Archive for November 30th, 2008

Production Vs. Distribution and Food Security

Sharon November 30th, 2008

There’s no escaping the Depression. I’ve been saying throughought my long life that money and love take on their various significances when they’re totally absent.  Same is true of food.  Food becomes most important when there isn’t any.” – Stetson Kennedy, WPA writers project  

 Check out Aaron Newton’s latest post – I think it provides a great introduction to issues of food security. 


These are going to be the central issues of our time – both producing enough food where it is most needed, and also equitable distribution.

For those who are new to my blog, Aaron and I are co-authors of the forthcoming (soon – March!) _A Nation of Farmers_, which explores what the US is going to have to do to prevent a massive food crisis.  This is our grand passion, the product of the second most productive collaboration of my lifetime (the first one is with Eric, obviously).  In the end, all my work, all Aaron’s work comes down to this – we want people to be able to eat sufficiently, sustainably, well – and for our children and our children’s children and onward to have this as a basic right. 


Why I'm Not Worried About Inflation…At Least for a Good While Yet

Sharon November 30th, 2008

Well, I wish I could take the credit for having constructed a brilliant analysis, but really, the best answer I can give is “What she said.”  That is, Ilargi and Stoneleigh have been running analysis of the credit crisis since before most people knew there was a crisis.  I frankly thought Ilargi was out of his mind when he told me that the economic crisis would reshape peak oil and climate change discourse, and ought to be our focus.  I was wrong, he was right.  Their analysis has been solidly spot-on, and I think it will continue to be.  We are in a self-reinforcing deflationary spiral.  Inflation may eventually be a response to that, but for right now and the immediate future, well, it isn’t.  Here’s an excerpt from Stoneleigh’s remarkable analysis.

“Thanks to a credit boom that dates back to at least the early 1980s, and which accelerated rapidly after the millennium, the vast majority of the effective money supply is credit. A credit boom can mimic currency inflation in important ways, as credit acts as a money equivalent during the expansion phase. There are, however, important differences. Whereas currency inflation divides the real wealth pie into smaller and smaller pieces, devaluing each one in a form of forced loss sharing, credit expansion creates multiple and mutually exclusive claims to the same pieces of pie. This generates the appearance of a substantial increase in real wealth through leverage, but is an illusion. The apparent wealth is virtual, and once expansion morphs into contraction, the excess claims are rapidly extinguished in a chaotic real wealth grab. It is this prospect that we are currently facing today, as credit destruction is already well underway, and the destruction of credit is hugely deflationary. As money is the lubricant in the economic engine, a shortage will cause that engine to seize up, as happened in the 1930s. An important point to remember is that demand is not what people want, it is what they are ready, willing and able to pay for. The fall in aggregate demand that characterizes a depression reflects a lack of purchasing power, not a lack of want. With very little money and no access to credit, people can starve amid plenty.

Attempts by governments and central bankers to reinflate the money supply are doomed to fail as debt monetization cannot keep pace with credit destruction, and liquidity injected into the system is being hoarded by nervous banks rather than being used to initiate new lending, as was the stated intent of the various bailout schemes. Bailouts only ever benefit a few insiders. Available credit is already being squeezed across the board, although we are still far closer to the beginning of the contraction than the end of it. Further attempts at reinflation may eventually cause a crisis of confidence among international lenders, which could lead to a serious dislocation in the treasury bond market at some point.”

I think it is important that we be prepared for the real crisis – a long term, deep, deflationary Depression.  As I’ve mentioned before, most rhetoric about the Depression tends to look at the deepest part of the Depression, observe that we aren’t there yet (something along the lines of “During the Depression, unemployment was 25%, but at present we are nearly at 7%, a long way away from that).  All of this ignores the fact that during the Depression, unemployment rose gradually too.  In the fall of 1929, unemployment rose only very slowly.  But between March 1930 and March 1931, unemployment doubled, and didn’t reach its peak until 1933, more than 3 1/2 years after the crash.

My claim is not that we will travel precisely the same road as described in the Depression. But one of the things about crises worth noting is this.  They have their moments of screaming and running around, of explosions and flames.  And then they have most of the rest of the time, which is rather like life, only with incrementally painful shifts. 

One of the incrementally painful shifts we are facing is that addressing peak oil and climate change are likely to be pushed to the back burner.  Obama has already noted that some of his energy goals will probably have to be put off.  The problem is that the odds are good that if they are put off, they won’t happen.  Meanwhile, over at The Oil Drum, Gail the Actuary has another clear-eyed post about how this will affect our long term energy infrastructure

BTW, if you’ve relied as much as I have on their analysis, and can afford it, you might consider donating to the Automatic Earth’s Holiday Fundraiser, on the sidebar.  Ilargi has been doing the work of researching and writing full time, and essentially, they are trying to make sure he can keep doing it.  His goal - to make as much as a McDonalds burger flipper by exploring the financial crisis and helping people address it – seems pretty reasonable to me – I’d sure as heck rather have the two of them doing this work.