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Transition Towns Conference 2010: The Automatic Earth Stoneleigh Lecture on the Financial Crisis.

Stoneleigh (AKA Nicole Foss) gave a lecture entitled 'Making Sense Of The Financial Crisis In The Era Of Peak Oil' to a packed audience at the Transition Towns Conference. Here's my overview of what she said with a few of my own thoughts sprinkled on top. Massively important food for thought.

Written by Amelia Gregory

Hire me by Joana Faria
Hire Me by Joana Faria.

Nicole Foss is a finance writer and energy analyst known as Stoneleigh when she blogs on The Automatic Earth website – a fact which confused me thoroughly for some time after hearing her fantastically absorbing talk at the Transition Towns conference back in June 2010.

Transition Towns 2010 Conference nicole foss
Nicole Foss of The Automatic Earth.

We all know we’re stuck in a bit of a financial trough, but hey, we’re bound to bounce out the other side soon and things will all be hunky-dory again. Right? Wrong. The climate crisis and attendant social crisis notwithstanding, according to Nicole Foss we’re still heading for the biggest financial crash we’ve ever known.

Nicole Foss by Sayaka Monji.

This mess – the result of our insatiable capitalist global system – ain’t going nowhere. To make matters worse, declines in the economy are normally sharper than inclines, so get ready for a steep ride down and a big bump when we hit the bottom. Nicole is so determined to forewarn ‘ordinary’ people of the imminent perils we face that she’s left her native Canada to travel the world on a punishing lecture schedule. This way maybe the bankers won’t be able to lay their grubby mitts on all that remains of our money. Which would be a good thing, right?

money rollercoaster Kayleigh Bluck
The Money Rollercoaster by Kayleigh Bluck.

Here then, is a distillation of the lecture that she gave at the Transition Towns conference in mid June 2010. Nicole also has a website called the Automatic Earth where you can find out more about her research, but if you’re like me you may well find it a little hard to understand. For this reason I hope I’ve managed to distill her key messages into something a little more comprehensible to the masses – read on, and be chilled to the marrow.

Abi Daker - Valuation Graph
The Psychology of Valuation by Abigail Daker.

Nicole has a theory, backed up by rigorous research: that right now we’re in serious denial about the situation of the financial markets and according to an investment graph called the psychology of valuation we’re merely riding a momentary upward blip which describes every mania the markets have ever seen, including the famous tulip mania of the 1600s and the South Sea Bubble. And we always end up worse off than where we started.

Abi Daker - South Sea & Tulip Graph
Market Manias by Abigail Daker.

She dates the current bubble back to 1982, just as the banking regulations that had been put in place during the 1930s were beginning to be dropped. Sadly it seems we have forgotten the lessons of the depression just in time for everything to go wrong again, so her estimation sees us returning to the house prices of the 1970s when the bubble finally bursts. We’ve just had the most ginormous party, so imagine the hangover that’s coming: the next depression is staring us in the face and yet we carry on with business as usual. Sounds horrendous? Is this merely scaremongering or worth investigating further?

The party is nearly over, by Yelena Bryksenkova.

Maybe a rudimentary analysis of the financial system would come in handy at this point. Here goes: as credit expands to accommodate the demands of a failing economy (a process still occurring now) there will eventually be an excess of credit. Witness the huge derivatives market that sits at the top of this pyramid. Looks stable eh? You’ve probably heard of the great beast known as quantitive easing, or the 62 trillion dollar debt monetization market, both of which hand excess cash to those at the centre of the finance industry – hence bailouts are always for insiders, ie the bankers. Yes, our world economy currently relies entirely on the inside trading of debts, not real products or services. So, if that implodes we’re utterly fucked.

Abi Daker - Inverted Pyramid Cartoon
The Derivatives Pyramid by Abigail Daker.

As cash gets harder to come by people will start to hoard, resisting the temptation to spend in the economy. If there is no motion of money then the value of cash will start to rise. This effect can be likened to trying to run a car without any oil. The light is on to warn us that there is not enough lubricant, and indeed, if we carry on this way the entire economy will start to seize up. The relative costs of goods and services will go up as wages fall faster than prices, and this will be exasperated by increasingly rare and costly resources – think of our beloved gadgets that contain so many rare trace elements. As well as peak oil we’re heading for peak pretty much everything. Then credit will disappear. And of course those at the bottom of the pile will experience the worst of it when their credit card debts get sold to Vinny the Kneecapper. Who will try his hardest to get some of that debt repaid in anyway he can.

Vinny the Kneecapper by Abigail Nottingham.

This is what happened during the recession of the 1930s – buyers and sellers couldn’t be connected, and even though there were lots of things that could be bought the lack of money meant they went to waste. And when there is a demand collapse (due to a lack of available cash to spend) a supply collapse will follow, followed by civil unrest. In fact Nicole predicts a likely insurrection in places such as Saudi Arabia. To make matters worse, during times of shortage any available supplies get grabbed by the military. Of course.

At the moment we are in an “extend and pretend phase” that merely continues the fiction we have been living for many decades. Money continues to chase its own tail in the City of London (witness record profits from the banks, announced this week) but Britain is still headed for much bigger trouble.

Worlds highest standard of living by Jenny Costello
World’s Highest Standard of Living by Jenny Costello.

Pension funds are famously feeling the effects of a failing economy because they’ve been chasing risk and that makes them extremely vulnerable, but all kinds of financial investment have always been predicated on making money out of someone else’s misery and misfortune – for example when water becomes scarce we are encouraged to buy shares in water companies, thereby making money out of the desperate.

The agribusiness model will fail because the Just In Time model of production (much trumpeted as the best, most efficient method when I was at school in the 1980s, quelle surprise) is brittle and liable to fall apart at the first lack of resources. Many other product services have adopted this model and will likely suffer a similar fate.

automatic earth - octavi navarro
Illustration by Octavi Navarro.

The price of real estate could fall by up to 90% which means that we will be stuck with property in a recession in the desperate hope that its value will increase. For this reason Nicole recommends that renting is now a better bet because it offers more mobility than owning a property. What’s more, it’s likely that we will need centralised power for rationing. Urban areas, despite being more dependent on services, are more likely to survive in times of crisis due to their closer communities.

What if you lose your home? by Natasha Thompson.

Chillingly Nicole predicts that the credit markets will fall in the next six months (remember that this lecture was a month and a half ago), and she predicts that the real economy will fall within about a year. Then the positive feedback will escalate fast. In September 2008 we came within 6 hours of complete seizure of the whole banking system… and Nicole accurately gave 6 months notice of the Icelandic Crash on her website – so she must be doing the sums right somewhere.

What then, to do with your money (presuming you have any?) Put it in precious metals? There’s a reason why humans have always valued gold – it holds its value for over 1000 years. Unbelievably Gaza has become a gold exporter in recent times, not because of the famous gold mines of Gaza, but because the people have become so desperate that they have sold their dowries. But even precious metal ownership may be banned as a failsafe route to retain the worth of your cash – it was banned in the depression. And anyway, what good is gold when there is no food to eat?

The Need for Gold by Olivia Haigh
The Need for Gold by Olivia Haigh.

Not all green companies will turn out to be good places to invest, simply because no one can make 20 year guarantees at this time when there is so much upheaval ahead. Nicole suggests keeping money in government gilts as the next best option to keeping hard cash literally under the mattress. Simply because the government is likely to stand longer than the banks and it would be wise not to leave our hard earned cash to the whims of the markets. Although she warns against a mistaken perception of safety in the dollar because there is always the risk that the currency could be reissued in the US, thereby targeting foreigners who could not convert their cash quickly enough. Transition Towns have been launching their own community currencies – could this be the answer? Unfortunately local currencies may become redundant if authorities realise they want a cut. Risk will be everywhere, so we desperately need to move towards no growth economic models that rely on real skills and hard cash currencies.

Illustration by Mina Bach.

Worst of all, social cracks are revealed in times of contraction because liberty tends to be the first casualty. Benjamin Franklin famously said that he who trades liberty for security shall enjoy neither, but frightened people will do these things. Multi culturalism is likely to be the first culprit – witness the rise of fascism across the West. Social unrest of the type we have seen recently in Greece will continue to happen as the centre pushes out to the periphery, creating horrible political divisions. But we have all been inveigled into this situation together – after all there would be no predator without a prey. We are all responsible for this crisis – like Hansel and Gretel, we’ve been tempted into the trap awaiting us by our insatiable desire to consume.

Illustration by Dee Andrews.

But not all is lost. Whilst there was a palpable air of unrest in her Transition Town audience Nicole remained resolutely upbeat – for she thinks (and I tend to agree) that we are living through exciting times of change. We cannot sustain our current pathological capitalist world economy so now is the perfect time to prove a more positive model of living and the folks involved in Transition Towns and all the other sustainable initiatives around the world are perfectly placed to showcase these new ideas.

Illustration by Yelena Bryksenkova.

Human relationships are the most important thing we have so we must work hard to build strong and resilient networks abundant with useful skills. We need to become more self-sufficient: looking after our own health and producing far more goods locally because there will be much less global trade. The final rub? Nicole predicts that we can expect to see the worst outcomes of the crash in just 2-5 years. No lie. So we need to show how sustainable systems can work with a slightly panicked sense of urgency.

Great Depression by Joana Faria
Great Depression by Joana Faria.

Of course this is all prediction, and I personally question how much of Nicole’s prophesies will come to pass. Will house prices really revert to those of the 1970s? Maybe it won’t be quite that bad. I hope not. What I don’t question in any way is the need for a massive change in our parasitical global financial systems. The huge risks to our current way of life are definitely there. And where better place to start making changes than at home, in the way we lead our own lives. Transition Towns offers one of the best possible ways to build a resilient and happy local communities and we should all be doing our best to make that happen.

Ready. Set. Go!

Illustration by Dee Andrews.

There’s a whole host of further information about this subject matter on the web and here is some of the best.

A tribute to The Automatic Earth, with voiceover snippets from the lecture I attended. Inspiration for many of the illustrators on this blog and essential viewing if you’ve got this far:

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A video of Rob Hopkins and Peter Lipman discussing their response to Stoneleigh’s Transition Conference Lecture shortly afterwards:

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Another very comprehensive overview of the lecture courtesy of Shaun Chamberlin.

Mike Grenville discusses his thoughts on the lecture on this podcast.

In the meantime business continues as usual for the bankers, who have been celebrating record profits in the city once more this week as they continue to fund gross climate injustices such as tar sands and expansion of open cast coal extraction across the UK with our money – even as the financial and climate crises loom ever more prominently. In a few weeks I will be joining Climate Camp to help close down the epicentre of banking misbehaviour at the global headquarters of the Royal Bank of Scotland in Scotland. Come and help us say no to austerity cuts which help to finance bank bailouts that jeopardise our future in pursuit of profit for the few.

Let’s connect the dots and make a better future together.

If Climate Camp made Avatar: the reason why we’re tackling RBS in Edinburgh between 21st-24th August 2010. Facebook event here.

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This is where we’re going to set up a sustainable camp where we can show the world a better way to live whilst drawing highlight to the root of our problems: we’re going to shut down the global headquarters of RBS on the day of action: August 23rd. Inspiring, no?

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14 Responses to “Transition Towns Conference 2010: The Automatic Earth Stoneleigh Lecture on the Financial Crisis.”

  1. Amelia says:

    haha you’re funny Monkey Terror x

  2. James Farrar says:

    Good post. Beautiful blog, amazing illustration. All blogs should look like this.

  3. Amelia says:

    Why thankyou very much James x

  4. Amelia says:

    am currently reading The Money-Less Man by Mark Boyle, founder of:
    This great idea is about sharing, free skills learning, and managing with little or money (the book recounts his year living with no money and surviving = fascinating social experiment). Way to go it seems from reading the above.


  5. Amelia says:

    many thanks for the link Amelia, I’m sure people will find it useful x

  6. [...] Aquí tenéis una ilustración que hice para un artículo sobre la crisis financiera escrito por Amelia Gregory. ¡Gracias por todo, Amelia! Podéis leerlo en Amelia’s Magazine. [...]

  7. Stewart says:

    I think Automatic Earth (stoneleigh) Nichole Foss is one of the best public speakers I have hear for a long time. She make sense of some much, I have been thinking, feeling working on for many years. After I attended the Transition meeting in Cambridge. I have not stopped researching all area relating to this important phase in out history. I am working on a blog of my own, that will be posted soon. Treecare twitter.

  8. [...] one proved to be a real challenge, for the Transition Towns Conference 2010 [...]

  9. Chris Harries says:

    How hard it is to put economics in picture format.

    I sat and listened to Nicole’s downloaded lecture for 45 minutes and had to concentrate, having no visuals. Well done Amelia.

  10. [...] one proved to be a real challenge, for the Transition Towns Conference 2010 [...]

  11. [...] one proved to be a real challenge, for the Transition Towns Conference 2010 [...]

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