Saturday, October 4, 2008

Financial Permaculture

Last night I happened onto Bill Moyers’ NOW: 2008 Bailout Blues, and a discussion with Kathleen Hall Jamieson of the Palen-Biden debate. Jamieson made the point that we have now had each of the four candidates — Obama, McCain, Biden and Palen — asked what part of their election year proposals will need revision in light of the global financial crisis, and all four have essentially said, “None.”
KATHLEEN HALL JAMIESON: When Gwen Ifill reframed the question asked by Jim Lehrer in the first debate: What would you change in your plans, given current economic circumstances? Both candidates, like the heads of the ticket in the last debate, punted. You had Joe Biden saying, "Well, we were going to double foreign aid, but maybe we won't do that as quickly as possible. And we won't do all those bad things John McCain is proposing. Well, of course not. If you're elected, you're not going to react to the other person's agenda.

And Governor Palin basically said we're not going to change anything. So we've now had two debates in which candidates have been asked a significant question. And Jim Lehrer followed up repeatedly in the first debate. That in changed financial circumstances, with an unprecedented deficit and debt, with the public deficit foreign-held, now about to increase over the huge level that it's already at, these four candidates, two presidential, two vice-presidential, don't have the courage to tell us that if elected, they will change their spending and taxing plans.

Even though I believe that if either is elected, he will. As a result, they're campaigning in a way that makes it harder for them to govern responsibility. And they're ensuring that when elected, the electorate's going to feel betrayed by being promised things that they're not going to deliver. But if they keep their promises, they're going to be financially irresponsible and drive this country further into an economic mess.
Hard to imagine going further into an economic mess than we already are, but get ready, from here on out, it’s all downhill. I recently told a radio interviewer to think of it like an avalanche. You turn downhill and ski as fast as you can. What I meant was, get out of the stock market, secure your food supply, water supply, look after your neighbors, and prepare for the worst.

This past couple weeks, it seems like most people are doing exactly that.

On October 24-28, in our county seat of Hohenwald, Tennessee, we will bring together some of the pre-eminent post-apocalytic thinkers to begin work on a transition methodology we are calling Financial Permaculture.

The 5-day workshop, led by Catherine Austin Fitts, is designed to teach people to
  • Map the financial ecosystem of a community
  • Apply permaculture principles to business design
  • Design, start and finance a regenerative business, and
  • Create ecological and socially responsible investment opportunities.
If you happened to miss any of Catherine’s recent appearances on Coast-to-Coast AM, I strongly recommend shelling out the $6.50 for a month’s subscription and getting all the podcast downloads. Catherine was on for three solid hours on October 1st, another hour on September 15th, and you can find even more if you go back into the show’s archives.

Over the past year, thanks to a $50,000 USDA rural development grant that Global Village Institute and the Center for Holistic Ecology landed in 2007, we have been drawing together the threads of what “sustainability” might look like in the context of The Farm’s county seat, the old Swiss colony of Hohenwald (35.547 N, 87.551 W., pop. 3808, average violent crimes per year = 2).

Through a cautiously slow series of baby steps, we have gradually been sucking Transition Town Hohenwald into the viral meme of the emerging world made by hand. Our Local Economic Development and Green Education Initiative has been hosting public meetings, film screenings, presentations, and columns for the weekly newspaper. In July, we held an ecovillage design charrette with Diana Leafe Christian and Greg Ramsey to allow citizens the chance to re-envision what Hohenwald might look like if the giant tractor-trailer rigs filled with pine logs and appliances didn’t drive through the center of town every daylight hour and those barren and decaying storefronts, their business lost to the big box stores on either end of town, were back to selling groceries and hardware to pedestrian and bicycling walk-ins.

But lets stop a moment and consider the current financial firestorm. Step for a moment with me into the WayBack Machine and journey to those thrilling days of yesteryear, which seem so much like déjà vu all over again. I was in my 30s and arguing atomic veterans cases. Ronald Reagan was tearing the photovoltaic cells off the White House roof, launching Star Wars, and killing Jimmy Carter’s plan for energy independence.

The U.S. Savings and Loan crisis of the 1980s came from the failure of 747 savings and loan associations (S&Ls) in the United States, losing around $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. taxpayer ($326 billion in 2008 dollars). The scandal was prompted by the activities of one particular bank, Lincoln Savings and Loan Association of Irvine, California, headed by Charles Keating, who ultimately served five years in prison.

John McCain and Charles Keating had become personal friends following their initial contacts in 1981. Between 1982 and 1987, McCain received $112,000 in political contributions from Keating and his associates. In addition, McCain's wife, Cindy, and her father Jim Hensley had invested $359,100 in a Keating shopping center. McCain, his family, and their baby-sitter had made nine trips at Keating's expense, often using Keating's jet, to Keating's opulent Bahamas retreat.

The “Keating Five” affair began when it was learned Keating made $1.3 million in political payoffs to five U.S. Senators, McCain included, in exchange for helping deflect regulators from Lincoln Savings. The regulators backed off, with disastrous consequences.

With the regulators off its back, Lincoln moved FDIC-insured accounts into commercial real estate ventures. By the end of 1986, the Federal Home Loan Bank Board had found that Lincoln had $135 million in unreported losses and had surpassed the regulated direct investments limit by $600 million. Undaunted, Keating appealed to President Reagan to make a recess appointment of a Keating ally, Atlanta real estate developer Lee H. Henkel Jr., to an open seat on the FHLBB, and that quelled the investigation for a while, until Henkel himself was caught up in the scandal and forced to resign.

In March 1987, with the investigation heating up, Keating and Senator Dennis DeConcini asked McCain to travel to San Francisco to meet with regulators regarding Lincoln Savings, but McCain refused. Keating called McCain a "wimp" behind his back, and on March 24, Keating and McCain had a heated, contentious meeting. After that they apparently kissed and made up, because on April 9 McCain attended a meeting with FHLBB regulators to discuss the government's investigation of Lincoln. The regulators felt that the meeting was very unusual and that they were being pressured by McCain and the other four Senators, and in May issued a report recommending that Lincoln be seized by the government due to unsound lending practices.

Because of Keating’s friends in high places, it took two years to close Lincoln down. More than 21,000 mostly elderly investors lost their life savings, about $285 million. The federal government was liable for $2 billion to cover Lincoln's losses when it seized the institution. A Senate Ethics Committee investigation criticized McCain for exercising "poor judgment." Time Magazine noted that the Committee had timed its report to coincide with the run-up to the Gulf War, minimizing its news impact.

In 1989, Catherine Austin Fitts was serving as Assistant Secretary of Housing. The housing bubble of the 1980’s had burst, and foreclosures were rising. John McCain had been caught with his hand in the S&L bribe till. The mortgage insurance funds of the Federal Housing Administration (FHA) were experiencing dramatic losses. HUD was losing $11 million a year in its single-family fund. All funds had lost $2 billion in the southwest region the year before. Fitts complained to her superiors that there was a lot of hanky-panky, but I’ll let you read that part of the story on her website.

As she looked into it more deeply, Catherine had a minor revelation. It you take away the Reagan/McCain lax regulation and fraud part, the single biggest cause of losses in the FHA portfolio was a falling Popsicle Index – an index Catherine and her staff coined to express the health of the living equity within a place.
The Popsicle Index is the percent of people who believe that a child can leave their home, go to the nearest place to buy a popsicle, and come home alone safely. It’s an expression of the sense of intimacy and well being in a place.
— Catherine Austin Fitts
Catherine says, “Not surprisingly, there is a correlation between the financial equity or wealth in a place and the living equity or human and natural wealth. Where the people, living things and land are happy, businesses thrive, and the value of real estate is good.

“It took many years of researching to realize what was going on in our financial systems to incentivize this behavior. In most areas of the world, places are organized by government and financed with debt.

“Corporations are financed with both debt and equity. The key financial opportunity is in owning the equity. When profits increase or the perception of a company prospects improve, the stock goes up. Senior management and investors sell the shares, generating capital gains. Capital gains on stocks and real estate are primary mechanisms for creating financial wealth in our society.

“As a result, corporations can make money exploiting people and places and their stock will go up. The ‘stock’ of the place harmed will not go down; there is no ‘stock’ of the place. By centralizing our investment capital into large corporations, our financial interests are not aligned with the interests of the people and our natural environment.

“So what do we do? If we are to stop the financial drain on our families and communities we must change how we manage our own finances. Perhaps the way to begin is as permaculture teaches us – to listen and build out from natural systems which are, ultimately, the source of most of our wealth.

“In every place, there are thousands of existing financial agreements, including laws and regulations that impact financial values. If we are to nurture and restore places, we are well served to listen to both natural systems and existing financial agreements, looking for ways of building new, fundamental alignments between land, people and their savings that reduce risk and optimize resources on an integrated basis.”

* * *

“Developing ways of creating sound investments to finance permaculture developments and the businesses that supply them would serve to spread the adoption of permaculture techniques. The more opportunities locally, or through decentralized networks, the easier it will be for people to withdraw their retirement savings from destructive systems.”

The idea of using the term Financial Permaculture to describe these efforts was coined by Thomas Hupp of the Leadership School as he, Jennifer Dauksha-English of the Center for Holistic Ecology, Greg Landua of the Ecovillage Training Center, Carolyn Betts of Solari and Catherine were brainstorming how to integrate the Solari investment strategy with the economic revitalization of Hohenwald.

Then they decided the best way to create an integrated vision of natural and financial health within a place was to invite many more people into the conversation.

For the past several months this group has been holding a series of public events in Hohenwald, getting gradually more specific, and, through that process, has teased out a few areas that most of the stakeholders can agree on. By “stakeholders” I mean county and city officials, private enterprise leaders, State agency representatives, and interested citizens of all backgrounds and predispositions.

From October 24-28, we will gather with participants and experts from across the country for a five day course and simulation — Financial Permaculture: The Greening of a Rural American Community. We will look at creating a new business such as alternative energy and fuel production. We will apply permaculture design to regional economic planning. Please join us. This is not intended just for Lewis County, Tennessee.

In her most recent Coast to Coast appearance, Catherine told George Noory that the $700 billion bailout bill was sending money in exactly the wrong direction. It was moving it from the real economy — people’s homes, small business enterprises, groceries, dental care and car loans — to the phony economy of pyramid schemes, fractional reserve debt finance, and loan derivatives. It was buying a pig in a poke — toxic paper — and it was using real peoples’ real life savings to do it. The antidote, Catherine said, was to reverse the flow. Run money out of the fake economy and into the real one; put it where it counts by making it easier to shelter your family, buy food, and get to and from work. Invest locally if you want to see your local economy thrive and the Popsicle Index rise.

The bailout bill may slow down the crash of global financial institutions, or it may not. What is certain is that people will still be around afterwards, and they will still have the same needs to be met. It is not enough just to outrun the avalanche. Once you get to safety, you have to start rebuilding. That starts closest to home.

No comments:




The Great Change is published whenever the spirit moves me. Writings on this site are purely the opinion of Albert Bates and are subject to a Creative Commons Attribution Non-Commercial Share-Alike 3.0 "unported" copyright. People are free to share (i.e, to copy, distribute and transmit this work) and to build upon and adapt this work – under the following conditions of attribution, n on-commercial use, and share alike: Attribution (BY): You must attribute the work in the manner specified by the author or licensor (but not in any way that suggests that they endorse you or your use of the work). Non-Commercial (NC): You may not use this work for commercial purposes. Share Alike (SA): If you alter, transform, or build upon this work, you may distribute the resulting work only under the same or similar license to this one. Nothing in this license is intended to reduce, limit, or restrict any rights arising from fair use or other limitations on the exclusive rights of the copyright owner under copyright law or other applicable laws. Therefore, the content of
this publication may be quoted or cited as per fair use rights. Any of the conditions of this license can be waived if you get permission from the copyright holder (i.e., the Author). Where the work or any of its elements is in the public domain under applicable law, that status is in no way affected by the license. For the complete Creative Commons legal code affecting this publication, see here. Writings on this site do not constitute legal or financial advice, and do not reflect the views of any other firm, employer, or organization. Information on this site is not classified and is not otherwise subject to confidentiality or non-disclosure.