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This article was first published in Organic New Zealand – July/August 2012. Co-authors Deirdre Kent and Helen Dew are founding members of Living Economies. Deirdre is the author of Healthy Money Healthy Planet and a co-founder of the New Economics Party http://neweconomics.net.nz.
"The future is, after all, something we create, not something that just happens."
Paul Gilding1 - The Great Disruption
If economic and energy analyst Nicole Foss2 is correct, we’ll need to do much more than grow our own food to meet the challenges of economic collapse.
Foss, keynote speaker at the 11th Australasian Permaculture Convergence held in April 2012 in Turangi, believes the global financial crisis is far from over. “The recent credit bubble was the biggest ponzi scheme the world has ever experienced and it’s not yet unwound.” The bailouts now add up to at least $4.6 trillion or $4,600,000,000,000. Foss says the bubble is leading us into a very long and painful depression, perhaps another ten years, and Professor Steve Keen3 of Sydney agrees.
Foss had just completed a tour of New Zealand, transfixing many audiences. Although for many years she ran the Oil Drum website, she now sees finance as a more immediate challenge than the admittedly serious energy crisis. Many of those attending her talks planned to change their personal situations.
We in New Zealand have had a taste of what is to come with the collapse of 28 finance companies. Europe is in turmoil at the prospect of Greece leaving the Euro. Foss predicted the Euro would collapse in the next two years and send shock waves throughout the world.
So how have we got to this situation?
The fancy “financial instruments” that trading banks and investment banks have invented in the last 30 years created virtual wealth as markets bid up the price of assets. But when a bubble bursts, panic sets in and prices plummet. The financial system is rather like a game of musical chairs. When the music stops there are 100 people claiming each chair because the amount of credit in circulation far exceeds the available assets.
In a depression the economy slows and the money supply shrinks. Investment and pension funds are badly affected. If interest rates rise mortgage holders are very exposed. People stop spending and cash is king. Against a background of increasingly high unemployment it doesn’t matter whether prices are high or low. What matters is the ability to pay.
So how will we prepare for a long depression? Politicians are unlikely to help – they typically cheerlead and talk up the economy.
New Zealand is vulnerable because household debt is very high. During the 1930s depression, trade fell 66% in two years - alarming for a trading country with long supply lines, importing 97% of our oil.
New Zealand’s banking system is exposed to the Euro and to the Australian banking system. Appropriate preparation can reduce the risk of panic, protests against austerity, repression and political instability. Constructive activities generate a sense of empowerment and purpose.
Energy
We have used the easy-to-access, cheap supplies of oil. The increasing cost of extraction will push the price up and at some point extraction will become uneconomic . As a result, commodity and service costs - especially of the essentials - will rise steeply.
The drop-off in oil production will be dramatic, forcing society to move very quickly to a low carbon economy. In 2008, oil hit $147/barrel but collapsed quickly to $32 when the financial bubble burst. However, oil priced as low as $20 a barrel may be unaffordable if incomes fall.
A community approach
Foss says reality is not going to negotiate with you and neither will the environment. You don’t want to be the only wildebeest crossing a crocodile-infested river, so work together. Design a resilience plan with family and friends; get to know your neighbours and wider community. Pool time, financial resources, skills, space, tools and facilities. Grow your own food, and create a local food, fuel and transport plan.
Decentralise and build local capacity, especially for basics, while we still have the chance – before declining resources lead to rationing, surveillance, loss of freedom and centralised power.
Depression-proof employment will include suppliers of life's essentials - builders, repairers, farmers, food growers, wood merchants, health workers and top entertainers. Be careful with education costs – consider an apprenticeship rather than studying for a degree.
Learn how to use complementary currencies, read books by Professor Bernard Lietaer4, start or join a timebank (www.timebanks.org.nz) or a LETS (Local Exchange Trading System), encourage your employer to participate in a business barter network.
Eliminate your mortgage and pay off your debts. Granted, getting out of debt may be easier said than done! Living Economies Savings Pools enable participants to share financial resources with friends and family – interest-free.
The ‘Co-operative Home Ownership Pool (CO-HOP)’ is a recent initiative that matches those with mortgages with others wanting safer investments. (Contact Sonia Corbett at to help develop this idea.)
Visit the Bank of Real Solutions (www.realsolutions.org.nz) or www.scoop.it/t/transition-culture/ for a comprehensive range of initiatives at local level to enhance resilience. Join a Transition Towns group www.transitiontowns.org.nz. Start a neighbourhood group.
Take an active interest in your local authority and central government. Councillors planning for business as usual and committing to huge unserviceable loans could cause significant rate increases. Growing your own food won’t save the day if you‘re forced to sell your house because you can’t pay your rates!
Nicole Foss’s checklist
1) Hold no debt (for most people, this means renting).
2) Hold cash and cash equivalents (short term treasuries) under your own control.
3) Don't trust the banking system or deposit insurance.
4) Sell equities, real estate, most bonds, commodities, collectibles.
5) Gain some control over the necessities of your own existence.
6) Work with others to enhance personal and community resilience and security.
7) Get out of managed funds and don’t rely on middlemen.
8) Change your bank account to a New Zealand-owned bank.
9) Buy durable goods and quality tools.
10) Educate yourself and your children; read, watch and discuss documentaries.
11) Download material from the internet while it’s still working!
12) Watch your local and central government indebtedness and risk-taking.
1 Paul Gilding is an independent writer, advisor and advocate for action on climate change and sustainability. http://paulgilding.com/
2 Nicole Foss LLM and BSc, Systems Analyst, http://theautomaticearth.org/ If you do a search you will find many references to her NZ tour.
3 Professor Steve Keen writes at http://www.debtdeflation.com
4 Professor Bernard Lietaer’s website has a comprehensive range of his books, articles and TED talks. http://www.lietaer.com/
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