I’m no economist, but maybe that’s a good thing. I don’t
feel obligated to perpetuate the myth that economic growth is the answer to all
our problems.
The uncomfortable and unsustainable nature of our world
economic model may be at the forefront of my consciousness at the moment thanks
in part to Charles Eisenstein’s excellent book Sacred Economics. For a 12-minute taste, he talks about the topic in this video.
I don’t think most mainstream folks get it. There was a
young woman in Auckland interviewed on tv the other night—sorry, I can’t
remember her name—who talked about having several properties in a rental
portfolio and being unconcerned that this put her over a million dollars in
debt. Now Auckland—if you don’t live in New Zealand you might not know this—must
have one of the boomingest real estate markets in the world at the moment, with
median house prices up almost 2% on the month and 13% on the year. Fourteen
Auckland suburbs now have median house prices over NZ$1 million. The thing is,
this young woman reported she wasn’t worried because if there was a financial
crash, her houses have gone up so much in price that she could sell them and
pay off the mortgages. And I wondered, does she realise that if there was a
crash, there wouldn’t be buyers wanting to buy her houses at the current record-breaking
prices?”
Bizarrely, though, in the event of a banking crisis, being
in debt might be better than having no debt at all and a truckload of money
sitting in the bank. The New Zealand Reserve bank has proposed giving a “haircut” to bank deposits (Cyprus-style) should New Zealand banks get in trouble. Now most New Zealand banks are affiliates of
big Australian banks and most have AA- ratings (high quality, low risk) so they’re
probably pretty safe. Still, I have a friend who reckons if he had a substantial
sum of cash he wanted to bank, he’d get it off shore, probably to Singapore (second
only to Norway and Luxembourg for low risk).
And while New Zealand Prime Minister John Key was keen to talk
about New Zealand's government “operating surplus” in the 2013 budget report, national debt
to our overseas creditors is increasing by an unsustainable $130 million every week. (See
TVOne’s quick summary of the 2013 budget report.) You can check how much New Zealand owes at the moment here.
As Eisenstein points out, the problem really comes back to
interest. Money is created out of interest: the giver of a loan expects the
loan + extra money back. It is the method of wealth creation used by banks
around the world. The trouble is, of course, that interest is “buying” your
future income based on money that you don’t have (yet), and that doesn’t
actually exist (yet). To get that money, you have to offer your goods and/or
services, and to keep this system running, the "market" has to continually
increase its demand for your goods and services. It is a kind of indentured
servitude. And many of these “goods” you're selling and buying come at planetary expense. Ultimately, there
is a finite end to our ability to exploit the planet for money to pay our
debts.
If you’re unsure how the banking, interest and money-go-round
works, I highly recommend the series of videos
published by Positive Money at you tube starting with Banking 101, the first in
a series of 6 short videos on this topic.
I don’t know what the future holds. I’m not only not an
economist, I’m also not a soothsayer. Still, I reckon we are at the beginning
of some serious financial reckoning. Check back in ten years’ time. It’s going
to be an interesting ride.
