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Economics Level 4

Jeremy Rifkin: “The Zero Marginal Cost Society”

Posted by Matt Beer - May 20, 2014 - Economics, Economics Level 4, Energy, Level 4, Sustainable Economy
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In this talk at Google HQ, serial big picture author Jeremy Rifkin talks about how the internet is changing our society and our economy. More specifically, how the internet surrounding information communication has radically changed how our economy functions and how this will spread into a future “Internet of Things”, doing the same thing to the economy of physical goods. In other words, a fundamental driving force that will rebalance the foundations of capitalism, potentially making it unworkable and create a world that is hard to envisage today.

The term “marginal cost” refers to the cost of producing an additional unit of a product and capitalism is all about reducing those cost to maximise profits. Unfortunately when these costs are driven down to near zero, the product can them become free. Think of the internet. It doesn’t really matter if the website serves 100 people or a million, the (relatively) fixed costs of production remain the same and each additional person served costs virtually nothing. This is having a profound impact on people’s quality of live in two ways. 1) people are able to access that service for free or very little, in theory making their lives better. But it is also 2) causing many people who were traditionally employed in that industry to not have a job anymore. Near zero marginal costs combined with the ability to easily access the related service is wiping out middlemen and this phenomenon is set to continue as it spreads from industry to industry.

Here lies the fascination in this concept, just how will the world adapt to a new economic paradigm? Will it be a bumpy road or a smooth one? Will this make our quality of life richer or poorer? Will we need to foster the creation of government or co-op organisations to provide the more critical functions (such as journalism)? It is a very big idea and is one that is worth being aware of when trying to envisage the future.

Steve Keen – Hardtalk BBC 2011

Posted by Matt Beer - April 7, 2014 - Economics, Economics Level 4, Level 4
1

As one of the few to have predicted the 2008 financial crisis, Australian economist Steve Keen has something real to say about the un-sustainability of our current financial system. “Debt that can’t be paid off, won’t be paid off” is essentially the focus of this interview and he talks about how the financial system has allowed levels of debt to reach astronomical levels and in doing so the industry has become parasitic in nature. He argues that a modern debt jubilee (cancelling of debts) is a much more preferable outcome than 20 or so years of slowly paying off the debt in the usual fashion, and the economic stagnation that will accompany it. It will take a bold idea such as this to avoid living through another economic depression.

The Crisis of Civilization

Posted by Matt Beer - March 8, 2013 - Climate Destabilisation, Climate Level 4, Economics, Economics Level 4, Energy, Geo-politics, Level 4, Oil, Peak Oil Level 4
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This 77 min pseudo documentary “The Crisis of Civilization” is based on the Book by Nafeez Mosaddeq Ahmed of the same name. It goes through multiple parts each exploring various elements of our interconnected world, namely Climate Catastrophe; Peak Energy; Peak Food; Economic Instability; International Terrorism; and the Militarization Tendency with some final thoughts on a Post Peak World. I have mixed feeling about this one and I still can’t figure out if I like it. For starters it really is just a long talk done in an interview style with some old stock footage and the occasional custom animations to provide some visual distraction. I don’t have a problem with this, but that is what the pseudo documentary refers to.

What it does do well is take a holistic view of the world and the many problems we are currently facing and pulls them together. I am in broad agreement of most the overall stuff that Nafeez talks about, especially highlighting the link between our current neo-classical economic model and energy use. But the scientific/academic side of me cringed a few times at some of the statements he made and I was inwardly saying “that’s not technically correct”. It just made me question his thinking when he said this and this and therefore that. There was certainty some cherry picking of data and some logical inconstancies that made his truth more obvious than it fact it likely is.

For example he talked about how the world oil production would peak (I agree), then he said that nuclear energy uses oil (yes) and therefore oil peaking would make uranium mining unviable (which I cannot agree with). Yeah sure it might not work under the exact market conditions of today, but if I was a head of state with an oil crisis on my hands I would sure as hell prioritise getting oil to critical economic functions like electricity generation. Lets not confuse peak oil with running out all together and there is a hell of a lot of waste in the system so making just a small saving in domestic transport will free up more than enough to make nuclear energy viable (or building renewables for that matter). There certainly is a risk of what Nafeez talks about coming true, but there is probably a bigger likelihood that collective human effort and technology will be directed into solving some of these energy problems. That side of things doesn’t really get a mention. I could go through another few examples but I won’t.

What I will say to you watch this to get an overview of our problems from holistic viewpoint. You should certainly be aware of the broad areas that this film covers and how they fit together. As for the details I would say don’t take them as the gospel truth even there is a lot of truth in there. This is still basically another opinion film and I generally always have a problem with pure opinion as broad statements can be made without the viewer knowing the truth behind them. This is why I will continue to stick to keeping data at the centre of any videos and articles that I make.

PBS Frontline – The Untouchables

Posted by Matt Beer - February 9, 2013 - Economics, Economics Level 4, Level 4
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Frontline spends 54 minutes examining why no Wall Street execs have been prosecuted for any fraud related activities despite their clear knowledge of the toxicity of the bad mortgages contained within the complex financial products they were selling. There seems to be little political will to go to trial and win the tough to prove cases. Is it a case of “too big to jail?”

Watch The Untouchables on PBS. See more from FRONTLINE.

PBS Frontline – Money, Power & Wall Street Part 4

Posted by Matt Beer - February 9, 2013 - Economics, Economics Level 4, Level 4
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In the final instalment of this four part PBS special the culture of Wall Street and investment banking is explored. It was a culture of making money and everyone was in on it. Bankers, really glorified salesman, were encouraged by management and a system of lucrative bonuses to sell derivatives to everyone, from municipal governments, countries trying to get into the EU, even nuns.

Ethical boundaries were deliberately crossed in the stampede to sell these complex products to unsuspecting customers. Hell, even the bankers themselves didn’t really understand what they were selling. It all looked good on the surface until the market changed in 2008 causing the subprime crisis in America to spread throughout the world.

People around the world felt the pain and the occupy movement rose up out of the millions of unemployed and disillusioned. But despite the resilience of this movement the banks and their lobbyists are still firmly in control and have successfully watered down any attempts to reform the system. So we are still where we are before the crash began. The big banks are still too big to fail and the risky derivative market is (mostly) hidden from regulatory oversight. It appears that the lessons have not been learned.

For me it is only a matter of time until another bubble pops. Again I think a spike in oil prices will prick this bubble just as it has the last several recessions. Add in climate change and the fact that a huge part of the global stock market value is based on fossil fuel reserves that cannot be extracted if we are to have a safe climate, the events of 2008 are just a taste of things to come.

Watch Money, Power and Wall Street: Part Four on PBS. See more from FRONTLINE.

PBS Frontline – Money, Power & Wall Street Part 3

Posted by Matt Beer - February 9, 2013 - Economics, Economics Level 4, Level 4
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In the third of a four part series, Frontline takes a look at how freshly elected President Obama dealt with the incredibly daunting task of fixing up the worst economic mess since the 1930′s. A key part of this would be the selection of the economic team that would ultimately deal with the situation. Would he bring in outsiders to reform the system in line with his fiery campaign rhetoric? Or would he stick with the experienced Wall Street players who knew the system?

Ultimately Obama went with the status quo and wasted this once in a lifetime chance to leverage the banks into accepting reform that would address the root causes and help prevent a repeat of the situation.

Watch Money, Power and Wall Street: Part Three on PBS. See more from FRONTLINE.

PBS Frontline – Money, Power & Wall Street Part 2

Posted by Matt Beer - February 9, 2013 - Economics, Economics Level 4, Level 4
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In the second of a four part series, Frontline examines how the financial top brass dealt with the dilemma that this systemic risk caused. The basic survival of the fittest ideals of a market system were continually discarded as the reality of the “too big to fail” situation was revealed. Being backed further into the corner the choice between letting the markets self correct or bailing out the banks became increasingly easy to make as it was obvious the system would not self correct. In unplanned desperation Geithner and Paulson turned to the government and managed to produce a blank check which they handed on to the banks.

Watch Money, Power and Wall Street: Part Two on PBS. See more from FRONTLINE.

PBS Frontline – Money, Power & Wall Street Part 1

Posted by Matt Beer - February 9, 2013 - Economics, Economics Level 4, Level 4
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In this rather excellent 4 part series the Frontline team from PBS documents the events surrounding the global financial crisis told through the lens of 17 interviews from insiders to give a unique first hand view of how it all unfolded.

The first part covers the build up to the 2008 crash. The repeal of the Glass Steagall Act by the Clinton administration allowed investment banking to merge again with everyday public banking. This helped create the “too big to fail” financial institutions central to the crisis. New fields of financial engineering in derivatives trading created new products such as credit default swaps and collateralised debt obligations (CDO’s) in turn created a new market that was hugely profitable and totally un-transparent. The rational behind it was distribution of risk that would help lower the banks exposure and allow for greater levels of lending. In plain english they created a very complicated means to gamble on both real world market changes and positions that other organisations were taking. Like betting on a football match and then betting on whether your friends would lose money too. This of course did not reduce risk to the system but rather spread it around so that everyone would be exposed as well as create the illusion that the risks were lower than they actually were. The banks loved them and the bubble grew and grew until one day it popped.

I should also add from my energy point of view it was a shame that oil prices were not mentioned once as the pin that burst this bubble, but the mainstream media is still way behind on a lot of things.

Watch Money, Power and Wall Street: Part One on PBS. See more from FRONTLINE.

Corrupted?

Posted by Matt Beer - October 19, 2011 - Economics, Economics Level 4, Energy, Level 4
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Before the financial crisis I never really understood what all the business bits in the news really meant, the whole economy was a bit of a mystery. Since then I have learnt a few things, one of which is that money is largely an illusion. As an individual it is very real, how much I have will determine much of how I live my life. But on a societal/global level it is simply a way in which we humans organise ourselves and the economic system is just a loose rulebook on the distribution of materials and labour. As much as we think the rulebook is based on rules that are fixed like the laws of nature, it can in fact be changed at any time, you just need the political will to do so.

Which is why it is encouraging to see the whole Occupy Wall Street movement spread throughout the world. As this great Business Insider chart article shows the economic system is well and truly broken. I have said for a long time that the 2008 financial crisis wasn’t a crisis enough. Maybe I was wrong.

If economic growth is the main driver in human behaviour (on a governmental level) and this apparently is for the good of the people and the future why is this link now broken?

The current system is now supporting the rich at the expense of the 99%. Also the levels of debt will not be able to be paid of for decades. The way in which we extract our energy and extract resources to feed this economy is slowly poisoning or eroding the natural capital base on which we are all dependent. Our desire for babies and our belief in family values has caused a boom in consumption, indirectly harming others. The notion of “love miles” – jumping on a plane to see our loved ones – is also doing the same thing. And once again, the bottom 99% are going to be most affected by all of this. Just what is the system designed for?

One of the problems is that we have all grown up thinking our actions are inherently “good”. It has been a long time since we as a society have looked in the mirror and questioned this.

If this video of Dylan Ratigan doesn’t stir the blood and get you thinking I don’t know what will. Just as the political process has slowly been corrupted, so too have our values as a society.

Bailout, Debt, Economics, Economy, environment, fossil fuel, Politics, United States

Overcoming the Resource Curse – Stanford Uni

Posted by Matt Beer - September 10, 2011 - Economics, Economics Level 4, Energy, Geo-politics, Level 4, Peak Oil, Peak Oil Level 4
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Terry Karl, Gildred Professor of Latin American Studies and professor of Political Science at Stanford University, discusses overcoming the resource curse. Also known as the paradox of plenty it is the fact that most resource rich, in this case oil rich countries are performing far poorer than non resource rich countries in terms of development and governance indicators, defying logical economic thought. This is largely a phenomenon in countries which have poor governing systems and high incomes (from the oil) increasing the likelihood of corruption. These oil rents/income break the traditional relationship of governments and people with the tax, representation, accountability dynamic found in developed countries such as Europe and the US. When government coffers are not dependent on taxes and are almost exclusively dependent on secret transactions between oil companies and governments it leads to the continuation of this corruption cycle. Government leaders can spend this money however they like, building up military and buying off certain key sections of the population (religious, ethnic, regional groups, etc.) and keep control of government through more autocratic means. A story that exists in the majority of oil producing countries.

Terry argues that transparency in disclosing payments made from oil companies to countries is a key first step in breaking the cycle of secrecy which helps shape the current political situations of civil war and conflict in many of these oil producing countries. Without it, development and democracy will be permanently hindered. It also has large ramifications for the world as a whole. Reporting on oil production and reserves is highly dubious in terms of accuracy and the biggest, most profitable market in the world uses this extremely bad information to predict oil prices. This helps breed uncertainty, speculation and ultimately volatility in the marketplace which is bad for every consumer of oil but also completes a viscous circle with oil producing countries as their incomes yoyo up and down, causing any budget planning to go out the window. This also helps breed mistrust between the various parties, particularly with the left out sections of the population of the oil producing countries, increasing likelihood of conflict, interruptions in oil production and further market volatility. The resource curse affects us all.

Africa, Economics, Geo-politics, Oil Companies, Oil Producing Countries, OPEC, Peak Oil, Reporting, Resource Curse, Video

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