RIP Bill Mollison……

26 09 2016

You won’t see mention of Bill Mollison’s passing away in the media today – just the usual boring stuff about a couple of good looking Hollywood actors getting divorced or TV programs about baking cakes or who will make the next footy grand final….. In case you are wondering who he was, Bill was a one time Tasmanian shark fisherman and hunter who co-founded the permaculture movement which can be neatly encapsulated as the notion of people living in abundance within nature’s systems.

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Here is his acceptance speech when he won the 1981 “Right Livelihood Award” also known as the “Alternative Nobel Prize”………….:

“I grew up in a small village in Tasmania. I was born in 1928, but my village might have existed in the 11th century. We didn’t have any cars; everything that we needed we made. We made our own boots, our own metal works, we caught fish, grew food, made bread. I didn’t know anybody who lived there who had one job, or anything that you could define as a job. Everybody had several jobs.

As a child I lived in a sort of a dream and I didn’t really awake until I was about 28. I spent most of my working life in the bush or on the sea. I fished, I hunted for my living. It wasn’t until the 1950s that large parts of the system in which I lived were disappearing. First, fish stocks became extinct. Then I noticed the seaweed around the shorelines had gone. Large patches of forest began to die. I hadn’t realised until those things were gone that I’d become very fond of them, that I was in love with my country. This is about the last place I want to be; I would like to be sitting in the bush watching wallabies. However, if I don’t stand here there will be no bush and no wallabies to watch. The Japanese have come to take away most of our forest. They are using it for newsprint. I notice that you are putting it in your waste‑paper basket. That’s what has happened to the life systems I grew up in.

It’s always a mark of danger to me when large biological systems start to collapse, when we lose whole stocks of fish, as we’ve lost whole stocks of herring, and many stocks of sardines, when we lose huge areas of the sea bottom which were productive in scallops and oysters. When we enquire why this happens, it comes back to one thing: the use of energy sources not derived from the biological system.

Dr. Sternglass, who was a pupil of Einstein’s, has followed the drift of radioactive dust from Three Mile Island. The newspapers say: ‘Nobody died at Three Mile Island’. Dr. Sternglass says that 30,000 children are now dead, died under the cloud drifts of hypothyroidosis, and many thousands are yet to die. Across this country, Russia, Germany, Japan, Canada and the United States, drifts an air system, carrying not only radioactives, but highly corrosive acids: sulphuric acids from the burning of coal, and nitric acids from motor vehicle exhausts.

The snow which we measured in Vermont a few months back had pH values of 1.9 to 2.5, which is much more acid than vinegar, more acid than any biological system can stand. We cannot find in the northern part of the United States or in Germany waters of pH higher than 4. Fish can’t breed in those waters, frogs can’t live there, and salamanders are extinct. Forests started to die in 1920, soon after the coal era started. Chestnuts have disappeared on the American continent by 80%, the Beech trees have disappeared. The Oaks are beginning to die throughout America, the pines are dying in Germany (they’re losing 80,000 hectares this year) and many of them are now dying in Japan. The Eucalyptus are dying in Australia at 14% per annum. It won’t be very long before you won’t have any forests to throw away in your garbage cans. It’s obvious to simple people like myself who go out on foot to find out what’s happening that the Northern hemisphere will not be occupied by man for very many more years while he uses coal, petrol and radioactives. I wonder what happened to make us abandon the sort of life that I grew up in, in which we could sustain our lives indefinitely and in which no great systems died. I don’t believe that we lead a better life, that we are any happier than I was and the children in that town still are.

I withdrew from society about 1970 because I had been long in opposition to the systems that I saw were killing us. I decided it was no good persisting with opposition that got you nowhere. I thought for two years. I wanted to return to society but I wanted to come back only with something very positive. I did not want to oppose anything again and waste my time. Somewhere someone had given me Mao‑Tse‑Tung’s little red book. I didn’t understand it very well, in fact it was very difficult for me to read. But, at one point when he was talking about an attack on the city of Tai Ching, his advice to his army was ‘Don’t attack Tai Ching: it’s too heavily defended. Go around it and Tai Ching will fall.’ So I’ve been going around the things that I think are killing us.

When I came back into our society I came back with a system I call Permaculture, a way in which man can live on the earth. To me we’re not any more important a form of life than any other life form. Those of you, very few, who have been alone in forests for a long time, more than five weeks, know that you totally lose identity as a human being. You can’t distinguish yourself from the trees, you can’t distinguish yourself from any other living thing there. All aboriginal people, all tribal people, have to undergo such a period on their own in the environment. Afterwards, they never again can see themselves as separate: man here and tree there. You become as though you are simply a part of life.

The only safe energy systems are those derived from biological systems. A New Guinea gardener can walk through the gates of his garden taking one unit of energy and hand out seventy. A modern farmer who drives a tractor through the gate of his farm takes a thousand units of energy in and gives one back. Who is the most sophisticated agriculturist? We are getting rid of our soil even faster than we are destroying our atmosphere. For every one of us there is a loss of ten tons of soil a year. Nature can only replace one or two tons. We will leave our children an earth in which there is no soil or drinkable water.

We ourselves have always been left out of the energy equations. I’m the only machine I know which can fuel itself: I can make the food upon which I run. Give me a few friends and I can look after myself and many others. This will do me for an alternative energy source. We’ve never been taught to have confidence in ourselves as our own salvation. All the books you can buy on gardening are books on technique. All the books on strategy are wrong because they are one-dimensional. Multi‑dimensional systems will out‑yield one‑dimensional systems hundreds of times. Polycultures will always out‑yield monocultures. The Permaculture system is a safe way of a sustained ecology; it is in itself a safe and sustainable energy system.

In the days of Carl Linnaeus we were still naming things. For a century or so after Linnaeus we were finding out how they functioned. Today we know some of the principles that make them work but just as we’ve reached this stage, they have commenced to fall apart. We estimate that of the species that we can see and count, we will lose some 35,000 in the next one and a half decades. All my life we’ve been at war against nature. I just pray that we lose that war. There are no winners in that war.

A couple of years ago I resigned from a job at the university and threw myself at an advanced age into an uncertain future. I decided to do nothing else but to try to persuade people to build good biological systems. I existed for quite a while by catching fish and pulling potatoes. Then I started to make some money by designing sustainable systems for people, for their own houses and for their villages. Since then I’ve been able to train 20 people at a time. I have trained 400 young people who are now designing systems throughout the U.S. and Australia. In the coming year I will be training people in Germany and Brazil. We’ve set up a sort of brotherhood ‑ and sisterhood, because half of us are women. I don’t believe women are any better designers than men but I think they know more about living systems.

We must make a very large movement towards a very quiet sort of revolution. We will go on training people until we have saturated all countries. What we try to do is to integrate all things that plants and animals will do with our own lives and our structures. It’s possible to design entirely biological systems in which you could live, but we have to start with a place like Stockholm, which is about as abiological as you can get. There are simple things that anybody can do to look after themselves. Every city, for example, can produce its own food.

We are faced with an absolute choice: We can build the sort of cities we are building, continue to accumulate resources and power to run around like blowflies in cars, and be killed before long. Or we can live easily on the earth. It’s possible for us to construct biological systems that work, it’s well within our capacity. For a fraction of the cost of Swedish armaments Sweden could become an entire system like this. It’s up to you, it’s entirely up to you. I hope you all go back to work tomorrow and take your wages. Good luck to you.”





Why is emergency-scale climate action necessary?

24 09 2016

From climatecodered.org

The world now faces a climate emergency. Our scientists tell us. We know it. Slowly the political elite are realising that the current international climate policy-making paradigm is dying of failure. Recognition of the climate emergency is now written into the platform for the Democratic Party for the 2016 US presidential election.

So how does our scientific understanding guide as to constructing a new way of looking at the challenge, as to what is happening, what is safe, and how we should respond? The Victorian Climate Action Network held a workshop on these questions on 11 September 2016. The slides below were the contribution by David Spratt to the first session, which asked the question ‘Why is emergency-scale action necessary?’

Slides





On the Thermodynamic Black Hole…..

23 09 2016

I recently heard Dmitry Orlov speaking to Jim Kunstler regarding the Dunbar Number in which he came up with the term ‘Thermodynamic Trap’. As the ERoEI of every energy source known to humanity starts collapsing over the energy cliff, I thought it was more like a thermodynamic black hole, sucking all the energy into itself at an accelerating pace… and if you ever needed proof of this blackhole, then Alice Friedemann’s latest book, “When the trucks stop running” should do the trick.

alice_friedemann

Alice Friedemann

Chris Martenson interviewed Alice in August 2016 about the future of the trucking industry in the face of Peak Oil, especially now the giant Bakken shale oil field in the US has peaked, joining the conventional oil sources. This podcast is available for download here.trucks_stop_running

Alice sees no solutions through running trucks with alternative energy sources or fuels. I see an increasing number of stories about electric trucks, but none of them make any sense because the weight of the batteries needed to move such large vehicles, especially the long haul variety, is so great it hardly leaves space for freight.

A semi trailer hauling 40 tonnes 1000km needs 1000L of liquid fuel to achieve the task. That’s 10,000kWh of electric energy equivalent. Just going by the Tesla Wall data sheet, a 6.4kWh battery pack weighs in at 97kg. So at this rate, 10,000kWh would weigh 150 tonnes….. so even to reduce the weight of the battery bank down to the 40 tonne carrying capacity of the truck, efficiency would have to be improved four fold, and you still wouldn’t have space for freight..

There are not enough materials on the entire planet to make enough battery storage to replace oil, except for Sodium Sulfur batteries, a technology I had never heard of before. A quick Google found this…..:

The active materials in a Na/S battery are molten sulfur as the positive electrode and molten sodium as the negative. The electrodes are separated by a solid ceramic, sodium alumina, which also serves as the electrolyte. This ceramic allows only positively charged sodium-ions to pass through. During discharge electrons are stripped off the sodium metal (one negatively charged electron for every sodium atom) leading to formation of the sodium-ions that then move through the electrolyte to the positive electrode compartment. The electrons that are stripped off the sodium metal move through the circuit and then back into the battery at the positive electrode, where they are taken up by the molten sulfur to form polysulfide. The positively charged sodium-ions moving into the positive electrode compartment balance the electron charge flow. During charge this process is reversed. The battery must be kept hot (typically > 300 ºC) to facilitate the process (i.e., independent heaters are part of the battery system). In general Na/S cells are highly efficient (typically 89%).

Conclusion

Na/S battery technology has been demonstrated at over 190 sites in Japan. More than 270 MW of stored energy suitable for 6 hours of daily peak shaving have been installed. The largest Na/S installation is a 34-MW, 245-MWh unit for wind stabilization in Northern Japan. The demand for Na/S batteries as an effective means of stabilizing renewable energy output and providing ancillary services is expanding. U.S. utilities have deployed 9 MW for peak shaving, backup power, firming windcapacity, and other applications. Projections indicate that development of an additional 9 MW is in-progress.

I immediately see a problem with keeping batteries at over 300° in a post fossil fuel era… but there’s more….

Alice has worked out that Na/S battery storage for just one day of US electricity generation would weigh 450 million tons, cover 923 square miles (2390km², or roughly the area of the whole of the Australian Capital Territory!), and cost 41 trillion dollars….. and according to European authorities, 6 to 30 days of storage is what would be required in the real world.

The disruption to the supply lines of our ‘just in time’ world caused by trucks no longer running is too much to even think about.

Empty supermarket shelves, petrol stations with no petrol, even ATMs with no money and pubs with no beer come to mind. I remember seeing signs on the Bruce highway back in Queensland stating “Trucks keep Australia going”.  Well, oil keeps trucks running; for how much longer is the real question.

 





Some excitement at the Fanny Farm…..

18 09 2016

It’s raining. Quite a bit actually, for this neck of the woods, 8mm so far today, and it’s only mid afternoon. What else is a blogger to do in this sort of weather but…. blog!  The green manure crop is doing well, and should be plainly visible by the time Glenda arrives here next weekend…..

On Friday, I drove my French wwoofer to Buckland, a whole 130km away. I did this because she agreed to pay me her bus fare towards my petrol costs, and I wanted to see the permaculture property she was moving to. It also meant she’d only have to spend an hour and a half in my ute as opposed to four hours in buses… Then on the way back, I could conveniently pick up two IBC’s (which stands for the enigmatic intermediate bulk container) and are basically 1000L plastic cubes inside a metal cage for holding, in my case, water. Then while driving back through Hobart, I was able to pick up a second dipole circuit breaker for the power station, and a new pump for filling above mentioned IBC’s from the dam….

Paul, who owns and runs the Tiger Hill property I took Laureen to, took the time to show me around…. What I found fascinating was the way some permies take on challenges, just because they can! Paul, it turns out, comes from a heavy machinery driving background, working in mines. Not the sort of bloke one would expect to turn into a permaculture greenie, but there you go…..

tigerhill

Over the past five years, Paul has concentrated on earthworks, which this place really needs, as it’s normally dry as a bone, with only 300mm of annual rainfall. Not that this was evident on my visit, Tiger Hill had just been blessed with 65mm of rain just the day before, and there was water everywhere, which clearly demonstrated the efficacy of his swales….

His biggest issue, as far as I was concerned, is the prolific wildlife. The grass looked like it had been mown to within an inch of its life, and there were wallaby scats everywhere….. and I mean, everywhere! This means his extensive garden – he sometimes has as many as 12 wwoofers working there – has to be entirely covered with poly pipe hoops and netting… and because he still has no animals of his own yet because he apparently flies in and out of Tasmania frequently, most of his efforts go to feeding the wildlife, except for the netted bits. He compensates for the lack of animal manures by having more composting toilets 20160917_153649than I cared to count, he is indeed big in humanure!

The reason I bought another dipole circuit breaker for the power station is that I have moved the freezer into the container. Everything is now switched on and operational, but the freezer alone is not enough to load up the batteries, so I have put a breaker on each string of panels so I can switch one off when there’s an overabundance of sun…. this not being the case today, both strings generated barely enough to cover the 1.3kWh that the freezer consumed in the past 24 hours.

Mind you, the freezer probably worked extra hard after being moved, and later filled with (almost) a whole lamb purchased from next door.

Soon, I will also have my new pump hooked up to fill one of those ICB’s so that I can water the crops that will be planted in the new poly tunnel. Which leads me to the excitement…….

I recently found a two inch poly pipe going under the road, from the apple orchard to the base of the dam wall. The dam has a 100mm sewer plastic pipe going through it, with this weird S bend glued to the pipe, which has a garden variety tap attached to it, and I mean literally. I’ve been using this water for the chooks, and filling bathtubs whenever I’ve been agisting other people’s animals on our land. The whole setup, I thought, was very dodgy, but I was about to find out how dodgy very soon.

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I unloaded one of the IBC’s next to the pipe outlet in the orchard; this will be very handy come the day I have ducks and geese in there, which need copious amounts of water.

I then fed a garden hose through the pipe, and pulled it out the other end to connect to the tap where the dam water comes out….. There’s a lot of friction in a twenty metre long garden hose, and not that much water pressure when the outlet of said hose is only a couple of metres below the dam water level…. the result was a mere trickle coming out the hose.

Dissatisfied with the flow rate, I went back to the tap to make sure it had been turned on properly……. and the whole end of the dodgy connection simply fell off the pipe! The S bend and the sewer pipes are made of different plastics, and gluing them together was never going to work. I could throttle whoever did this…!

To say I had a brain meltdown is an understatement. I tried to push it back on, but the non existent pressure suddenly made its presence felt, and there was no way I was going to fix this on my own. Terror set in… visions of an empty dam upon Glenda’s arrival next weekend clouded all the thinking I was still capable of, and I rang my trusty neighbour for help. Except his phone was flat! So I drove over to find him, which wasn’t easy without the spectacles I discarded after being sprayed with water from head to toe!

Matt understandingly jumped in my ute, and as he, unlike me, was thinking clearly, came up with a plan that I can now report worked to perfection. I guided the fittings into position, and while I was sprayed with water, he levered them into place against the pressure with a crowbar…… a few self tapping screws to replace the glue that failed, and voila, problem solved.20160918_152700

I wish I had taken photos of the gushing water….. it must have been coming out at easily twenty litres a second, but I sort of had my hands full at the time, and I can only show you what the repaired outlet looks like. Which reminds me, I must put some screws into the other end that didn’t fall off, before it does! Then I can get rid of that ridiculous tap, replace it with a proper valve, and put a bit of one inch poly pipe on it instead of that useless garden hose…. the IBC did eventually fill up, but it is very very slow.

Having calmed down, I then started wondering how long it would have actually taken to drain my 10 million litre pond at twenty litres a second…… and it turns out, it would be about three weeks! All that panic and adrenaline for absolutely nothing….. after fixing the problem, Matt and I walked up the dam wall to inspect the damage…… and you couldn’t even tell it had happened, even after a good thirty minute flush.

Life is full of little lessons, and you learn them one at a time.





First anniversary……

14 09 2016

One year ago today, Richard and I arrived at the Fanny Farm to take permanent possession of our new project…… where has the time gone? Even though you can see where I’ve been (or at least where our money‘s been..!), it still feels like I’ve achieved less than I had planned.

I’m probably just fretting because it so much feels like we are all running out of time, especially after reading Nicole’s articles on negative interest rates.

20160911_12493420160908_130624This week, with the assistance of my young French wwoofer, a new polytunnel has been built (still needs a door and a vent), 200m² of new ground has been tilled, composted, and planted with green manure (which has started germinating, yeah….. hope it rains a bit more tonight); and just this afternoon, after watching a permaculture orchard movie in Cygnet promoted by the Huon Producers’ Network last week, we have made twenty odd Codling Moth traps that the Canadian owner of the orchard in the film swears by.

20160914_171419They are made of recycled milk bottles, drilled with a 20mm hole in two sides to allow the moths to enter the traps after being attracted by the molasses and water mixture poured therein….

Will it work?  One can only hope so. If it works in Canada, there’s no reason why it can’t work in Tasmania.

Look hard enough, and you will see my Geeveston Fannies are trying hard to form flower buds, so hopefully we have beaten the moths to it!

The little critters almost wiped out my crop of Pink Ladies (though, amazingly, hardly touched the Fannies, go figure..

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Codling Moth

The other good news is that my neighbour John came over with his laptop and worked out that the reason I could not reset my Victron inverter’s settings by autodetecting the port it was plugged into was that I had to tell it which port to use….! So much for technology supposed to make things easy.

Now the inverter is reset to operate at the Nickel Iron batteries’ voltage settings, my power station is operational, and I will soon move my freezer out of the shed and into the container to reduce my power bills and load the batteries, which they need to build up capacity, I am told….

I’ll soon have to buy a pump to get water out of my dam so I can do some irrigating, and it will all be solar powered. There is progress every day, it’s just it doesn’t really feel like it to me…… watch this space, I guess.





Limits to growth: policies to steer the economy away from disaster

14 09 2016

Samuel Alexander, University of Melbourne

Samuel Alexander

If the rich nations in the world keep growing their economies by 2% each year and by 2050 the poorest nations catch up, the global economy of more than 9 billion people will be around 15 times larger than it is now, in terms of gross domestic product (GDP). If the global economy then grows by 3% to the end of the century, it will be 60 times larger than now.

The existing economy is already environmentally unsustainable. It is utterly implausible to think we can “decouple” economic growth from environmental impact so significantly, especially since recent decades of extraordinary technological advancement have only increased our impacts on the planet, not reduced them.

Moreover, if you asked politicians whether they’d rather have 4% growth than 3%, they’d all say yes. This makes the growth trajectory outlined above all the more absurd.

Others have shown why limitless growth is a recipe for disaster. I’ve argued that living in a degrowth economy would actually increase well-being, both socially and environmentally. But what would it take to get there?

In a new paper published by the Melbourne Sustainable Society Institute, I look at government policies that could facilitate a planned transition beyond growth – and I reflect on the huge obstacles lying in the way.

Measuring progress

First, we need to know what we’re aiming for.

It is now widely recognised that GDP – the monetary value of all goods and services produced in an economy – is a deeply flawed measure of progress.

GDP can be growing while our environment is being degraded, inequality is worsening, and social well-being is stagnant or falling. Better indicators of progress include the Genuine Progress Indicator (GPI), which accounts for a wide range of social, economic and environmental factors.

Cap resources and energy

Environmental impact is driven by demand for resources and energy. It is now clear that the planet cannot possibly support current or bigger populations if developing nations used the same amount of resources and energy as developed nations.

Demand can be reduced through efficiency gains (doing more with less), but these gains tend to be reinvested in more growth and consumption, rather than reducing impacts.

A post-growth economy would therefore need diminishing “resource caps” to achieve sustainability. These would aim to limit a nation’s consumption to a “fair share” of available resources. This in turn would stimulate efficiency, technological innovation and recycling, thereby minimising waste.

This means that a post-growth economy will need to produce and consume in far less resource-intensive ways, which will almost certainly mean reduced GDP. There will of course be scope to progress in other ways, such as increased leisure time and community engagement.

Work less, live more

Growth in GDP is often defended on the grounds that it is required to keep unemployment at manageable levels. So jobs will have to maintained in other ways.

Even though GDP has been growing quite consistently in recent decades, many Westerners, including Australians, still seem to be locked into a culture of overwork.

By reducing the average working week to 28 hours, a post-growth economy would share the available work among the working population. This would minimise or eliminate unemployment even in a non-growing or contracting economy.

Lower income would mean we would have less stuff, reducing environmental impact, but we would receive more freedom in exchange. Planned degrowth is therefore very different to unplanned recession.

Redirect public spending

Governments are the most significant player in any economy and have the most spending power. Taking limits to growth seriously will require a fundamental rethink of how public funds are invested and spent.

Among other things, this would include a swift divestment from the fossil fuel economy and reinvestment in renewable energy systems. But just as important is investing in efficiency and reducing energy demand through behaviour change. Obviously, it will be much easier to transition to 100% renewable energy if energy demand is a fraction of what it is today.

We could fund this transition by redirecting funds from military spending (climate change is, after all, a security threat), cutting fossil fuel subsidies and putting an adequate price on carbon.

Reform banking and finance

Banking and finance systems essentially have a “growth imperative” built into their structures. Money is loaned into existence by private banks as interest-bearing debt. Paying back the debt plus the interest requires an expansion of the monetary supply.

There is so much public and private debt today that the only way it could be paid back is via decades of continued growth.

So we need deep reform of banking and finance systems. We’d also need to cancel debt in some circumstances, especially in developing nations that are being suffocated by interest payments to rich world lenders.

The population question

Then there’s population. Many people assume that population growth will slow when the developing world gets rich, but to globalise affluence would be environmentally catastrophic. It is absolutely imperative therefore that nations around the world unite to confront the population challenge directly.

Population policies will inevitably be controversial but the world needs bold and equitable leadership on this issue, because current trends suggest we are heading for 11 billion by the end of this century.

Anyone who casually dismisses the idea that there is a limit to how many people Earth can support should be given a Petri dish with a swab of bacteria. Watch as the colony grows until it consumes all of the available nutrients or is poisoned by its own waste.

The first thing needed is a global fund that focuses on providing the education, empowerment and contraception required to minimise the estimated 87 million unintended pregnancies worldwide every year.

Eliminating poverty

The conventional path to poverty alleviation is the strategy of GDP growth, on the assumption that “a rising tide will lift all boats”. But, as I’ve argued, a rising tide will sink all boats.

Poverty alleviation must be achieved more directly, via redistribution of wealth and power, both nationally and internationally. In other words (and to change the metaphor), a post-growth economy would eliminate poverty not by baking an ever-larger pie (which isn’t working) but by sharing it differently.

The richest 62 people on the planet own more than the poorest half of humanity. Dwell on that for a moment, and then dare to tell me that redistribution is not an imperative of justice.

So what’s stopping us?

Despite these post-growth policy proposals seeming coherent, they face at least four huge obstacles – which may be insurmountable.

First, the paradigm of growth is deeply embedded in national governments, especially in the developed world. At the cultural level, the expectation of ever-increasing affluence is as strong as ever. I am not so deluded as to think otherwise.

Second, these policies would directly undermine the economic interests of the most powerful corporations and institutions in society, so fierce resistance should be expected.

Third, and perhaps most challenging, is that in a globalised world these policies would likely trigger either capital flight or economic collapse, or both. For example, how would the stock markets react to this policy agenda?

Finally, there is also a geopolitical risk in being first to adopt these policies. Reduced military spending, for instance, would reduce a nation’s relative power.

So if these “top-down” policies are unlikely to work, it would seem to follow that if a post-growth economy is to emerge, it may have to be driven into existence from below, with communities coming together to build the new economy at the grassroots level.

And if we face a future where the growth economy grows itself to death, which seems to be the most likely scenario, then building up local resilience and self-sufficiency now will prove to be time and energy well spent.

In the end, it is likely that only when a deep crisis arrives will an ethics of sufficiency come to inform our economic thinking and practice more broadly.

The Conversation

Samuel Alexander, Research fellow, Melbourne Sustainable Society Institute, University of Melbourne

This article was originally published on The Conversation. Read the original article.





Negative Interest Rates and the War on Cash (4)

10 09 2016

For your weekend entertainment, here is Nicole’s fourth installment of a mammoth piece of work…..

Holding on to cash under one’s own control is still going to be a very important option for maintaining freedom of action in an uncertain future. The alternative would be to turn to hard goods (land, tools etc) from the beginning, but where there is a great deal of temporal and spatial uncertainty, this amounts to making all one’s choices up front, and choices based on incomplete information could easily turn out to be wrong

This, has utterly convinced me to spend everything we’ve got left towards finishing our Tasmania Project…….. Money IS after all there for spending, not hoarding…….

Some of the stuff in part 4 is truly scary.

Part 1 is here
Part 2 is here
Part 3 is here

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Financial Totalitarianism in Historical Context

nicolefoss

Nicole Foss

In attempting to keep the credit bonanza going with their existing powers, central banks have set the global financial system up for an across-the-board asset price collapse:

QE takes away the liquidity preference choice out of the hands of the consumers, and puts it into the hands of central bankers, who through asset purchases push up asset prices even if it does so by explicitly devaluing the currency of price measurement; it also means that the failure of NIRP is — by definition — a failure of central banking, and if and when the central bank backstop of any (make that all) asset class — i.e., Q.E., is pulled away, that asset (make that all) will crash.

It is not just central banking, but also globalisation, which is demonstrably failing. Cross-border freedoms will probably be an early casualty of the war on cash, and its demise will likely come as a shock to those used to a relatively borderless world:

We have been informed with reliable sources that in Germany where Maestro was a multi-national debit card service owned by MasterCard that was founded in 1992 is seriously under attack. Maestro cards are obtained from associate banks and can be linked to the card holder’s current account, or they can be prepaid cards. Already we find such cards are being cancelled and new debit cards are being issued.

Why? The new cards cannot be used at an ATM outside of Germany to obtain cash. Any attempt to get cash can only be as an advance on a credit card….This is total insanity and we are losing absolutely everything that made society function. Once they eliminate CASH, they will have total control over who can buy or sell anything.

The same confused, greedy and corrupt central authorities which have set up the global economy for a major bust through their dysfunctional use of existing powers, are now seeking far greater central control, in what would amount to the ultimate triumph of finance over people. They are now moving to tax what ever people have left over after paying taxes. It has been tried before. As previous historical bubbles began to collapse, central authorities attempted to increase their intrusiveness and control over the population, in order to force the inevitable losses as far down the financial foodchain as possible. As far back as the Roman Empire, economically contractionary periods have been met with financial tyranny — increasing pressure on the populace until the system itself breaks:

Not even the death penalty was enough to enforce Diocletian’s price control edicts in the third century.

Rome squeezed the peasants in its empire so hard, that many eventually abandoned their land, reckoning that they were better off with the barbarians.

Such attempts at total financial control are exactly what one would expect at this point. A herd of financial middle men are used to being very well supported by the existing financial system, and as that system begins to break down, losing that raft of support is unacceptable. The people at the bottom of the financial foodchain must be watched and controlled in order to make sure they are paying to support the financial centre in the manner to which it has become accustomed, even as their ability to do so is continually undermined:

An oft-overlooked benefit of cash transactions is that there is no intermediary. One party pays the other party in mutually accepted currency and not a single middleman gets to wet his beak. In a cashless society there will be nothing stopping banks or other financial mediators from taking a small piece of every single transaction. They would also be able to use — and potentially abuse — the massive deposits of data they collect on their customers’ payment behavior. This information is of huge interest and value to retail marketing departments, other financial institutions, insurance companies, governments, secret services, and a host of other organizations….

….So in order to save a financial system that is morally beyond the pale and stopped serving the basic needs of the real economy a long time ago, governments and central banks must do away with the last remaining thing that gives people a small semblance of privacy, anonymity, and personal freedom in their increasingly controlled and surveyed lives. The biggest tragedy of all is that the governments and banks’ strongest ally in their War on Cash is the general public itself. As long as people continue to abandon the use of cash, for the sake of a few minor gains in convenience, the war on cash is already won.

Even if the ultimate failure of central control is predictable, momentum towards greater centralisation will carry forward for as long as possible, until the system can no longer function, at which point a chaotic free-for-all is likely to occur. In the meantime, the movement towards electronic money seeks to empower the surveillance state/corporatocracy enormously, providing it with the tools to observe and control virtually every aspect of people’s lives:

Governments and corporations, even that genius app developer in Russia, have one thing in common: they want to know everything. Data is power. And money. As the Snowden debacle has shown, they’re getting there. Technologies for gathering information, then hoarding it, mining it, and using it are becoming phenomenally effective and cheap. But it’s not perfect. Video surveillance with facial-recognition isn’t everywhere just yet. Not everyone is using a smartphone. Not everyone posts the details of life on Facebook. Some recalcitrant people still pay with cash. To the greatest consternation of governments and corporations, stuff still happens that isn’t captured and stored in digital format….

….But the killer technology isn’t the elimination of cash. It’s the combination of payment data and the information stream that cellphones, particularly smartphones, deliver. Now everything is tracked neatly by a single device that transmits that data on a constant basis to a number of companies, including that genius app developer in Russia — rather than having that information spread over various banks, credit card companies, etc. who don’t always eagerly surrender that data.

Eventually, it might even eliminate the need for data brokers. At that point, a single device knows practically everything. And from there, it’s one simple step to transfer part or all of this data to any government’s data base. Opinions are divided over whom to distrust more: governments or corporations. But one thing we know: mobile payments and the elimination of cash….will also make life a lot easier for governments and corporations in their quest for the perfect surveillance society.

Dissent is increasingly being criminalised, with legitimate dissenters commonly referred to, and treated as, domestic terrorists and potentially subjected to arbitrary asset confiscation:

An important reason why the state would like to see a cashless society is that it would make it easier to seize our wealth electronically. It would be a modern-day version of FDR’s confiscation of privately-held gold in the 1930s. The state will make more and more use of “threats of terrorism” to seize financial assets. It is already talking about expanding the definition of “terrorist threat” to include critics of government like myself.

The American state already confiscates financial assets under the protection of various guises such as the PATRIOT Act. I first realized this years ago when I paid for a new car with a personal check that bounced. The car dealer informed me that the IRS had, without my knowledge, taken 20 percent of the funds that I had transferred from a mutual fund to my bank account in order to buy the car. The IRS told me that it was doing this to deter terrorism, and that I could count it toward next year’s tax bill.

 

 

The elimination of cash in favour of official electronic money only would greatly accelerate and accentuate the ability of governments to punish those they dislike, indeed it would allow them to prevent dissenters from engaging in the most basic functions:

If all money becomes digital, it would be much easier for the government to manipulate our accounts. Indeed, numerous high-level NSA whistleblowers say that NSA spying is about crushing dissent and blackmailing opponents. not stopping terrorism. This may sound over-the-top. but remember, the government sometimes labels its critics as “terrorists”. If the government claims the power to indefinitely detain — or even assassinate — American citizens at the whim of the executive, don’t you think that government people would be willing to shut down, or withdraw a stiff “penalty” from a dissenter’s bank account?

If society becomes cashless, dissenters can’t hide cash. All of their financial holdings would be vulnerable to an attack by the government. This would be the ultimate form of control. Because — without access to money — people couldn’t resist, couldn’t hide and couldn’t escape.

The trust that has over many years enabled the freedoms we enjoy is now disappearing rapidly, and the impact of its demise is already palpable. Citizens understandably do not trust governments and powerful corporations, which have increasingly clearly been acting in their own interests in consolidating control over claims to real resources in the hands of fewer and fewer individuals and institutions:

By far the biggest risk posed by digital alternatives to cash such as mobile money is the potential for massive concentration of financial power and the abuses and conflicts of interest that would almost certainly ensue. Naturally it goes without saying that most of the institutions that will rule the digital money space will be the very same institutions….that have already broken pretty much every rule in the financial service rule book.

They have manipulated virtually every market in existence; they have commodified and financialized pretty much every natural resource of value on this planet; and in the wake of the financial crisis they almost single-handedly caused, they have extorted billions of dollars from the pockets of their own customers and trillions from hard-up taxpayers. What about your respective government authorities? Do you trust them?…

….We are, it seems, descending into a world where new technologies threaten to put absolute power well within the grasp of a select group of individuals and organizations — individuals and organizations that have through their repeated actions betrayed just about every possible notion of mutual trust.

Governments do not trust their citizens (‘potential terrorists’) either, hence the perceived need to monitor and limit the scope of their decisions and actions. The powers-that-be know how angry people are going to be when they realise the scale of their impending dispossession, and are acting in such a way as to (try to) limit the power of the anger that will be focused against them. It is not going to work.

Without trust we are likely to see “throwbacks to the 14th century….at the dawn of banking coming out of the Dark Ages.”. It is no coincidence that this period was also one of financial, socioeconomic and humanitarian crises, thanks to the bursting of a bubble two centuries in the making:

The 14th Century was a time of turmoil, diminished expectations, loss of confidence in institutions, and feelings of helplessness at forces beyond human control. Historian Barbara Tuchman entitled her book on this period A Distant Mirror because many of our modern problems had counterparts in the 14th Century.

Few think of the trials and tribulations of 14th century Europe as having their roots in financial collapse — they tend instead to remember famine and disease. However, the demise of what was then the world banking system was a leading indicator for what followed, as is always the case:

Six hundred and fifty years ago came the climax of the worst financial collapse in history to date. The 1930’s Great Depression was a mild and brief episode, compared to the bank crash of the 1340’s, which decimated the human population. The crash, which peaked in A.C.E. 1345 when the world’s biggest banks went under, “led” by the Bardi and Peruzzi companies of Florence, Italy, was more than a bank crash — it was a financial disintegration….a blowup of all major banks and markets in Europe, in which, chroniclers reported, “all credit vanished together,” most trade and exchange stopped, and a catastrophic drop of the world’s population by famine and disease loomed.

As we have written many times before at The Automatic Earth, bubbles are not a new phenomenon. They have inflated and subsequently imploded since the dawn of civilisation, and are in fact en emergent property of civilisational scale. There are therefore many parallels between different historical episodes of boom and bust:

The parallels between the medieval credit crunch and our current predicament are considerable. In both cases the money supply increased in response to the expansionist pressure of unbridled optimism. In both cases the expansion proceeded to the point where a substantial overhang of credit had been created — a quantity sufficient to generate systemic risk that was not recognized at the time. In the fourteenth century, that risk was realized, as it will be again in the 21st century.

What we are experiencing now is simply the same dynamic, but turbo-charged by the availability of energy and technology that have driven our long period of socioeconomic expansion and ever-increasing complexity. Just as in the 14th century, the cracks in the system have been visible for many years, but generally ignored. The coming credit implosion may appear to come from nowhere when it hits, but has long been foreshadowed if one knew what to look for. Watching more and more people seeking escape routes from a doomed financial system, and the powers-that-be fighting back by closing those escape routes, all within a social matrix of collapsing trust, one cannot deny that history is about to repeat itself yet again, only on a larger scale this time.

The final gasps of a bubble economy, such as our own, are about behind-the-scenes securing of access to and ownership of real assets for the elite, through bailouts and other forms of legalized theft. As Frédéric Bastiat explained in 1848,

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”

The bust which follows the last attempt to kick the can further down the road will see the vast majority of society dispossessed of what they thought they owned, their ephemeral electronic claims to underlying real wealth extinguished.

The Way Forward

The advent of negative interest rates indicates that the endgame for the global economy is underway. In places at the peak of the bubble, negative rates drive further asset bubbles and create ever greater vulnerability to the inevitable interest rate spike and asset price collapse to come. In Japan, at the other end of the debt deflation cycle, negative rates force people into ever more cash hoarding. Neither one of these outcomes is going to lead to recovery. Both indicate economies at breaking point. We cannot assume that current financial, economic and social structures will continue in their present form, and we need to prepare for a period of acute upheaval.

Using cash wherever possible, rather than succumbing to the convenience of electronic payments, becomes an almost revolutionary act. So other forms of radical decentralisation, which amount to opting out as much as possible from the path the powers-that-be would have us follow. It is likely to become increasingly difficult to defend our freedom and independence, but if enough people stand their ground, establishing full totalitarian control should not be possible.

To some extent, the way the war on cash plays out will depend on the timing of the coming financial implosion. The elimination of cash would take time, and only in some countries has there been enough progress away from cash that eliminating it would be at all realistic. If only a few countries tried to do so, people in those countries would be likely to use foreign currency that was still legal tender.

 

 

Cash elimination would really only work if it it were very broadly applied in enough major economies, and if a financial accident could be postponed for a few more years. As neither of these conditions is likely to be fulfilled, a cash ban is unlikely to viable. Governments and central banks would very much like to frighten people away from cash, but that only underlines its value under the current circumstances. Cash is king in a deflation. The powers-that-be know that, and would like the available cash to end up concentrated in their own hands rather than spread out to act as seed capital for a bottom-up recovery.

Holding on to cash under one’s own control is still going to be a very important option for maintaining freedom of action in an uncertain future. The alternative would be to turn to hard goods (land, tools etc) from the beginning, but where there is a great deal of temporal and spatial uncertainty, this amounts to making all one’s choices up front, and choices based on incomplete information could easily turn out to be wrong. Making such choices up front is also expensive, as prices are currently high. Of course having some hard goods is also advisable, particularly if they allow one to have some control over the essentials of one’s own existence.

It is the balance between hard goods and maintaining capital as liquidity (cash) that is important. Where that balance lies depends very much on individual circumstances, and on location. For instance, in the European Union, where currency reissue is a very real threat in a reasonably short timeframe, opting for goods rather than cash makes more sense, unless one holds foreign currency such as Swiss francs. If one must hold euros, it would probably be advisable to hold German ones (serial numbers begin with X).

 

US dollars are likely to hold their value for longer than most other currencies, given the dollar’s role as the global reserve currency. Reports of its demise are premature, to put it mildly. As financial crisis picks up momentum, a flight to safety into the reserve currency is likely to pick up speed, raising the value of the dollar against other currencies. In addition, demand for dollars will increase as debtors seek to pay down dollar-denominated debt. While all fiat currencies are ultimately vulnerable in the beggar-thy-neighbour currency wars to come, the US dollar should hold value for longer than most.

Holding cash on the sidelines while prices fall is a good strategy, so long as one does not wait too long. The risks to holding and using cash are likely to grow over time, so it is best viewed as a short term strategy to ride out the deflationary period, where the value of credit instruments is collapsing. The purchasing power of cash will rise during this time, and previously unforeseen opportunities are likely to arise.

Ordinary people need to retain as much of their freedom of action as possible, in order for society to function through a period of economic seizure. In general, the best strategy is to hold cash until the point where the individual in question can afford to purchase the goods they require to provide for their own needs without taking on debt to do so. (Avoiding taking on debt is extremely important, as financially encumbered assets would be subject to repossession in the event of failure to meet debt obligations.)

One must bear in mind, however, that after price falls, some goods may cease to be available at any price, so some essentials may need to be purchased at today’s higher prices in order to guarantee supply.

Capital preservation is an individual responsibility, and during times of deflation, capital must be preserved as liquidity. We cannot expect either governments or private institutions to protect our interests, as both have been obviously undermining the interests of ordinary people in favour of their own for a very long time. Indeed they seem to feel secure enough of their own consolidated control that they do not even bother to try to hide the fact any longer. It is our duty to inform ourselves and act to protect ourselves, our families and our communities. If we do not, no one else will.