Tuesday, 2 September 2014

The real world vs bubble land

We know that there is no such thing as a free lunch, but right now collectively we just can't seem to resist the allure of getting something for nothing. This is not just a character flaw, it is symptomatic of this moment in the cycle of our civilization.

When the options are either to try for a free lunch, or work hard to earn your lunch, many of us will roll up our sleeves and get to work. But at this point, the only options we seem to have are to try for the free lunch, or go hungry.

As a civilization, we are floating in a fragile bubble, over the abyss of an economic crisis. Far down below we can see the earth. It is too far to make anything out clearly, but we have convinced ourselves that it is cold, dirty, and primitive down there. Up here in our bubble things are much nicer. It is clean, warm, and safe, and as long as we don't do anything that might pop the bubble we'll be fine.

Except... obviously not. We know deep down that a real economy is built in the real world, from the real earth, with real sweat and effort, and with the real risk of failures along the way. But when the bubble pops and we stare below us and can't see the bottom, all we want is for someone to blow us a new bubble to catch our fall. And governments, central banks, and Wall Street are only too happy to oblige.

We are in the midst of a systemic economic crisis. Our bubble is now so far removed from the production and exchange of real things of value that we barely even know what that means or what it looks like in a simple economic way. The sea of debt that holds our bubble afloat has clouded our view of reality. But reality is what we need most. We desperately need a reality-based economics, focused on the ground level of value creation and consumption. Each moment, and each dollar we invest keeping our bubble afloat, segregated from the real world, is a moment lost.

To be more direct, our leaders (elected and otherwise) are trying to address our economic crisis by manipulating our financial/monetary system to keep the bubbles from popping. The allure of this "solution" is that it doesn't require us to change our patterns of living, our patterns of production and consumption, and perhaps most importantly, our patterns of thought. The authorities are on top of it. All we have to do is keep shopping!

The problem is, the chances of success of this strategy are basically zero.

It is well past time to recognize that tinkering with the financial system via central bank interventions is NOT GOING TO save our economies or preserve our status as history's wealthiest society. That kind of wealth didn't ever come from tinkering with interest rates and printing money, nor will it now. It came from a) the most abundant, concentrated, and cheap energy source ever exploited on earth in the form of fossil fuels and b) industrious and entrepreneurial application of that energy to create things of real value.

Non-renewable fossil fuels are, well, non-renewable. We've used a lot of them, and there is nothing we can do to re-create what has been consumed. Even if we could set the environmental impacts aside (which we can't), fossil fuels have a rapidly declining long term return on investment for our economies.

So that leaves our ability to innovate, our industriousness, and our entrepreneurship. Back in the real world, outside the bubble, there is a huge amount of work to do. Much of our industrial and commercial infrastructure is fast becoming obsolete. Huge and growing numbers of people are living in poverty or at high risk of it. We are far less wealthy than we thought we were, and the things people value here in the real world are far different than what they value back in bubble land.

So there is much work to do! Is there ever! Instead of wasting vast amounts of time and resources on keeping the bubble floating for another day, let's get real. Let's get our hands dirty. People everywhere are doing it. Sometimes out of desperation, but often because we see that the real world is actually not so bad, and we just don't really care for life in the bubble.

For those of us who are getting to work in this way, do we abstain from the financial system altogether? Well, if the only option was bubble land finance, we would probably be better off without anything. But that isn't the only option. We need a finance system that is focused far more directly on aiding the circulation of things of value, not the blowing of bubbles.

But most importantly, we need to find and create local supply chains to keep producing, exchanging, and consuming the things of value that we need and want. A finance system that stays close to the ground, serving this real community need, will prosper, especially as the cracks in bubble land finance get wider, and it becomes ever harder to keep the bubbles afloat.

What would such a grounded financial system look like? Honestly, I can't claim to know the answer. But that doesn't mean I'm not experimenting, and learning about it as I go!

Credex is an experiment to develop a financial system more closely connected to reality. The first phase proved that it can work, and the second phase is coming soon!