Saturday, February 28, 2009

Clues and cluelessness in dear little Australia

The New South Wales jobs summit has showcased just how out of touch the mainstream is with what's bearing down on us. Australia's foremost employment economist, Emeritus Professor Bob Gregory continues to paint a happy face on the situation. I'm sure these guys are inhaling nitrous oxide during the breaks. Along with the great majority of our economic elite he thinks we're just facing a temporary downturn before BAU reasserts itself. So what if China goes from 12% growth per annum to 6%? They'll still want our commodities! So before long the noveau rentier class of baby boomers will see their superannuation rise again and can happily go back to drinking fine reds, riding their Honda Gold Wings and jetting off to Europe once a year.

But there were one or two, or perhaps one and a half warning voices (from the ABC's report)

But one summiteer threw in what looked like a hand grenade to disrupt the group think. This is where the China syndrome as a major flaw in current Australian strategy emerged.

Dr Jonathan West, director of the Australian Innovation Research Centre and just back after 18 years as Harvard University's graduate school of business administration, said there was always one person who disagreed with the flow on the conversation. "I find myself in that position today".

Dr West spoke off the cuff and I've transcribed his remarks from Stateline NSW's camera tape.

"My disagreement rests on a simple proposition. What is the right thing to do about a crisis depends on what's causing the crisis. So it's very important to be clear about what's causing the crisis.

"If, as our federal treasury believes, the crisis is caused by a transitory passing downturn in demand, which is usually driven as Bob (Gregory) pointed out by central bank or government-driven increases in interest rates, then the appropriate reaction is for government to support demand, including by borrowing. And that's what our federal government is doing. It's borrowing money.

"And since we're a net debtor nation internationally it means we're borrowing money internationally ... read, in short hand .. from China. It's borrowing money to support consumption. What is that consumption?

"By and large it's buying goods from China. So we're borrowing money from China ... (I'm using short hand of course. We're borrowing money from a lot of places) ... to give to consumers who use it to buy goods that are no longer made (can no longer be made) in Australia ... from China.

"So we're left with the plasma TV and the debt and China has the jobs and the credit. Now that would be the right policy if the problem, as stark as it sounds, was a transitory contraction of credit due to rising interest rates and therefore a need to support demand. But that is not what's happened."

Historic proportions
Dr West is not an advocate for rebuilding the tariff wall to protect Australian industry and jobs. He said that the GFC - global financial crisis - had occurred because an unsustainable $US66 trillion debt bubble accumulated since 1992 had finally burst.

He directly challenged Professor Gregory's analysis.

"What is happening is a fundamental structural deleveraging of the global capitalist system and it's a deleveraging of historic proportion. That will demand a different policy response than the ones we've seen from the Federal Government.

"The scale of the deleveraging? We reached an historic average level of debt in the global economic system in 1992. Since that time we have added to the global capitalist system an amount of additional debt in constant dollars of roughly $US66 trillion.

"Now if we consider that the US economy is around $US10 trillion to $US12 trillion, depending on which day you're counting it, $US66 trillion is a gigantic amount of additional debt above the average level of debt. And what's happening is we're bringing that debt level down to an historic average. We have too much lending, too much borrowing, and not enough productive capacity to balance it.

"Unfortunately over the last 18 months $US23 trillion in assets - productive assets - to balance that debt have been destroyed by the decline in bond markets in particular but also equity markets and property markets.

"If the crisis is a deleveraging crisis it's very important to understand the implications of that. One implication is it is extremely difficult to predict what will happen next because leverage multiplies the impact of apparently small events.

"How is it that some of the biggest banks in the world can go broke in a few weeks because of a 1 or 2 per cent increase in defaults? How can that happen? The answer is leverage. The Bank of America which is currently fighting for its life - one of the largest banks in the world, one of the largest banks in the United States - is leveraged 47 times. It's estimated that the appropriate level of leverage - debt - for a commercial bank of that type is nine times."

Dr West said that with this bank's debt exposure a one percent increase in defaults therefore did not produce a one percent impact. It produced a 47 per cent change.

"What's happening in our economy will be overwhelmed by these global forces. You take out of the global economy $US66 trillion in purchasing and investment power then you have a structural change that will not go away in a year or two."

Australians seemed to be viewing the GFC as tremors on the surface of the lilypond in their backyards "when the radio is reporting a tsunami is coming".
There seems to be persistent belief amongst Australians at all levels that we somehow occupy some special, privileged position in relation to the rest of the inhabitants of the planet. We're too "nice", too good at sport and too healthy to ever suffer anything like all those other bad-luck places. To go against this belief publicly takes some courage so I congratulate Dr Jonathan West on his stand. And fortunately someone else decided to rock the cosy consensus: Roger Corbett, Reserve Bank board member, director of Fairfax and Wal-Mart had this to say…

"Those macro conditions you (Dr West) referred to, the imbalance of wealth in the world, and the fact that America is really living on credit from China and that credit is going to devalue in the longer term are major macro issues. But I don't think they are going to affect the next six and 12 months in Australia," he said.

"I think there's also another very important macro fact. Today there are 6.5 billion people on the face of this earth. By the year 2050 there will be 9.5 billion people living on the face of this earth and how we all survive and provide our food and share our energy in the future is a dynamic fact. And the fact that Doha (global free trade) has failed is I think a critical issue in the world that will affect that macro picture."

The problems now facing Australia were sufficiently large, said Roger Corbett, that he was calling on all Australian political parties to adopt bi-partisan support for the current stimulus packages and future strategies to protect and create a sustainable Australian economy.
Indeed. One wonders of course who doesn't want to create a sustainable Australian economy. Motherhood statements come so easily to the lips of conference attendees — still all credit to Roger Corbett for at least mentioning some upcoming problems that don't allow an easy chanting of the mantra of Return to Business-as-Usual after a short break to re-organise the investment portfolio. Exactly what he means by "protect and create a sustainable Australian economy" I don't know, especially when paired with support for the stimulus package which I think will be a complete waste of much needed capital. And there are his board memberships: Wal-Mart? Sustainability? That does not compute.

Still, one-and-a-half cheers.

Thursday, February 26, 2009

Experts, celebrities and the noise they make

Not everyone is smitten by celebrity or in awe of eminent experts and authorities, but the impulse to be that way is built into us. The natural tendency to obey authority is reinforced in a thousand ways by education and socialisation. You may disagree with me and say that the world is full of disobedient, undisciplined and unruly youth, but even the most uncontrollable group of children will obey an adult in an emergency situation such as a fire.

And so it is with leadership too: if you gain power and authority over other people for whatever reason and by whatever means, it soon feels perfectly natural and quickly becomes part of one's identity, with its own pleasures and subtle, addictive seductions.

At a primitive level (and let's admit it, most of us operate at a primitive level, even and perhaps especially the highly educated) this belief in authority means that we invest leaders with semi-magical properties. This can be seen in the ancient belief that the touch of the King could cure scrofulous disease. In more modern times it leads us to think that authority in one area of knowledge automatically spills over into others. Then there is celebrity culture where people are firstly famous for what are often trivial reasons but end up with the kind of authority and power more usually associated with politicians.

A friend of mine recently sent me a short movie of a whole lot of very well-known people talking about some burning issue of the day (Desmond Tutu, Robert Redford, Bono I think among others) — I forget the issue itself — but each person was filmed framing them in semi-profile, beautifully lit and from a position slightly below the celebrity's eye level. Because I'm a cranky and paranoid old curmudgeon, I found my warning antennae bristling and waving. The technique of filming, without intending to I'm sure, threw into very sharp relief the reflexive way we associate celebrity and authority in one field with a kind of universal wisdom transferable to others. Now here I will here confess that when I was a young person in my early twenties I was the archetypical arrogant prick who thought like that: the fact that I was one of the smarter kids in class meant I believed I was mentally superior in all ways to anyone who couldn't match my level of knowledge in my chosen specialities. Life and its accidents soon kicked that particular stupidity out of my system, because I didn't find myself picked up and carried along into some specialised and cosy little academic nook where my illusions could have been protected by obsequious underlings or students, but instead I had to make my way in the real world full of real people. And of course I discovered that wisdom and knowledge are more widely distributed than I'd thought.

So I received a kind of inoculation against certain types of false authority, especially those based on narrow expertise. This was later reinforced through a lot of exposure to academics, politicians, journalists, actors, artists and other semi-celebrities plus what may be termed the top end of town. My work for many years consisted in working with these kinds of people on various projects, some of a political nature and some to do with my business.

And of course the complexity of our society means very few people are generalists: most people are specialists, moving in circles of people who share their narrow speciality or perhaps crossing over into a few related fields. And outside of our speciality much of our knowledge of the world is a kind of metaknowledge: a whole lot of mental shorthand which helps us deal with the buzzing, blooming confusion around us but which is fatally flawed when place under strain. A great illustration of that is the complete confusion most people exhibit when they talk about investing and investments. Very few people understand what investment really means. I highly recommend that you go the the Archdruid's latest post, The Investment Delusion, for a wonderfully clear explanation of my point and which deserves to become a classic explanation of a subject much on the average Baby Boomer's mind these troubled days.

Anyway this post was inspired by reading Dmitri Orlov's latest offering, Of Swans and Turkeys, which of course refers to Nasim Taleb's great parables which I have reviewed earlier. Let me quote from Dmitri's post…

On Monday I was on Equal Time Radio with Carl Etnier, WDEV, Waterbury, Vermont. The other guest was the technological optimist William Halal, author of Technology's Promise: Expert Knowledge on the Transformation of Business and Society. Halal claims to be able predict the future of industrial civilization by talking to experts in different technology fields and then putting all of their predictions about their own fields together as a single map of things to come.

Dmitri knew there was something fundamentally wrong with this kind of thinking but couldn't put his finger on it properly at the time. His post is a detailed explanation of the expert fallacy and I highly recommend you read it as part of your own inoculation against nonsense.

Rich pickings this week!

Wednesday, February 25, 2009

Around town on the cargo bike

I've been minimising my car use lately and riding the Cargo Cycle between our nursery, our house and my factory. It's a stretch of fairly flat road so it's easy going on the big bike. I made the mistake of cutting across the golf course to our Chamber of Commerce meeting last night at the Golf Club and discovered it's heavy pedalling in long grass!

Here's a shot of the bike in my workshop with a load of tools (about 50 kilos) I brought back from the nursery a few minutes ago. It easily handles big weights (I've had 100 kilos in it) as far as pedalling and handling goes. Steep hills are another matter of course! It has an eight-speed Sturmey-Archer hub gearbox, which is very clean as it allows for a chain guard and it seems like a very nicely made unit.

Anyway I'm the agent for these things in Foster. I'm getting lots of interest in it as I pedal around the town and have one trader seriously looking at buying one. In Holland there is a longer version available which would certainly be very useful for tradesmen. This is a Chinese copy of the Dutch original, but it's very well made.

I like the way you can chat to people as you ride by. It saves lots of fuel and takes hardly any more time than using our diesel van, which I was driving up and down Station Road half-a-dozen times each day before I started using the bike. It's taken me a short while to get used to it physically, although I generally walk the dogs a couple of times a day so I'm not totally unfit. But still, it gives me a heart and lung workout! Helps to burn off the boysenberry muffin I get each morning from Ando's Bakery too.

My plan was to use it as a local delivery vehicle for the nursery, and with a suitable cargo container we could use it for flower deliveries from our florist business too.

This is the year of change for us

From John Robb's latest post...

The Resilient Community Alternative
The option for those not interested in advancing economic interests through the projection of violence, is to disconnect or firewall your community via efforts at resilience. The most critical element of that effort in the short term is a tremendously difficult judo move:

How do you prevent the undertow of the failing global financial system from gutting your community via foreclosure/bankruptcy and debt (and thereby driving the development of global guerrillas) while at the same time building alternative forms of local commercial and/or cooperative endeavor? That's the big question.

Indeed. I was at our local Foster Chamber of Commerce & Industry meeting last night (I'm secretary) where we discussed among other things the impact of the huge fires on our local economy. We are being hit here from all sides. The global financial crisis has been slow to impact us: people talk about it but so far it's just been TV news. Not so the effects of climate change. At the end of last winter someone I know who works in Wilsons Promontory National Park, our biggest tourist drawcard, told me moisture levels in vegetation at that time were typical of the end of summer, not the end of winter. Now a huge area of the Prom has been burnt by a fire started by lightning several weeks ago. As the winds blow from all points of the compass the fire drives this way and that, pushing into all corners of the park with the exception so far of a patch of rugged and damp mountain forest right in the middle. There is no sign of the end of this fire and we have some extreme heat and wind coming up on Friday.

Naturally the park is closed. Melbourne has been blanketed with smoke from the fires for weeks. The result has been that the tourist industry down here has stopped dead. Schools are not booking school camps. Other accommodation providers are likewise without customers. The park will recover, but it will take a few years.

While tourism is important here we are fortunate in having other types of business. Agriculture has always been the main one, plus fishing and the oil field service port at Barry's Beach. However dairy farming has suffered through the international crisis killing demand, and prices have fallen steeply.

There is no doubt our community is going to come under a lot of pressure. Our great weakness is our dependence on international markets for dairying and for the imports of oil which everyone seems to take for granted still. We are a long way from being a resilient community.

Like organisms living on a coral reef, our small businesses depend on the economic currents carrying the nutrients we need to within our grasp. The great international current is faltering. Can we generate enough local capacity to (a) employ people living here in activities which they find sustaining enough to stop them leaving for greener pastures and (b) gather from local sources those economic nutrients which have always come from elswhere?

Whatever happens we are also going to have to take the effects of climate change into account. The gradual drying out over the last twenty years has created the conditions for these devastating fires. They will continue each summer until all that can burn has been burnt. Then a different type of ecosystem will grow up which can cope with the changed conditions.

I don't think the kind of Mad Max world of violence which John Robb talks about is what we need to guard against here — not yet anyway and if we do have security issues they will not be as extreme as in a lot of other places. Our big issue is how do we live in this land? How can we transit from being a European colony treating the land as a resource to be mined with the products thus produced sold to far-off strangers in return for the goods they send us in return, to a semi-closed system where most of what we need come come from local sources in a sustainable way.

This is a project which will take more than one generation.

Tuesday, February 24, 2009

Another reason not to look for leaders to save us...

From the Automatic Earth, an assessment of the Obama presidency ...

Ilargi: It’s just not going to stop anytime soon, is it? The markets will keep plunging and the unmitigated disaster that the Obama administration has turned out to be will continue to get worse day after grueling day.

"The U.S. government stands firmly behind the banking system...." Oh yeah? Well, that's not where the US government belongs. The US government should stand firmly behind its citizens. Standing behind the banking system? You better wear a helmet, because it's busy falling apart. These people live in a parallel universe, and that is a very bad idea when things are in need of repair. The government in Washington, like those in Paris, London and all the other capitals of the world has to come up with a plan, very very soon, to lay a bottom underneath its economy and society. And that is not happening at all, there's nothing happening. Instead of focusing on the people, on what will become of the children, on what the children will eat, the government is focusing on the banks. The banks are dead. The children are not. Yet.

This 3 Stooges circus is busy fixing the roof while the foundations of the house are collapsing. Economic growth, you said, Mr. President? We don't need those dead banks, and we don't need economic growth. We need to feed our children, so they can grow. This is getting serious, and it's deteriorating at the speed of light. Current policies are calamitous, and that's not just in the US. There are no guarantees that we can fix this to the point where we won't see children dying of hunger in our streets. There is, though, the guarantee that we will see them if we don't adopt a radically different approach to our problems. The banks may have financed your campaign, but it's the people who voted you in office. It's real simple: you can't save both. Time to choose. So far, so bad. A spectacular failure.

Thursday, February 19, 2009

Ran Prieur — How to Survive the Crash and Save the Earth

From How to Survive the Crash and Save the Earth...

4. You are here to help. In the culture of Empire, we are trained to think of ourselves as here to "succeed," to build wealth and status and walls around ourselves, to get what we desire, to win in games where winning is given meaning by others losing. It is a simple and profound shift to think of ourselves instead as here to help -- to serve the greatest good that we can perceive in whatever way is right in front of us.

You don't have to sacrifice yourself for others, or put others "above" you. Why is it so hard to see each other as equals? And it's OK to have a good time. In fact, having a good time is what most helping comes down to -- the key is that you're focused on the good times of all life everywhere including your "self," instead of getting caught up in egocentric comparison games that aren't even that fun.

Defining yourself as here to help is a prerequisite for doing some of the other things on this list properly. If you're here to win you're not saving anything but your own wretched ass for a few additional years. If you're dropping out to win you're likely to be stepping on other outsiders, instead of throwing a rope to bring more people out alive. And as the system breaks down, people here to win will waste their energy fighting each other for scraps, while people here to help will build self-sufficient communities capable of generating what they need to survive.

In the real world, being here to help is easier and less stressful, because you will frequently be in a situation where you can't win, but you will almost never be in a situation where there's nothing you can do to help. Being here to win only makes sense in an artificial world rigged so you can win all the time. Thousands of years ago only kings were in that position, and they reacted by massacring all enemies and bathing in blood. Now, through a perfect conjunction of Empire and oil energy, we just put the entire American middle class in that position for 50 years. No one should be surprised that we're so stupid, selfish, cowardly, and irresponsible. But younger generations are already getting poorer and smarter.

Read the rest here...

Wednesday, February 18, 2009

Small political crisis in Australia: not many thrilled (they shrilled)

I try to resist the temptation to comment on politics, either Australian or international. From now on they are going to be epiphenomena, a result of what's happening rather than a cause of it. The commentariat largely haven't caught up with this yet. They're still chattering like teenage schoolgirls about who's in and who's out. So Rudd has outflanked the Liberals. What about reality outflanking Rudd? But that would mean exposing the irrelevance and sheer meaninglessness of much that's going on, and reporters, like anyone, have a stake in maintaining the prestige of their profession. To admit the irrelevance would be recognising their own unimportance.

You can take any political shenanigans going on anywhere and it's the same game with different names. It's not even entertaining anymore, bar the drunken Japanese Trade Minister.

And how can anyone listen to investment advisors without a feeling of nausea? One piece of advice for those with stocks. Get Out Now. There is not going to be a return to Growth, Business-as-Usual, Industrial Civilisation's steady progress towards uplands lit by the reflected glow of flat-screen TVs with two hundred channels of reality TV, not in my lifetime or yours.

Now dear children, we need to play a new game. Make up the rules as you go! It could be fun. Just make sure the rules line up with reality and not with the hallucination which the top end of town are caught in, a hall of mirrors from which they and those traveling with them are unable to escape.

Tuesday, February 17, 2009

Exploring local resources

One of the things I've been meaning to write about I happened to mention at our meeting on Thursday night, but failed to put in the notes I've already posted. We need to think of ways of utilising local resources which may have value, but for reasons of prejudice or lack of imagination may have been overlooked. Two that spring to mind are worth mentioning. How about a source of protein which is easily harvestable, requires no special animal husbandry, is endlessly self-replenishing and at the moment is regarded purely as a nuisance? I'm refering of course to the swarms of bush flies we have to deal with each summer (not so bad this year: maybe it's too dry?). Surely they'd make excellent fish food for raising carnivorous fish such as barrumundi and trout. The problem isn't harvesting them, it's storing them. Freeze-drying? Any suggestions?

The other one is ragwort. A weed, so I have been told, is a plant whose virtues have not yet been discovered. Surely the toxicity of ragwort indicates it could be a rich source of alkaloids which might have all kinds of medical or other uses. C'mon you biochemists! We need your help here!

Monday, February 16, 2009

The appropriateness of technology

Technophiles love novelty. Mention Peak Oil and the prospect of the Fall of Industrial Civilisation to a technophile and they will laugh scornfully at your foolish tremblings, and then they will be off and running with amorphous silicon solar cells, hydrogen-powered cars, wind and wave-powered generators, nuclear fusion, microwave power generation from orbiting solar satellites and geothermal steam production.

But none of this stuff is something you can call your local fitter and turner about and get him to knock up in an afternoon. Even where the technologies mentioned above actually exist (rather than being something techno-freaks dream of feverishly in the watches of the night while we others, less intellectually favoured, dream of the more enjoyable aspects of human reproduction), they require huge capital investments, scores of technical specialists and long-term planning by industry and government.

What is all this for? Why do we need to go to ever more complex and difficult technologies, requiring an ever more disciplined, educated and narrowly specialised workforce? Is it so we can all have giant flat screen TVs at home where we can watch movies with brilliant special effects and morally cretinous and creepy sadomasochistic story lines, in order to release the tensions that come from spending the best part of our lives in the cube farm, looking at abstract concepts on smaller screens while we strive for Worlds Best Practice? Is it so we can cram ever more people onto this poor groaning Earth so they can enjoy the benefits of the technological wonderland just mentioned?

Rupert Murdoch seems to think it's all good. After all, without such a system people like him would have no chance to skim the cream off the top. Ah yes! From the beginning to the end of time: from the rich, forgiveness: from the poor, sins. And so we must grow, forever!

But here we need to mention the the Law of Diminishing Returns. There is a world of difference between the usability of the first computers, which filled large rooms but could barely run a modern digital calculator and today's marvels like the Mac laptop on which I'm typing this. But what about cars during the same period? Yes, a lot of change, but not the same orders of magnitude: cars are not thousands of times faster, cheaper and smaller. And what about hammers and nails in the last fifty years? What about doormats and dishes? Not much happening there at all. Progress seems to have stalled. And yet we could more easily do without computers than hammers or dishes. And if we examine every aspect of technology, from medicine to textiles to agricultural technology we can see the law of diminishing returns applying. In fact it's easy to argue that in some cases we're worse off with newer technology. What are the beneficial effects of modern confectionary manufacture?

You can see what I'm angling towards here. Three things really. Do we serve technology or does it serve us? Do we need more inventions and more hi-tech or is there enough usable stuff in the world to be able to pick and choose from already? And there's something to be said too for being able to nip down to your local blacksmith or potter for a hammer or a plate.

Anyway there are a number of us thinking along these lines. One is Rob Windt (of The Naked Mechanic blog and who has the Eco-Wizard ad on my blog). Rob is working on wood-gas generators which can be fitted to cars and trucks. Have a look at his December archive. And on a related internal-combustion-engine-alternatives note, I've been thinking about hot-bulb engines, or semi-diesels. You may never have heard of these as they are long out of production, but my friend Michael Snell's dad George had a Lanz Bulldog tractor powered by one and I remember staying with Michael and seeing it in operation when I was a teenager. A fascinating thing: the first step being the heating by blowtorch of the bulb on top of the cylinder head. Then the steering wheel was removed and inserted onto the crankshaft, then the motor was rocked backwards and forwards until it fired. Being two stroke, it would sometimes start and run backwards! Then you had to stop it and start again. Here's a movie showing the operation of a Lanz Bulldog...

Hot bulbs are not terribly efficient, but will run on an astonishing range of fuels. In the video you may have heard the owner mention running them during the Second World War on sour cream! George Snell ran his on used sump oil and when he was using it as a contractor, with crude oil skimmed off a dam near a natural oil seep. They could run on virtually any combustible liquid: animal fat or vegetable oil for instance. The other virtue I can see is that they are relatively simple to build and thus maintain. Because of the relatively low combustion chamber pressures and the simple fuel injection arrangement (not requiring the kind of precision of a modern diesel fuel pump) they could be built in any reasonably equipped machine shop if the castings were obtainable: the castings should be reasonably simple to make too.

Of course there is no way such engines meet current emission standards, but in a world where they could have some utility, it's unlikely that such standards would either be enforceable or even necessary.

Sunday, February 15, 2009

Small-scale technology

One of the many things we discussed at Thursday night's meeting which I didn't mention in my earlier post is small business and small-scale technology appropriate to the kind of localised economy we will see in the future. Geoff Montague was saying how difficult it was to get someone in to bale his hay: the quantity was too small for a lot of contractors to bother with and in any case it was hard now to find someone willing to do small square bales. All the bales done these days, round or square, tend to be monsters needing machinery to move them. Anyway I came across this picture:
It was in an interesting article about Amish technology which is here. The baler is diesel powered (you can see the small diesel on top). There is a lot of old machinery lying around which may be perfectly appropriate in the future. In fact rather than have money in the bank (lets hope you're right out of the markets by now!) the smart thing to do now is stockpile useful tools of all descriptions.

Saturday, February 14, 2009

Dmitri strikes again

A fantastically clear and very long post by Dmitri Orlov. Here's the last few words: There is nothing any of us can do to change the path we are on: it is a huge system with tremendous inertia, and trying to change its path is like trying to change the path of a hurricane. What we can do is prepare ourselves, and each other, mostly by changing our expectations, our preferences, and scaling down our needs. It may mean that you will miss out on some last, uncertain bit of enjoyment. On the other hand, by refashioning yourself into someone who might stand a better chance of adapting to the new circumstances, you will be able to give to yourself, and to others, a great deal of hope that would otherwise not exist. Read the whole thing and marvel. It's times like this where the true value of the internet is apparent: here we have the still small voice of experience telling us the real score, for free and right on time.

The great investment dilemma

Sharon Astyk has a long and thoughtful post (does she ever have any other sort?) about the psychology of investment which is well worth reading and digesting. It follows on from the point I was making about slow and fast changes in my last post. We are looking at a big change in people's thinking brought on by a sudden shock, and these changes can be rapid, far more rapid than the ability of institutions, laws and our physical infrastructure's capacity to change to fit new circumstances.

Friday, February 13, 2009

Last night's meeting

There were ten of us at the meeting at Foster Community House last night. Here is the gist of my talk, which was followed by a wide-ranging general discussion. Firstly there was some correspondence. Dr Barbara Hoare had emailed me with some concerns:

I have been finding that quite a few people are unable to access services in this area as they have no transport to get from town to town. It would be very useful in terms of public health (access to mental health & other medical services) as well as community cohesiveness & environmental savings to have a co-op of some sort which could coordinate car pooling, sharing of home-grown foods & sharing of skills. This is what's happening in the transition towns already but I wasn't sure how it was all funded & whether there are any problems with insurance eg for car pooling.

I'm involved with an initiative of the South Gippsland Shire Council, the South Gippsland Transport Connections project, where I'm a member of the Advisory group as a community representative, and with the Partnership Group which oversees the project. It is attempting to address some of the issues which Barbara mentions. We're working with V-Line which are conducting a review of current coach services from Melbourne to the area with a view to doubling them. Our main task is to find ways of using existing resources to set up a public transport network throughout the area. This involves utilising the existing school buses in their downtime and also those which have the space to take on public passengers during their regular school pick-up runs. We are also trialing public services in various locations. One has been the recent bi-weekly bus from Yarram to Wilsons Promontory and another is to be a service between Venus Bay and Leongatha. There are also town services for Leongatha and later Korumburra in the pipeline.

There is a web-based car pooling scheme, My Spare Seat, which has the potential to be a great resource — check it out.

I'm going to be attending a workshop in March conducted by Todd Litman, a Canadian expert in the economic benefits of sustainable transport, so I'll report back on what I learn there.

Juneen Schulz, who is in charge of the Community Garden being established behind Foster Community House and who also has gardening programs running at the local schools, emailed me with this...
I'm not sure if I'll be able to make the meeting but with the sharing of home-grown foods and skills, there has been some discussion along these lines amongst the community garden members and Community House members. A LETS program has been successful in other towns and this is something perhaps we could do again. Apparently Foster had something similar many years ago [I was one of the founders of this! It eventually fizzled out for a variety of reasons. Lloyd]. I agree with Barbara in looking at these issues. Thanks Lloyd. From Juneen.

We had a discussion about a LETS scheme and agreed it was something we needed to look at again. Geoff Montague agreed to talk to a lady he knows in Leongatha who has been running a successful LETS scheme with a view to seeing if she could help us. We also had a chat about Permablitz, which Greg Bull said his wife Barbara (sender of the first email) has been involved with for some time. Permaculture designer and teacher Cam Wilson is running a permablitz on the 10-acre Southern Cross Permaculture Institute of Rick and Naomi Coleman near Leongatha, South Gippsland this Saturday 14th February.

Having dealt with correspondence, we then moved on to my main talk. Events are moving very quickly in the wider world, and I think the time is ripe to look at the specifics of the kinds of changes we will need to take into account in our personal, community and business life in the next five or so years. I outlined what seems to be the likely course of events at the macro level and then we discussed how it may affect us individually and as a community.

The stimulus package which is our government's response to the crisis will fail to restore business-as-usual, but the government really has no choice but to try, given the political realities. Until the power of the dominant groups and institutions such as big business, the banks and big unions is broken by the unstoppable tide of events, they will continue to dominate decision making however unsustainable their favoured policies are. Unfortunately no matter how much money is poured into the car industry, if no-one buys cars it will fail. This is because frugality is going to be the new paradigm. Citizen will no longer equate with consumer. The shopping centre model is dead, here and everywhere.

Deflation is now the dominant force in the stock markets and property markets world-wide and it has got a long way to go yet. It will end with the destruction of most accumulated wealth. Property prices have only begun to crash in Australia, but will have been given a big kick along in that direction by the recent terrible fires.

With the shrinking of the consumer economy and a corresponding precipitous drop in GST revenue for the government, coupled with a fall in tax receipts from land tax due to property valuation declines and falling income tax due to rising unemployment, the obligations of the state and federal governments will become very burdensome. Social Security payments, public service wages and government debt will be impossible to maintain at their current level. What will the (federal) government do? There is only one practical recourse: print money and thus inflate debt away while effectively shrinking payments to social security recipients, public servants, the medical system and school teachers.

We face two kinds of change: slow, gradual change and sudden abrupt change. The slow changes will be in the economy and in politics. They will play out over years and decades as institutions fight tooth and nail to survive and slowly buckle under the strain. The consumer economy will gradually shrink as demand slows and inflation slowly cuts disposable income. But sudden abrupt changes can happen too, in areas unconstrained by institutional and political inertia.
Such changes can take place in the thoughts and sentiments of large sections of the populations virtually overnight under the stress of major events. The attacks of September the 11th are one example and so are the fires which swept across many rural settlements in Victoria in the past week.

One effect of the fires will be an immediate plunge in the value of dwellings on bush blocks in rural areas, and we are talking about huge numbers of people and a very large prior investment here. This will represent a very serious and sudden deflation spread across the whole of Australia. The resulting forcing of demographic change will play out over a longer time scale.

Another fairly sudden shock was the huge rise in fuel prices last year. It may have only been temporary and because of this many people may have gone back to sleep on the issue, but those planning long term will not have forgotten and we can look forward to more fuel price volatility coupled with possible shortages in the future. Once this has come to be accepted as an enduring reality by most people, many things will change overnight.

Following my talk, discussion ranged very widely over the issue of how to build a resilient community and there was an exploration of our local area's strengths and vulnerabilities. Various participants were able to discover interests they had in common and some important connections were made, which was a very positive outcome despite the small size of the meeting and the somewhat restricted age range of the participants! No date was set for a following meeting but my feeling is we should have one within the next two months.

Friday funnies

Good luck Mr Rudd!

Thursday, February 12, 2009

Permablitz (coming to a location near you!)

Check out Permablitz: Permablitz is a social enterprise committed to improving the sustainability of our cities and suburbs. We use a sustainable design system called permaculture to help communities move away from denial and dependent consumerism to engagement and responsible production. Our core focus is helping people sustainably grow food where they live, building healthy community in the process. Rather than depressing people with the bad news, we empower them with the good news - that the solutions are at hand - and get on with having fun rolling them out. Permaculture designer and teacher Cam Wilson is running a permablitz on the 10-acre Southern Cross Permaculture Institute of Rick and Naomi Coleman near Leongatha, South Gippsland this Saturday 14th February: check out details on their site...

Have a look at a video about them over at Rob Windt's The Naked Mechanic...

Wednesday, February 11, 2009

Fire and the future

We had an anxious weekend waiting to hear how a friend of my wife's had fared in the fires. The area where she lived, not far from here, had at least ten deaths and her place was in dense bush. Yesterday my wife spoke to her. She and her husband were OK but had lost everything except her business, which fortunately was in a big neighboring town untouched by the fires.

When the first Europeans explored the coast of this continent they remarked on the columns of smoke rising everywhere which seemed to be a feature of the landscape. The aboriginal people's fire-stick management of their country was a characteristic of their culture and produced a certain form of vegetation, which in heavily treed areas meant a thinner undergrowth as the easily combustible fuel on the forest floor was removed regularly.

The early European colonists lived in the cities of the coast and in small towns or on farms where the first task was the removal of as much native vegetation as possible to make way for pasture. There were people who did live in the bush — timber cutters being the most numerous. The dispossession of land from the aboriginals meant their cultural practice of regular burning no longer happened and another pattern of landscape and vegetation emerged, where dense growth took place, burned at longer intervals by much larger fires.

Despite this change, fire has not been a serious impediment to settlement in this country until recently. Fires when they occurred could be devastating for those directly affected but these were usually farmers and other rural dwellers in thinly populated areas. The fires of 1939 were a turning point though, because it was realised that isolated timber harvesting settlements in the dense forest were just too vulnerable and that way of settling the landscape came to an end.

But here we are seventy years later, with the most sophisticated fire fighting organisations and equipment which have ever been devised and yet we have suffered terrible loss of life and property. Is it climate change? Too many arsonists? Or as some creepy religious types allege, God's punishment for abortion law reform?

One thing that has changed noticeably over the past few decades, principally since 1970, is that very large numbers of people have built houses in rural settings, often surrounded by trees. It has become a widespread ideal of the Australian way of life. I was one of the early settlers of this type, and I remember looking at a forested block in the hill country behind Ulladulla on the New South Wales south coast back in the early seventies when not many houses were being built outside of towns on bush blocks, before finally building on ten acres near Waratah Bay in southern Victoria in the late seventies, by which time there was what amounted to a boom in small acreages all over the country.

Very few of the houses built on these bush blocks took the risk of fire into account. I know the place I built at Waratah North certainly didn't, and not until we had a fire emergency of our own there (caused by my three-year-old son setting fire to 120 bales of hay stacked in the carport next to the house!) did I do anything about it. I rushed out after that and bought a Honda fire pump which lived in its own enclosure on the north side of the house yard, with a hose long enough to reach any building on the property, all fed from a dam at the top of the block. And I ran it every day in summer to water the garden, so at least I knew it would work when needed.

Our house was some distance from any dense stands of trees and was relatively easily defendable (once I had the Honda pump!) against the grass fires which were our greatest threat. I hardly know how one would cope in a bush setting. Perhaps if the bush is not too dense, the house is well designed and all rubbish and leaves are removed to stop sources of ignition, you're relatively fit and confident and have fire-fighting gear on hand, then you can sleep peacefully over summer.

Why has this new pattern of settlement grown up in the past thirty years and become all-pervasive? Because it could! Once car ownership had become near-universal in the nineteen-sixties, and the suburbs which had been the pinnacle of the Australian dream for an earlier generation had become dull, ugly, conventional and constraining for their children, the stage was set for an explosion of rural living. And so we have a vast section of the population now hostage to fear of fire every summer. It is obvious that this problem is not going to go away quickly or easily.

The recriminations have begun. The hunt for the arsonists who are no doubt responsible for a lot of the fires is on. Much learned pontification will fill the airwaves explaining the psychology and motivation of these people. The call for more severe punishment has gone out. But even if arsonists were to be publicly hung, I doubt if that would solve the problem. My own feeling, purely subjective, is that the young men mainly responsible for these crimes are not types who think too deeply about future consequences. And in any case young men tend to wear risk lightly, which is why they make such good soldiers. And what about lightning strikes? They also cause many fires and are not particularly amenable to draconian legislation either.

Three years ago we sold our dream property overlooking Wilsons Promontory and Waratah Bay and moved into Foster town. Not because of the fire risk, but because we were paying a fortune in traveling costs and it was a sellers market with prices at an all-time high. As for my wife's friend, I very much doubt if she and her husband will return to build on the site of their burnt-out home. No doubt there will be many others rethinking their lifestyle choices. Slowly our culture will change and fall in line with the imperatives imposed on it by the nature of this country and by the declining availability of fossil fuels, which in the past have have made thinly-spread patterns of settlement possible and a matter of somewhat casual and careless choice.

Sunday, February 8, 2009

Gary North

Gary North is an economic commentator and investment advisor in the USA. He is founding member of the Christian right and a long-time supporter of Ron Paul, the only presidential candidate with any idea of what is really going on in the US and world economy. He is an adherent of the Austrian school of economics. He represents a very pure form of a certain type of conservatism (as does Ron Paul): socially very conservative, anti-fascist, anti-socialist and a believer in the free market in its pure form, undistorted by government intervention and by powerful corporate interests, a type of free market which to my knowledge has not yet existed anywhere and perhaps never will.

Anyway I read his columns regularly because despite the fact that in most ways we have little in common, he has been very good at calling the situation as it is and predicting what is coming next. He's just published quite a long article which is worth a look. Here's a quote from it:

I wonder sometimes if there is anything coherent remaining in what is generally called the conservative movement. Do any of these people have a clue as to what has been taking place? We are seeing the disintegration of the fractional reserve banking system all over the world. It is being held together by bailouts, which are the government equivalent of bailing wire and chewing gum.

The only thing holding the whole structure together is an enormous residual faith in the State and a naïve faith that deficits don't matter.

What he is talking about here describes the Australian scene as well. Remember this guy is a conservative! Read the article for another view from a different perspective of what we're going through: he's saying very similar things to the other people I quote and link to.

Friday, February 6, 2009

Agenda for Thursday's meeting

Hi everyone

At this coming meeting I'd like to concentrate specific issues, rather than give general background information as I did at the first meeting, or wait and see what people wanted to discuss as we did at the second. Barbara Hoare has emailed me with some particular concerns of her own, which I'll quote:

I have been finding that quite a few people are unable to access services in this area as they have no transport to get from town to town. It would be very useful in terms of public health (access to mental health & other medical services) as well as community cohesiveness & environmental savings to have a co-op of some sort which could coordinate car pooling, sharing of home-grown foods & sharing of skills. This is what's happening in the transition towns already but I wasn't sure how it was all funded & whether there are any problems with insurance eg for car pooling.

I will give you all some background on a Shire initiative, the South Gippsland Transport Connections project, with which I am involved at the moment as a member of the Advisory group and as a community representative with the Partnership Group which oversees it. It is attempting to address some of the issues which Barbara mentions.

Events are moving very quickly in the wider world, and I think the time is ripe to look at the specifics of the kinds of changes we will need to take into account in our personal, community and business life in the next five or so years, because we all need to make some plans to deal with what could be sudden disruptions to our accustomed routines. I will outline what seems to be the likely course of events at the macro level and then we can discuss how it may affect us individually.

If there is anything any of you wish to discuss related to the topics I've mentioned please email me so I can make some space for it on the agenda. I look forward to seeing you on Thursday evening.


Lloyd Morcom — Convenor
South Gippsland Futures project

Amended meeting time

I've amended the time for our next meeting of the South Gippsland Futures Forum to 7:30 pm Thursday February 12th.

Tuesday, February 3, 2009

Desperation will force exporters and importers down a slippery moral slope

John Robb has a new post discussing the kinds of power shifts we might see in nation states (including sweet innocent little Australia) when sections of the economy and their associated communities are crucially dependent on imports and/or exports (think of the dramatic fall in milk prices for farmers in South Gippsland). The huge pressures generated by these sudden changes in the economy will be another factor, along with difficulties in the continued provision of basic services due to falling tax revenues, leading to a loss of political legitimacy of national governments.

It seems likely a new protectionism will arise as nations try to shore up their core economy by beggaring their neighbors. This will provide the space for large scale organised crime to move into international trade. The Iraq oil for food scandal gives us the template for the corruption of major economic institutions in this country.

Monday, February 2, 2009

Our holiday

We've just had a week of blazing heat, a fitting end to the holiday season. My wife and I had a few days off (the first reasonable break since June of last year) at Port Albert, about fifty kilometres to the east of our home town of Foster. While we were there the load tripped out sections of the power grid (including where we were) due to everyone running their air-conditioners, while tracks buckled and other technical problems closed down a lot of the suburban rail system in Melbourne. We sweltered like everyone else but could at least walk across the road and go for a swim next to the wharf. It was OK, but in some ways like a foretaste of the end of the world as we know it.

Port Albert is a ghost port. It is one of the earliest settlements in Gippsland, and was a destination for goods and passengers when travel on land was difficult before the coming of the railways and decent roads. It also supported a fishing fleet. It has some charming old buildings, and the arty types who like that sort of thing have moved in on the town, renovating places into bed-and-breakfasts and a café which inside looks as if it's a transplant from Brunswick Street Fitzroy. But half of these places had For Sale signs and the café, also for sale, was closed without explanation.

The fishing fleet has dwindled to almost nothing. A few yachts have made their home at the port and there are a scattering of recreational vessels of various vintages. Amateur fishermen from out of town roll in with their huge twin-engined white-hulled toys behind bulky four-wheel-drives and cluster round the launching ramp.

The pub (the oldest continually licensed hotel in Victoria) is an unrenovated mouldering remnant with a certain shabby charm. We had dinner in the bar one hot, breezy evening in the company of a scattering of various well-worn habitués hunched over their beers. There's a very new and quite large upmarket restaurant on the rebuilt pier which brings in the well-heeled of the district from many kilometres away. I thought of The Restaurant at the End of the Universe when we had dinner there. It certainly seems to have little connection to the local community, which simply provides the ambience as seen through the wall of windows along the north side, where you watch the sun set over the town and the boats at the wharf to the west.

A short drive away was Manns Beach, a tiny cluster of fishing shacks and ancient, bent little houses on the edge of the mangroves. The place had Mad Max feel: dirt roads, old tractors under the carports, wooden boat hulls disintegrating on the mud flats, all hardly elevated above the surrounding lagoon. It was noticable how newer houses are on raised foundations as the place must flood regularly on high tides. The whole area between Manns Beach and Port Albert seemed hardly above sea level, even the farms some kilometres inland had creeks running through their paddocks which were obviously tidal.

It would seem that global warming will see the whole area slowly reclaimed by the sea, a gentle euthanasia.

By then the retirees who make up a large percentage of the place's population will have passed on. And the young people, the teenagers of the town, boys and girls, who came every afternoon down to the jetty to dive and swim (despite signs forbidding such hedonism) and who as the afternoon wore on, would climb the derrick of the pile-driving barge tied to the wharf and dare each other to jump from higher and higher platforms — they will follow their vigorous anarchic impulses and move on to where the grass is greener and hope springs higher.