Tuesday, November 10, 2009

My Permie Homestead Unified Beliefs, Part 3: Economics and Localization

This is Part 3 in a series I call "My Permie Homestead Unified Beliefs."  If you are new to my site, check out the introduction to see what this series is all about, plus links to the first two parts.  IMPORTANT NOTE: Because of the time between when I envisioned this post and when it is being posted, I am going to take a cop out and come back to it more at a later date.  Since posting my introduction to this series, I have been reading a lot about financial permaculture, slow money, and other systems of finance and economics that I want to explore more before I can write a post like this as well thought out as I want it to be.  But, I will share a few of my thoughts so this post isn't entirely hollow.

Another topic that I have complex ideas about is economics, and once again Permaculture answers some of my questions for me.  As the introduction post says, I have thoughts and feelings about taxes, money, the economy, and globalization/localization that don't always fit well with each other, or with some of my other personal paradigms.

As everyone is aware, the economy of the United States and of other countries all across the world have been faltering this year and last.  The solution the US government and many other governments have pursued has been to issue "bailouts" or "stimulus" packages for failing banks and faltering corporations.  In the last twelve months, the United States has passed legislation to spend nearly $2 billion in this fashion.  Because the government budget was already in deficit, this stimulus and bailout money was entirely deficit spending, which basically amounts to creating money out of thin air.

Economics may be where I do not necessarily share the same views as many permaculture enthusiasts.  I generally tend to be small government because the bigger a government is, the more money it spends.  I'm not "low" taxes but I do believe we should only pay necessary taxes.  I also believe in maintaining a conservative household budget, just like I would advocate maintaining a conservative ecological budget.  I will try to give an example of each other these.

As far as small government, as you can probably guess from my earlier paragraph, I am quite against the bailouts and stimulus packages.  They put dangerous strain on our economy by hugely inflating the money supply, and vastly increasing our national debt.  I think of our money supply the way I think of stocks.  Imagine that each dollar bill, printed or electronic, is a "stock certificate" in the United States economy.  In a crude way, it really is.  Foreign exchange (forex) traders buy and sell dollars the way Wall Street buffoons buy and sell stock in companies.  And just like the Wall Streeters are betting on a company when they buy a stock, forex traders are betting on our nations economy when they buy dollars.  When we print money that doesn't really exist to pay for things like bailouts/stimulus packages, we devalue the dollars those people are buying, because anytime there is a lot more of something, it becomes a lot cheaper, right? And guess what, the dollars those forex guys are buying are the same dollars you have in your bank account.  I will now give a shortish lesson on inflation.  If you don't want to read it, skip the next 2 paragraphs.

Imagine you own 10 shares in permiehomestead.com stock. (It won't ever exist, but we'll say it does for the sake of argument.)  And let's say there are 100 shares of permiehomestead.com stock available in the world.  And finally, let's say permiehomestead.com is worth $100.  That means each share is worth $1, and your 10 shares equal $10.  Now, let's say that permiehomestead.com has been doing well in the market, and I decide I need more shares to sell, and I split my stocks.  So now, instead of 100 shares, there are 200 shares.  But my company is still only worth $100 (until my stock prices start going up) and I have 200 shares on the market, so each share is only worth $0.50 now.  Well, as a shareholder, you are entitled to another 10 shares, bringing your total to 20 shares and maintaining your shareholding value at $10.  Everything balances out nicely, and if you were a shareholder, you'd be quite happy, because now you have twice as many shares to make money off of, right?

Now imagine the exact same scenario.  Let's say the United States has a GDP of $100 (we'll use small numbers so I don't confuse myself) and you have $10 of it in the bank.  Your purchasing power is 10% of the GDP.  (Once again, I know this is a ridiculous number, but the logic carries out if you make the number $46 trillion, or whatever our GDP is.  Trust me, I used to teach math.)  Now, the United States government decides it needs some money to bailout Ford or Chase or whoever, so it prints another $100.  So now, the US economy has $200 in it.  But they never send you another $10 to keep your purchasing power at 10% of GPD.  You still have the same lousy $10 in the bank, and your purchasing power has dropped to 5% of GDP.  And that, ladies and gentlemen, is the basic gist of inflation.  (For anyone interested, the numbers are more like a GDP of $46 trillion, and the bailouts/stimulus packages created about $2 trillion, plus another unaudited production of about $4 trillion by the Federal Reserve, all on the Fiscal Year 2009 budget. This means that in 2009 alone, the money supply expanded by about 13% of GDP, and the one dollar package of spaghetti noodles you bought on January 1st, 2009 will cost $1.15 on December 31st, 2009.

Naturally, I see this kind of spending that leads to massive inflation as a slow robbery of my money, and I reject it's validity, therefore rejecting the validity of bailouts/stimulus packages.  Next, I'd like to discuss what I mean by "necessary" taxes.  The most obvious one is our military spending.  While I do think military spending is necessary, I absolutely do NOT think it is necessary in the volumes the we spend it.  Our annual military budget is larger than something like the next 5 countries combined.  This is enormously too much, and I believe it could even be dangerous to our liberties should someone even crazier than some of our more recent presidents (and I do intent the plural, I'm not just talking about "W" here) become elected.  Not to mention of course the danger it implies to anyone we decide to go after.  If we spent a lot less on the military, we wouldn't be able to engage in so many quagmires.  We might even have to keep our troops home, defending our ports and borders from foreign invasion/attack, but otherwise going about their training and leaving the rest of the world alone.  We would probably make a lot fewer countries angry with us, and hopefully the desire to terrorize our country might subside a bit as well.  This has gotten long enough, so I won't explain any more examples of where spending less might solve some of our problems, and I bet you can think of others.  Basically, I want our nations leaders to set our tax policy to the original meaning of "conservative" economics, which involves conservation of dollars.

And speaking of conservation, this brings me to my last topic, keeping a conservative household budget.  Again, please notice the lower-case "c" on the word conservative.  I'm not talking about the Republican political party's idea of what conservative means, I'm talking about the original meaning of conservative, namely... conservation, saving, protecting, preserving for the future.  That conservative.  So in the household, I think people should learn to spend less money, save more money, consume less material, consume less resources, just consume less in general.  I think credit cards are a bad idea.  There is a Native American proverb you have probably heard that says "We do not inherit the earth from our ancestors.  We borrow it from our grandchildren."  I think the same logic applies to using credit in your household budget.  "Credit appears to better our lives today, but it borrows from our happiness tomorrow."  I don't know if anyone has said that before, and if they haven't, you can quote me.  So, to sum it up, I think people should conserve their money and household economies the same way they try to conserve water, forests, the soil, and any number of other things.  Remember, the economy IS part of the environment, so your household economy is part of your personal environment.  Be ecological in all things.

Finally, I would like to say that I will definitely be writing another post about economics sometime in the future.  As I mentioned before, I am only now starting to read about slow money, financial permaculture, etc., and I would like to revisit how permaculture effects my personal beliefs about the economy once I know more about those topics.  And I didn't even touch on localization because this post is already far too long.

Thanks as always for reading.  Please comment if you have the time after reading this treatise and let me know what you think.  And if you have made it this far, give yourself a pat on the back.  Heck, if you've made it this far, comment and let me know, and I'll issue you an "official" share for my imaginary permiehomestead.com stock certificates.  And please come back soon to read the next post in my "Permie Homestead Unified Beliefs" series, which will probably be the most controversial post of all since I will be talking about politics. (Cue dramatic music!)  Political Science was my major in college, so I can't help but slip a little bit of politics into this blog.  And you've got to admit I've done pretty alright so far with sticking to permaculture/gardening/etc.  Anyhow, bye for now, and all the good things to you.


  1. i think most permaculture enthusiasts would agree that smaller, localised governments are preferable to massive federal nation states. personally, i'd like to see the sovereign state of Cascadia be realized in my lifetime. I think the pacific northwest-- on either side of the border-- has more in common with itself than with the rest of our respective countries. i also think the united states would be better off as 50 sovereign states, not united under a federal overseer.

    as for the bailouts-- i agree with you 100%, and i'm as 'socialist' as they come. all they're doing is propping up the massive, collapsing, global corporations at the expense of everyone on the ground. a seriously bad idea.

    as for military spending being necessary-- i think it's a manufactured necessity. that is, not all states need a military (look at costa rica), but america certainly does, mainly because of their imperialist foreign policy.

    anyway, i'm just kinda rambling now. good post-- i look forward to reading the next one.


  2. I have a the Cascadian flag on the back of my truck! I'm completely with you, I think the Pac NW has more than enough to be it's own sovereign nation-state. And with the environmentalist mindset that seems to permeate the region, I think it would make a great example for the rest of the world. I'm sure you've probably read it already, but if you haven't, read Ecotopia by Ernest Callenbach. It's one of my favorite books all-time.

    As for the military spending, I agree with you. I don't think all countries must spend money on a military. But I do think some level of military spending will always be necessary in this country, precisely for the reason you mentioned, our foreign policy. For many generations we will be dealing with people who we have harmed in some way, and I think a nominal level of spending will always be necessary to keep us from being invaded by any number of the countries we have pissed off in the last 60 years.

    One other thing I'd like to see realized in my lifetime aside from a sovereign Cascadia is a massive reduction in military spending. Imagine if the $450+ billion were cut in half, and the $225 billion reduction was invested in the permaculture movement! Not only would our military budget STILL be bigger than the next couple countries combined, but us permie's could feed the entire world, and solve a lot of the worlds' ecological problems while we were at it!

    But I'm getting ahead of myself. I'll talk about how I think permaculture could solve all of the worlds' problems in another "Permie Homestead Unified Beliefs" post.

    Thanks for your awesome comments Mark!

  3. I feel like I should give another example of "necessary" taxes. I, for one, think the National Parks and Wilderness areas are absolutely necessary. In fact, I think they should be expanded to protect more land. If I had the choice of where my tax dollars went, I would send a lot if not most of my taxes to the National Park Service.