Thursday, March 26, 2009

Wednesday, March 25, 2009

Don't get guilted into overspending now!

Conflicting signals are being sent by the Mainstream Media on the subject of thrift and frugality in the current economic crisis. Take for example Newsweek, which is one I happen to read. One week it carried had a story by a fellow whose parents were so frugal that they could have written the Tightwad Gazette:

In today's cratering economy, my parents are looking pretty smart all of a sudden. President Obama talks a lot about personal sacrifice, and we all need to look for ways to cut costs these days. Maybe he ought to consider Bill and Joyce Tuttle as the nation's first thrift czars, because when it comes to pinching pennies and saving for the future, my parents are extreme.
They dry their clothes outside, don't have cable TV and heat their (self-built) home with wood they chopped. Although the author acknowledges that the model is a tough one to replicate, the conclusion is admiring:

But there are still valuable lessons to be gleaned from their example, which boils down to this: the people who have been living the thrifty life all along, doing the right thing—crazy stuff like buying houses they can afford and saving up money for things they want to buy—are the smart ones now. And they'll be the ones who adjust most easily to a leaner time.
and the very next week there was a story whose title says it all: Stop Saving Now!

For our $14 trillion economy to recover and thrive, hoarders must open their wallets and become consumers, and businesses must once again be willing to roll the dice. Nobody is advocating a return to the debt-fueled days of 4,000-square-foot second homes, $1,000 handbags and $6 specialty coffees. But in our economy, in which 70 percent of activity is derived from consumers, we do need our neighbors to spend. Otherwise we fall into what economist John Maynard Keynes called the "paradox of thrift." If everyone saves during a slack period, economic activity will decrease, thus making everyone poorer. We also need to start investing again—not necessarily in the stock of Citigroup or in condos in Miami. But rather to build skills, to create the new companies that are so vital to growth, and to fund the discovery and development of new technologies.
The copious qualifiers notwithstanding, it is hard to believe that he's not talking about designer handbags and speciality coffee. After all, if one still has a job they're not likely not to be spending on food and other daily necessities - albeit perhaps at a lower level than before. What has suffered in this economy is precisely the credit-fueled consumerism of large-screen TVs and stainless steel kitchen appliances.

If you really want to see what the problem is, check out this posting from Nate Silver:

Per-family household debt increased by about 130% in real dollars between 1989 and 2007, from roughly $42,000 per family in 1989 to $97,000 eighteen years later. Most of that increase has come during the past six or seven years -- household debt increased by 52% between 2001 and 2007 alone.


All of his wasn't that much of a problem so long as the value of the housing stock was appreciating at 10 or 15% per year, keeping pace with the additional debt that households were assuming. But of course, it stopped doing so about 2-3 years ago. Translation: look out below. When people talk about the destruction of the household balance sheet, this is what they're referring to (or at least what they ought to be referring to).
In other words, the paradox of thrift notwithstanding, the growth in the economy and the reliance of it on consumer spending was built on an unsustainable bubble in the value of one particular asset - housing. The decline in those values -and the resultant tightening of consumer credit - means we couldn't return that economy right now even if we wanted to.

Which we shouldn't. It bears repeating that building an economy on handbags and Starbucks and large screen TVs doesn't do a single darn thing "to build skills, to create the new companies that are so vital to growth, and to fund the discovery and development of new technologies." That kind of activity is above the paygrade of most consumers anyway. For now, the best thing that we (the consumers) can do is to pay down debt, increase savings, and continue to sensibly buy those things we need to our daily lives - not foregoing them, but not buying more (in quantity or in designer label "quality") than we need.

That's the way to get our own "toxic assets" off our balance sheets. When, in the future, the economy and the credit markets return to some measure of normalcy, we will then be in a much better position to invest and spend planfully and wisely than we will be if we allow ourselves to be guilted into over-spending now.

So go ahead, hang your clothes outside. Drive your car till it dies. Pay cash for what you buy. You have my permission.

Wednesday, March 11, 2009

Drastic times call for hopeful measures

Thomas Friedman in the Times brings up a similar point to the one in the Alternet article I linked to the other day: that the current economic crisis shows that the economic-growth model of the last 50 years has run its course. Money quote:
We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...

We can’t do this anymore.
The piece points out that economic growth based on the exploitation of our natural resources isn't really wealth at all, but an elaborate Ponzi scheme, the consequences of which we pass on to our children.
“Just as a few lonely economists warned us we were living beyond our financial means and overdrawing our financial assets, scientists are warning us that we’re living beyond our ecological means and overdrawing our natural assets,” argues Glenn Prickett, senior vice president at Conservation International. But, he cautioned, as environmentalists have pointed out: “Mother Nature doesn’t do bailouts.”
The solution is sustainability, on the macro level:
For starters, economies need to transition to the concept of net-zero, whereby buildings, cars, factories and homes are designed not only to generate as much energy as they use but to be infinitely recyclable in as many parts as possible. Let’s grow by creating flows rather than plundering more stocks.
This of course is what this blog and other sustainability and frugality blogs have been advocating all along: living within our means, taking out only as much as we need, not wasting, recycling and reusing as much as possible. Unfortunately, the mechanisms of society as a whole are built to use exploitative and non-sustainable means and technologies. Changing that will be our biggest challenge.

Tuesday, March 10, 2009

It takes more than just a share-the-road sign

The death of an experienced cyclist in Chatanooga, Tennessee leads to this sensible, thoughtful and well-reasoned editorial in the Chatanooga Times Free Press (h/t Carlton Reid). It recounts the discourtesy and even hostility with which some drivers treat bikers who dare to utilize the road and makes this recommendation:
A remedy for such malicious disregard should hinge on enforcement of the law against such potentially lethal driving, and legal and public education policies. Local and state transportation agencies and governments should consider a range of changes to improve driver awareness and road safety for cyclists, and pedestrians, as well.

A focused public information campaign, particularly in urban areas where bicycling has become a widely popular method of alternative transportation and recreation, should aggressively inform drivers of their legal obligation for safe driving when they encounter bicyclists.

State and municipal governments should consider both tighter driver safety laws and penalties, and also broader efforts to establish designated and more clearly delineated bicycle lanes that contain barriers to vehicular traffic.

One can't really say that bicycling has become a "widely popular method of alternative transportation" in Wichita, but maybe it would be more so if the city government spent a little effort on educational and enforcement efforts like the ones described in this editorial.

Monday, March 9, 2009

How much nest with the nestegg?

Here's an interesting article from Alternet that asks whether, with the collapse of housing prices and people's retirement funds, there will be a rethinking among baby boomers of the one-house-per-family paradigm. To make housing costs more affordable and to stretch those entitlement funds (that are in many cases - more than we thought a couple of years ago - going to be the main means of support for many of tomorrow's seniors), people will be thinking about such "new" arrangements as co-housing, boarders, group homes and more.
“In the last few months we've experienced explosive growth in interest by homeowners age 50-plus to find rooms and roommates,” says Jacqueline Grossmann, Chicago coordinator for the National Shared Housing Resource Center, "The trend now is getting younger and younger. People in their 50s and 60s are losing their nest eggs and increasingly willing to give up their privacy in exchange for rents of $500, $600 a month.”
The article goes on to ask if this might not be one of those silver-lining opportunities of our current financial situation.
As more and more boomers scale down their retirement plans and consider alternative living arrangements, it's worth asking: Is shared housing such a bad thing for aging boomers? Does a return to the Communal idea, borne of economic necessity, also have emotional, social, and environmental benefits? Why wait for the retirement home or hospice to live with other people? With the nation full of worthless, ridiculously large, and mostly empty houses, why not fill them with the newly penurious and like-minded boomers in need of housing?
When Joe Rodriguez of Your Money or Your Life fame retired from Wall Street at the age of 30, he had investments that guaranteed him an income of $6,000 per year, and that was before the massive inflation of the 70s reset the value of the dollar. One of the main mechanisms I remember him mentioning as to how he made this arrangement work was the sharing of housing and housing costs.

In addition to the savings, as the article mentions, there are advantages in terms of environmental impact (more people in fewer houses means fewer homes to be heated and cooled) and social connectedness (as people form families-of-choice, they are emotionally invested in others' lives in a way that aging grandparents miles away from their kids rarely are). Not to mention that a more communal lifestyle will counter a lot of the YOYO (your on your own) propaganda of the past 30 years, which sees any social connectedness beyond blood and church as invasive. Is it any wonder Americans are so neurotic?

Our current financial mess can be useful if it causes us to rethink our goals, both individually and as a society. Rather than just Humpty Dumpty back together again, it may be time to move past the failed models of recent years and toward a way of living that is less focused on acquisition and economic growth, and more focused on sustainability and the sharing of resources.

The first bike entry of spring

I rode my bike to work for the first time this season on Friday. Right now it looks like, weather permitting and if I have no other appointments I need to drive to, that I'll be biking on Mondays and Fridays. Tuesdays and Thursdays I have to pick up the kids from school, and Wednesdays DW takes DKs 1 and 2 to Hebrew School and she drops DK3 off at my job on the way.

Anyway, getting out the bike led me to look at some of the links that I've accumulated on the subject, and here are a couple: a good one if your biking to work depends on the weather, a 50 page sampler of the "Bike to Work" book that I'm eagerly awaiting.

Another thought, inspired by gardening over the weekend

Pack your mishloah manot in those green plastic planters that plants come home in. There's always plenty of those around with nothing to do.

Thursday, March 5, 2009

Reconstructing Mishloah Manot

This posting on the Jew and the Carrot (the link is broken, but maybe they'll fix it later) led me to thinking about sustainable, eco-friendly, thrifty mishloah manot. For those who don’t know, mishloah manot is the custom of sending gifts of food to others on Purim – it is actually one of the four mitzvot that everyone is supposed to observe on Purim. As with every mitzvah, it’s possible to do it in a very over-the-top and expensive way; in a stam, fulfilling-the-ritual-obligation-but-not-very-attentive way; or in a way that fulfills the mitzvah in new and thoughtful ways – as an expression of our values and commitments.

Just jotting down some notes on issues that could be addressed in this manner, I note healthful, local, fair trade, low carbon and low packaging. Traditionally one is to give mishloah manot from at least two different food groups, which means giving the recipient the opportunity to make two different brakhot. So in a reconstructed practice, we could say that one should include in one’s package at least two different issues – two different ways to make a difference.

It’s still too early in the year to share locally grown produce, at least where I live. But dried fruit and nuts make a nice addition to any mishloah manot package, and they can be purchased in bulk from your local healthfood store. Supporting local, independently owned businesses is important too!

Also, make sure to include some fair trade chocolate. I’ve come to the realization (again) that much of what we get cheaply is gotten on the backs of someone else’s poorly paid labor. Plus, much fair trade is produced in ways that are more environmentally sustainable as well.

Making hamentaschen or other treats at home allows us to have control over the ingredients and therefore the healthfulness of the end product. Whole-grain hamentaschen, anyone?

Maybe making a donation to an organization working on climate change, and including cards in your basket saying, “In lieu of sweet treats, a donation has been made to such-and-such organization in your honor” would be educative as well as effective. I suppose one could buy carbon offsets as well, although I’m not convinced of their efficacy. How about postcards made out to your friends’ legislators, asking them to support clean energy?!

Buy baskets or coffee cups from the second-hand store for your packaging. Use newspaper instead of tissue paper for lining. Make ribbons from worn-out clothes or linens. Draw cards. Make stickers.

With a little thought and resourcefulness, our mishloah manot packages can represent what we care about, to those we care about. And of course, they’re fun and delicious, too!

Happy Purim!