Greener Times

Promoting a sustainable society…one day at a time.

GT for February 23 – March 1

Posted by Trey Smith on February 22, 2009

Greener Times for the Week of February 23 – March 1

Volume 3 No. 45

an e-publication for Greens anywhere and everywhere

Trey Smith – Publisher/Editor
Tom Herring, Duff Badgley & Maryrose Asher – Columnists

In This Week’s Issue
* King County Green Party Launches New Website
* Derivatives Powder Keg Threatens Economy
* Thoughts By the Way: Beyond Words
* Our Climate Crisis: Obama Condemns Us to Our Climate Fate
* Un-Spinning the Spin: Want a Real Stimulus to the Economy? — Cut the Military Budget
* This Week in History
* Letters to the Editor
* Pencil Shavings: It’s Not All Bad News
* News You May Have Missed

King County Green Party Launches New Website
The KCGP has launched a new website. “We are grassroots activists, environmentalists, advocates for social justice, nonviolent resisters and other members of the public who’ve had enough of corporate-dominated politics.”

If you’d like to get involved, contact the Chair or the Secretary.

Derivatives Powder Keg Threatens Economy
by Chuck Barr of Culture Change

There is a quadrillion-dollar powder keg sitting at the center of the world financial markets. If the economy keeps on it present course, it will be ignited into a financial supernova. This is the result of the combination of greed and computers — derivatives.

The Derivatives Powder Keg

Derivatives are financial instruments whose values are derived from something else such as assets or indexes such as interest rates or the stock market. They are used to mitigate or hedge the risk of economic loss from the changes in the value of the underlining asset or index. Derivatives can also be used to acquire risk rather than insure against it to speculate, betting that the party seeking insurance will be wrong about the future value. The derivative market is largely unregulated with no loss reserve requirement thanks to Clinton’s 2000 Commodities Future Modernization Act.

Total world derivatives are $1000 trillion or 19 times the total world GDP of $54 trillion. Over-the-counter derivatives total $684 trillion of which 67 percent are interest rate swaps. Exchange-traded derivatives total $344 trillion. Interest rate swaps are the largest derivative powder keg waiting to blow the world financial markets to supernova.

Interest rates swaps are maintained by the spread between the Fed funds and prime mortgage rates. At the end of 2008, Fed funds were at 5.25 percent while mortgage rates were six percent, yielding a spread of less than one percent.

To increase the spread to avoid interest rate swaps from imploding, Wall Street bankers took advantage of the U.S. people’s ignorance of economics. People look at prices to gage inflation, when it is really the money supply that controls inflation. Prices are the symptom, not the cause. They ran up commodities for a time and then brought about a dramatic drop in prices later to give the perception that deflation might be setting in. This is how they justified the near-zero interest rates we see now, which can yield a huge spread of about five percent, which is more than five times what was available before all the trouble started.

Already we have seen the subprime derivatives, large insurers, and investment banks implode. Wall Street CEO’s lied through their teeth about the condition of their insolvent companies right up to the day they went bankrupt. The losses are going directly to the people through the bailouts.

But the $700 billion bailout to absorb banking toxic waste plus the new $787 stimulus package will ignite hyperinflation and bring double-digit interest rates. Because of the world economic downturn, foreign nations have fewer dollars to buy U.S. Treasuries with. Tax revenues are plummeting world wide as earnings collapse.

Bailouts Are Lighting the Fuse

The Fed and the Treasury are using debt instruments that are being monetized. In other words, creating money out of thin air. This is immediately very inflationary, and is how the fuse to interest rates swaps is being lit.

Inflation at the wholesale level surged unexpectedly by .8 percent in January well above the 0.2 percent increase that economists had expected.

Take JP Morgan Chase for example, and their $90 trillion derivative portfolio. Let’s say that $50 trillion are in interest rate swaps. If they have even a mere two percent overhang (loss) where they have to pay out variable rates of interest on two percent more of their total interest rate swaps than the portion of swaps on which they are, by contrast, receiving variable rates of interest, they could suffer horrendous losses that could easily put them under.

Let’s say that everything balances at a four percent spread as described earlier. But now rates move to 14 percent because of hyperinflation and everyone ignores the rates set by the central banks sending LIBOR and Treasury bill rates to unheard of high levels.

Two percent of $50 trillion is a trillion dollars of overhang loss on which you are now paying out 10 percent more, and 10 percent of one trillion is $100 billion, a killer loss. That would put them under. Even an overhang of only one half of one percent pumps out a loss of $25 billion. And what if the overhang is five percent, or 10 percent, or 20 percent? With an overhang of 20 percent, we hit one trillion in losses. And this is only one bank!

Our capitalist global casino is a house of cards. If the economy continues to sink, credit default swaps will be the first to blow as we move from hundreds of billions to trillions in corporate quarterly losses. This triggers more deficit spending, which ignites more inflation which lights the fuse to the interest rate swaps supernova.

The Pension Bomb

Greater financial risk plus plummeting earnings per share pushes stock markets lower, which increases pension deficits and defaults. As mentioned in my previous essay, America’s 500 largest companies have a deficit of $200 billion in their pension plans. If the Dow hits 4,000, pension deficits would rise to $400 to $500 billion. Retirees lose their pensions and stock market investments. Many will be left with just their FDIC insured deposits if the government does not default.

Standard and Poor’s estimates that by Q3 2009 S&P 500 earnings will have collapsed by 83 percent from their high in Q2 2007. This will push the Dow to between 5000 and 4000 over the next year. Japan’s GDP, formerly a major buyer of U.S. securities, shrank at an annual rate of 12.7 percent from October to December 2008 after contracting for two previous quarters. The UN International Labor Organization estimates that 50 million workers will lose their jobs worldwide in 2009. About 20,000 major banks worldwide collapsed, were sold, or were nationalized in 2008. An estimated 62,000 U.S. companies are expected to shut down this year.

The triple whammy is that during the great depression about half the Americans lived on farms, but today only two percent participate in their food production.

The big picture for me is that I do not see another Internet boom on the horizon to pull the world economy out of further decline. The Obama stimulus bump will last six to 12 months, but then wear off. Even if we avoid further financial meltdown, starting in the next two to four years peak oil is going to start building relentless downward pressure on the world economy.

The best solution is to start powering down to a steady-state economy, and build community gracefully now while we have the resources. Today you can plant your first backyard garden and still go to the grocery store if it does not work out.

Thoughts By the Way: Beyond Words
Tom Herring is a Community Council member on Vashon Island. Catch more of Tom’s thoughts on his blog.

Last week this column wrung its hands over two days worth of mail pleading for me to support worthy causes. This, it seemed, meant that the government was disintegrating. But the next boxful was dominated by direct evidence the government was trying to disintegrate me. Example, a War College monograph stating that the Army should prepare for “violent, strategic dislocation inside the United States”. Well, the bad news wins. Here we are a month into savior time and the score is we are carrying the baggage from the “war on terror” into more war, and this time we will be included along with the Moslems as victims.

Not believe? Then try to convince me that the “detention centers” going up around the country are where the Government is going to put the pin stripers who just heisted a trillion dollars of our money. It is perhaps unfortunate timing that just now Australia’s dried out bush has caught fire and Brazil’s rain forest is next. Also not cheerful is that the play money problems in the Wall Street financial sandbox have finally trickled out into the real economy and wrecked it. Even less cheerful than that is our “made in China” standard of living. And so, with a nod to some meager good news it is put to you that our plight is now beyond the power of ordinary words to describe.

If there is to be any valid communication between us regarding our plight it will be in poetry and art. This is the language of flesh and blood facing flesh and blood, the only language that can cut through the grammatical noise filling those hundred extra channels of digital television. It’s a language that’s been dying these long years of sped up consumption and digitization and is coming back little by little in a handful of communities. Funny thing about this language, almost like sexually transmitted disease, it is communicated face to face.

Our Climate Crisis: Obama Condemns Us to Our Climate Fate
Duff Badgley is the leader of the One Earth Climate Action Group and was a candidate for Governor as a Green in 2008. He can be reached at 206-283-0621.

Obama condemned us this week to our climate fate.

I’m not surprised that he has. Well, maybe a little surprised he revealed so early his enslavement to the capitalist mantra of eternal growth, no matter the cost.

Here’s what Obama said last week in Canada, on his first foreign trip as president.

“So the dilemma that Canada faces, the United States faces and China and the entire world faces, is how do we obtain the energy that we need to grow our economies in a way that is not rapidly accelerating climate change?” — Barack Obama, Feb. 19, 2009, Ottawa.

The simple answer from the Earth, our morbidly ill Home Planet: “You don’t.” You do not ‘grow economies’ sustainably.

You do not ‘grow economies’ and avoid ‘rapidly accelerating climate change.’ It cannot be done. More money means more carbon.

We can shrink economies sustainably. We can shrink economies and possibly mitigate some of what’s coming to us from our Climate Crisis. We can shrink economies and certainly start adapting to some of what’s coming to us from our Climate Crisis.

We can retreat from our murder/suicide pact with all of Earth’s creatures that decrees humans must organize themselves into Planet Wrecking Armies. These armies are called capitalist economies.

When Obama made the ‘grow our economies’ comment, he and Canadian premier Stephen Harper were talking about extracting oil from the vast ‘tar sands’ fields in Alberta. America gets more oil from Canada than any other country. Much of Canada’s oil is found in these tar sands.

But, says our leading climate scientist Jim Hansen, continuing to extract Albertan tar sands oil “would be disastrous for life on our planet.”

“The tar sands of Canada constitute one of our planet’s greatest threats. They are a double-barreled threat. First, producing oil from tar sands emits two-to-three times the global warming pollution of conventional oil. But the process also diminishes one of the best carbon-reduction tools on the planet: Canada’s Boreal Forest.

“This forest plays a key role in the global carbon equation by serving as a major storehouse for terrestrial carbon – indeed, it is believed to store more carbon per hectare than any other ecosystem on Earth. When this pristine forest is strip mined for tar sands development, much of its stored carbon is lost.

“Canada’s Boreal Forest is also the reservoir for a large fraction of North America’s clean, fresh water, home to some five billion migratory birds, and some of largest remaining populations of caribou, moose, bear and wolves on the planet.”

Hansen’s pleas were neatly side stepped by master politician Obama.

He and Harper agreed to “a clean energy dialogue” that allows development of the tar sands fields to continue. This agreement keeps all that Canadian oil flowing to American gas tanks. While allowing both men to preserve their phony ‘green’ credentials.

This wink-and-nod treatment of an issue vital to the health and survival of All of Us is worse than reprehensible. It is a much deadlier version of the American military’s ‘don’t ask, don’t tell’ policy toward homosexuals. ‘Sure, we know Canada will keep selling us tar sands oil. But we won’t talk about it. We’ll hide behind talks about clean energy.’

Obama has joined the ranks recently vacated by George Bush: those politicians whose deceit is so shameless, it disarms most people – for a while.

Our Climate Crisis, however, does not give us much of “a while”.

Un-Spinning the Spin: Want a Real Stimulus to the Economy? — Cut the Military Budget
Maryrose Asher is a former Chair of the Green Party of Washington State and a tireless activist of many causes.

Perhaps, one of the most important briefings will be held this coming Tuesday, February 24, 2008. Congressman Barney Frank will present his proposal to cut the military/war budget by 25 percent.

While others talk of tax cuts or bailouts to stimulate the economy, Frank appeared on ABC to point out that the largest spending program has been the war in Iraq (projected to be 2.4 trillion by 2017). The host, George Stephanopoulos, responded by saying, “That is a whole ‘nother show.” Frank was quick to counter by saying,

No it isn’t. That’s the problem. The problem is that we look at spending and say oh don’t spend on highways, don’t spend on healthcare, but let’s build cold war weapons to defeat the Soviet Union when we don’t need them, let’s have hundreds and hundreds of billions of dollars going to the military without a check. Unless everything is on the table, then you’re going to have a disproportionate hit in some places.

Americans, on average, agree. The Program on International Policy Attitudes (PIPA) issued a report in March 2005 titled, “The Federal Budget: The Public’s Priorities.” In this report, participants were shown the distribution of funds in the federal budget. They were then asked to prioritize how they would re-distribute the funds. Regardless of political affiliation, Americans said they would slash 31 percent from the military budget. Cutbacks on spending for large-scale nuclear and conventional wars were first on their list, with cuts in the defense budget for Iraq and Afghanistan second.

Participants chose the biggest increases in funds to go to education, job training, employment and medical research, with the largest percentage of those surveyed choosing the conservation and development of renewable energy.

The expected push back to Frank’s proposal will be the loss of jobs in an already bad economy. However, a report by Robert Palin and Heidi Garrett-Peltier of the Political Economy Research Institute at University of Massachusetts – Amherst, “The U.S. Employment Effects of Military and Domestic Spending Priorities,” states the opposite. The report shows that investment in military jobs in fact provides fewer and lower-paying jobs for the economy than would public investment in education, health care, home construction, or mass transit.

Frank is inviting organizations to come to the briefing and to return to their communities to build support for his proposal. I hope the Green Party of the United States will be among those organizations invited to attend and that Green Party members at local levels will organize to push for a cut in the military budget.

This Week in History
This Week in History, published by Carl Bunin and edited by Al Frank, is a collection designed to help us appreciate the fact that we are part of a rich history advocating peace and social justice. While the entries often focus on large and dramatic events there are so many smaller things done everyday to promote peace and justice. Find more info at http://www.peacebuttons.info/E-News/thisweek.htm.

February 25, 1941: A general strike was called in Amsterdam to protest Nazi persecution of Jews under the German Nazi occupation. Truck drivers, dock and metal workers, civil servants and factory employees – Christians, Liberals, Social Democrats and Communists – answered the call and brought the city to a standstill. The work stoppages spread to Zaanstreek, Kennemerland and Utrecht. Two days later the strike was called off: nine people were dead, 50 injured and another 200 arrested, some of whom were to die in the concentration camps.

February 28, 1919: Mohandas Gandhi launched his campaign of non-cooperation with Imperial British control of India. He called his overall method of non-violent action Satyagraha, formed from satya (truth) and Agraha, used to describe an effort or endeavor. This translates roughly as “Truth-force.” A fuller rendering, though, would be “the force that is generated through adherence to Truth.”

March 1, 1961: President John F. Kennedy issued Executive Order 10924 establishing the Peace Corps as a new agency within the Department of State. The same day, he sent a message to Congress asking for permanent funding for the agency, which would send trained American men and women to foreign nations to assist in development efforts. The Peace Corps captured the imagination of the U.S. public, and during the week following its creation, thousands of letters poured into Washington from young Americans hoping to volunteer.

Letters to the Editor
Got something you want to get off your chest? Did an article in a previous edition of Greener Times make you madder than a hornet or cause you to stand up to say, “Right on!”? Well, this space is reserved each week for your comments and opinions.

No letters received.

Pencil Shavings: It’s Not All Bad News
Pencil Shavings appears in this space most weeks and solely represents the opinions of the publisher. If you’d like to read more of Trey’s ruminations, visit The Rambling Taoist.

Everywhere we looks these days, things seem to be going down the toilet. The economy is tanking. More people are out of work. Foreclosures are climbing. Climate change is accelerating. More troops are headed to Afghanistan. On and on it goes…

So, where is any good news in all of this? One can’t seem to find it in DC or any other national capitol and it doesn’t seem to be coming from any state legislature either. No, the glimmer of hope is coming from our local communities. Across the nation, though beset with their own financial shortfalls, it is our cities and counties who are developing innovative programs to combat many of our societal ills.

With the wave of foreclosures steadily climbing, the city council in Euclid, OH has launched a Foreclosure Prevention Committee. In Kansas City, MO sustainability criteria have been added to the forms for every resolution and ordinance introduced. Local governments east to west and north to south are mandating green building standards in all new construction and many communities are establishing green funds to help carry out this work. And cities from Davis, CA to Guelph, Ontario are phasing out the use of bottled water.

All of this information and more can be found in the GreenPRO database. I’ve spent the better part of the last 1 1/2 years compiling this information. There are now nearly 2,150 entries and the list continues to grow.

As our national economy continues to collapse, more and more people will learn that the answers to our problems will not be forthcoming from the White House nor the Governor’s mansion. It’s going to be up to us in our own local communities to turn things around. So, why reinvent the wheel if we don’t have to? The great beauty of GreenPRO is that it allows us to see what is working in other locales and to modify these strategies to work in our own back yards.

News You May Have Missed

My Unwitting Role in Acts of Torture
I like to think that some of the things I write cause discomfort in those readers who deserve to feel it. Ideally, they should squirm, they should flinch, they might even experience fleeting gastro-intestinal symptoms. But I have always drawn the line at torture. It may be unpleasant to read some of my writings, especially if they have been assigned by a professor, but it should not result in uncontrollable screaming, genital mutilation or significant blood loss. With such stringent journalistic ethics in place, I was shocked to read online a Mail on Sunday article headed “Food writer’s online guide to building an H-bomb … the ‘evidence’ that put this man in Guantánamo.” The “food writer” was identified as me…

Is Economic Recovery Even Possible on a Planet Headed for Environmental Collapse?
It turns out that you don’t want to be a former city dweller in rural parts of southernmost Australia, a stalk of wheat in China or Iraq, a soybean in Argentina, an almond or grape in northern California, a cow in Texas, or almost anything in parts of east Africa right now. Let me explain…

Twitter Nation Has Arrived: How Scared Should We Be?
Welcome to Twitter Nation. What was once an easily avoided subculture of needy and annoying online souls is now a growing part of the social and media landscapes, with Twittering tentacles reaching into the operations of major newspapers, networks, corporations and political campaigns. Suddenly, our skies are dark with brightly colored cartoon birds. As in a nightmare, they are everywhere…

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