• We can't grow ourselves out of debt, no matter what the Federal Reserve does

    posted by Keito
    2012-09-04 21:34:32
    'Let's replace our fixation on growth with a steady-state economy focusing on lower consumption, leisure and ecological health.

    Federal Reserve chairman Ben Bernanke's pledge at Jackson Hole last Friday to "promote a stronger economic recovery" through "additional policy accommodation" has drawn criticism from economists, liberal and conservative, who question whether the Fed has the wherewithal to stimulate economic growth. What we actually need is more spending, say the liberals. No, less spending, say the conservatives. But underneath these disagreements lies an unexamined agreement, a common assumption that no mainstream economist or policy-maker ever questions: that the purpose of economic policy is to stimulate growth.

    So ubiquitous is the equation of growth with prosperity that few people ever pause to consider it. What does economic growth actually mean? It means more consumption – and consumption of a specific kind: more consumption of goods and services that are exchanged for money. That means that if people stop caring for their own children and instead pay for childcare, the economy grows. The same if people stop cooking for themselves and purchase restaurant takeaways instead.

    Economists say this is a good thing. After all, you wouldn't pay for childcare or takeaway food if it weren't of benefit to you, right? So, the more things people are paying for, the more benefits are being had. Besides, it is more efficient for one daycare centre to handle 30 children than for each family to do it themselves. That's why we are all so much richer, happier and less busy than we were a generation ago. Right?

    Obviously, it isn't true that the more we buy, the happier we are. Endless growth means endlessly increasing production and endlessly increasing consumption. Social critics have for a long time pointed out the resulting hollowness carried by that thesis. Furthermore, it is becoming increasingly apparent that infinite growth is impossible on a finite planet. Why, then, are liberals and conservatives alike so fervent in their pursuit of growth?

    The reason is that our present money system can only function in a growing economy. Money is created as interest-bearing debt: it only comes into being when someone promises to pay back even more of it. Therefore, there is always more debt than there is money. In a growth economy that is not a problem, because new money (and new debt) is constantly lent into existence so that existing debt can be repaid. But when growth slows, good lending opportunities become scarce. Indebtedness rises faster than income, debt service becomes more difficult, bankruptcies and layoffs rise.

    Central banks used to have a solution for that. When growth slowed, they would simply buy securities (usually government bonds) on the open market, driving down interest rates. Investors who wouldn't lend into the economy if they could get 8% on a risk-free bond might change their minds if the rate were only 5%, or 2%. Rates that low would stimulate a flood of credit, jumpstarting the economy. Today that tool isn't working, but central banks are still trying it nonetheless. With risk-free interest rates near zero, they continue creating money through the same means as before, now calling it "quantitative easing". The thinking seems to be: "If you have more money than you know what to do with and are afraid to lend it, how about giving you even more money?" It is like giving a miser an extra bag of gold in hopes that he'll start sharing it.

    Most commentators interpret Bernanke's remarks as signalling the possibility of a new round of quantitative easing. If so, the results will likely be the same as before – a brief churning of equities and commodities markets, but little leakage of the new money into the real economy. In all fairness, we cannot blame the banks for their reluctance to lend. Why would they lend to maxed-out borrowers in the face of economic stagnation? It would be convenient to blame banker greed; unfortunately, the problem goes much deeper than that.

    The problem that we are seemingly unable to countenance is the end of growth. Today's system is predicated on the progressive conversion of nature into products, people into consumers, cultures into markets and time into money. We could perhaps extend that growth for a few more years by fracking, deep-sea oil drilling, deforestation, land grabs from indigenous people and so on, but only at a higher and higher cost to future generations. Sooner or later – hopefully sooner – we will have to transition towards a steady-state or degrowth economy.

    Does that sound scary? Today it is: degrowth means recession, with its unemployment, inequality and desperation. But it need not be that way. Unemployment could translate into greater leisure for all. Lower consumption could translate into reclaiming life from money, reskilling, reconnecting, sharing.

    Central banks could play a role in this transition. For example, what if quantitative easing were combined with debt forgiveness? The banks get bailout after bailout – what about the rest of us? The Fed could purchase student loans, mortgages or consumer debt and, by fiat, reduce interest rates on those loans to zero, or even reduce principal. That would liberate millions from the debt chase, while freeing up purchasing power for those who are truly underconsuming.

    More radically, central banks should be allowed to breach the "zero lower bound" that has rendered monetary policy impotent today. If investors are unwilling to lend even when risk-free return on investment is 0%, why not reduce that to -2%, even -5%? Implemented as a liquidity tax on bank reserves, it would allow credit to circulate in the absence of economic growth, forming the monetary foundation of a steady-state economy where leisure and ecological health grow instead of consumption.

    One thing is clear: we are at the end of an era. No one seriously believes that we will grow ourselves out of debt again. There is an alternative. It is time to begin the transition to a steady-state economy.'
  • The Elephant in the Room

    posted by Keito
    2012-08-13 14:31:55
    "Once it was necessary that the people should multiply and be fruitful if the race was to survive. But now to preserve the race it is necessary that people hold back the power of propagation." ~Helen Keller

    "You know, I have often thought that at the end of the day, we would have saved more wildlife if we had spent all WWF's money on buying condoms." ~Sir Peter Scott, founder of the World Wildlife Fund (WWF).

    "There is no human circumstance more tragic than the persisting existence of a harmful condition for which a remedy is readily available. Family planning, to relate population to world resources, is possible, practical and necessary. Unlike plagues of the dark ages or contemporary diseases we do not understand, the modern plague of overpopulation is soluble by means we have discovered and with resources we possess. What is lacking is not sufficient knowledge of the solution but universal consciousness of the gravity of the problem and education of billions who are its victims." ~Rev. Martin Luther King Jr.

    "....democracy cannot survive overpopulation. Human dignity cannot survive it. Convenience and decency cannot survive it. As you put more and more people into the world, the value of life not only declines, it disappears. It doesn't matter if someone dies. The more people there are, the less one individual matters." ~Isaac Asimov

    "Among the most important issues affecting the world’s future is the rapid growth of human population. Together, the increase in population and in resource consumption are basic causes of human suffering and environmental degradation and must become major priorities for national and international action.

    Because of its pervasive and detrimental impact on global ecological systems, population growth threatens to overwhelm any possible gains made in improving human conditions. Failure to curb the rate of world population growth will magnify the deterioration of the Earth’s environment and natural resources and undermine economic and social progress. A humane, sustainable future depends on recognizing the common ground between population and the environment.

    Current national and international efforts to address the world’s rapidly expanding population are not sufficient. A new commitment to population programs which enhance human rights and conditions is urgently needed. The United States and all nations of the world must make an effective response to the issue of population growth a leading priority for this decade." ~Zero Population Growth, 1991

    “The world might, perhaps, be considerably poorer if the great writers had exchanged their books for children of flesh and blood.” ~Virginia Woolf

    "We feel this issue is of crucial concern for successful conservation and sustainable development. Even while environmental goals can be met, conservation efforts will become secondary if population continues to grow at the present rate. The sheer number of people, forced to exploit the environment for extraction of finite resources to meet basic needs, impacts the limited amount of progress we have been able to make." ~Conservation International, 1999

    "Can you think of any problem in any area of human endeavor on any scale , from microscopic to global, whose LONG-TERM solution is in any DEMONSTRABLE way aided, assisted, or advanced by further increases in population, locally, nationally, or globally?" ~Dr. Albert A. Bartlett, Emeritus Professor of Physics, University of Colorado

    "The point of population stabilization is to reduce or minimize misery." ~Roger Bengston, founding board member, World Population Balance

    "We must alert and organise the world's people to pressure world leaders to take specific steps to solve the two root causes of our environmental crises - exploding population growth and wasteful consumption of irreplaceable resources. Overconsumption and overpopulation underlie every environmnetal problem we face today." ~Jacques-Yves Cousteau

    "The optimum population of a country is the one which is most likely to produce a good and sustainable quality of life for its inhabitants without adversely affecting the quality of life of people in other countries." ~Optimum Population Trust, Manchester, England, 1995

    "Which is the greater danger - nuclear warfare or the population explosion? The latter absolutely! To bring about nuclear war, someone has to DO something; someone has to press a button. To bring about destruction by overcrowding, mass starvation, anarchy, the destruction of our most cherished values - there is no need to do anything. We need only do nothing except what comes naturally - and breed. And how easy it is to do nothing." ~Isaac Asimov

    "There is no issue of importance to the environmental community that is not affected by the increasing number of humans on the planet. Unless we can limit population growth, we cannot achieve ecological stability." ~Peter Berle

    "'Smart growth' destroys the environment. 'Dumb growth' destroys the environment. The only difference is that 'smart growth' does it with good taste. It's like booking passage on the Titanic. Whether you go first-class or steerage, the result is the same." ~Dr. Albert A. Bartlett

    "Overpopulation of the earth is a danger to the planet's life-support system and to the people themselves." ~David Brower, Earth Island Institute

    "There will not be an environment left to worry about unless we get the population crisis under control." ~John H. Adams, Natural Resources Defense Council

    "Achieving and maintaining a sustainable relationship between human populations and the natural resource base of the earth is the single most critical long-term issue facing the peoples of the world and this issue will increasingly be the focus of international affairs for the foreseeable future." ~Russell E. Train, World Wildlife Fund

    "If steps are not taken soon to stabilize population growth, all our efforts in conservation will have little or no impact." ~Russell A. Mittermeier, Conservation International

    "Global population growth is an urgent priority, and it must be addressed with substantial family planning assistance." ~Denis Hayes, Earth Day

    "The population problem concerns us, but it will concern our children and grandchildren even more. How we respond to the population threat may do more to shape the world in which they will live than anything else we do." ~Lester Brown, Worldwatch Institute

    "Governments must foster conditions leading to population stabilization if we are to preserve the global climate and environment." ~Dr. James Hansen, Goddard Institute for Space Studies

    "Basically, then, there are only two kinds of solutions to the population problem. One is a 'birth rate solution,' in which we find ways to lower the birth rate. The other is a 'death rate solution,' in which ways to raise the death rate - war, famine, pestilence - find us." ~Paul Ehrlich, The Population Bomb

    "In the last 200 years the population of our planet has grown exponentially, at a rate of 1.9% per year. If it continued at this rate, with the population doubling every 40 years, by 2600 we would all be standing literally shoulder to shoulder." ~Prof. Stephen Hawking

    "The hungry world cannot be fed until and unless the growth of its resources and the growth of its population come into balance. Each man and woman--and each nation--must make decisions of conscience and policy in the face of this great problem." ~Lyndon Baines Johnson

    "Instead of controlling the environment for the benefit of the population, maybe we should control the population to ensure the survival of our environment." ~Sir David Attenborough

    "For those not numerically aware, humans have quadrupled in number in the 20th century. That is referred to as 'plague phase' by biologists." ~Steve Kurtz

    "I consider the dramatic growth in the world's population to be the greatest challenge currently facing the environment.... the effects of this rapid increase are felt around the globe. Starvation, deforestation and lack of clean water are just some of the problems...." ~Al Gore, U.S. Vice-President

    "The human race's prospects of survival were far better when we were defenceless against tigers than they are today when we have become defenceless against ourselves." ~A. Toynbee

    "If motherhood doesn't interest you, don't do it. It didn't interest me, so I didn't do it." ~Katherine Hepburn

    "The U.S. cannot afford to ignore the threat raised by increasing world population." ~Jay D. Hair, National Wildlife Federation

    "Pressures resulting from unrestrained population growth put demands on the natural world that can overhwelm any efforts to achieve a sustainable future. If we are to halt the destruction of our environment, we must accept limits to that growth." ~World Scientists' Warning to Humanity, signed by 1600 senior scientists from 70 countries, including 102 Nobel Prize laureates

    "Desperation to have a child comes from neediness, not instinct. It comes from the expectation that a child will fill an existing hole in our heart. Children, or anything else out there, can't fill that empty space. A feeling of wholeness comes from within." ~Susan Jeffers

    "It is not prudent to rely on science and technology alone to solve problems created by rapid population growth, wasteful resource consumption and harmful human practices." ~U.S. National Academy of Sciences and Royal Society of London, joint statement

    "If the world is to save any part of its resources fro the future, it must reduce not only consumption but the number of consumers." ~B.F. Skinner

    "When the family is small, whatever little they have they are able to share. There is peace." ~Philip Njuguna --- pastor, Nairobi, Kenya

    "We must stabilize population. This will be possible only if all nations recognize that it requires improved social and economic conditions, and the adoption of effective, voluntary family planning." ~Lester Milbrath

    "What becomes of the surplus of human life? It is either, 1st. destroyed by infanticide, as among the Chinese and Lacedemonians; or 2d. it is stifled or starved, as among other nations whose population is commensurate to its food; or 3d. it is consumed by wars and endemic diseases; or 4th. it overflows, by emigration, to places where a surplus of food is attainable." ~James Madison, 1791, U.S. President

    "Population, when unchecked, increases in a geometrical ratio." ~Thomas Robert Malthus