Further thoughts on “Reboot economics”

A couple of other thoughts popped into my head after writing that last post.

In no particular order:

  • I wonder if the lack of credit available is a result of foreign governments, such as China, basically decided to stop propping up the US spending spree? If so, this looks a lot like the scenario George Monbiot outlined in his book Age of Consent.
  • Given that the market has decided that these loans are too risky, why on Earth does it make sense for the public to underwrite risky investments like this?
  • I wonder if now is the time for the public (and US politicians) to get behind the Code of Corporate Citizenship – does this crisis open a window of opportunity to push this through?

Reboot economics

I was chatting to Ang the other night about the economic crisis, and I can’t help but think this is just a big “reboot” – the market correcting itself after years of abuse.

And if you’re a true believer in market economics, now is the time you should be arguing that we need to let this happen, as it is “the way of the market”.

What’s interesting is that’s not what’s happening. Instead we’re seeing what amounts to the biggest nationalisation project the western world has seen in a long, long time. (As Wade says: “So the AU govn’t is assuring all credit. Now all these private companies are publically funded. Remind me again why privatization is good?”)

We need this correction – to stem the tide of greed that has flooded the economic system over the past few decades (in this sense I agree somewhat with what Marc says on the matter – it’s not just the CEOs and banks at fault).

I’m actually fairly liberal (note the small “l”) when it comes to markets. Testament is the fact I’m starting a business as my method of achieving social change. With that in mind I say let the market do what it does best – let it balance itself.

Maybe I’m naive, but I think that such a correction would see a blossoming of sustainable businesses to fill the voids left by the unsustainable ones that toppled the market. In “sustainable self reliance as David Ransom puts it [via Wade]). Perhaps that’s part of the “balancing” process – a recognition that business does not operate in a vacuum with infinite resources and growth.

Yes there will be significant fallout that will affect a lot of people – some who can afford to “ride it out” and others who can’t. But instead of investing billions in banks (essentially supporting those who can afford it) why not funnel those dollars into support mechanisms for the people that are most directly affected, in their day to day lives, by the crisis. i.e. the ones who will need assistance with their rent and food bills, not bolstering their spouse’s trust fund.

That could take the form of state-run services – which, after all, is what the state is meant to be for (to pick up the pieces where/when the market fails). But could mean many things – I suspect many of them better than propping up corrupt executives.

Sustainable investments in the “credit crunch”

Strangely enough I’ve been thinking about my financial situation given the apparent impending collapse of the global economic system… (Or has it already collapsed? I can’t quite work that bit out.)

Although the tanking Aussie dollar is a little bit of a concern, I have a suspicion it’s going to bounce back a bit in the coming months. (Besides, if it wasn’t for the recent buoyancy of the dollar we probably wouldn’t be too concerned – it’s not like the first time the dollar has been hovering around $0.70).

And despite all the ups and downs of the interest rates, I’ve only actually seen one small increase in my mortgage in the past 12 months, so there’s not much to concern myself with there either.

Most of my “net worth”, though, is in my superannuation – so I’ve been thinking about that a bit.

I recently shifted my super across to a more aggressive fund option that includes international shares. This has increased my exposure to the current volatility – though I’m not panicking and “locking in” my losses by changing strategy just yet. Allow me to explain why…

For a number of years my super has been invested with Australian Ethical Superannuation. This means that my money is invested in businesses geared towards a sustainable future.

As far as I can tell the fund has been a strong performer for some time – and one of the nice things is when there’s a downturn the fund typically doesn’t see as great a loss as the general market (unless tech stocks are particularly affected – there’s a slight bias towards bio- and medical-tech in the fund).

Additionally, I truly believe that sustainable businesses are the way of the future and that as the market recovers the sustainable stocks will recover well, especially as people reconsider their investment options and perhaps put some thought into sustainable strategies, rather than the “growth at all costs” approach that started this whole mess. (Call me naive – but that’s how I view things.)

So while I’m expecting to be a bit shocked at the level to which my super goes backwards in my next statement, I’m confident that over time the value will be restored and I’ll be better off in the long run. And I’m really glad I made the choice all those years ago to invest in a strong SRI fund…

Ethical investment review

Choice magazine has a great review of ethical investment (also known as socially responsible investment) funds in Australia.

My long-time fave, Australian Ethical is the only one that has stayed out of all of the so-called “sin stocks” of alcohol, tobacco, weapons (euphemistically labeled “defence” in Choice’s comparison) and uranium.

If you’re considering ethical investment as an option, perhaps for your superannuation, the review is well worth a look.

On a related note, Choice recently announced their sustainability policy. Hits a lot of the right notes…