Sallie Mae and Our Environment

Over the weekend I read an article about the college loan fund Sallie Mae. The article told the story of a father and son. The son wanted to be a Marine, so Dad said ok, but go to college first. He went to college, double majored in engineering, graduated and enlisted to join the Marines. Before he was to report, he was killed in a car accident.

The son had student loans with three lenders, two private and Sallie Mae. The father sent letters requesting that, given the difficult situation, the loans be forgiven. The two private lenders were understanding and forgave the debt. Sallie Mae sent a form letter denying the request.

The author of the article summarized – ” It is beyond obscene that a government now handling billions in bailouts to boardroom executives whose idea of risk is using a 9-iron instead of a wedge on an approach shot could spawn a lender like Sallie Mae to soak the family of a young man willing to spill his blood for others.”

I recently also read that some government responsibility group had tried with thirty banks to find out how they were using bailout funds…none of them were willing to release any detail.

How can we respect and improve our environmental sustainability if we do not have accountability in our institutions?

Abrupt Climate Change

From a USGS Press Release:

The United States faces the potential for abrupt climate change in the 21st century that could pose clear risks to society in terms of our ability to adapt.

“Abrupt” changes can occur over decades or less, persist for decades more, and cause substantial disruptions to human and natural systems.

A new report, based on an assessment of published science literature, makes the following conclusions about the potential for abrupt climate changes from global warming during this century.

  • Climate model simulations and observations suggest that rapid and sustained September arctic sea ice loss is likely in the 21st century.
  • The southwestern United States may be beginning an abrupt period of increased drought.
  • It is very likely that the northward flow of warm water in the upper layers of the Atlantic Ocean, which has an important impact on the global climate system, will decrease by approximately 25-30 percent. However, it is very unlikely that this circulation will collapse or that the weakening will occur abruptly during the 21st century and beyond.
  • An abrupt change in sea level is possible, but predictions are highly uncertain due to shortcomings in existing climate models.
  • There is unlikely to be an abrupt release of methane, a powerful greenhouse gas, to the atmosphere from deposits in the earth. However, it is very likely that the pace of methane emissions will increase.

The U.S. Geological Survey led the new assessment, which was authored by a team of climate scientists from the federal government and academia. The report was commissioned by the U.S. Climate Change Science Program with contributions from the National Oceanic and Atmospheric Administration and the National Science Foundation.

“This report was truly a collaborative effort between world renowned scientists who provided objective, unbiased information that is necessary to develop effective adaptation and mitigation strategies that protect our livelihood,” said USGS Director Mark Myers. “It summarizes the scientific community’s growing understanding regarding the potential for abrupt climate changes and identifies areas for additional research to further improve climate models.”

Further research is needed to improve our understanding of the potential for abrupt changes in climate. For example, the report’s scientists found that processes such as interaction of warm ocean waters with the periphery of ice sheets and ice shelves have a greater impact than previously known on the destabilization of ice sheets that might accelerate sea-level rise.

To view the full report, titled Synthesis and Assessment Product 3.4: Abrupt Climate Change, and a summary brochure on abrupt climate change, visit

USDA Announces New Office of Ecosystem Services and Markets

WASHINGTON, Dec. 18, 2008–Agriculture Secretary Ed Schafer today announced the intention to establish a new USDA Office of Ecosystem Services and Markets and the creation of a federal government-wide Conservation and Land Management Environmental Services Board to assist the Secretary of Agriculture in the development of new technical guidelines and science-based methods to assess environmental service benefits which will in turn promote markets for ecosystem services including carbon trading to mitigate climate change.

“Our Nation’s farms, ranches and forests provide goods and services that are vital to society – natural assets we call “ecosystem services,” said Schafer. “The Office of Ecosystem Services and Markets will enable America’s agriculture producers to better compete, trade their services around the world, and make significant contributions to help improve the environment.”

Agriculture producers provide many ecosystem services which have historically been viewed as free benefits to society – clean water and air, wildlife habitat, carbon storage, and scenic landscapes. Lacking a formal structure to market these services, farmers, ranchers and forest landowners are not generally compensated for providing these critical public benefits. Market-based approaches to conservation are proven to be a cost-effective method to achieve environmental goals and sustain working and natural landscapes. Without financial incentives, these ecosystem services may be lost as privately-owned lands are sold or converted to development.

Secretary Shafer intends to name Sally Collins Director of the Office of Ecosystem Services and Markets (OESM). Organizationally, OESM will be located within the Office of the Secretary providing direct access to the Secretary. Collins will assume this position after serving as Associate Chief of the USDA Forest Service for the past 8 years, where she pioneered concepts for ecosystem services and markets as part of that agency’s sustainable land management mission.

OESM will provide administrative and technical assistance to the Secretary in developing the uniform guidelines and tools needed to create and expand markets for these vital ecosystem services and will support the work of the Conservation and Land Management Environmental Services Board. As directed by the authorizing legislation the first ecosystem services to be examined will be carbon sequestration. The Office of Ecosystem Services and Markets and the Conservation and Land Management Environmental Services Board will be established to implement actions authorized by the 2008 Farm Bill.

The Conservation and Land Management Environmental Services Board will be comprised of the Secretaries of Interior, Energy, Commerce, Transportation, and Defense; the Chairman of the Council of Economic Advisors; the Director of the White House Office of Science and Technology ; the Administrator of the Environmental Protection Agency; and, the Commander of the Army Corps of Engineers. The Secretary of Agriculture will Chair the Board. The Chairman of the White House Council on Environmental Quality and the Administrator of Office of Information and Regulatory Affairs will serve as vice-chairs.

Nominations will be sought in the near future for a federally chartered public Advisory Committee to advise the Board. The Advisory Committee will include farmers, ranchers, and forest landowners, Tribal representatives, as well as representatives from State natural resource and environmental agencies, agriculture departments, and conservation and environmental organizations.

The Process of Creative Destruction

I’m concerned that our national bailout and stimulus processes are manipulating the ‘creative and destructive’ processes that are fundamental to dynamic free economies. It’s not just about protecting executives that ought not to be protected (although I think we need to have a new generation of executives that ‘think’ differently about economics)… concern is that we are losing the values that make America’s economy work.

The idea of ‘too large to fail’ is a breakdown of our economic ethic that allows useless, out-of-date, and misaligned economic institutions to fail….and be replaced with institutions with better qualities.

Eliot Spitzer (..that’s a familiar name?) wrote this interesting paper.

Why I’m Not Worried About Inflation…

I yesterday became aware of the weblog and writings of Sharon Astyk…

Well, I wish I could take the credit for having constructed a brilliant analysis, but really, the best answer I can give is “What she said.”  That is, Ilargi and Stoneleigh have been running analysis of the credit crisis since before most people knew there was a crisis.  I frankly thought Ilargi was out of his mind when he told me that the economic crisis would reshape peak oil and climate change discourse, and ought to be our focus.  I was wrong, he was right.  Their analysis has been solidly spot-on, and I think it will continue to be.  We are in a self-reinforcing deflationary spiral.  Inflation may eventually be a response to that, but for right now and the immediate future, well, it isn’t.  Here’s an excerpt from Stoneleigh’s remarkable analysis.

“Thanks to a credit boom that dates back to at least the early 1980s, and which accelerated rapidly after the millennium, the vast majority of the effective money supply is credit. A credit boom can mimic currency inflation in important ways, as credit acts as a money equivalent during the expansion phase. There are, however, important differences. Whereas currency inflation divides the real wealth pie into smaller and smaller pieces, devaluing each one in a form of forced loss sharing, credit expansion creates multiple and mutually exclusive claims to the same pieces of pie. This generates the appearance of a substantial increase in real wealth through leverage, but is an illusion. The apparent wealth is virtual, and once expansion morphs into contraction, the excess claims are rapidly extinguished in a chaotic real wealth grab. It is this prospect that we are currently facing today, as credit destruction is already well underway, and the destruction of credit is hugely deflationary. As money is the lubricant in the economic engine, a shortage will cause that engine to seize up, as happened in the 1930s. An important point to remember is that demand is not what people want, it is what they are ready, willing and able to pay for. The fall in aggregate demand that characterizes a depression reflects a lack of purchasing power, not a lack of want. With very little money and no access to credit, people can starve amid plenty.

Attempts by governments and central bankers to reinflate the money supply are doomed to fail as debt monetization cannot keep pace with credit destruction, and liquidity injected into the system is being hoarded by nervous banks rather than being used to initiate new lending, as was the stated intent of the various bailout schemes. Bailouts only ever benefit a few insiders. Available credit is already being squeezed across the board, although we are still far closer to the beginning of the contraction than the end of it. Further attempts at reinflation may eventually cause a crisis of confidence among international lenders, which could lead to a serious dislocation in the treasury bond market at some point.”

I think it is important that we be prepared for the real crisis – a long term, deep, deflationary Depression.  As I’ve mentioned before, most rhetoric about the Depression tends to look at the deepest part of the Depression, observe that we aren’t there yet (something along the lines of “During the Depression, unemployment was 25%, but at present we are nearly at 7%, a long way away from that).  All of this ignores the fact that during the Depression, unemployment rose gradually too.  In the fall of 1929, unemployment rose only very slowly.  But between March 1930 and March 1931, unemployment doubled, and didn’t reach its peak until 1933, more than 3 1/2 years after the crash.

My claim is not that we will travel precisely the same road as described in the Depression. But one of the things about crises worth noting is this.  They have their moments of screaming and running around, of explosions and flames.  And then they have most of the rest of the time, which is rather like life, only with incrementally painful shifts.

One of the incrementally painful shifts we are facing is that addressing peak oil and climate change are likely to be pushed to the back burner.  Obama has already noted that some of his energy goals will probably have to be put off.  The problem is that the odds are good that if they are put off, they won’t happen.  Meanwhile, over at The Oil Drum, Gail the Actuary has another clear-eyed post about how this will affect our long term energy infrastructure.

BTW, if you’ve relied as much as I have on their analysis, and can afford it, you might consider donating to the Automatic Earth’s Holiday Fundraiser, on the sidebar.  Ilargi has been doing the work of researching and writing full time, and essentially, they are trying to make sure he can keep doing it.  His goal – to make as much as a McDonalds burger flipper by exploring the financial crisis and helping people address it – seems pretty reasonable to me – I’d sure as heck rather have the two of them doing this work.


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