Archive for December 2nd, 2008

Why Credit Cards Matter So Much

Sharon December 2nd, 2008

Yesterday put the nail in the coffin of a move from recession (small “r”) to Depression (capital “D).  Two pieces of news that were absolutely essential came out - and no, neither one was that we’ve been in a recession since last year, or that last week’s stock market rally was yet another sucker rally.  The first was the observation that McDonalds is now the second-largest merchant vendor on credit cards - that is,  people are now buying their Big Macs on plastic - in part because they don’t have the cash.  Credit card balances have risen enormously in the last few weeks, as people attempt to keep going through the holidays:

Commercial bank exposure via the total amount of credit card loans outstanding has risen more in the last 10 weeks than it did in the previous 10 months cobined. Moreover, the growth in the last 10 weeks — $32.3 billion, or roughly $600 million per shopping day — represents nominal growth of 9.3%, or 48.3% annualized over the last 10 weeks. According to American Express, delinquencies on credit payments rose to 4.1% of all credit outstanding in the third quarter, up from 2.5% in 2007, with Bank of America’s rate rising even more steeply - to 5.9% for the period. Moreover, the pool of loans deemed uncollectable rose to a high 6.7% in the third quarter, soaring from 3.6% last September. What consumer spending there is has been fueled in part by credit card: The second-largest merchant-vendor for credit card use is now McDonalds. This suggests that many consumers are in serious distress if they need to get their $4 Big Mac and fries with a credit card. 

 The second is the news that credit card companies are planning to pull 2 trillion dollars of personal and small business credit lines over the coming months, to reduce their risk:

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

“In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent.”

Almost all of the consumer spending we’ve done in the last few days has been done on credit.  In November and December, retailers see more than 40% of their annual sales - and since the average American comes out of the holiday season with more than $800 in credit card debt, it is safe to say that retailers in general are dependent on an annual payback that is then amortized over mos tof the year in the form of personal credit.  That is, the consumer spending economy, 70% of our total economic activity, is utterly dependent on consumer credit.  And whether that’s a good thing or not, the destruction of consumer credit lines will bring about a shift in consumer spending that makes the present economic woes looks petty.

But there’s more to it than that - Americans have seen real wages decline, and have depended heavily on credit, and as unemployment rises and companies cut benefits, pensions and retirement savings disappear, they will depend on their credit more, not less.  The credit card allows them to even out uneven income streams - and millions of Americans have them.  Either they rely on uneven overtime, on tips, on seasonal boom and bust cycles, or as small business owners and contractors whose payment comes in irregularly. 

When unemployment strikes, right or wrong, the expenses go on the credit card.  When hours are cut back or paycuts proposed, the credit card covers the inevitable emergency car repairs or medical bills.  Yes, people should have saved.  Yes, running up credit card debt you aren’t certain you will be able to pay off is dangerous.  But it is also the case that saving has been enormously discouraged, and reliance on credit has become a cultural norm, even a cultural pressure.  Cards poured out like water.  Couples who arrived with a downpayment at a mortgage meeting were told to keep their cash and take out a 100% loan.  Companies made huge sums of money by persuading ordinary people to put their money in the markets and that growth could never end.  Yes, there is personal responsibility here, but the situation was not of each person’s personal making, and there is plenty of blame to go around.

In difficult times, the American policy is to rely on credit as a reserve source, as a substitute for savings.  And that reserve is about to be pulled out from under them.  And for the best reasons - the ability to pay is declining rapidly. Most Americans have no idea how they would pay off their debt in this economy - and my bet is that most of them won’t.  Past recessions have been survived by increasing debt and sitting tight until things got better.  Now, we can’t increase debt, and we can’t sit tight, and it will be a long time before things get better - much longer than most people forsee.  You only have to look at the bank’s own reasoning here - they are withdrawing their credit lines because they don’t believe that a boom will come along and allow people to pay off before they are forced to default.  They know that reducing credit on this scale will hurt them too - but their own internal analyses have convinced them that they are in more danger by loaning than they are by not loaning.  Given the huge role of consumer credit in the economy, that’s one big shift.

What is certain is that without credit, the recession will hit a lot harder, a lot faster than it has.  Personal spending will drop a whole lot more.  People who were getting at least Big Macs will stop having them to eat.  Moreover, with reduced credit lines, people will be forced rapidly to assess their situation - the transition between unemployment and foreclosure, between a bad year and homelessness, between getting by and going hungry, between surviving a medical crisis and being bankrupted by it -  will be much, much shorter.

Yes, building up credit card debt has been bad for us.  But it has also functioned to delay our reckoning, to keep marginal participants in the economy going, to keep the economy going even as far as it has been.  And without large open credit lines, life as we know it will shift.  Suddenly, small businesses won’t be able to buy inventory on credit - and many of those businesses will close.  Travellers whose balances are near their new, dramatically lowered limit will not travel, because they can’t reserve a car, a hotel room or a plane ticket.  People will stop shopping online.  And the kids whose daily meal, tragically enough, was the Big Mac (and we should remember that one out of every three Americans eats daily in a fast food restaurant) won’t eat. 


How to Save Energy (and Money) when Cooking

Sharon December 2nd, 2008

Note: I’m going to be frantically finishing my next book _Independence Days_ which is about the ties between sustainable food systems and food preservation and storage.  This means not as much time to post new stuff.  So I thought I’d run a few old columns - after all, I’ve been writing this blog for years now, and my readership has expanded a lot, so hopefully some of the old content will be valuable to people. Apologies to those who are already familiar with this stuff.  More new come January, when I get to breathe again.  This one is from May, 2007, just as we were about to start the Riot for Austerity, as I was thinking how to get our energy cost for cooking down.

In the spirit of our really riotous reduction, I’ve been thinking about how to cut my cooking energy down as much as possible. Here are 25 ways I’ve come up with to cut cooking energy.

1. Turn off the stove/oven before you are finished. This is fairly simple - when you soup is almost hot, turn off the stove - it will continue to heat for a while. When your bread is 15 minutes short of baked, turn off the oven and let it sit in the hot oven. You can do this for longer with things that are hotter for longer, or less sensitive, like casseroles. Be cautious with meat - you don’t want food poisoning. Experiment.

2. Eat more salads, sandwiches and raw foods that don’t require cooking.

3. Make a hay box cooker - insulated a box with a blanket, hay or other good insulator. Get your food nice and hot, and then put it in that insulated box and let the retained heat do the cooking.

4. Use a pressure cooker - they save a lot of time when cooking beans, grains, stews and such.  Modern pressure cookers don’t explode like the old ones did, so don’t be scared!

5. Capture heat whenever you can. Instead of heating up several pots of water for tea or soup each day, heat that water and put it in a thermos, and use it for tea when you need it.  If the stove has residual heat, stick your kettle on the burner to warm up the water. 

6. Use a wood cookstove to heat your house and cook at the same time. Save heavy canning and long cooking projects for times when you would be heating the house anyhow whenever possible - for example, canning applesauce can often wait until winter if you have varieties of apples that store well.

7. Or, if you heat with wood but don’t have a cookstove, cook on your heating stove. Put your kettle on the stove. Keep soup on the back of the stove. Have someone build a sheet metal oven for you (just a metal box with a door) that will enable you to bake on the stove.

8. Build an earth or masonry oven outside and use twigs and other scrap wood to bake and cook. A hot earth oven will stay hot enough for you to start by making pizza, then move down to bread, stew and finally dehydrating. Info in _Build Your Own Earth Oven_ by Kiko Denzer and _Capturing Heat Two_ by Still, Hatfield and Scott of the Aprovecho Research Center.

9. Build or buy a solar oven. Instructions for making your own are available on many sites, and in _Capturing Heat: Five Earth Friendly Cooking Technologies and How to Build Them_ by Still and Kness of the source above. The Maria Telkes Solar Cooker gets a bit hotter than some other models, as do the commercial ones.  Tom at Sustainable Choice (who advertises on the sidebar of the blog) sells commercial Sunovens, and we’ve been very happy with ours, although we got along for a good long time with homemade versions.

10. Build a solar dehydrator for food preservation instead of using an electric one. Here’s a cool one:

11. Don’t preheat your oven - that is, put your food in while the oven is preheating to capture that heating energy. The only exceptions where this isn’t a good idea are a few really delicate baked goods, but generally this works fine, although you may have to slightly adjust your timing. Practice makes perfect.

12. If you have an electric stove or oven, convert to natural gas or propane - they are much more efficient ways of making heat.  Or at least convert to convection heating, which uses less energy than conventional electric stoves. 

13. Build a rocket stove or rocket bread oven as seen in the first _Capturing Heat_ - a rocket stove uses biomass fuel much more efficiently than a woodstove or earth oven. A rocket bread oven can cook 20 loaves at a time.

14. Have a baking day, or two a week. Do all your oven work then and store your baked goods. 

15. Use a crockpot if you have an electric stove - a crockpot generally will use less energy than an electric stove, although not a gas one.  It can also save a lot of time and energy if you’ve been eating take out - it uses a lot less energy, generally, than driving for fast food.

16. Only bake in a full oven - plan ahead and while you are baking your bread, also consider roasting a pan of vegetables or baking that pie you’ll want later.

17. Don’t open your oven or remove pot lids more often than necessary. Keep the heat in.  Never boil water or heat anything without a lid.

18. Use a microwave instead of a stove (I personally hate microwaves, but they are more efficient than conventional stoves).

19. Make large batches of things and reheat, cooking less often (although this might not make sense if you could give up fridge or freezer otherwise - think it through carefully).

20. Lactoferment pickles, kimchi, etc… and don’t can them. Just keep them in a cool place, and save the canning energy.

21. Switch from a coffee percolator to a press coffee maker.

22. Soak beans overnight in cold water to reduce cooking time.

23. Use cast iron or other heavy cookware that retains heat better than cheap aluminum. That way, you can turn things off even sooner.

24. Make your own low-heat charcoal, cook over the process, and then use agrichar to improve your garden soil.

25. Get your cat to sit on the butter warmer (covered of course) when you need it melted. Ok, this one isn’t a real suggestion, but I’m one short, and it probably would work, if you could persuade the cat not to eat the butter.