Archive for March, 2008

Recognizing Parallels When they Slap You In the Face with a Haddock

Sharon March 31st, 2008

Nearly every financial report that discusses how bad the economic situation is going to be reports two facts.  1. Ben Bernanke is a student of the Great Depression, which means we’re safe from making the same mistakes twice.  2. Clearly, we aren’t in the same situation as the Depression, because after all, the situation isn’t the same.  Consider today’s essay in “Fortune” which repeats a mantra I’ve noticed over and over again - remember, things aren’t nearly as bad as in the Great Depression.

“No, Meltzer isn’t saying that a Great Depression - 25% unemployment, social unrest, mass hunger, millions of people’s savings wiped out in bank collapses - is upon us. Nor, for that matter, am I. But the precedent is unsettling, to say the least. You can only imagine how unsettling it is to Federal Reserve chairman Ben Bernanke, a former economics professor who made his academic bones writing about the Great Depression.”

This is supposed to reassure us - and, despite acknowledging the danger,  to point up the radical differences between the Depression period and the present.  And I suspect for some people it works.

The problem is, the parallel is a false one.  The statistics that the commentators are citing are statistics from deep in the middle of the Depression from 1933 when unemployment really was 25%, and they are holding them up against our present situation - at the very beginning of a financial disaster.  Observing that the Great Depression isn’t upon us isn’t very helpful, because at the comparable stage of the Great Depression, those things weren’t upon us either. 

For example, when the stock market crashed in October of 1929, a news report observed that “the vast majority of Americans remain unaffected.” Two months after the stock market crash, Secretary of the Treasury Andrew Mellon said, “I see nothing in the present situation that is either menacing or warrants pessimism.” 

Unemployment did not instantly rise to 25% - in March of 1930, it was 3, 250,000 (and this is some months after the crash).  By 1931, however, a year and a half into the crash, it had doubled to above 7,000.  By 1933 it would double again.  But again, at a parallel point in time, unemployment was comparatively reasonable (high by our present standards, but fairly typical for the period).

Meanwhile, those who were lucky enough to keep their jobs found themsleves at first in a decent position - as Don Lescohier reports in Common’s _History of Labor in the United States_ “The first impact of the Depression of the ‘thirties did not affect the wages structure.  It cut the earning of millions through unemployment and part-time work before it affected wage rates.  It was not until the last quarter of 1930 that appreciable downward changes in manufacturing wages occurred.”  Yet again, the first ripples in the financial centers didn’t actually translate right away.  But by 1932, wages in Ohio had fallen by nearly 60%.

In that sense, the current system may be worse than the Depression - while wages haven’t declined, buying power has declined much more precipitously than it did in a parallel period during the Depression.  For example, in the news today, food stamp use is approaching record highs - that is, while unemployment remains comparatively low and wages are still stable.  This is not a good sign. 

On the other hand, there are parallels we might want to look at.  For example, in Harper’s Magazine in 1933, a lawyer from Mason City, Iowa wrote about the housing bubble that preceeded the collapse,

“Farm prices shot sky high almost over night.  The town barber and the small-town mercahant bought and sold options  until every town square was a real estate exchange.  Bankers and lawyers, doctors and ministers left their offices adn clients and drove pell mell over the country to procure options and contracts upon this farm and that, paying a few hundred dollars down and expecting to sell the rights before the following March brought settlement day.  Not to be in the game marked on as an old fogy, while paper profits were pyramided and Cadillac cars and pleasure trips to the cities took the place of Fords and Sunday afternoon picnics.  Everyone then maintained that there was only a little land as fertile as the fields of Iowa, Illinois and Minnesota, and everyone ought to get his part before it was all goine.  Like gold, it was limited in extent and of great potential value.  Prices skyrocketed from $100 to $250 and $400 per acre without regard to the producing power of the land.

During this period insurance companies were bidding against one another for the privelege of making loans on Iowa farms at $90 or $100 or $150 per acre.  Prices of products were soaring.  Everyone was on the highroad, not only to comfort, but to wealth and luxury.  Second, third and fourth mortgages were considered just as good as government bonds.  Money was easy and every bank was ready and anxious to loan money to any Tom, Dick or Harry on the possibility that he would make enough in these trades to replay the loans almost before the day was over.”

I bet you thought we invented housing bubbles ;-).  But again, the bust didn’t happen instantly.  There were foreclosures in 1929 to be sure, but the wave of property taking occurred primarily in 1931 and 1932. 

Right now the media is starting to warn that there “might” be a real Depression.  But they are quick to say that now isn’t much like 1929 - and we are buying it,  because most people’s relationship to historical events is pretty sketchy - when talking on a long historical scale, the fact unemployment really began to get bad 2 years after the stock market crash is a blurry fact, the difference of a typo in numbers.  Who cares whether it happened in 1930 or 1931, the depression is the depression.  But the thing is, if you were living it, watching things unfold, it looked to people just like it looks to us now - a few steps forward, some good news, a few steps back, a bit of bad news.  And in the interval between one piece of history (the stock market crash) and another (unemployment peaking) were four miserable years of life gradually sliding down.   We understand history in chunks, but we live in history day to day, and everyone who lives in history experiences it that way.  We forget that at our peril. 

Telling us that it isn’t as bad as the mid-point of the depression isn’t just useless, it is misleading, and intentionally so.  Compare the worst to the not so bad, and things don’t look that bad.  But compare where we are now to where we were at a comparable period of the Depression, and things begin to look worse - and more accurate.

I can only hope that Ben Bernanke is a better student than the people who write these articles.  But of course, he has even more incentive to tell us that things aren’t really so bad.

 Sharon

Monday On the Air

Sharon March 30th, 2008

Oddly enough, I’m all over the radio tomorrow.  First, I’ll be on Vicki Walker’s Media Watchdogs show in Kansas City KKFI 90.1 from 9:40 Central (10:40 my time) to a bit before 11, talking about Victory Gardens.  If you want to stream along, it is on the web at www.kkfi.org

Then, I’m off (metaphorically speaking, I’ll actually still be in my kitchen) to Mendocino County, California to appear for the second time on Jason Bradford’s radio show on 90.7, 91.5 www.kzyx.org,  from 9-10am Pacific, noon to 1 my time.  With Jason I’ll be talking about food preservation.

Now unfortunately, both interviews are happening on a day when the husband is off teaching and I am doing the Mom thing.   Thus far, all phone interviews have been scheduled for times when some other competent adult was around.   I suspect bad parenting will ensue - the distribution of sweet bribes and television will probably be required.  Feel free to take bets on whether either interview will be interrupted by me screaming “Stop that right now, Mommy is on the phone!”

 Cheers!

 Sharon

My Readers are Amazing

Sharon March 30th, 2008

I’m regularly awed by the people I meet through this blog, but I admit, I’m particularly stunned by this.  At 11 am on a Sunday morning, I posted a request for a volunteer transcriptionist or two.  I figured maybe we’d get lucky and get a couple of volunteers, but probably not before Monday when people got back to work.  We didn’t offer much in the way of rewards, either.

By you 3:30 today (Sunday), I had 22 volunteers, almost twice as many as we have interviews ;-).  Can I just say how awed, thankful and deeply impressed I am by your generosity?  Some of you I know, and some of you I don’t, but I know everyone who volunteered has 43 other uses for that time.  Aaron and I appreciate it hugely.

We don’t need any more volunteers, but thank you so much also to those who thought “Oh, if only I’d seen it first I would have done it ;-)!”  And if you emailed or commented in the blog, I’ll get in touch to let you know ;-).

Thank you all again!

 Sharon

Anticipating the End…

Sharon March 30th, 2008

No, not of the world as we know it!  Right now I’m fixated on two end points - first, the end of winter.  I know a lot of you are all done there and have been a while now, but this is rural upstate NY, and on Friday we had six freakin’ inches of snow.  It is melting - slowly.  But the reality is that spring does not come in March, but is solidly a product of April here - and usually mid-April at that.  But while I know that in my head, in my heart I-AM-DONE-WITH-WINTER!!!  It need to leave…now.  So I’m looking at my daffodils, which have been up slightly since early February, and praying they get bigger faster, and that their growth somehow magically destroys the snow.

 The other thing I am finally anticipating is the end of the Book Marathon.  Last year in March, I committed to writing two books in 15 months.  On June 2, I will finish _A Nation of Farmers_, and can I just say “Hallelujah!!!”

The thing is, we live the way we do in part because it means we have a reasonable life pace.  Eric and I did the two career academic thing for about a year after Eli was born, and then promptly said we’d never do it again.  We hated racing around all the time, and the sense that we barely saw each other and our kids.  So we decided that we’d work as little as we could and get along - no more than one full time and one part time job, and that was gracious plenty with family and farm.

 But that hasn’t been the case this year - this year I’ve worked full time and more, while Eric has had his own full time job and picked up my slack, doing the majority of the homeschooling and an enormous amount of additional housework.  I’ve done less of a host of things I love than I wanted to - and that isn’t going to change between now and June 2.  But more, we’ve been running to keep up - and while we can do this, it isn’t what we dream of.  I miss that I had the time to hang the laundry the slow way, with a toddler hanging on my ankles and “helping” instead of frantically hanging it while saying “go play with your brothers.”  I know that’s a reality of motherhood sometimes, but it feels like we’re cutting corners we don’t want to cut.  I’ve had to scale back spring garden plans, and other ambitions - and these are the things I honestly care most about in my life.

I know it is for a good cause - it is more and more urgent that we relocalize our agriculture.  The recent 30% overnight rise in rice prices and the announcement that many nations are restricting exports or raising tariffs means that it is especially urgent that we build local food systems - and not just in the developing world.  I believe in this project - but I still wish it was over, and my family could go back to a slower pace.  Again, I’m ready for it to go away - but it will only do so in its own sweet time - like winter, the book will be done when it is done.  Me jumping up and down and screaming at it won’t help ;-).

I wrote 34 posts in the month of March - my guess is that April and May will have many fewer, most of them about food, as I work through ideas for the book.  So expect a quieter blog until June comes.  Knowing me, I won’t be able to resist writing about other things sometimes, but I’m going to try and keep it to a minimum. 

I do have one request of y’all, or anyone with free time and the relevant skill set.  _A Nation of Farmers_ will include more than a dozen interviews with people with important stuff to say about food systems in a lower energy world.  Some of them are famous: Richard Heinberg, Bill McKibben, Albert Bates,  Alice Waters, Gene Logsdon and some of them are not, but have a lot to say about growing food, or cooking it or eating it in a low energy world.  We’ll be including recipes from each of our interviewees - don’t you want to know what Richard Heinberg thinks we’ll be eating when the gas pumps run dry ;-)?

 Writing this book is, shall we say, not a high paying proposition (I think I’m showing a net loss so far ;-)), so we were hoping to find among my readers or Aaron’s one or more volunteers who would be willing to transcribe our interviews for us.  Each one is about half an hour long.  The only payment we’re offering is a. a chance to read the interviews before anyone else, including me ;-), b. our gratitude and acknowledgement in our books, c. if this is a profession for you, I’ll run a free ad on my site for your transcribing services for six months and d. a free copy of the book.  If you are interested, email me at [email protected] or Aaron at [email protected].

 Edited to Add: Thank you all!  We actually now have more volunteers than we have interviews, so we don’t need any more.  But wow!!!  We’re so appreciative of all who volunteered and all who would have!

Ok, off to write another book.  More soon!

 Shalom,

 Sharon

Dissecting the Long Emergency

Sharon March 28th, 2008

If there is one thing Jim Kunstler deserves all the props in the world for, it is his naming and describing the complex, sweeping and all-encompassing crisis we’re facing.  He called the combination of energy, climate and financial crisis “The Long Emergency” and I think that’s turning out to be just about right.  As a prophet, Kunstler is looking pretty accurate in some respects (I’m still kind of skeptical about the Asian pirates marauding across the northwest coast, but maybe I’m wrong ;-).

I’ve been getting emails from people asking me whether the present crisis is “just” financial and whether/how peak oil and climate change are factors.  And this is a fascinating question - because, honestly, it is awfully hard to sort them out.  In fact, it is really all one crisis - I call it (perhaps not as eloquently as Kunstler) the crisis Ourobouros, the great worm that encircles the globe, and does not realize that he is devouring his own tail - it is impossible to entirely find the beginning or end.  But we can take a stab at it.

 I thought for my own edification, and perhaps for others, it might be worth trying to sort out how all three segments of our present situation are working together, and what parts of the hard times facing us are tied into more than one segment of the crisis.  I make no claims that I can provide a perfect explanation, or that I won’t miss some links, but if nothing else, it is an interesting way for me to clarify my own thought.  So I’m going to list present problems one by one, and describe how (if at all) they are tied into each element - financial crisis, climate change, peak oil.  I’ll try and figure out whether what we’re seeing is a cause or effect, and just how closely related they are.  I doubt I’ll even come close to articulating the whole picture - that sounds like a book in itself, and one for someone more knowledgeable than I.  But here goes nothing:

Crisis # 1: Rising Food Prices

Relationship to Climate Change: Super Direct. Climate change is a direct cause of rising food prices, particularly the rise in wheat prices.  Wheat crops were heavily affected by drought in Australia, the Middle East and the Mediterranean.  Aquifer depletion in China, along with reduced rainfall is also affecting wheat crops.  Massive growth in  biofuel production, was in part motivated by the (completely erroneous) assumption that biofuels would produce fewer greenhouse gasses than fossil fuels.  Climate instability is also a primary motivator as nations become more concerned with feeding themselves, and restrain exports or raise tariffs, as when Russia raised wheat tariffs and Egypt and India announced they will largely stop exporting rice.

Relationship to Peak Oil: Super Direct. Peak oil is a direct cause of rising food prices.  Biofuels are only a feasible project in a world of declining oil availability - their Energy Returned over Energy Invested is simply too small to make any sense when you’ve got plenty of oil and natural gas.  The mistaken belief that we can keep all the cars going and our basic lifestyle intact has led to a rush to biofuels that has helped driving prices of staples, meat, eggs, milk and other foods up by 50%. In addition, rising fertilizer prices (because of rising prices for natural gas and rising prices for rock phosphates) are also driving food prices up, as are the costs of transporting industrial food over long distances. 

Relationship to Financial CrisisDirect. The financial crisis is in part a result of rising food prices.  Over this winter, we saw more and more people using their holiday gift cards and store credits for groceries - food prices are rising so quickly that they are cutting heavily into consumer spending, which is a substantial part of the economy.   Food price rises have slightly slowed growth in countries whose wealth has been propping up the US economy. This is somewhat speculative, but rising food prices are probably an underlying force fueling the collapse in housing values - the reality is that basic needs like food and housing must both be met, and when you are paying more for one, you can pay less for another.  I’ve written about the relationship between housing and food prices here.

Crisis #2: The Housing Collapse

Relationship to Climate Change: Tenuous.  So far, sea levels haven’t risen enough, and climate change hasn’t been a large enough factor to really motivate large numbers of people to relocate.  Some farmers in Australia, and a few others are starting to see the writing on the wall, but mass migration in the rich world has not yet affected property values.  So far, people are still looking at any given disaster as short term thing.  I don’t expect that to last.  In the long term, climate change will probably dramatically alter housing patterns, and cause some markets simply to collapse.

Relationship to Peak Oil: Substantive.  I’m going out on a limb here, because I’ve seen no research suggesting this to be true, but while the majority of the housing collapse is based on the fact that we had ridiculously overinflated housing prices to begin with, I think that it is also the case that rising energy prices for home heating, cooling, food and other things have begun to eat into not just people’s ability to pay a large chunk of their income towards a mortgage, but also into their belief in housing as a refuge from difficulty.  It isn’t an accident that the housing boom really took off in the US shortly after 9/11, when people turned inwards, hiding from the outside world. Again,  I’m speculating, but I think the outside world has penetrated, and the idea that a home could be a form of protection is wearing off in the face of skyrocketing costs. Also, as energy prices rise, local governments are less able to maintain services -we have seen this with school bus and plowing declines - and thus become lower value regions, although the latter is a tertiary effect.

Relationship to Financial Collapse: Absolutely Direct.  In this case, it operates as both a cause and an effect.  The housing boom and the use of inflated house values to borrow was the cause of the bubble, and the collapse of housing prices is, if there is a single root cause, the cause of the crisis.  But it is also an effect of drying up credit - the less there is to borrow, the smaller the chance people will buy.    The more foreclosed and devalued properties there are, the less reason to buy a new house.  It is vicious circle, and it looks like it has a lot longer to go.

Crisis #3 - Rising Gas Prices

Relationship to Climate Change: Not Much Yet.  We are going to see a strong relationship in both cause and effect here, but so far, the effect has been small.  So far, the major effects of climate change in oil prices are limited to natural disasters affecting refineries, and growing political conflicts over water that threaten economic relationships.  None of these is terribly acute yet.  However, with discussion of carbon taxes in the works and more and more disasters, water shortages and other problems occurring, we may see supply issues more tied to climate change.  More importantly, gas prices have yet to drive off global demand enough to mitigate climate change.  As prices get higher, more effects should be seen - but probably not enough to mitigate things.

Relationship to Peak Oil: Umm…duh!  Do I really have to explain this one?  Yes, peak oil is the root here.

Relationship to Financial Crisis: Significant, but mostly concealed. Growth requires energy - and quite a lot of it. I won’t go into detail here, since Gail the Actuary has just done a great talk on this subject which you can read here that covers anything I would say better.

Crisis #4 - Failing to Mitigate Climate Change

Relationship to Climate Change: Well, yes.  This one seems like it would be a “duh” but it actually isn’t just that.  Yes, our failure to mitigate climate change is causing climate change.  But we are also failing to mitigate climate change *BECAUSE* of climate change.  That is, the rising number of natural disasters are making us react to climate change more and more, rather than addressing it.  We are spending more and more of our money and energies that we might use to adapt our infrastructure repairing it and fixing the damage of climate change.  Moreover, because climate change is happening much more quickly than anyone expected, we are still basing our mitigation efforts on inadequate information - that is, we’re still talking about 450 or 550 ppm limits, when 350 ppm is probably more like it.  We still don’t get what we even have to do - and that weakens our ability to do it.

Relationship to Peak Oil: Very Direct.  The reality is that all the discussions of what we potentially could do to mitigate climate change depend on large scale economic growth and lots of cheap energy to do the initial build out.  As energy prices rise and shortages start showing up (mostly so far in the Global South, but not entirely), we’re going to use more and more money and energy on mitigation. Diesel supplies, which are required for global trade, build outs, mining and other projects are showing shortages even in the rich world.  Moreover, our warmongering is the direct cause of 10% of all emissions, and that, of course, is about the oil.  James Hansen recently released an analysis suggesting that there isn’t enough oil in the ground to get us to the worst effects of climate change - but that would only work if we didn’t use the coal.  But higher oil and natural gas prices are likely to drive us steadily towards coal.

Relationship to Financial Crisis: Direct.  Despite all the hype, the payback time of most renewable energies is pretty damn long, compared to oil.  So in order to build out renewable energies you lots of liquid credit dripping off the walls and down into various new industries.  We need people who are willing not to get their money back for a good long time.  Guess what - those people are increasingly in short supply.  So expensive, long term renewable solutions are also likely to be in short supply.  On the domestic level, while some energy consumption drop is likely to happen, there are also likely to be short-term losses, for example as people priced out of heating oil in the northeast burn coal, or as people rely on existing gas guzzlers rather than buying more fuel efficient vehicles.  In the long term, a depression will cut consumption, but also adaptation, which will mitigate climate change and increase unhappiness.  Poorer cities and towns will likely end efficiency programs, nations may permit coal plants again to keep the grid going.

Crisis #5 - Increasing World Political Instability

Relationship to Climate Change: Absolutely Direct.  Climate change is likely to be a political disaster - up to 1.5 billion people without access to safe water, some without any water at all.  More than a billion refugees.  Growing hunger.  Political conflict over resources, land and borders of all sorts.  Some of these wars are already popping up - the conflict in the Sudan, for example.  And a fair bit of anger on these issues is likely to be directed (quite correctly) at the Global North, probably especially at the US.  We can also expect more internal conflicts within nations over resources, such as the ones the US is already seeing over water.  Political unrest is also likely to exacerbate climate change, as oil fields and forests are burned in conflicts and the war machine, which already produces 10% of all greenhouse gasses, expands.

Relationship to Peak Oil: Direct…And Getting More So. Well, I won’t belabor Iraq, but that’s probably just the beginning.  For example, Saudi Arabia recently announced it will no longer grow wheat, its primary staple - probably due to climate change.  Rice prices rose by 30% in a single day this week - and almost 2/3 of the world’s population depends on rice as a staple food, in large part due to climate change and biofuel production.  The rising price of corn is already causing tortilla riots, and that’s directly tied to ethanol production. 

Relationship to Financial Crisis: Tenuous…for the Moment. Even if you don’t think that any attack on Iran will be partly motivated by the Republican administration’s desire to distract from the unfolding financial crisis, our political relationship to Russia and China (among others), is clearly being shaped by America’s declining economic situation.  So far things are in the early stages, but it seems like the balance of world power is shifting, and how that will play out, we do not know.  The one good thing one can say about the coming financial crisis is that if the economy crashes enough we will probably leave Iraq fairly quickly.

I’m sure I could come up with a whole host of other crises to discuss, but this at least gets us a start! 

 Shalom,

 Sharon

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