The Freakonomics blog offers up a long-ish but lucid discussion of the ongoing financial crisis. I recommend the whole thing, but in a nutshell:
Financial institutions borrow money all the time to fund their investments. When the real estate bubble burst, a lot of those investments lost value rapidly, leaving banks such as Bear Stearns and Lehman Brothers unable to borrow new money and unable to repay their existing debt. This situation can lead to a domino effect -- "contagious failures" -- in which borrowers are unable to repay lenders, who are then themselves sucked into the financial crisis.
The issue isn't that all these banks are suddenly worthless. By all accounts, most of AIG's business is quite healthy. Rather, the banks fail because they don't have enough cash to cover their near-term debts, in much the same way that you can starve to death in your $3 million house if you don't have cash to buy bread. So the federal government stepped in with bridge loans. By effectively guaranteeing that these companies will be able to repay their debt, the government hopes to stave off the contagion. But even if the intervention works, very few institutions want to loan out more money in this environment.
This credit crunch affects everyone who needs to borrow money: clean energy developers, homeowners, business owners, etc. The effects will be far-reaching:
We have not seen this much stress in the financial system since the Great Depression, so we do not have any recent history to rely upon in quantifying the magnitude of the slowdown. A recent educated guess by Jan Hatzius of Goldman Sachs suggests that G.D.P. growth will be just about 2 percentage points lower in 2008 and 2009.
This reminds me of another broad trend that I forgot to include on my list:
5) The economy. Although it is very difficult to make predictions about the direction of the economy, it appears likely the current downturn will continue for some time. Which is bad for the climate, mainly because of the way that a weak economy interacts with the other items on the list.
For example, slow growth saps the political will for dramatic action on climate change. Some legislative efforts, such as California's A.B. 32, are probably too far along to be at major risk for derailment. RGGI in the northeast is also pretty far along, but not so far along that New York Gov. David Paterson wouldn't consider bolting from the agreement. And, of course, federal legislation continues to lurch zombie-like around the halls of congress. The next president will have to expend a lot of political capital to pass a national carbon cap even under the best of circumstances. These are not the best of circumstances.
Also, as Sean notes, a weak economy could at least temporarily bring fossil fuel prices down. I continue to believe that the long-term trend in fossil fuel prices is up, up, up, but, as mentioned, volatility will muddy the investment picture for clean energy.
Top 25 reasons to give a damn about climate change
Cash for Clunkers brought us ... more clunkers!
N.Y. Sen. Kirsten Gillibrand answers Grist’s questions on the Kerry-Boxer bill
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stevenearlsalmony Posted 5:26 am
19 Sep 2008
First, the leaders in my generation of elders wish to live without having to accept limits to growth of seemingly endless economic globalization, of increasing per capita consumption and skyrocketing human population numbers; our desires are evidently insatiable. We choose to believe anything that is politically convenient, economically expedient and socially agreeable; our way of life is not negotiable. We dare anyone to question our values or behaviors.
We religiously promote our widely shared and consensually-validated fantasies of `real' endless economic growth and soon to be unsustainable overconsumption, overproduction and overpopulation activities, and in so doing deny that Earth has limited resources and frangible ecosystems upon which the survival of life as we know it depends.
Second, my not-so-great generation appears to be doing a disservice to everything and everyone but ourselves. We are the "what's in it for me generation." We demonstrate precious little regard for the maintenance of the integrity of Earth; shallow willingness to actually protect the environment from crippling degradation; lack of serious consideration for the preservation of biodiversity, wilderness, and a good enough future for our children and coming generations; and no appreciation of the vital understanding that humans are no more or less than magnificent living beings with "feet of clay."
Perhaps we live in unsustainable ways in our planetary home; but we are proud of it nonetheless. Certainly, we will "have our cake and eat it, too." We will own fleets of cars, fly around in thousands of private jets, live in McMansions, exchange secret handshakes, frequent exclusive clubs and distant hideouts, and risk nothing of value to us. We will live long, large and free. Please do not bother us with the problems of the world. We choose not to hear, see or speak of them. We are the economic powerbrokers, their bought-and-paid-for politicians and the many minions in the mass media. We hold the much of the world's wealth and the extraordinary power great wealth purchases. If left to our own devices, we will continue in the exercise of our `inalienable rights' to outrageously consume Earth's limited resources; to recklessly expand economic globalization unto every corner of our natural world and, guess what, beyond; and to carelessly consent to the unbridled global growth of human numbers so that where there are now 6+ billion people, by 2050 we will have 9+ billion members of the human community and, guess what, even more people, perhaps billions more in the distant future, if that is what we desire.
We are the reigning, self-proclaimed masters of the universe. We enjoy freedom and living without limits; of course, we adamantly eschew any talk of the personal responsibilities that come with the exercise of personal freedoms or any discussion of the existence of biophysical limitations of any kind.
We deny the existence of human limits and Earth's limitations.
Please understand that we do not want anyone presenting us with scientific evidence that we could be living unsustainably in an artificially designed, temporary world of our own making....a manmade world filling up with gigantic enterprises, virtual mountains of material possessions, and boundless amounts of filthy lucre.
Third, most of our top rank experts appear not to have found adequate ways of communicating to the family of humanity what people somehow need to hear, see and understand: the rapacious dissipation of Earth's limited resources, the relentless degradation of the planet's environment, and the approaching destruction of the Earth as a fit place for human habitation by the human species, when taken together, appear to be proceeding at breakneck speed toward the precipitation of a catastrophic ecological wreckage of some sort unless, of course, the world's colossal, ever expanding, artificially designed, manmade global political economy continues to speed headlong toward the monolithic `wall' called "unsustainability" at which point the runaway economy crashes before Earth's ecology is collapsed.
Who knows, perhaps we can realistically and hopefully hold onto the expectation that behavioral changes in the direction of sustainable production, per human consumption, and propagation are in the offing.....changes that save both the economy and the Creation.
Steven Earl Salmony
AWAREness Campaign on The Human Population,
established 2001
http://sustainabilitysoutheast.org/index.php
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Jon Rynn Posted 6:03 am
19 Sep 2008
But there is also one new social "technology" that we now have: democracy. The current Masters of the Universe are a holdover from nondemocratic times, it seems to me. They sit on top of vast economic dictatorships. The sooner we move toward economic democracy, the better, no?
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GonzoDon Posted 8:32 am
19 Sep 2008
And they may be correct, if by "bringing gas prices down" you mean lowering the per-gallon price by maybe two or three cents in perhaps 10-15 years.
Now compare to that the fact that gasoline prices -- at least in my neighborhood -- have dropped by about 50 cents/gallon. In one month.
That was not the result of increased oil production. That was the result of reduced demand.
No, I am not one who sees $4-a-gallon gas in the U.S. as a "problem" that needs to be "solved". I recognize it as a long-term reality that's here to stay, whether we like it or not.
However, that said, why don't we hear more messages aimed at middle America pointing out that the current and anticipate reduction in petroleum consumption over the past few months has done more to reduce gas prices than a dozen ANWRs drilled tomorrow would do -- and has done it much, much, more rapidly.
This seems like a no-brainer: Cut U.S. gasoline demand by a couple of percent and you'll reap much greater benefits, economically, than you could hope to get by drilling ANWR like a madman.
Why is the corporate media not pointing this out?
Oh. I guess I just answered my own question.
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stevenearlsalmony Posted 8:59 am
19 Sep 2008
Steven Earl Salmony
AWAREness Campaign on The Human Population, established 2001
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amazingdrx Posted 1:54 pm
19 Sep 2008
The pursuit of happiness is difficult without the possibility of financial security. That possibility for financial security must be nurtured with free and fair markets.
In order to maintain those fair and free markets a goverment of, by, and for we the people must regulate and enforce those regulations.
A formula for economic democracy.
What say you free marketeerian think tankers? Still want to let the markets work, free of government interference? Hehey.
Oh, I know you are waiting until the news cycle switches back to Biden's french cuffs. Yep french cuffs.
Relax, they are "freedom" cuffs. What was that stuff about the economy again? And how you all were wrong for the last 30 years? Huh?
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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SMLowry Posted 9:45 am
20 Sep 2008
Today I went to the top of Cannon Mountain (Franconia Notch, NH) with my son, his partner, and my grandsons. It was a gorgeous day, we could see for miles, even into Vermont and Canada. But the "haze" was definitely there. This was not haze, but pollution. I reminded me of the "haze" one could see from any high point in Athens looking out to the horizon. Not as bad, but much more than I can remember seeing it. This, too, is scary.
The economy is a house of cards. I'm no expert but it seems to me that we should be taking all those billions of dollars and finding ways to rebuild it by restructuring things. "Fixing" the economy will only ensure that it "breaks" again. I'd just as soon get it over with now. What with energy issues and climate change, things need to change. We could "take advantage" of this crisis to transform things. Of course I know this won't happen any time soon. Too bad.
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mreinbold Posted 3:11 pm
20 Sep 2008
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