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The Great Transition
Policy news & blueprints for the transition to a new Sustainable and Social Economy
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Energy and the Financial System: What Everyone Needs to Know… and Work Darn Hard to Avoid

Energy and the Financial System: What Everyone Needs to Know… and Work Darn Hard to Avoid | The Great Transition | Scoop.it

"Our economic and financial system is based on assumptions of continued growth. Currently growth is highly dependent on energy and a surplus thereof as provided by high EROI energy sources. Our available energy sources, however, are providing less and less energy returns on the amount of energy we put into them. Therefore the amount of surplus energy available is declining. Thus, given the dependence of growth on energy, growth will decline too. The little remaining health of our financial systems, however, relies heavily on assumptions of continued growth and rather high ones at that, but those assumptions will increasingly turn out to be false if Boyd’s prediction of declining EROI is true".

Willy De Backer's insight:

Great article on the link between society's diminishing energy return on energy investment and the current economic and financial crisis. A must-read for all austerians and post-Keynesians. This time it IS really different.

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Eli Levine's curator insight, April 13, 3:35 PM

Indeed, our ability to "grow" economically and socially is bound by the environment, our population size, cosmological conditions, food production and our state of technology.  Should we honestly "grow" for the sake of "growing", if it comes at long term as well as short term harm?

 

Things that Capitalism under its current logic, does not answer and does not wish to answer.

 

Think about it.

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Climate change, debt and inequality 'threaten financial stability'

Climate change, debt and inequality 'threaten financial stability' | The Great Transition | Scoop.it
Ahead of Davos 2013, World Economic Forum calls on policymakers to step up efforts to tackle three biggest dangers
Willy De Backer's insight:

Interesting report - my favorite quote from the press release: "Two storms – environmental and economic – are on a collision course"

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Stephane Bilodeau's curator insight, January 8, 2013 4:29 PM

"Continued stress on the global economic system is positioned to absorb the attention of leaders for the foreseeable future," the report said. "Meanwhile, the Earth's environmental system is simultaneously coming under increasing stress. Future simultaneous shocks to both systems could trigger the 'perfect global storm' with potentially insurmountable consequences.


"On the economic front, global resilience is being tested by bold monetary and austere fiscal policies. On the environmental front, the Earth's resilience is being tested by rising global temperatures and extreme weather events that are likely to become more frequent and severe. A sudden and massive collapse on one front is certain to doom the other's chances of developing an effective, long-term solution."

 

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Don’t Sell Economic Stability to Buy Economic Growth

Don’t Sell Economic Stability to Buy Economic Growth | The Great Transition | Scoop.it

“Our problem is not lack of growth but too much of it,” Sedláček said. An economy that uses debt to grow must continue to do so by taking on more and more debt or, alternatively, face a slowdown that will lead to bankruptcy. It is like owning a car that explodes when it stops, argued Sedláček."

 

Brilliant presentation at the Fifth Annual European Investment Conference in Prague by Czech economist Tomáš Sedláček, who was an advisor to Vaclav Havel in the past.

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Climate change is already damaging global economy, report finds

Climate change is already damaging global economy, report finds | The Great Transition | Scoop.it
Economic impact of global warming is costing the world more than $1.2 trillion a year, wiping 1.6% annually from global GDP...

 

By 2030, the researchers estimate, the cost of climate change and air pollution combined will rise to 3.2% of global GDP, with the world's least developed countries forecast to bear the brunt, suffering losses of up to 11% of their GDP.

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Degrowth, expensive oil, and the new economics of energy

"Expensive oil ... does appear to be suffocating the debt-ridden, global economy, just as it is trying to recover ...

 

Unfortunately, mainstream economists, including those in government, seem oblivious to the close relationship between energy, debt, and economy, and this means they are unable to see that expensive oil is one of the primary underlying causes of today’s economic problems. Consequently, they craft their intended solutions (e.g. stimulus packages, quantitative easing, low interest rates to encourage borrowing, etc) based on flawed, growth-based thinking, not recognising that the new economics of energy means that the growth model, which assumes cheap energy inputs, is now dangerously out-dated. When growth-based economies do not grow, household, firms, and nations struggle to repay their debts, and quickly things begin to unravel in undesirable ways."

 

Excellent analysis by Dr Samuel Alexander of the links between global energy descent, rising commodity prices, the end of growth and the Great Depression.

 

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New Club of Rome Report paints dark future for humanity

New Club of Rome Report paints dark future for humanity | The Great Transition | Scoop.it

"2052: A Global Forecast for the Next Forty Years", by Jorgen Randers, launched by the Club of Rome on May 7, raises the possibility that humankind might not survive on the planet if it continues on its path of over-consumption and short-termism.

 

While global leaders are focused on financial debt crisis, the ecological and social crisis gets worse.

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Het grootste slachtoffer van de duurzaamheidscrisis zou wel eens de democratie kunnen zijn

Het grootste slachtoffer van de duurzaamheidscrisis zou wel eens de democratie kunnen zijn | The Great Transition | Scoop.it
De belangrijkste reden waarom de wereldgemeenschap niet aan duurzame ontwikkeling toekomt, is omdat de politici het lef niet hebben om te zeggen dat het totaal anders moet.
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In Chief Executives’ Pay, a Rich Game of Thrones

In Chief Executives’ Pay, a Rich Game of Thrones | The Great Transition | Scoop.it
Although the growth in C.E.O. compensation slowed last year, the pay numbers are still eye-popping.

 

More shocking figures on the economic perversity of CEO's paychecks or why capitalism and democracy will implode.

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Nassim Taleb: How to prevent other financial crises?

This article argues that the crisis of 2007–2008 happened because of an explosive combination of agency problems, moral hazard, and “scientism”—the illusion that ostensibly scientific techniques would manage risks and predict rare events in spite of the stark empirical and theoretical realities that  suggested otherwise. The authors analyze the varied behaviors, ideas and effects that in combination created a financial meltdown, and discuss the players responsible for the consequences. In formulating a set of expectations for future financial management, they suggest that financial agents need more “skin in the game” to prevent irresponsible risk-taking from continuing.

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Mumbo Jumble: The underwhelming response of the American economics profession to the crisis

Mumbo Jumble: The underwhelming response of the American economics profession to the crisis | The Great Transition | Scoop.it

"In this extract from his forthcoming book, Never Let a Dire Crisis Go to Waste (Verso), the philosopher and historian of economics Philip Mirowski seeks to explain how the American economics profession has successfully avoided culpability for the economic crisis."

 

Another must-read contribution in Open Democracy's great series Uneconomics.

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Global rebellion: The coming chaos?

Global rebellion: The coming chaos? | The Great Transition | Scoop.it

Global elites are confused, reactive, and sinking into a quagmire of their own making, says Californian Sociology and Global Studies Professor William I. Robinson in this absolutely brillant, must-read, analysis of the current crisis of capitalism.

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The Lessons Of The North Atlantic Crisis For Economic Theory And Policy

The Lessons Of The North Atlantic Crisis For Economic Theory And Policy | The Great Transition | Scoop.it

"The world has seen a hundred financial crises in the past three decades. In this column, Nobelist Joe Stiglitz argues that we could have done much more to prevent this crisis and to mitigate its effects. Looking ahead, we can do much more to prevent the next one. This is a chance to revolutionise flawed economic models, and perhaps exit from an interminable cycle of crises."

Willy De Backer's insight:

Excellent analysis by Joe Stiglitz of some of the lessons of the crisis but his own analytical model is still flawed, leaving out the biophysical realities (limits to growth, resource scarcity) which underpin our global economy. Only be recognising this new reality will it be possible to move to the radical transformation of economic models for the post-growth society.

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On the link between resource scarcity, financial fraud and the failure of austerity policies

Willy De Backer's insight:

This is an absolute must-read commentary written by Jin Chen and James Galbraith explaining how rising energy and resource constraints have led to the extreme fraudulous financialisation of global economy and why austerity policies but also a return to Keynesianism will not work.

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What is the Chicago Plan and can it save the global economy?

What is the Chicago Plan and can it save the global economy? | The Great Transition | Scoop.it
An IMF study has proposed a 1930s plan that would magic away government debt and end 'boom and bust' for good...

 

Why does this IMF paper not get more media attention? Because it would increase the power of government and tame the banks?

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Michael Hudson's new must-read book: The Bubble and Beyond

Michael Hudson's new must-read book: The Bubble and Beyond | The Great Transition | Scoop.it

"The finance, insurance and real estate (FIRE) sector has emerged to create “balance sheet wealth” not by new tangible investment and employment, but financially in the form of debt leveraging and rent-extraction. This rentier overhead is overpowering the economy’s ability to produce a large enough surplus to carry its debts. As in a radioactive decay process, we are passing through a short-lived and unstable phase of “casino capitalism,” which now threatens to settle into leaden austerity and debt deflation."

 

The new book by economist Michael Hudson should be mandatory reading for anyone seriously dealing with the global and European crisis.

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The power of ignorance and the problem of abundance

"Since the financial crisis of the late 2000s, most analyses have placed the failure of markets on a lack of information: traders lacked the skills to interpret complex algorithms; regulators lacked awareness of the risks banks were taking with capital reserves. Few analyses have explored the usefulness of those limits to stakeholders who had something to gain from purporting the crisis was unperceivable or understandable until it happened – or even after it happened."

 

Very interesting analysis of the financial crisis from a different perspective based on the work of great French writer George Bataille. Worth a read.

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A Primer on Peak Oil

A Primer on Peak Oil | The Great Transition | Scoop.it

Three top financial news sites this week report on the reality of peak oil: The Economist, the Financial Times and French Le Figaro. At Economonitor, Edward Harrison compares the three articles and explains the difference between hard peak and soft peak and the upcoming "chaotic energy transition".

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Greening Out of the Recession? No, recapturing austerity is what we need

My ideas on an alternative narrative to tackle the economic and ecological crisis during a recent conference co-organised by the ETUI and the European Parliament on 9 February 2012...

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Is Europe's left ready to govern?

Is Europe's left ready to govern? | The Great Transition | Scoop.it
The central question of the crisis is not whether it will rejuvenate nation-state social democracy, but whether it can stimulate new strategies on which a revived platform of egalitarian prosperity and social welfare might be built. The task is to frame a response so that social democracy can benefit from a new openness to ideas in domestic and world politics – against a residual neoliberalism that would frame the global financial crisis as one of the overbearing state.

 

In the Guardian, two progressive political thinkers question social-democracy's answers to the crisis of our global economic system.

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Uneconomic Growth Deepens Depression

Uneconomic Growth Deepens Depression | The Great Transition | Scoop.it

One more brilliant analysis by former World Bank economist and "father of ecological economics" Herman Daly explaining why new Keynesianism will not work to counter the crisis in a full world and why growth has become uneconomic.

 

The only solution to poverty, says Daly, is sharing."Sharing is frequently referred to as “class warfare.” But it is really the alternative to the class warfare that will result from the current uneconomic growth in which the dwindling benefits are privatized to the elite, while the exploding costs are socialized to the poor, the future, and to other species."

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Raghuram Rajan - A crisis in two narratives

Raghuram Rajan - A crisis in two narratives | The Great Transition | Scoop.it

Interesting but faulty analysis by "Fault Lines" author and finance professor Raghu Rajan on the two struggling narratives (Keynesianism and Monetarism) to explain the crisis.

 

There is a third narrative which looks at the economy as part of the biophysical world and focuses on the ecological, energy and commodity limits to understand the real root causes of the current Transition crisis. Observe how Rajan puts his hopes in "lower-cost energy" as one of the three forces to get us out of the crisis. Clear wishful thinking.

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Top 1% are getting even richer

Top 1% are getting even richer | The Great Transition | Scoop.it
From 1979 to 2007, average household income for the nation's top 1% nearly tripled, while middle-class incomes grew by less than 40%, according to a new report from the Congressional Budget Office (CBO) found.

 

Austerity policies do not hurt the rich, while American dream becomes American nightmare for the middle classes.

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