Cows past, present, future


Every time I drive to St. Andrews I pass a small herd of tawny-brown and white-faced cattle. They’re usually facing the sun in a vivid green pasture on a hill overlooking the St. Croix River and St. Croix Island. It’s beautiful and bucolic—a scene from another century.

The scene always gets me thinking. A century ago, this area was almost entirely self-sufficient. Along with the farms were highly productive fisheries, a busy logging and lumber industry, and a lucrative craft, trades and manufacturing culture.

A colleague of mine brought home just how recently this culture has disappeared. Now in his late 40s, he can remember in his youth travelling with his dad into the woods to visit the bush camps. His father was a supervisor there, overseeing—and paying—the workers, who were still using teams of horses to draw the logs out of the forest, right up until the early 1970s.

The changes we’ve seen over the last 40 years have been remarkable. But fasten your seatbelts. Even more are on the way. On the one hand we’re seeing the exponential growth in knowledge and new technologies. On the other hand we’re experiencing the unprecedented degradation of our environment and the inevitable decline of our fossil fuel economy. The great hope is that we’ll be able to use our newly minted knowledge to overcome the looming prospect of a growing scarcity of natural resources—including both fuel and food.

One of the more fascinating things about change is that it’s not exactly linear. A few short years ago, leading financial economists were telling us that our generation could look forward to at least another 20 uninterrupted years of unrestrained economic growth on the stock market and in the real world, with only a few minor corrections. Obviously, that prediction isn’t quite working out. After the events of the last couple of weeks, nervous financial professionals on network television are now publicly worrying that we may be headed for another Great Depression as the woes of Wall Street hit Main Street.

In my mind, the trouble with Wall Street is it’s too complicated, with its derivatives, futures, commercial paper, short selling and the like. Real life is a whole lot simpler. Here in the real world, we learn the hard way not to spend what we don’t have. If we live on credit and for some unexpected reason lose our job, we may lose our car, our house, or everything we own. In the real world there’s no safety net for you and me.

But a great many of us have been drawn into the credit-crazy Wall Street world. The government has very actively encouraged us to buy RRSPs to offset our taxes and to bolster our old age pensions. The banks have marketed low-interest consumer loans, escalating interest credit cards and low-to-no-down-payment mortgages. So Americans and to a lesser extent Canadians have borrowed themselves silly.

The entire system, of course, has become a giant Las Vegas casino. However safe it may seem, an RRSP is still a gamble on the stock market. And one of the bad things about RRSPs is the fact that you can’t take cash them out without paying a big penalty in income tax. However, when the market gets bad, you can move your investments into the money market—which is kind of like parking your money on the side of betting table.

This has always seemed a safe way to go—until now. With financial institutions losing such huge amounts of money in the sub-prime mortgage crisis, they’re facing a serious shortage of real cash. Or, in banker parlance, liquidity. One of the few sources of liquidity available is in the money market. And ordinary investors can easily get so nervous that they’d start to pull their cash out of the money market. Had that happened it would have caused a panic—with consequences of epic proportions.

To put some liquidity and spine back into the market, the US government and international banks have pushed over a trillion dollars of liquid cash into the US financial system. Most of this bailout will come from the US taxpayers.

To put this in perspective, just before the Great Depression millions of ordinary people invested their life savings and even borrowed money to invest in the stock market. It was their panic that sent the markets plunging into ruin. It wasn’t until the early 1950s that the value in the stock market rose to the level it was in 1929.

One of the things that this current crisis should teach us is that we need some regulatory protection for small investors. If the government wants us to “save” using RRSP investment tools, it needs to either guarantee our initial investment, or allow small investors to get out of the market altogether—without penalty—when stock markets get too volatile. But that’s never going to happen, because the markets are now too dependent on our personal savings.

According to Kevin Phillips, author of Bad Money, the events of the last couple of weeks could be just a warning of what’s to come. In an interview with Bill Moyers, Phillips cited his ‘seven sharks’ of the economy, “…the first is financialization because we’re so dependent on this industry that’s sort of half lost its marbles. The second is that you have this huge buildup of debt, absolutely unprecedented anywhere in the world. The third is you’ve now got home prices collapsing. The fourth is you’ve got global commodity inflation building up. The fifth is you’ve got flawed and deceptive government economics statistics. The sixth is that you’ve got what they call peak oil where the world is, to some extent, running out of oil. So it’s not just commodity inflation, it’s a shortage of oil. And then the last thing is the collapsing dollar. Now, whenever you get this sort of package in one decade, you got a big one…I think it’s…on a par with the Thirties.”

So getting back to those wonderful brown cows on the hill in the sun. They and their local farm may pointing not to yesterday as much as to tomorrow. No matter what the marketplace does short term, we’re all likely facing a future with much tighter constraints and greatly limited resources.

Today it takes a whopping 9 calories of fossil fuel energy to put just 1 calorie of food on your plate. We can’t afford to keep living on borrowed energy. We—and our politicians—need to wake up. Sustainability in the future can’t be supported on government-subsidized global trade. It will have to be based on a much greater extent on our ability to produce what we can, as effectively and sustainably as we can, locally.


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