This thread is for continuing the discussion which began in the economy and money workshop at the October 11th Conference in London.
Perhaps someone could start by providing a summary of what was discussed, so that those who went to other workshops or weren't able to attend the conference will feel able to participate.
Economy and Money Workshop at October 11th Conference
Moderator: Peak Moderation
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PowerSwitchJames
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For Peak Oil and the Economy you may want to read this by Richard Douthwaite
http://www.feasta.org/documents/shortci ... tents.html
http://www.feasta.org/documents/shortci ... tents.html
-
PowerSwitchJames
- Posts: 934
- Joined: 24 Nov 2005, 11:09
- Location: London
- Contact:
You can read the notes from this at the Oct11 page.
http://www.powerswitch.org.uk/portal/in ... &Itemid=71
Or you can read below but miss out on the graphs.
Economy workshop -
Led and presented by Richard Douthwaite, Author of ?When the Wells Run Dry?
Topics for discussion:
1. Will there be an end to economic growth?
2. Money reforms
a. National
b. International ? discuss huge national deficits such as the US
3. Fear of future resource wars
Trade deficits:
The US burrows a Trillion dollars a year, mainly from China, who buy back treasury certificates; effectively this means that the US gets cost free loans
Why does China do this? Some say it is a way of them undermining the superpower
Many people buy dollars as it has always been seen as a ?safe? currency to invest in. If the dollar were to tumble due to a future energy crisis, then the US will not be able to buy things with its dollars as they will be worthless.
This would in turn mean that they have to use exports to buys goods, flooding EU markets. Thus even if the EU was initially immune to an energy crisis which would most devastating hit the US first, then we would soon be in economic crisis due to the complexities of international trade.
Carbon allowance idea.
This is a concept of rationing carbon emissions/energy.
Part of the theory of ?Contraction and Convergence?, i.e. moving into a low carbon economy.
This chart indicates a suggested scenario where a level of carbon allocation could be set in 2010 below the level needed to meet reduction commitments.
This would a give a flexible allocation, indicated by the dashed region which the government would use to give flexibility to certain sectors that needed longer to make the necessary changes.
By 2030 the idea is that the economy would have converged onto the necessary carbon levels and then a year on year reduction would gradually bring down our emissions.
Such a systems seem may seem far fetched and any one country would be unwilling to implement it as it would cause higher energy costs, and thus reduce their competitiveness.
One possibility is that a ?club? of nations, such as the EU might get together and use a system of import and export tariffs t compensate the differing price of the energy against competing economies who are not in the club, such as the US.
This need not be to the detriment of poorer nations, who would have no reason not to be in the club also, as they would be paid money in exchange for their carbon credits that they do not use.
The EU has set up the Emissions Trading and National Allocation Plans which give carbon allowances to companies which they may trade between each other. Should it be business that gets these, should they be free? Or should it be individual citizens who get them?
Of interest: The Global Commons Institute, An independent organization campaigning on climate change: www.gci.org.uk
Books mentioned from audience: ?Limits to Growth?, by Donella H. Meadows, Jorgen Randers and Dennis L. Meadows.
Should we also ration money on a government level?
An aside: should we have regional currencies in the EU, will the Euro zone break up under pressures of diverging economies such as Germany and Italy.
In the past few decades, it has been argued that the decline of manufacturing in the North and Scotland was exacerbated by the over valuation of Sterling due to the exceptional performance of the financial sector in the City. Had the City a different currency from the manufacturing heartlands, perhaps their goods would have been more competitive.
One of the problems with tackling climate change is that many politicians appear unwilling to consider any solutions that would interfere with economic growth. How can the world?s financial systems be changed so that constant growth is not necessary? Do economies always have to expand and do we always have to have interest?
When oil supply decreases and cannot meet demand then economies will go into recession. One unfortunate scenario which may prolong the use of oil and so continue the harmful effects of climate change will be a cycle of recession and expansion.
During a recession, demand for oil would decrease, along with its price, making research of alternatives uneconomical. Then as economies begin to grow again the price will rise and some research may divert to renewables, however if un-sustained they will not have time to yield meaningful results and thus the growing price of oil will cause yet another recession.
We keep debating options for changing the world financial systems, but this may lead one to believe that we have a choice. If we carry on as we are, growth will collapse and world economies will descend into massive recession. Unemployment will soar, interest rates will rise along with house prices, and the dollar will collapse.
Another problem with the idea the market mechanism will quickly provide solutions as the price of oil puts pressures on the market, is that price rises have been shown to boost growth in the medium term (up until the point when supply cannot actually increase).
A ten dollar rise will typically knock 0.4% of growth, then after 18 months effects are neutralized due to new business opportunities in such fields as oil refineries, (it has been realized after the hurricane, that one of the greatest problems is lack of capacity for oil refineries), technologies relating to improving the efficiency of homes, renewables.
Of course increased investment in renewable is a good thing, however as mentioned before unless sustained this could quickly be withdrawn and no real alternatives becoming available.
This can lead to a positive feedback system, whereby increased economic activity will cause a net increase in energy demands.
The concept of peer to peer economics was discussed, rather than national currencies and local currencies issued by provincial authorities. This was employed in Argentina during its National currency crisis and hyper inflation. These authorities would routinely withdraw money out of circulation to try and combat inflation.
In Douthwaite?s opinion, it is flexibility that gives an economy strength. He believes that the Celtic Tiger (Ireland), whose economy has doubled in the last decade was due to the period of independence when they were not pegged to Sterling and before they joined the Euro. There are predictions that this economic success will falter if Ireland beings to slow down as it will be unable to control its own growth by changing its interest rates because it is restricted by being in the Euro zone.
Resource wars ? will the developed countries fight for the remaining resources rather than curb our usage?
Suggested read: the Rimini protocol: An oil depletion protocol. Some believe it is unfair as it calls for equal percentage cut backs in energy use for both developed and developing nations whereas in order to develop to our level, some countries may need to be given more ?slack? than we need. http://www.peakoil.ie/protocol
Douthwaite has also done work for Ireland on energy scenarios, i.e. where the energy will be derived, in terms of fossil, nuclear, renewable etc. Look these up at: www.energyscenariosireland.com
Are we in a peak? It is accepted by many that we are at least close to a production maximum. It is also possible that if we are at a peak, then a ?plateau? of production may continue for some time due to their having been a lack of investment in discovery of new fields in the past, so there is still new supply potential to offset declining existing fields.
Audience suggested web links: oilmodel.co.uk, ecovillage.org
But what can us as individuals do to influence government and call for such radical measures as carbon credits? Need to ask our own MPs however also need to get developing countries to take up the ideas as well.
World currencies are now less secure. Money used to be rationed as it was based on definite physical things, like gold reserves. Now it is based on non-physical things, such as ?activity?, money is no longer rationed, should it be?
If energy supplies were to decrease, then there would not be enough economic activity to support how much money there is, and this is what would lead to inflation and a devaluing of currencies.
Money could instead be based on carbon emissions. Price of fossil fuels could be in carbon units; renewable energy would have no carbon price.
Will we make these changes before a crisis ? humanity tends to wait till after a crisis to act. E.g. Italy threatening to pull out of the Euro may be the only thing that persuades the EU to consider regional currencies.
Richard Douthwaite works for The Foundation for the Economics of Sustainability, www.feasta.org, from which many of his ideas explored in this workshop can be found.
http://www.powerswitch.org.uk/portal/in ... &Itemid=71
Or you can read below but miss out on the graphs.
Economy workshop -
Led and presented by Richard Douthwaite, Author of ?When the Wells Run Dry?
Topics for discussion:
1. Will there be an end to economic growth?
2. Money reforms
a. National
b. International ? discuss huge national deficits such as the US
3. Fear of future resource wars
Trade deficits:
The US burrows a Trillion dollars a year, mainly from China, who buy back treasury certificates; effectively this means that the US gets cost free loans
Why does China do this? Some say it is a way of them undermining the superpower
Many people buy dollars as it has always been seen as a ?safe? currency to invest in. If the dollar were to tumble due to a future energy crisis, then the US will not be able to buy things with its dollars as they will be worthless.
This would in turn mean that they have to use exports to buys goods, flooding EU markets. Thus even if the EU was initially immune to an energy crisis which would most devastating hit the US first, then we would soon be in economic crisis due to the complexities of international trade.
Carbon allowance idea.
This is a concept of rationing carbon emissions/energy.
Part of the theory of ?Contraction and Convergence?, i.e. moving into a low carbon economy.
This chart indicates a suggested scenario where a level of carbon allocation could be set in 2010 below the level needed to meet reduction commitments.
This would a give a flexible allocation, indicated by the dashed region which the government would use to give flexibility to certain sectors that needed longer to make the necessary changes.
By 2030 the idea is that the economy would have converged onto the necessary carbon levels and then a year on year reduction would gradually bring down our emissions.
Such a systems seem may seem far fetched and any one country would be unwilling to implement it as it would cause higher energy costs, and thus reduce their competitiveness.
One possibility is that a ?club? of nations, such as the EU might get together and use a system of import and export tariffs t compensate the differing price of the energy against competing economies who are not in the club, such as the US.
This need not be to the detriment of poorer nations, who would have no reason not to be in the club also, as they would be paid money in exchange for their carbon credits that they do not use.
The EU has set up the Emissions Trading and National Allocation Plans which give carbon allowances to companies which they may trade between each other. Should it be business that gets these, should they be free? Or should it be individual citizens who get them?
Of interest: The Global Commons Institute, An independent organization campaigning on climate change: www.gci.org.uk
Books mentioned from audience: ?Limits to Growth?, by Donella H. Meadows, Jorgen Randers and Dennis L. Meadows.
Should we also ration money on a government level?
An aside: should we have regional currencies in the EU, will the Euro zone break up under pressures of diverging economies such as Germany and Italy.
In the past few decades, it has been argued that the decline of manufacturing in the North and Scotland was exacerbated by the over valuation of Sterling due to the exceptional performance of the financial sector in the City. Had the City a different currency from the manufacturing heartlands, perhaps their goods would have been more competitive.
One of the problems with tackling climate change is that many politicians appear unwilling to consider any solutions that would interfere with economic growth. How can the world?s financial systems be changed so that constant growth is not necessary? Do economies always have to expand and do we always have to have interest?
When oil supply decreases and cannot meet demand then economies will go into recession. One unfortunate scenario which may prolong the use of oil and so continue the harmful effects of climate change will be a cycle of recession and expansion.
During a recession, demand for oil would decrease, along with its price, making research of alternatives uneconomical. Then as economies begin to grow again the price will rise and some research may divert to renewables, however if un-sustained they will not have time to yield meaningful results and thus the growing price of oil will cause yet another recession.
We keep debating options for changing the world financial systems, but this may lead one to believe that we have a choice. If we carry on as we are, growth will collapse and world economies will descend into massive recession. Unemployment will soar, interest rates will rise along with house prices, and the dollar will collapse.
Another problem with the idea the market mechanism will quickly provide solutions as the price of oil puts pressures on the market, is that price rises have been shown to boost growth in the medium term (up until the point when supply cannot actually increase).
A ten dollar rise will typically knock 0.4% of growth, then after 18 months effects are neutralized due to new business opportunities in such fields as oil refineries, (it has been realized after the hurricane, that one of the greatest problems is lack of capacity for oil refineries), technologies relating to improving the efficiency of homes, renewables.
Of course increased investment in renewable is a good thing, however as mentioned before unless sustained this could quickly be withdrawn and no real alternatives becoming available.
This can lead to a positive feedback system, whereby increased economic activity will cause a net increase in energy demands.
The concept of peer to peer economics was discussed, rather than national currencies and local currencies issued by provincial authorities. This was employed in Argentina during its National currency crisis and hyper inflation. These authorities would routinely withdraw money out of circulation to try and combat inflation.
In Douthwaite?s opinion, it is flexibility that gives an economy strength. He believes that the Celtic Tiger (Ireland), whose economy has doubled in the last decade was due to the period of independence when they were not pegged to Sterling and before they joined the Euro. There are predictions that this economic success will falter if Ireland beings to slow down as it will be unable to control its own growth by changing its interest rates because it is restricted by being in the Euro zone.
Resource wars ? will the developed countries fight for the remaining resources rather than curb our usage?
Suggested read: the Rimini protocol: An oil depletion protocol. Some believe it is unfair as it calls for equal percentage cut backs in energy use for both developed and developing nations whereas in order to develop to our level, some countries may need to be given more ?slack? than we need. http://www.peakoil.ie/protocol
Douthwaite has also done work for Ireland on energy scenarios, i.e. where the energy will be derived, in terms of fossil, nuclear, renewable etc. Look these up at: www.energyscenariosireland.com
Are we in a peak? It is accepted by many that we are at least close to a production maximum. It is also possible that if we are at a peak, then a ?plateau? of production may continue for some time due to their having been a lack of investment in discovery of new fields in the past, so there is still new supply potential to offset declining existing fields.
Audience suggested web links: oilmodel.co.uk, ecovillage.org
But what can us as individuals do to influence government and call for such radical measures as carbon credits? Need to ask our own MPs however also need to get developing countries to take up the ideas as well.
World currencies are now less secure. Money used to be rationed as it was based on definite physical things, like gold reserves. Now it is based on non-physical things, such as ?activity?, money is no longer rationed, should it be?
If energy supplies were to decrease, then there would not be enough economic activity to support how much money there is, and this is what would lead to inflation and a devaluing of currencies.
Money could instead be based on carbon emissions. Price of fossil fuels could be in carbon units; renewable energy would have no carbon price.
Will we make these changes before a crisis ? humanity tends to wait till after a crisis to act. E.g. Italy threatening to pull out of the Euro may be the only thing that persuades the EU to consider regional currencies.
Richard Douthwaite works for The Foundation for the Economics of Sustainability, www.feasta.org, from which many of his ideas explored in this workshop can be found.