Are we investing in endless growth prospects or something more sustainable?
Indigo Dutton
that started me thinking/worrying. I welcome your input if you have
thoughts on the issue, particularly if you can explain away my
concerns. This is how I'm seeing it right now though:
There appears to be a "nature vs. commerce" trade off when it comes to
the opposite way in which human population growth affects the
environment vs. how it affects the economy. Nature benefits when there
are fewer humans, given our polluting ways, while the economy relies
on an ever increasing consumer base. We either need a new model for
our economics or a new planet to house all the humans that must
eventually be created to keep the ever expanding stock market
expanding.
The prices of stocks on the stock market all have priced in the future
sales potential of the underlying companies. No one invests in a
company that is expecting to only be selling the same number of
widgets in 10 years as they are selling now. That stock price wouldn't
go up, and you buy it for how its price will increase, not for what
it's worth now. So not only does the company need to convince
potential investors it will sell more widgets in 10 years than it
sells today, but that it will also sell even more in 15 years than it
sells in 10. It has to have an ever increasing consumer base. Yet each
product that gets sold had to first be produced, and you can only
produce new widgets out of the Earth's natural resources. You might
add a lot of human labor as "value added" which is most of the price
that is charged for the widget, but it still relies on some physical
resource being used, whether oil to make a plastic or metal to make
something or some other resource used to make something else. So no
matter how much you get humans to conserve, each new human MUST use
more of the Earth's resources somehow in order for the economy to be
stable vis a vis the stock market.
I would argue that the problem is not just that the true price of
carbon is not being factored in when it is used, but that the true
cost to the Earth of every single natural resources is being ignored.
We only price items by "what the market will bear," the price agreed
upon by people who have access to the resource and those who want it.
But where does mother nature get to say, "Um, excuse me, but it
actually took me 10 million years to make that and I think it's
actually worth quite a bit more than you're trading it for. And you
won't see me making anymore for quite a long while, folks, so don't
plan on this ponzi scheme of yours working out indefinitely. Thanks
for listening. Have a nice life."
We not only need fewer people being born so that fewer resources are
inescapably used for the necessities of human life (water, food, etc.)
but we need fewer consumers and an economy that creates well-being for
humans and other life forms just fine under those circumstances. But
no one at all out there seems to be planning such an economy. That is
why ultimately none of what is happening to try to fix the current
global recession is going to fix anything for long. We are patching up
an unsustainable system.
This is why I think that the current system has a natural limitation
and I wonder how soon the effects of coming up against that natural
limit will begin to affect our daily lives. And what will owning
property and having renters mean at that time? What will be the value
of money held in cash in a bank, versus money held in gold, or even
more useful, guns to protect the gold you have? And what is even the
value of gold? There were bubbles when the world was on the gold
standard also. Any system built on the idea of increasing value is a
ponzi scheme. There cannot be ever increasing value without an ever
increasing consumer base and yet the planet can only house so many
humans, particularly given that each time a human consumes a product
the environment receives a blow. At some point either the planet
cannot support our life at all or it cannot support our economies.
There seems to be no win-win on this front, unless the very structure
of our economy stops being about the value of growth.
The economy either collapses 1) because global warming has caused
there to be water shortages, killing most of the crops, putting ag
workers out of work, deflating the tax base, and making any purchase
other than food out of the question for most people, not to mention a
whole host of other environmental woes with a large human population
wanting to live with US living standards; or 2) because we have
stopped creating new people at a rate that grows the population and a
shrinking consumer base cannot support an expanding stock market, nor
can a shrinking worker base support social security and other
entitlements for a large aging population.
Is the investment in real estate somehow outside this dynamic, because
people have to live somewhere protected from the elements (and each
other)? Or do you wind up in a situation where the sheriff's only job
winds up being evicting tenants who aren't paying the rent because the
economy has utterly collapsed and they can't find jobs?
Please show me the light.
Aditya Angrish
Indigo O. Dutton
I agree. I think it may be more like 30-50 years that we find there is no new bubble to inflate us out of a confrontation with the fundamentals.
Indigo
Indigo Dutton
are betting on when we invest, I did come across someone else's
comment on the article I read that not only has a similar take on it
to me, but that fortunately was able to propose some solutions. I
think adopting some set of solutions is inevitable, or else the sky
really does essentially fall. Action will eventually have to be taken
to protect us from the current fundamentals, and I'd like to position
myself to be invested in that path forward. In case it interests you
too, here is what the other commenter wrote:
"This column doesn't connect the dots. Yes, changing the Dow doesn't
change Mother Nature. And yes, a saner energy policy would help. But
its our entire economy, not just a few energy policies, that's
embedded in Mother Nature.
And it's not just our economy that's embedded. It's everyone's. Yet
every country in the world believes it's entitled to keep growing.
More than 30 years ago, former Harvard economist Nicholas Georgescu-
Roegen pointed out that it's physically impossible for the global
economy to grow forever: according to the laws of physics, more heat
and pollution will result -- even from the so-called "knowledge
economy". But the dominant theories of economics call these effects
"externalities", as if Nature is an afterthought. Truth is closer to
our being Nature's afterthought than the other way around.
Some countries need to grow. Those of us in the OECD probably don't.
Some claim that GDP growth is favorably related to "happiness",
environmental cleanliness, and so on. But at best those relationships
are correlations only, not causation. And some supposed relationships
(such as the "environmental Kuznets curve") don't exist even as
correlations for global problems like greehouse gases. The theories
that say growth is necessary to fund social security, employment, and
so on to growth are based at least in part on politics and ideologies,
such as the American allergy to taxes. Again, Mother Nature doesn't
care about our tax burden.
Both capitalism and Communism are based on the fantasy that we can
keep producing and consuming more stuff every year, forever. The
current version of capitalism is based on "productivity", which goes
"up" when people get axed -- how about an economic theory that
stresses the idea of fulfilling employment for people, instead?
Current capitalism encourages us to throw everything away every two
years, so that production, consumption, and "innovation" can increase
-- how about an economics that encourages companies to make quality
stuff that lasts or can be repaired, instead? And in current
"economics of scale", the only scales that matter are the industrial
and the global -- how about the human scale, instead?
Both in this column and his book "Hot, Flat and Crowded," Tom Friedman
mentions many pertinent facts, but doesn't see their significance.
Preserving market capitalism and inflating the American economy to an
even more obese level are not the solutions. (Ditto for Japan, Germany
and lots of other countries). The time has come to look for a new
economic theory that doesn't make a fetish of growing GDP, and then to
act on that basis. What we need is a new economics, not just new
policies."
— A.J. Sutter, Tokyo, Japan
Hoa Nguyen
I believe the world is sacred, it "knows" whats going on. So don't try to fix it just let it be and let the consequence be. Either it is a waste of your time (and mine) thinking about it or you'll cause trouble to the world itself. Communists tried to fix the economy once and it caused at least 50 million deaths and suffering.
My life decision making are concentrated on increase health, happiness and prosperity. I don't solve problem. hehe =)
Indigo Dutton?? hmm I don't recall who you are. Were you in mr. Grant finance class?
-Vincent
http://trinelight.com
Indigo O. Dutton
Hi Hoa,
I don’t recall your name either, but I guess we were both in Grant’s finance class. I’m also in his upcoming RE Investment class.
I appreciate your input and also that clearly you are a person who cares about others, if you once found yourself interested in these sorts of questions. I agree that a single person cannot solve the intricate and extensive problems facing our civilization as we confront the conflict between eternal growth and limited natural resources, and the Earth’s own feedback loop that plays into the big picture. The Earth’s vote is a lot stronger than any of ours, yet as citizens of a Democratic Republic, we do have a responsibility to try to form informed opinions on the matter, if only to decide which policies to support with our elected representatives. I don’t think anyone could argue that the decisions made by America, a nation with 5% of the world’s population which consumes 25% of the world’s resources, don’t actually make any difference. Our decisions are life and death decisions for poor people around the world, particularly since so many other nations seem to want to emulate certain aspects of our society that are the very aspects where we are doing the most harm. Imagine if 70% of adults in India and China had a car, the same as is the case in America! While we can’t “solve the problem” we can make decisions that make each of us less a part of the problem, say by walking when we have a choice between a 20 minute walk and a 5 minute drive, and by voting in favor of referendums for more high speed rail, which the other developed nations already have in great supply.
But really, none of this is quite the point of my original post or the follow up from the other NY Times commenter. My point is that in making decisions for my own “health, happiness, and prosperity,” something I’m sure everyone wants, I am increasingly aware that these issues cannot be ignored. Not if I want to truly increase my chances for health, happiness and long term prosperity, not just my illusions about their attainment and sustenance. I am trying to think more broadly in terms of how I plan for this personal well-being, as well as being a responsible citizen in trying to contribute to overall well-being with the choices I make. I don’t want to be selfish, and I do want to be prosperous, and I believe those two things are most likely to both be achieved when we pursue the greatest overall well-being, because as you say, the world may very well be sacred, and proactively so. If it is, what would it be voting for: a system where more and more people take more and more resources from the Earth at the expense of the entire ecosystem, or one where we take what we need and distribute it in a manner that most people have needed sustenance without anyone needing to have billions of natural resource units in their possession (sometimes called dollars) that they cannot personally utilize (spend) all of, but which still had to be extracted from the Earth? It’s not about forcing anyone to give anything up (aka the communist revolution) nor even about cutting off the heads of the aristocrats (aka the French democratic revolution). It’s simply about making policy decisions and personal decisions in alignment with the direction we actually need to head in order to have a sustainable economy. I would argue that right now that is not what is happening, and that because of that I have doubt about exactly what would be the best investment to make right now. I think the chickens are going to come home to roost pretty soon, and I want to be positioned properly to face the least negative impact personally when they do.
That said, after having collected more info and reflected more since last writing a few days ago, I have come to believe that real estate may very well be the best place to invest, even if the threats of global warming and other environmental issues (water shortages, increasing floods and fires, etc.) truly do materialize within the next 10 years, as many scientists are warning (see the Frontline piece called “Heat” that is currently available on the PBS website if you are interested). Used to be they said 2050 was our cutoff, but now they are saying irreversible changes will occur by 2017 if we keep going as we have. The worldwide recession has probably bought us some time, because we are using less fossil fuel when shipping fewer products around the world due to decreased export demand. But still, this is no longer a “somebody else’s problem” sort of issue. We will live to face the consequences of our own action or failure to act. Still, I think real estate will be the most dependable investment so long as one is well insured and lucky to see that one’s insurer does not go under. Though with property there is increased risk of direct environmental “smack back” from nature, the odds are higher that the economic effects of overall environmental damage will be felt before one is a direct victim. So that would hit employment, consumerism and stock values more than the value of real estate, so long as you could evict tenants and find new ones as unemployment increased.
And of course I realize that not everyone believes in science and the warnings of scientists. I myself was surprised when viewing the Frontline piece to hear that they have revised down the timeline from 40 years to 10. I do listen to scientists, and so I factor in what they say in trying to plan for prosperity. In case any of you do also, I share this info, but I realize many may not think of these as investment issues and so I thank those of you for your patience with my exploration of this and hope you benefit from it somehow.
Best regards,
Indigo
From:
BAREprof...@googlegroups.com [mailto:BAREprof...@googlegroups.com] On
Behalf Of Hoa Nguyen
Sent: Thursday, April 02, 2009 2:56 AM
To: BAREprof...@googlegroups.com
Subject: Re: Are we investing in endless growth prospects or something
more sustainable?
So, at 2:30 i checked my email
and read this article. And I remember when I was 10 years old I thought/worry
about this issue once. Think it came to light that there is no way I could
solve the problem what i was thinking was a waste of time. Life is full of
happiness and other prosperity which I should be thinking.
Hoa Nguyen
Wow you covered all my points. Your thought are deep. Are you a philosopher?
Let say: Human nature wants to obtain something with the least possible of energy and have a maximum gain of profit. A person will not walk 20 minutes down the street if he can use his car to get him there in 5 minutes. Imagine saving a world and cost 75% of your efficiency or 75% of your lifetime, which is a big sacrifice. People don't want that. So people will be craving for the earth energy to substitute for their time and energy. No amount of scientist warning would stop them doing so. Aligning your personal goals with the world benefit is extremely hard!
I agree in general real estate a great investment. However, there are other factors such as your situation, time of investment, usability of the investor, or capacity...etc... Every of them has a deep and profound impact on your decision.
I also agree that it would be best if we can align our personal goals with policy decisions. That is more like a win win situation. If you read psychology about the famous "the prisoner dilemma", win-win occur at the odd of 1:4 . Best way to break through is to have good communication and good understanding. This era has come to the information age so communication has improved. I believe our future is bright. Haha.
I think I stop here. DOn't want to spam the group. I just want to share my perspective. Its not neccessary the truth or anything. Thank for your input. =)
-Vincent
http://trinelight.com