It’s seems that 2008 will be the year the year the Second Great Depression began.
It all started with the US subprime mortgage fiasco where money was lent to NINJ's (people with No Income and No Jobs) assuming that when they defaulted the value of the property would have increased and the banks would make a profit upon its repossession... wrong! The total value of all US$-based mortgage bonds is $10.4 trillion, of which 30 percent is now expected to be lost in defaults and property devaluation. That’s $3.2 trillion in losses. When this happened in the past there were bank runs, (remember the recent queues outside Northern Rock in the UK?) a stock market collapse, (seen the latest figures?) and, perhaps, (next?) a money panic.
Such things have happened in the past but this time its very different. Now the problem is not just financial mismanagement, there is a deeper instability. We have to face the fact that the global economy is based on a fundamentally unsustainable exploitation of depleting creations resources.
The economic bubble that lifted the stock market to its heights was sustained as much by cheap oil as by cheap mortgages and cheap credit. The Oil Age opened 150 years ago, releasing a flood of cheap energy, such that today’s production is equivalent in energy terms to 22 billion slaves working around the clock. The resulting economic prosperity allowed the banks to lend more than they had on deposit, yes, that's right, they were lending more than they had, (which is why they now need the bank of England or the US Reserves to help them out) because they were confident that tomorrow’s expansion was collateral for To-day’s Debt. It sounds a strange way of doing business to me but it worked well enough during the first half of the Oil Age allowing at least some countries to reap great prosperity.
We are now in the second half of the Oil Age and the falling oil supply, effectively removes the collateral for debt, which is why the Middle East invasion took place, the West needed the oil. You don't think for one moment that if the major production from Iraq was carrots the invasion would have taken place do you? So, as the oil drains away, the view is all downhill from here. A depression is, well, lets face facts, depressing even to think about but it seems that we are going to have to live through one.
So what do we do? it is obvious that creation's resources are becoming depleted and that our techno-industrial society has become pathologically parasitic on nature. If we are to survive as a species and if there is to be hope for millions of other creatures then we need to shrink the human enterprise. Economic contraction must be the major part of the cure for what ails our planetary home.
However, we can manage this contraction either foolishly or intelligently.
A FOOLISH management of economic contraction would entail burning the biosphere for alternative fuels, (Bio Diesel and so on) carrying on propping up the banks and other financial institutions that created the mortgage mess in the first place without ever re-examining the wisdom of 'everlasting' growth-based economics and to continue to respond human deprivation and misery with repression and war.
An INTELLIGENT management would start with an explicit commitment to redesign the global economy to run with and to run on less. It CAN be done. We would assess the remaining resources of God's creation and identify a humane, workable path toward a reduction in both population and consumption levels. We would focus on those aspects of life that bring us increasing satisfaction without requiring more inputs of energy and materials recognising that the bottom line is NOT all that really matters. We would re-acquaint ourselves with the values and virtues of community and self-sufficiency. We would redesign our cities to minimise the need for cars, while developing renewable energy sources and educating a new generation. If this is handled corectly then the medicine of contraction will leave nature intact and humanity in a state of greater happiness, equity, and peace.
One way or another, we don’t have a choice regarding whether a depression will ensue, but when it does, a great deal depends on our response. It’s not too soon to act on this knowledge and to start a discussion on the way forward. Are YOU joining in?