Tuapte Semper Ingredere Via

Community, People, Localization – a return to a human scale

Thinking during a rainy weekend

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Not much done the past few days.  Lots of rain and waiting on contractors to return my calls.  Fits and starts.  Project management at its finests.  At least I am not dealing with time zones, and internal politics !

Back to reading about economics which seems to consume as I read more about global finances and the problems we are in. Lots of obvious trigger points to cause another slowdown and lots of not so obvious ones.

me thinking really hard

Far too much of the news we are bombarded with seems to proclaim better things are coming and the corner has been turned.   One has to dig a bit to find out what is happening as we witness global structural changes that will and are affecting our economies, our cities and our lifes.

The real threats to our economy and society over the coming few years are from these things we have little control over. Even were the global economy in the greatest of health, it could still face ruin. That is because we are dependent upon, and interwoven with, the globalised economy. And the globalised economy cannot stand the convergence in real time of constraints in its primary enabling energy resource-oil; its primary human constraint-food, and loss of trust in the credit that makes economic life possible. This convergence marks the end of economic growth, and
initiates powerful destabilising shocks and stresses to the globalised economy.

Because of this, across the political spectrum, people are claiming solutions for a predicament that cannot be solved. They are claiming a level of insight and control over systems they can barely grasp and over which they have little and declining control. The electorate assumes there must be a solution to get us out of a global recession, a way to reverse what we have come to call ‘austerity’ or increased gov’t spending. More than that, we demand the right to the realisation of their expectations- our pensions and purchasing power, jobs and savings, health and education services.

Through these assumptions we enter our collective narrative about where we’ve been, where we are, and where we’re going. Part of the reason for this is a world-view maladapted to the conditions in which we now find ourselves. World-views comprise the meanings and assumptions through which our lives are understood; they embody the myths, stories and emotional attachments that frame our place in a complex world. They are social, and also define how we become socialised.

A common global narrative formed in the context of our past experience, and in particular, that of economic growth and the profound influence it brought to the human experience. We have become accustomed to the reassuring thought that at the end of every recession, no matter how deep or long, growth and prosperity will again take off. There is a sense that economic growth, though sometimes wayward, is the natural order of things. It is a powerful idea both redemptive and optimistic.

Growth is part of the glue that holds together the social contract between the rich and poor, and between citizen and state. It stands behind our expectations of technology, the rise of China, population growth, and pensions. Growth shaped the specialisation of our occupational roles and
the forms of social relations. It acclimatised us to increasing wealth, both personal and in the goods and services we expect from society and the state. We are now claiming as rights, services that only fifty years ago would have been considered miracles. It shaped our identity as the tormented consumer and the anxious lover.

Growth is very recent, two hundred years or so, and resilient, bouncing back from world wars and a great depression. It’s been the driving dynamic of the integrated, de-localised system that has tied our welfare to trillions of transactions across the world. It has been so stable, and we have become so habituated to it that we barely notice what has transpired, the inherent complexity obscured by attenuation in simple things and services-my phone rings, I take a bus, my money works to buy my bread. Bread was once hard won from our local environs and required a large share of our time or income. Now it is of slight cost, accessible with trivial effort, but requires the integrated dance of complex transport, IT, banking, electric grid infrastructure; factories supplying factories, supplying factories; and the economies of scale and supply-chains that depend
upon a globalised world.

ot only have our dependencies become more and more de-localised and complex, they have also become more dependent on high speed flows of good and services. The real-time flow of deliveries is an integral part of modern production processes. If deliveries are halted, for example, by a
large-scale systemic banking collapse, the flow can be arrested, and economic production halted. The longer production is halted, the deeper the supply-chain failure extends, and the greater the entropic decay, from rust, for example. And the longer the down time, the harder it would be to
re-boot the economy, and the greater the risk of a terminal systemic collapse in the global economy. Indeed internationalised production flows are as important for the viability of our complex economy as energy flows, they are two of a number of co-dependent systems that integrate the globalised economy. If spare parts for our national grid could not be replaced due to some supply chain failure, having plenty of fuel may not matter, electricity might not be delivered. And electricity failure would compromise other critical infrastructure such as banking infrastructure, IT systems, sewage and water.

As our self-regard has grown, our real dependencies-on soil and bees, forests, natural gas, rivers and rain, worms and sticky hydro-carbons, beasts and ferrous oxides-have been largely framed as issues of managerial utility. Our welfare is assumed to depend upon politicians, entrepreneurs,
competitiveness, the knowledge economy, our innate inventiveness, and so on. Outside of utility, the environment has been sentimentalised or used as a signifier of higher feeling.

A fiield for tomorrow

Yet we ignore that our economy and civilisation exist only by virtue of resource flows from our environment. The only laws in economics are the laws of physics, everything else is contingent, supposition or vanity. An economy, growing in size and complexity, is firstly a thermodynamic
system requiring increasing energy flows to grow and avoid decay. Waste, be it greenhouse gasses or landfill is also a natural outcome of such a thermodynamic process.

The reality is that we are locked into an economy adapted to growth, and that means rising energy and resource flows and waste. By lock-in, we mean that our ability to change major systems we depend upon is limited by the complexity of interdependencies, and the risk that the change will
undermine other systems upon which we depend. So we might wish to change the banking or monetary system, but if the real and dynamic consequences lead to a major bank freeze lasting more than a couple of days we will have major food security risks, massive drops in economic production, and risks to infrastructure. And if we want to make our food production and distribution more resilient to such shocks, production will fall and food prices will need to be higher, which will in the short-to-medium term drive up unemployment, lead to greater poverty, and pose even greater risks to the banking system.

The driving force of this failure is likely to be the fastest and most unstable process-the impact of energy and food constrained economic growth, and an already vulnerable monetary and financial system dependent upon continuing growth. What everybody wants and needs is a sudden and explosive increase in the production of real goods and services (GDP) to make their continual debt requirements serviceable. But that, even were it
remotely possible, would require a big increase in oil flows through the global economy, just as global oil production has peaked and begins its decline. It cannot happen. This means that the global financial system is essentially insolvent now.

The only choice is default or inflation on a global scale. It mean banks are insolvent, because their assets (loans) cannot be repaid; or they can be solvent (assuming appropriate action taken) but their depositors cannot redeem their deposits at anything like their real value. It means the vast overhang of stocks and bonds, including pensions, and insurance cannot be realised in real goods. It means our monetary systems, dependent on fiat money, fractional reserve banking, and interest can only collapse.

A localised economy will no longer be something environmentalists aspire to develop; rather it will be forced upon us as bank failures, monetary uncertainty, and lost purchasing power sever links in the web of the global economy. But we no longer have indigenous economies to fall back
upon.

Get to know your local food producer

***************************************************************************

An excerpt from the Bundeswehr (german military) Report on oil

Medium-term collapse
Such contagion is precisely what the Bundeswehr analysts warn against in the second part of their scenario. In bold type, they assert, “In the medium term, the global economic system and every market-based economy would collapse.”

This is a shocking assertion which the analysts justify by explaining both the likely causes and the potential consequences of such a collapse. They point to the importance of certain psycho-social factors such as awareness and trust. As people become aware that the contraction in global oil supply and economic activity is likely to be a prolonged, indefinite reality, there could be an increasing (and to some degree, self-fulfilling) loss of faith in markets, currencies, financial institutions, and the ability of governments to maintain economic and social order.

A series of interrelated potential consequences is then outlined:
– Collapse of the banking system, the stock & financial markets.
– Loss of confidence in currencies.
– Collapse of value-added chains.
– Collapse of monetary systems and international supply chains.
– Extreme increase in unemployment in all modern societies.
– State bankruptcy.
– Collapse of critical infrastructure.
– Famine.

The authors further warn:
The outlined chain of events demonstrates that the energy supply of the economic cycle must be secured and sufficient to facilitate economic growth. A shrinking economy over an indeterminate period presents a highly unstable situation, which would lead to system collapse. The security risks of such a development can hardly be assessed (p. 65).

 

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Written by dcveale13

June 14, 2011 at 3:00 am

Posted in First things

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