's what the fed and the administration in power have in mind.
 
 
eye landed
20:17 / 09.01.08
that gave me an idea which i expressed in a different thread.
 
 
grant
18:06 / 15.01.08
Just for fun, here's an overview of how depressions and recessions are defined.

And here's an AP story on how inflation rose last year by a greater amount than in the prior 26 years.
 
 
Hydra vs Leviathan
14:48 / 17.01.08
I'm interested in thinking about how this, and the energy and climate crises, are going to work together to affect standards of living in the next ten years. Realistically, what could we be doing to prepare now?

Growing our own food, on a local/community level. Trading it for goods and services directly (or even trying to institute a gift economy). Getting into subsistence/barter/non-currency economies. Permaculture. Localising energy production and using sustainable sources (a solar water heater on every house, a wind turbine on every street, trees sustainably grown for firewood and replanted, etc). Recycling or repairing things rather than buying new things. Re-skilling communities by teaching genuine subsistence/survival skills which are applicable both to current conditions and to a hypothetical post-crash society to people who are currently on the scrapheap of capitalism and regarded as "dependent" and "useless". Resisting, and helping each other resist, the financial system by refusing to pay debts, taxes, etc. Realising that money only exists because people consent to its existence, and that consent can be withdrawn. Realising that not only are Big Government and Free Market Capitalism both the enemy, but that they are two faces of the same enemy, and both need to be resisted together. Realising that we don't need them.

And, of course, encouraging people in the US and China and everywhere else to do the same...
 
 
eye landed
04:52 / 20.01.08
on the subprime mortgage crisis.

DEDRICK MUHAMMAD: Well, and the way the subprime crisis has been able to develop into the point that it’s at is that there was a great financial arrangement made between Wall Street and between mortgage lenders, where mortgage lenders would take out loans from a, let’s say, a Latino American family who made a good income but had very little wealth, and would steer them into a high-cost loan and for a property that they really could not afford. And now, oftentimes in the past, mortgage lenders wouldn’t sign on to something like this, because they would be concerned about getting their money back.

But the deal they worked out with Wall Street is that they could sell this debt to Wall Street, and then Wall Street could sell it again and again and again, and you have a whole bunch of different people at different layers making money off of bad loans. So it really became to a point where mortgage lenders didn’t even care if they were going to actually get the money back from the individual they lent it to, because they knew they were making their money off of the loans being sold over and over again in Wall Street, which is why now you’re seeing major financial institutions across the country shaking from this subprime crisis, because debt had to be paid back at some point. And even though many wealthy people have made much money off of this, at some point this debt had to be collected. And so, now we’re seeing major financial institutions suffering the consequences. But who’s going to suffer the worst consequences are those who are going to have their homes foreclosed, who are going to have their credit destroyed, and have already weakened financial communities in a much worse situation.


related, from same page.
 
 
DecayingInsect
14:49 / 20.01.08
To respond to Hydra vs Leviathan's post: some of those ideas sound good, but I wonder how they'd work in practice: presumably you'd need engineers, factories and infrastructure to build solar heaters capable of operating, e.g. in the UK. That's a bit of a tall order for full-on anarcho-primitivism.

Also (at the risk of stating the very obvious) unless you are already rich and powerful, defaulting on debts and dodging taxes is almost certainly going to leave you with a horrible credit record (that will take years to shake off) and possibly result in a stretch in jail. Neither of which is going to help your prospects now, let alone in an economic meltdown.
 
 
diz
04:06 / 22.01.08
Everybody needs to chill the hell out. There's going to be a fairly mild recession in the US. It's not that big a deal. Civilization as we know it is not likely to collapse anytime in the near future (i.e. within our lifetimes), and thank whatever deity you'd like to thank for it, because the "solutions" offered by the likes of H vs L are basically a bunch of romantic twaddle. Isolated agricultural societies with no technological progress are miserable hellholes, and if that were what we had to look forward to, I'd throw myself off the nearest bridge.
 
 
Char Aina
09:32 / 22.01.08
Sunday losses and Monday commentary from High Probability Trader, a blogger and futures fan.

HPT started posting videos a few months ago, and he just lost a lot of money. Found via MeFi, where they have more links about the current financial worry.
 
 
The Idol Rich
09:43 / 22.01.08
Everybody needs to chill the hell out. There's going to be a fairly mild recession in the US.

How can you be so sure of this? Most of the consensus I’ve seen seems to be that there will be a recession (most likely worldwide rather than just in the US) but reports as to how bad it will be have varied greatly.

the "solutions" offered by the likes of H vs L are basically a bunch of romantic twaddle

I’m inclined to agree with this though I’m afraid.
 
 
ONLY NICE THINGS
12:22 / 22.01.08
Well, perhaps you and Dizfactor can pool your resources and work out a way to say it that doesn't make you sound like douches.

Good luck!
 
 
Char Aina
12:45 / 22.01.08
More on the situation, this time from a fairly excited Jim Cramer.
He says armageddon is upon us.

(posted by Dutch in the youtube thread in convo)
 
 
The Idol Rich
13:33 / 22.01.08
Well, perhaps you and Dizfactor can pool your resources and work out a way to say it that doesn't make you sound like douches.

Well, let’s see shall we?
Perhaps "romantic twaddle" is not quite what I mean, broadly speaking the first things proposed are good ideas as far as they go although, I suspect, not really solutions in themselves as far as preventing climate change.
My main problems are with the second part, I fear that although the idea sounds attractive, if you default on your debts and encourage those you know to do the same you will merely end up either in court, facing bailiffs or worse. I just don’t see how it would be possible to achieve a critical mass that could have any effect on globalised capitalism (or big government) in this way.
There is a saying along the lines of “owe the bank a million and you have a problem, owe the bank a hundred million and they have a problem” which I think may be apposite here but the problem is that if you are planning to destroy capitalism by this method you will need to scale it up massively. In other words, if you plan to destroy capitalism by defaulting on debts you had better owe trillions (at least). Also, it should go without saying that this is an incredibly risky strategy becuase if it fails to bring down the bank it will mean you are in debt for life.
As for money only having value because people agree to recognise it, this is true as far as it goes but you could equally say that it will only lose its value if people choose not to recognise it – again you are faced by the problem of making people spontaneously decide to do this, how can you make this happen? I would say, you can’t unless you can cause a complete financial collapse, now while I would never rule out such a collapse happening, I think that it is not something that one individual could bring about (unless that individual has penetrated the system to the extent that they are Chairman of the Fed or some equivalent).
If, somehow, you did however, and a situation of bartering came into place much as existed before money was around, what makes you think that people wouldn’t then scrap that system for a more convenient (monetary system), exactly as they did before?
Overall I feel that the strategies outlined are at first attractive (hence romantic) but ultimately unworkable and probably likely to distract from other more viable methodologies by placing the people most likely to implement them in gaol.

Life Critic – I wish I could watch your youtube links when I am at work – judging by the comments they look pretty interesting.
 
 
Saturn's nod
14:39 / 22.01.08
Isolated agricultural societies with no technological progress are miserable hellholes, and if that were what we had to look forward to, I'd throw myself off the nearest bridge.

But that's not what H vs L was suggesting. Already there exist co-operatives and family businesses running telecoms, ISPs, and engineering services; apprenticeship models may actually work better than formal education for developing and providing sustainable communications. Daniel Quinn's thinking about tribal business models may be of interest to people thinking about sustainable futures. Here's an address of his to a Social Investment forum 15 years ago.

I don't believe we have to have such massively centralised and unstable systems as we have now in order to achieve a much better outcome in terms of human wellbeing and future security. Better if our centralised resources go into supporting the things they're really needed for: climate change planning/future security, including maintenance and investment of scientific and intellectual capital for health services, ecological management, and innovation, rather than propping up the carbon-addicted energy-denial status quo in the West.

I don't agree with H vs L about loan defaulting; my own aim is to keep my debts as small as possible and to get loan-free in order to keep my choices open about how I work.

I think it's worth considering that programs of sustainable businesses with exactly the kinds of future-proofing strategies H vs L is talking about are high quality business investments; it has been recognised in several academic circles that the financial business sector needs to take some interest in the realities of the future - and several large companies including Unilever I believe are already involved in 'zero emissions' business model conversion; the financial outlook for really good future-proof tech is still v healthy - I hear the super-rich are interested in having a future, and as they put in their orders for future-secure high tech mansions, the R&D costs get recouped and bring the prices down for the rest of us.
 
 
ONLY NICE THINGS
15:59 / 22.01.08
Good for the rich! And good for the Idol Rich - that's much more the kind of critique I was looking for.

The first set of things HvL is describing might be described as hedges - by growing one's one food, one hedges against rising food prices, by generating one's own electricity one hedges against rising power costs, and so on. If one moves parts of one's economy off a cash base, one hedges against radical disparities developing between the value at which you, in effect, purchased your cash (by exchanging it for labour) and the value at which people are subsequently prepared to exchange it for goods and services. These are, on a personal level, perfectly sensible hedges to take, if one has the time to devote to them.

The part about defaulting on loans and debts seems unwise, in part for the reasons Idol Rich and Apt Joviality describe above, but also just because it seems to undermine the whole project a bit if you happily participate in the process of international banking right up to the point where they ask for the money back.

Meanwhile, and speaking of international banking, the Fed announced a shock rate cut of 0.75%, to stiffen the Dow Jones. I suspect that the timing - shortly before the NYSE opened - was specifically so that traders were too confused about the possible implications to dump stock immediately upon opening.
 
 
grant
17:24 / 22.01.08
If it matters, while I'm not yet defaulting on any loans (JUST BARELY, thanks), my family does get a significant portion of our weekly food from either making/growing it ourselves or from barter - delivering vegetables for a local co-op farm in return for a little cash and a lot of fresh produce.

So the lifestyle being described is not just hypothetical, as far as sustaining oneself. I don't think we could yet do that as a replacement for the conventional work-for-wages, pay-for-utilities lifestyle, but we're definitely supplementing. I have a feeling this stuff ("self-reliance"?) gets popular every other generation or so, possibly in parallel with financial markets.
 
 
Jack Vincennes
18:10 / 22.01.08
Some links that might be interesting for thinking about this -
Explanation of how CDOs work or fail to.

Interview with a hedge fund manager (this gets really good after part 1 so if you're pushed for time start at part 2)
 
 
Saturn's nod
18:35 / 22.01.08
Cheers Vincennes - fascinating links.
 
 
*
18:42 / 22.01.08
What I was looking for was more of an exploration of how to set up parallel social systems to replace things like social security and private health insurance and corporate medicine if and when those become unworkable, so that we can minimize the resulting suffering. I'm thinking of the coming (actually already present) change in our society as a slow but marked shift into less energy-intensive forms of economy, which could ultimately be good for human society or radically bad for it, but in practice will involve a lot of suffering as present unwieldy systems fail to do what they should be doing. Certainly these systems are already failing to do what they should be doing, so it's not a romantic dream to try to plan for this; quite the opposite. It is a bit romantic to think that people will be able to just go into subsistence farming and off-grid power and support themselves independently, without some kind of social system to help/support/encourage/make them do that. The vast majority of people do not have the resources to support themselves. In fact we're evolved to depend on each other and to create social structures to help us manage and share resources. The problem is that the ones we have are badly malfunctioning, and before they collapse entirely we need replacements running in parallel that people can opt in to.
 
 
diz
18:58 / 22.01.08
The problem is that growing a portion of one's food oneself is of limited effectiveness as a hedge against fluctuations in the food market, simply because in the long term it's essentially impossible to consistently produce enough food to support oneself unless one becomes a full-time farmer.

There's a vast difference between being able to produce 20-30% of one's own food and 100% or more, in that in one situation you're faced with the choice of dealing with the food market as is or starving to death, and with the other you're not. Presuming you're not going to be a farmer full-time (and more on this later), you have to deal with the money economy for the majority of your food.

Given that, you could spend time and energy growing your own food, but then what's the opportunity cost of your hedge? Could you develop a more effective hedge by spending the time you would spend growing your own food on things that will make you more money, which will give you the financial cushion to absorb the impact of fluctuations in food prices? You could get a second job (which is effectively what you're doing when you grow your own food anyway), or start a small business, or pursue further education, all of which are going to probably going to give you more for what you put in. In any realistic scenario, you're going to be better off with more cash than you would be with off-the-grid assets.

Sure, none of that will help you if the whole money economy collapses, but the odds of that realistically happening are slim to none, and you'd be pretty much fucked anyway in that case no matter what you did now, so is that really a wise eventuality to plan your life around? It's like building a bunker during the Cold War - realistically, how long would you survive the aftermath of a nuclear war anyway?

There are any number of other problems with the anarcho-collective agrarianism that H vs L is advocating. The biggest of them is that no subsistence agriculture economy is capable of maintaining, much less producing in the first place, the sort of sophisticated green-tech infrastructure H vs L is envisioning, simply because if everyone's a full-time (or nearly full-time) farmer, you don't have anyone available to design, construct, maintain, and hopefully improve such a system. You need to have people with specialized knowledge and expertise, which means devoting a significant investment of time and resources to training and supporting each one, neither of which are available in any abundance in a subsistence economy. You need to be producing a consistent surplus which is then traded in a more-or-less reliable, standardized way over a long period of time - which is to say, you need a money economy. Modern agricultural production allows a tiny number of people to produce vast amounts of surplus food, enough to support a non-agricultural population which then has the luxury of things like mass literacy, a health care infrastructure, etc. There's really no way to turn back the clock on agricultural production without losing everything we've gained with it - like low infant mortality, education, serious containment of infectious diseases, etc.

Within two generations, anyone growing up in a society based on barter and subsistence agriculture would be looking at life expectancy in the mid-40s, would be burying half their children before the age of five, would be expecting their community to be devestated by disease and/or famine at least 2 or 3 times in their short lifetimes, would probably have their community raided by bandits at least once per lifetime, and would be ruled by the unbeatable ruling coalition of The Guy With the Big Stick and The Guy Who Can Read.

Other problems include the fact that we are coming up on 7 billion people worldwide. There is not enough arable land in the world to give 7 billion people individual plots of land, and who would force the mass migrations necessary even if there were? Additionally, locally-produced food has a higher carbon impact than food shipped from further away, in some cases a number of times higher. Plus, you lose nutritional diversity and the levels of redundancy that protect the population in any given area from famine based on local conditions. Under these conditions, local food (and organic food, and non-GM food) are luxury products designed to make already privileged people in the global north feel better about themselves, not actual solutions.

Modern civilization is not perfect. It's not always just, it's not always fair, and it produces no small amount of misery, but it is almost infinitely better than anything we've had before, because we have a money economy which allows for specialization, which in turn creates huge quality-of-life improvements for everyone. It's completely delusional to think that we can all just go back to the farm and trade bread for repairs to our solar water heater and that will just make everything OK.

If you want to close the inequality gap between the global north and the global south, work on economic development in the global south. If you want to decrease the environmental impact of modern civilization, invest in green technology and support green urban design.
 
 
illmatic
19:35 / 22.01.08
Diz, this seems a bit counter intuitive to me:
locally-produced food has a higher carbon impact than food shipped from further away, in some cases a number of times higher.

Could you expand please?
 
 
grant
19:48 / 22.01.08
It seems like there's some confusion here about what a "co-op" farm really is:

it's essentially impossible to consistently produce enough food to support oneself unless one becomes a full-time farmer.

Well, yeah. That's why the local-farm folks subscribe to a local farm - a specialist business run by someone who spends all day growing enough food to feed themselves and a group of subscribers. Some co-ops call them "members," some call them "owners," and there's different ways to structure the deal - I've heard of co-ops where members spend a couple days a month repairing irrigation systems and pulling weeds.

I think it *is* possible for any given community to get enough food to live with this arrangement. I'm not sure it could necessarily work to sustain everyone who's currently alive on the planet, although it might - it'd be hard, water rights and pest control/contamination issues being what they are.

This is a little beside the point of a global market meltdown. I just wanted to point out that I was reading HvL as saying something slightly different than "everyone becomes a farmer."
 
 
diz
20:09 / 22.01.08
Rex Feral

Diz, this seems a bit counter intuitive to me:
locally-produced food has a higher carbon impact than food shipped from further away, in some cases a number of times higher.

Could you expand please?


By concentrating food production in more fertile areas, you reduce the need for petroleum-based fertilizers, and shipping in bulk is more fuel efficient by many orders of magnitude than shipping in the small quantities typical of local agriculture. The energy savings in both of these areas are more than enough to outweigh the distance issue. In other words, increased efficiency of production is such that that savings, plus the fact that one big trip uses less energy over time than many small trips, even if it's a VERY big trip, adds up to a net decrease in carbon consumption. As a result, growing food in a fertile area and shipping it in bulk to the other side of the planet is more carbon-efficient than growing it in a bunch of local farms on less fertile land and driving them around in trucks. The study that's cited most often is here.

grant

I think it *is* possible for any given community to get enough food to live with this arrangement.


Is that an article of faith, or do you have evidence to support that? I'm sure it's possible for some communities to do that, but "any given" community is a bit of a stretch, especially if you're looking at the aggregate effects of every community on earth trying to do this at once.

Anyway, even if we could convert to this model on a large scale (which, let's be real, we can't)... why? There's no real evidence it provides any significant environmental benefit, it closes off a major potential avenue for economic development in the global south (who could actually make enough money to bring themselves out of poverty if food subsidies from the developed world weren't depressing prices), and it reduces options for the end-users (i.e. people who eat). I mean, sure, it's a lovely and comforting idea to buy your vegetables from Farmer Joe in his neat little overalls, and I'm sure it's lovely to sit around at dinner with friends cooing about the fresh local origins of your veggies, but it's all kind of a load of self-indulgent feel-goodery more than anything else.
 
 
The Idol Rich
07:35 / 23.01.08
Meanwhile, and speaking of international banking, the Fed announced a shock rate cut of 0.75%, to stiffen the Dow Jones. I suspect that the timing - shortly before the NYSE opened - was specifically so that traders were too confused about the possible implications to dump stock immediately upon opening.

This is an interesting one, the Fed are describing it as nimble or suchlike and claiming it shows they have the manoeuvreability to react to the market and prevent large problems before they occur but it could equally well be argued that they are acting hastily or even in a panicked fashion. If this doesn't firm up the market significantly then there will be serious concerns that their policy options don't work. Also, using this weapon now limits their chances to use it in future and is basically sending a message that they are not really thinking about inflation.
There is a wider question though - for a while some commentators have been arguing that the stock market has been overvalued and thus due a correction. If this is the case (and even if it isn't), ought the Fed to be taking such steps to prop up the stock market?
 
 
ONLY NICE THINGS
07:45 / 23.01.08
Presuming you're not going to be a farmer full-time (and more on this later), you have to deal with the money economy for the majority of your food.

Not necessarily - you would have to deal with an exchange economy, which is a rather different thing. Personally, I think that having invented money, it would be awfully messy too go back to a system of bartering food for skills and skills for food, but one could certainly run the systems in parallel - people do this all the time, most often by paying for dinner in exchange for cuddles.

Certainly, an office worker in a city is not likely to be able to grow enough food or know enough other people who grow food and need his skills to make it a viable hedge. And even if one is growing a reasonable chunk of one's own food, one is still compelled to buy seeds, fertiliser, equipment - essentially, the money economy, if it exists, is going to affect you at some point: you can only hedge so far back.

However, we've already noted that HvL is not necessarily talking primitive agrarianism, and that if he is then other people are certainly not.
 
  

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