The Simplicity Option

“Simplicity is the ultimate sophistication.” – Leonardo da Vinci

Since the industrialization of society over the last two hundred years, humans have physically and mentally remained unchanged. We have, however, surrounded ourselves with accessories, added layers of complexity, and confusion in our lives. This urbanization has reduced humanity’s connection with nature.

Connection to the land and natural environment has been replaced by freeways, cities, concrete landscapes, and technological gadgetry that bring little solace and opportunity for reflection for individuals. Inner peace and happiness can be hard to find in a world of constant diversion and distraction. The ability to witness nature and live in harmony with the natural cycles provides unquantifiable experiences for those living a resilient life.

The 2010 Living Planet Report, based on the scientific research of the Global Footprint Network, reports humanity’s ecological footprint now exceeds the planet’s sustainable carrying capacity by 50 percent. In other words, human beings are now consuming ‘natural capital,’ which is diminishing the capacity of the planet to support life into the future. The propaganda and ideology that many economists, governments, and business people have been espousing in an effort to continue exploitation of resources is that developing countries can have similar standards of living to those in the West. The reality is that the West has been exploiting developing countries’ resources to fund our resource intensive lifestyles for many decades.

Think about this for a second. If the expected 9 billion people were to enjoy the “living standards” forecast for Western countries such as Australia, Canada, U.S., U.K, or Europe by 2050 (assuming 3% yearly economic growth), the world’s total consumption would be about 30 times as much as it is now. That would mean 30 times greater use of land, soils, trees, forests, minerals, fishing, energy, etc… With already stretched and depleted natural resources and ecosystems, this scenario would most likely end in ecological catastrophe.

Dr. Ted Trainer, senior Lecturer in the School of Social Sciences at the University of New South Wales in Australia, has been teaching about sustainability for many decades. He suggests:

It is difficult to see how anyone aware of these basic numbers could avoid accepting that people in developed countries should be trying to move to far simpler and less resource-intensive lifestyles and economies. The decreases might have to be around 90% – something that can only be achieved through dramatic reductions in production, consumption, and economic activity. To transition to a low energy society which resembles our current high energy model will be a significant challenge and highly unlikely. The enormity of the transition to alternative fuels and/or technologies will require a coordinated approach on an unprecedented scale. It would require vast amounts of resources and capital investment. (1)

Enter Voluntary Simplicity

As reported in the Melbourne Age, a growing number of people in the “voluntary simplicity” movement are choosing to reduce and restrain their consumption – not out of sacrifice or deprivation, but in order to be free, happy, and fulfilled in a way that consumer culture rarely permits. By limiting their working hours, spending their money frugally and conscientiously, growing their own vegetables, sharing skills and assets, riding bikes, rejecting high-fashion, and generally celebrating life outside the shopping mall, these people are new pioneers transitioning to a form of life beyond consumer culture. (2)

An Institute For Simplicity

There is even an Institute for Simplicity. The Simplicity Institute is an education and research centre seeking to:

  • seed a revolution in consciousness that highlights the urgent need to move beyond growth-orientated, consumerist forms of life.
  • envision and defend a ‘simpler way’ of life at a time when the old myths of progress, techno-optimism, and affluence are failing us.
  • transform the overlapping crises of civilisation into opportunities for ‘prosperous descent’

Goals of the Simplicity Institute

“To change something, build a new model that makes the existing model obsolete.” – Buckminster Fuller

SAMSUNG CAMERA PICTURESThe global economy is undermining the ecological foundations of life, producing perverse inequalities of wealth and spreading a cultural malaise as ever-more people discover that consumerism cannot satisfy the human craving for meaning. While industrial civilization continues this inevitable descent, humankind is being challenged to reimagine the good life, tell new stories of prosperity, and get to work envisioning and building a new world within the shell of the old.

Genuine progress towards a just and sustainable world requires those who are over-consuming to move to far more materially ‘simple’ and less energy-intensive ways of living. This does not mean deprivation or hardship. It means focusing on what issufficient to live well, and creating new cultures of consumption, new systems of production, and new governance structures that promote a simpler way of life. Our basic needs can be met in highly localized and low-impact ways, while maintaining a high quality of life.

The Simplicity Institute seeks to provoke a broader social conversation about the need to transition away from growth-based, consumer societies toward more resilient, egalitarian, and rewarding societies based on material sufficiency and renewable energy. Rethinking growth, capitalism, and consumerism in an age of environmental limits and economic instability cannot be avoided. The only question is whether it will be by design or disaster. (3)

To find out more about the Simplicity Institute CLICK HERE


Article by Andrew Martin, author of  Rethink…Your world, Your future. and One ~ A Survival Guide for the Future… 

RethinkcoverCE2Sources: excerpts from Rethink…Your world, Your future. 





Bubble finance, junk energy bonds, oil derivatives being neglected by mainstream media

Those who still think the plummeting price of oil is a good thing for the economy are taken in by PR spin or the simple lack of coverage in the mainstream media. It is not about consumers having lower petrol prices and more in their pocket. It’s not even about the energy. It’s about the money, the financial structure of the oil industry, particularly for the wildly speculative ventures like shale oil extraction. Environmentalists will see low oil prices as bad news for climate change but they need also to look at the way these energy shale firms are financed and learn about things they don’t want to know about, like junk bonds, leveraged loans and derivatives. It causes more immediate pain and must be survived first.

WTI to 12 Dec 2014The relentless slide continues. As of Monday 15 December in New Zealand the price of WTI oil was $56.73, down over 47% since June this year.

Unfortunately in New Zealand we are being shielded from all this bad news. Bubble finance is not a sexy topic for a front page. During the last week the Dominion Post, national radio, Sunday Star Times had nothing, and a business programme on Radio Live on Sunday touched on everything but the junk energy bond issue or the derivative issue. The programme gave the impression the only place to invest was in shares, bonds or fixed interest. When the derivatives market is so enormous, this is a major omission. It’s not as though the media believe the public won’t be able to understand junk energy bonds or derivatives. The corporate owned media only gives us bad news when it is about crime.

OK let’s try and explain it.

There are four major risks of plummeting oil prices
. The first is the risk to junk energy bonds held by pension funds, mutual funds and governments. Second is the secondary oil market, including the risk associated with a variety of oil derivatives contracts held by big banks. The third is the social unrest in oil exporting countries like Venezuela, Russia. And a fourth is the ongoing and contagious decline in prices of a range of other commodities – iron ore, copper, milk powder. Let’s just deal with the first two, though the fourth one is dealt with in passing.

1. Junk energy bonds. What on earth are these, you might ask. They are the risky bonds that energy companies sell to help finance their operations. The bonds give you high returns but they are also high risk as they are unsecured loans. That risk-taking now comes home to roost. For a new venture now the bank will lend you less because the oil in the ground as their security is now worth less. In December 2014 the oil is worth only about half what it was six months ago. So you have to get more of your funding from junk bonds. You end up shelling out more in interest and what’s more you get less in revenue from the sale of your oil.

Michael Snyder says “The impact of lower oil prices has been felt directly by high yield energy bonds and since September they have posted a return of -11.2%. J P Morgan has warned that if oil prices stay at $60 a barrel for three years 40% of the junk bonds could be facing a default.”

Of course other companies finance themselves using junk bonds (as well as bank loans at a low interest rate and their own revenue stream). The energy sector accounts for over 17% of the high yield bond market (junk bonds) and when these are hammered apparently a stock market decline always follows. It’s not a small sector either. Analyst Wolf Richter says there are $210 billion of them.

So they have to sell more bonds. Unfortunately now fewer investors want to buy the risky bonds so that means the yields go up to make it more tempting for investors. As the debt markets dry up and profits fall due to cheaper oil, the funding gap widens.

It was all beautifully explained in October 2014 when oil prices were $85/barrel here

Who loses from this? The investors. And those employed in the oil industry as smaller or more indebted firms are less viable than others. And that is just the start.

But it isn’t only junk energy bonds being affected now. As the Financial Times told us on December 12,
“Investors are fleeing the US junk debt market as a selloff that started in low-rated energy bonds last month has now spread to the broad corporate debt market amid fears of a spike in default rates.” Woops, that wasn’t meant to happen.

2 Oil derivatives. Like other industries over the last few decades of financial wizardry, the oil industry has been financialised.

Remember when housing debt was bundled up by the banks, securitised, divided into tranches according to risk, and sold off? It was to increase the profits of the banks. You just pass the risk on. The bonds are sold to unwary buyers who don’t realise the risk for massive losses. The whole process was enabled by rating agencies who rated junk bonds (the risky ones have high returns) as A++. A great movie explaining all this was The Inside Job.

Now we have version 2 of the same script. Instead of CDOs (Consolidated Debt Obligations) we have got CLOs (Consolidated Loan Obligations) – just a different name this time. It’s what is called ‘leveraged loans.’

The 6 largest ‘too big to fail’ banks control $3.9 trillion in commodity derivatives contracts. A large portion of this is in energy. And the big banks of the world are on the other end of derivative contracts.

One of the headlines of a tweet going round is “Plummeting Oil Prices Could Destroy The Banks That Are Holding Trillions In Commodity Derivatives”

There is nowhere to hide. As the entire global economy is dependent on the six biggest banks, we will all be affected, even in New Zealand.

The Oil Industry is not just any old industry
Writing on Zero Hedge in October when oil was $75/barrel, Michael Snyder explains the huge investment of the energy industry in both capital expenditure and R&D.

He quotes the Perryman group on the economic effects of the oil industry in US alone:
If you think about the role of oil in your life, it is not only the primary source of many of our fuels, but is also critical to our lubricants, chemicals, synthetic fibers, pharmaceuticals, plastics, and many other items we come into contact with every day. The industry supports almost 1.3 million jobs in manufacturing alone and is responsible for almost $1.2 trillion in annual gross domestic product. If you think about the law, accounting, and engineering firms that serve the industry, the pipe, drilling equipment, and other manufactured goods that it requires, and the large payrolls and their effects on consumer spending, you will begin to get a picture of the enormity of the industry.

The combination of junk bonds and financialisation
Putting these two first effects together, former Reagan budget chief David Stockman, in an analysis on his “ContraCorner” website Dec. 9, wrote: “The now-shaking high-yield debt bubble in energy is $500 billion — $300 billion in leveraged loans and $200 billion in junk bonds. This is the same estimate EIR has made in recent briefings, of one-quarter of the $2 trillion high-yield market being junk energy debt. In that junk energy debt market, interest rates have suddenly leaped, in the past 45 days, from about 4% higher than “investment grade” bonds, to 10% higher; that is, credit in that sector has disappeared, triggering the start of defaults of the highly leveraged shale companies and their big-oil sponsors.”

“In the larger, $2 trillion high-yield debt market as a whole, interest rates have also risen sharply, so far by 2-2.5%: i.e., contagion. Whether the debt collapse will be “mini”, or maximum, may be determined in the markets for $20 trillion in commodity derivatives exposure.

“So now we come to the current screaming evidence of bubble finance—–the fact that upwards of $500 billion of junk bonds ($200B) and leveraged loans ($300 B) have surged into the US energy sector over the past decades—–and much of it into the shale oil and gas patch.

“An honest free market would have never delivered up even $50 billion wildly speculative ventures like shale oil extraction million of leveraged capital—let alone $500 billion— at less than 400bps over risk-free treasuries to.”

The simple fact is low oil prices kill millions of jobs. Falling oil prices are dangerous. While readers of mainstream media, listeners to radio and watchers of television remain in blissful ignorance of the nightmares that fund managers are living through, they will celebrate Christmas as though nothing had happened – and then ask later why nobody warned them.

The first Global Financial Crisis came on us with little apparent warning. The Queen was famously known to ask “ Why did nobody see this coming?”

For the last five years since QE, energy companies have received super cheap financing. Quantitative easing, where the Fed created trillions of dollars for banks, was a gift to the capital-intensive energy industry. Moreover job creation has been huge. Bloomberg reports Employment in support services for oil and gas operations has surged 70 percent since the U.S. expansion began in June 2009, while oil and gas extraction payrolls have climbed 34 percent.

It doesn’t matter whether the trigger for this fall was OPEC punishing the shale industry, falling demand in China, the end of QE or what it was. It was going to happen anyway and the trigger might have been anything. The whole pack of cards simply has to tumble. It’s a cauldron of death brought to the boil.

But many have seen it coming – Nicole Foss and Raul Ilargi Meijer of The Automatic Earth, Michael Snyder, Gail Tverberg, Jesse Colombo, Wolf Richter, Yves Smith are a few names that spring to mind. It’s just that haven’t been listened to yet. Whether is it the Tulip Bubble, the South Sea Bubble or the housing bubble of 2007, bubbles have a nasty habit of bursting.

Financial analyst and former oildrum editor joins New Economics Party as spokesperson

Top Financial Analyst to join New Economics Party

Friday, 1 August 14

The New Economics Party has just added top financial analyst Nicole Foss to its group as spokesperson on the global economy.

“We are delighted to welcome Nicole, Senior Editor of The Automatic Earth website to our team” said party co-leader Deirdre Kent. “Nicole, a Canadian has recently arrived to live in Motueka and is in demand as an international speaker on finance, energy and resilience,” she said.

Nicole is former Editor of The Oil Drum Canada ( She used to be a Research Fellow at the Oxford Institute for energy Studies in the UK and used to run the Agri-Energy Producers’ Association of Ontario in Canada. Her formal background is in science and law.

Nicole says she aligns with the New Economics Party idea that the global financial crisis is far from over. “The recent credit bubble was the biggest ponzi scheme the world has ever experienced and it’s not yet unwound.” The bailouts now add up to at least $4.6 trillion or $4,600,000,000,000. Foss says the bubble is leading us into a very long and painful depression.

The New Economics Party
is not contesting this election.

For further comment phone Deirdre Kent 06 364 7779 or 021 728 852 or Nicole Foss 022 312 5120