Ryan Watson's Weblog

John Michael Greer hits on a crucial question that I’ve given some thought to in the past:

Plenty of countries in the past have tried to cover expenses that overshot income by spinning the presses at the local mint. The result is generally hyperinflation, of the sort made famous in the 1920s by Germany and more recently by Zimbabwe. That I know of, though, nobody has tried the experiment with a national economy in a steep deflationary depression, of the sort that has been taking shape in America and elsewhere since the real estate bubble crashed and burned in 2008. In theory, at least in the short term, it might just work; the inflationary pressures caused by printing money wholesale could conceivably cancel out the deflationary pressures of a collapsing bubble and a contracting economy – at least for a while.

What I see is a monetary system in a vicegrip. There are massively powerful forces of inflation and deflation at work in the system. For the moment these forces balance each other, perhaps mostly do to the sheer momentum of “normalcy.” But as the forces grow more powerful and the managers of the economy run out of clever tools, the chances that these forces will remain in balance over the long term appears vanishingly small. The system is balanced on a knife edge, and when one of the forces of inflation or deflation takes the upper hand it will spell disaster for our monetary system.

I’ve seen a few positive happenings on the NS political front in the last month or so, and I wanted to make sure to share them.

• The Wheeler report recommends feed-in tariffs to drive renewable energy production. Feed laws were a primary plank of our Green Party platform in 2009. Often brushed off as unrealistic for NS, it is wonderful to see the idea gaining some momentum in this report. I do have to also say that I’m very concerned by the biomass recommendations in the report though. Biomass for electricity makes very little sense to me. Biomass for heat… yes. But a large scale burning of our forests would be a massive tragedy and a massive failure of public policy.
• The NB government seems to want to actually keep ownership of its grid, rather than outsourcing their entire energy security to Quebec. Good move for them, and positive for the Maritimes in general. They are still selling basically all their generating capacity, and I question the wisdom of that, but keeping the grid is crucial.
• The Green Party of Nova Scotia is back on the scene with a few media releases and position statements from leader John Percy on the party website. Good to see!
• I also very much like this move by Mr. Dexter’s government.  These Back to Balance consultations encourage Nova Scotians towards taking responsibility for our province and our public policy. And it seems a savvy political move to boot. Fingers crossed that the input actually has an effect on the decision making process.

I just came across this piece I wrote back in October 2008 but never published. A little dated, but still relevant.

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As the financial crisis deepens, it is becoming a political crisis, a leadership crisis, and a global crisis of trust. Our economy has become disconnected from the creation and exchange of real value, and suddenly the ground that appeared so solid is shifting beneath our feet.

I believe that the roots of this crisis are very deep, and also very simple: our economic system demands exponential growth, and yet we live on a finite planet. The necessity of growth is hardwired into our monetary system, and when that growth falters the system comes under incredible strain.

We base our monetary system on these two premises:

1. Money is loaned into existence by banks
2. Loans must be repaid with interest

These premises are simple, yet when thoroughly understood they are extremely unsettling, for they clearly describe a system out of touch with reality, a system that simply cannot continue indefinitely.

The process of paying interest on loans is common knowledge. What is less well understood is that the money that we have been loaned is created by the bank at the moment that we borrow it. The implications of this are profound. Because money is created through loans, and loans must be repaid with interest, there is always more debt than there is money. The only way that debts can be repaid is if the supply of money is continually growing. Yet that means total debt is also continuously growing.

Although it has been unjust from the beginning, for generations this basic system has worked to grow our collective wealth. But now it is now under severe strain, and may be on the verge of failure. For generations, the money loaned into existence was invested to create real wealth. Because it generated real wealth, the loans could be repaid. But in a world of depleting resources, it becomes much more difficult to create real wealth, and more lucrative to invest in speculative enterprises based on perceptions. Houses that are assumed to increase in price forever are one such speculative investment. And because real value creation is waning, this speculation has become a cornerstone of our economy.

And now, the reality is dawning that we have invested massively into schemes that have not provided us with things of real value. Our houses are basically the same structures they were 10 years ago. The idea that they have doubled or tripled (or more) in value is proving to be an illusion. And our financial systems are buckling as the reality of our situation sets in.

The housing bubble may be the unfortunate basis of the unfolding meltdown, but the roots of our problem go much deeper than that. We have a money system that demands perpetual growth, and we live on a finite planet. We are seeing the collision between these two irreconcilable realities, and as vast and powerful as our market economy is, we are about to learn that the limits of nature cannot be overcome, and we ignore them at our own peril.

If this analysis is correct, then our political and financial leaders will be unable to stave off this crisis indefinitely, no matter how many trillions are pumped into the economy. This financial breakdown will affect us all, and we will all be called on to discover the strength, courage, and generosity to help ourselves and our communities find a way through the challenges we face.

The pivotal turning points in human consciousness occur when new energy regimes converge with new communications revolutions, creating new economic eras. The new communications revolutions become the command and control mechanisms for structuring, organizing and managing more complex civilizations that the new energy regimes make possible. For example, in the early modern age, print communication became the means to organize and manage the technologies, organizations, and infrastructure of the coal, steam, and rail revolution. It would have been impossible to administer the first industrial revolution using script and codex.

Communication revolutions not only manage new, more complex energy regimes, but also change human consciousness in the process. Forager/hunter societies relied on oral communications and their consciousness was mythologically constructed. The great hydraulic agricultural civilizations were, for the most part, organized around script communication and steeped in theological consciousness. The first industrial revolution of the 19th century was managed by print communication and ushered in ideological consciousness. Electronic communication became the command and control mechanism for arranging the second industrial revolution in the 20th century and spawned psychological consciousness.

…

Today, we are on the cusp of another historic convergence of energy and communication–a third industrial revolution–that could extend empathic sensibility to the biosphere itself and all of life on Earth. The distributed Internet revolution is coming together with distributed renewable energies, making possible a sustainable, post-carbon economy that is both globally connected and locally managed.

The convergence of new possibilities in energy and communications may indeed open new levels of human consciousness. And from a historic perspective these forces may be seen to be the defining elements of our time. Jeremy Rifkin’s Empathic Civilization offers this valuable perspective.

The urgently needed complement to this is an understanding of what it takes to thrive in a time when the the world is changing so rapidly, and in unpredictable ways. Our foundations of culture, governance, and commerce are stretching, adapting, and sometimes cracking under the strain of this transformation. This is an evolutionary pressure-cooker and the process of adaptation is the key to survival and success.

We don’t know where we are going, so trying to create the ideal organization of the future is a futile exercise. But we clearly cannot continue with business-as-usual. We need models that work NOW in the current economic and social realities, and we need models that can adapt as these realities change. This is social innovation.

Social innovation is a skill set, a mindset, and an approach to solving complex problems. Social innovation is the capacity to create networks of relationships and resource flows that match our current and changing realities.

The need for this capacity is certainly nothing new. What is new is the speed of change that needs to be adapted to, the tools that allow us to engage up down and across networks and hierarchies, and a growing cultural consciousness that pulls us all towards a higher level of engagement, creativity and authenticity.

We are being called to do more. To be more. Evolution isn’t something done to us, it is a call to find greater alignment with our world as it actually exists here and now.

On Monday at a lunch hosted by CCEPA, David Wheeler spoke on the “real truth” about Nova Scotia’s economy. He was focused on solutions and possibilities, and although the most fundamental economic challenges we face (energy security, food security, the biophysical limits to growth, the collapsing global financial system…) got little or no mention, he did nail the major leverage point for addressing these challenges and the many others that we face in this province.

Mr. Wheeler spoke very well about social capital, and leveraging strengths and relationships in our province to build success. He identified lack of trust and a preoccupation with past wrongs as stumbling blocks on the road to prosperity. And he went on to identify some successful businesses and listed their partners and the organizations they leveraged for their own success.

The examples demonstrated that there is a real strength to be found by building collaborations, partnerships, and linkages with other organizations that may hold the key to your own success. Individual organizations certainly can and should work with these kind of strategies, but the real issue is one of scale. We need a widespread culture of trust, collaboration, innovation and bold action in this province to address our challenges, and we need it now. A culture with that high level of social capital will imbue that strength into all organizations, creating prosperity across the board, and allow the successes of individual organizations to be leveraged multiple times by partners and collaborators.

But once we’ve identified the need to build social capital, how do we go about doing it? How do we increase connection, collaboration and trust? Where can we invest our energy so that it creates the greatest return of social capital?

Here’s an idea to ponder:

Resilience Nova Scotia
An organization dedicated to helping Nova Scotian communities, organizations and families adapt to changing circumstances, take advantage of new opportunities, and protect themselves against shocks and crises.

Resilience is increased when connections increase. The mandate of an organization like this would be first and foremost to build social capital, trust, and relationships. But that work could not take place in a vacuum. Relationships are built by shared goals, shared effort, and shared risk. Social connections are strengthened when economic progress is being made, when goals are being achieved, when there are real successes that can be leveraged.

We need to tell stories of success, research areas of vulnerability and find the people who can turn those vulnerabilities into opportunities. The focus needs to be on Nova Scotia as a whole, and creating the system conditions for strong networks that result in innovation and successful action on the crucial issues facing our province.

Resilience Nova Scotia: Government department? Non-profit organization? University department? Entrepreneurial business? Or perhaps most true to the spirit of the idea would be to found a partnership around the idea, including all of the above…

The root of all economic activity is the creation of value. A clear understanding of economics begins with an inquiry into what economic value is, and how it is created.

Samantha owns a sweater, and Kathrine owns a purse. Samantha prefers Kathrine’s purse over her sweater, and Kathrine prefers Samantha’s sweater, so they trade. Now Samantha owns the purse, and Kathrine owns the sweater.

This simple example demonstrates value creation at the most basic level.

To put this another way, at the time of the trade Samantha values Kathrine’s purse more than her sweater. When they trade, she has received something of greater value to her, so she has created value for herself. But if you look at the other side of the trade, Kathrine values Samantha’s sweater more than her purse, so she has also created value for herself through the trade.

This is the heart of the economic process: exchange for mutual benefit. Every economic exchange creates mutual benefit – it creates value on both sides of the transaction.

This basic fact of economics has the strength of a law of nature. It is by true by definition. Value is created on  both sides of an economic exchange. If value is not created on both sides of an exchange, it is not an economic exchange in the true sense.

I’ve just posted my 2006 paper The Organic Economy. Currently working on new ways to present these ideas.

In January of 2006 I published (electronically) a paper titled The Organic Economy. The process of writing it had taken a couple of years, including long stretches without any writing.

I’m feeling that the time is right to revise this piece of work. It could be made much more relevant and direct, and much more useful. Times have changed since 2006, and I’ve certainly changed. I think that there is something of real value in the paper, but it needs to be presented in a more accessible way.

Instead of trying to be comprehensive or present a complete framework, I will be striving to offer something of more direct and immediate relevance to the economic challenges being faced by people, businesses and communities everywhere.

I don’t have huge amounts of time to dedicate to this work, so I have no real idea when I’ll have something ready to share, but hopefully it will be within the next few months.

Excerpt from Lessons Learned by Sharon Astyk

Many of the people I meet do this dance [speaking at conferences] 50 or 100 or 150 times a year – they are constantly on trains, planes and automobiles, enduring the exhaustion of travel, the rush of doing something important presumably compensating for the physical price. I admire what they do, even though I can’t emulate it. Most of them are driven by the fact that their work matters – and it does. But they also know that most people will say “great talk, really interesting” and go home and live their lives much as they did before. And they will get on a plane and play Cassandra again tomorrow in a different city, or at home in another article, or another paper – and most people won’t listen.

So after the conference, we talk about what it is like – what it is like to imagine things most people don’t want to imagine, or look at numbers that no one else wants to hear. What it is like to try and get funding for research that shows this, or to make governments pay attention. What it is like to be dismissed or reviled. What it is like to do all you can bear, and know that it almost certainly isn’t enough to preserve what you want most to preserve.

But what I never hear – and I think I would – is that it isn’t worth doing the work – spreading the word, working for change, trying to make things better. You’d think that you would hear that – that people who express profound doubt in the efficacy of their measures – or at least whether they will be enough – would consider stopping. But they never do.

Stoneleigh’s case for deflation at The Automatic Earth blog is essential reading. She and Ilargi have a grim view indeed about the future of the global economy, and they make an extremely convincing case. There is just too much bad debt out there, and our credit based economy has very little left to prop it up.