Another long video, but essential watching nonetheless. This is a lecture given at UCLA's Hammer Museum by William K. Black. He investigated the 1980s Savings and Loan crisis when he was at the Federal Home Loan Bank Board. In this talk he discusses how more money was recently lost by one single bank, IndyMac, than during that entire crisis:

Here's a video (over an hour long!) which was recorded at the Edge "Reflections on a crisis" event held in Munich earlier this year. In it Daniel Kahneman, psychologist and winner of the Nobel Prize for economics, and Nassim Nicholas Taleb, ex derivatives trader and now Professor of Risk Engineering and author, discuss how a toxic combination of corporate greed and human failings created the current economic crisis:

In an interview on CNBC this morning Texas oil billionaire and wind energy advocate T. Boone Pickens blamed "lack of leadership" from George W. Bush and "that speech" from Nancy Pelosi for the vote against the Bail-Out plan in the House yesterday:

Watch the T. Boone Pickens interview on CNBC

Commenting on the current financial crisis and the Bail-Out failure Mr. Pickens said that:

Paulson is in there with bullets going past his head all over the place. He's very smart to call Warren Buffet.  Buffet's in Omaha and nobody's shooting at him… I think that's very smart on the part of Paulson and Buffet's very good to come in and help out on it. So here you've got the American people don't understand, and you've got everyone trying to get re-elected. I think they've got to come together on the deal, that's all there is to it. It's got to happen, and I think it will. I think it will happen on Thursday… I think you've got to get the FDIC into it, and I think that'll happen too.

Then he pointed out that in his opinion there is an even bigger problem waiting in the wings – The energy crisis:

You've got another one coming up, and that'll be energy. We can't continue to do what we're doing on energy. What's the number on this problem, $700 billion? Look at what you're paying for foreign oil. Annually, not one time, $700 billion!

The oil [price] we're still right around the $100.  I said OPEC would support it at $100, and I'm not so sure they're not supporting it right now.  All they have to do is just pinch back a little bit.  There's not any reason for them to take $60 oil. People talking about how it's going to come down to $60 they don't understand how the people that make the oil work. They're not going to give it to you at $60.

When we get to the energy issue, and we're going to get to it pretty quick just as soon as this is cleared up. When we get to the energy issue Washington doesn't fully understand it and they can't explain it to the American people.

Now it seems I was a bit hasty when I said just over a month ago that "BP Capital is still going strong".  Boone Pickens revealed in the CNBC interview that his hedge funds have lost over a billion dollars.

We have a 90 day notice and right now we have been notified by about 15% of our people that they want the option to withdraw their funds by the end of the year.

If I may summarise: the American people don't understand finance or energy. That's because Washington doesn't understand finance or energy. T. Boone Pickens understands energy so well his hedge funds have lost more than 1 billion dollars, plus a lot more yesterday. I guess we'd all better hope Warren Buffet understands some of this stuff, or who knows what might happen? As Boone Pickens put it:

We'll hope that Warren and Hank get this thing squared away here.

Another day dawns, and the list of failed banks grows ever longer.  Congress has renamed the Bail-Out as The Emergency Economic Stabilization Act.  The House has just rejected the latest draft by 228 votes to 205. George W. Bush said he was "very disappointed". Whilst Congress were extending the new act to a total of 109 pages over the weekend, banks around the world were dropping like flies as the virus spread.

In the United States Wachovia is the latest venerable institution to fall prey to the contagion.  Citigroup has agreed to buy the banking operations of Wachovia for the knockdown price of around $2.2 billion.  Wachovia Corporation was the fourth largest banking chain in the US. It originally got it's name from the Wachau valley of the river Danube. Settlers from Moravia named part of North Carolina after their homeland way back in 1753.

The deal does not currently include Wachovia's money management and retail brokerage arms, and the government is providing a limit to Citigroup's risk on the transaction.  In a similar guarantee to the one provided to JPMorgan Chase in their emergency takeover of Bear Stearns, the Federal Deposit Insurance Corporation will absorb all losses that Citigroup incurs on Wachovia's riskiest mortgages over and above $42 billion. Sheila Bair, the chairwoman of the FDIC, said that:

This morning's decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury. This action was necessary to maintain confidence in the banking industry given current financial market conditions.

As the the International Herald Tribune points out:

The deal further concentrates Americans' bank deposits in the hands of three banks: Bank of America, JPMorgan Chase and Citigroup will control more than 30 percent of the industry's deposits. Together, they will have unrivaled power to set prices for their loans and services… Some small and midsize banks, already under pressure, might have little choice but to seek suitors in order to compete.

Whilst the US government was underwriting Citigroup's buyout of Wachovia the UK government was being similarly obliging as Spanish bank Santander bought the 197 branches and £20 billion retail savings operation of the United Kingdom's Bradford and Bingley for £612 million. The bank's £50 billion mortgage and loans business has effectively been nationalised. Santander subsidiary Abbey has been paid £14.6 billion from the Financial Services Compensation Scheme, plus an additional £4.5 billion from the UK Treasury. The UK government says it will start to recoup that money when it sells off the mortgages that it now owns. UK Prime Minister Gordon Brown said that:

We will do whatever it takes to ensure the stability of the British financial system… We allowed Lloyds TSB to take over HBOS. We intervened to deal with share speculation in the market, and will continue to do whatever is necessary over these next few days in very difficult times, turbulent times around the world, to make sure that the British stability for which we have done a great deal over these last few years is maintained, and that's why the actions have been taken in the way they have.

As if Wachovia and Bradford and Bingley were not sufficient it seems as though the breakdown of the new paradigm in Anglo Saxon capitalism is not confined to just the United Kingdom and the United States.  In other announcements today the governments of the Netherlands, Belgium and Luxembourg have agreed to bail-out Fortis to the tune of 11.2 billion euros, and the goverment of Iceland has agreed to pay 600 million euros for a 75% stake in Glitnir, Iceland's third largest bank.

When do you suppose this government sponsored concentration of wealth into the hands of fewer and fewer giant corporations will stop, if it ever does?

Just over a week ago I found myself once again on EasyJet flight EZY6167 heading from Bristol to Amsterdam.  I asked the head of the cabin crew if he knew Dawn, who operated the camera on one of our previous internet videos.  He said he did.  I showed him one of our "Water Connects Us" leaflets, and I asked him if it would be OK if I handed some out to his passengers.  He said that would be fine as long as I didn't get in the way of the cabin crew as they went about their duties.

I handed a leaflet to a guy sat in front of his laptop.  He covered his screen with it! He said that although he was "in civvies" he worked in finance and he was in the middle of writing a report on the impact of rising commodity prices.  His report was confidential. I pointed out that our leaflet was not.  Maybe he could pass it around his colleagues when he got back to the office?

Since then quite a lot has happened around the world related to the third of the three F's – The global financial crisis.

The biggest bail-out so far is the rescue of the largest insurer in the United States, American International Group Inc.  According to the Financial Times:

The US Federal Reserve announced that it would lend AIG up to $85bn in emergency funds in return for a government stake of 79.9 per cent and effective control of the company – an extraordinary step meant to stave off a collapse of the giant insurer that plays a crucial role in the global financial system.

AIG is the biggest domino to topple so far, but according to the Los Angeles Times it didn't fall, it was pushed by financial speculators. So were a number of other financial companies, including Lehman Brothers and Washington Mutual. The Securities and Exchange Commission is now investigating and will demand that hedge funds explain their activities under oath:

Short selling is legal as long as investors follow well-known rules. But as Wall Street’s bear market has worsened this year, short sellers have been vilified as market manipulators. Legally or illegally, the shorts had it right on Lehman, whose shares now trade for 22.5 cents — down from $16 at the end of August.

The $85 billion for AIG sounds like a very large amount of taxpayer's money to me, but it seems as though it is nowhere near enough. As a first step in a battle to prevent global financial meltdown on September 19th the SEC banned short selling of a large range of stocks:

In a move against traders who have sought to profit from the financial crisis by betting against bank shares, the Securities and Exchange Commission issued a temporary ban on short sales of 799 financial stocks, following similar action in Britain on Thursday.

By Saturday the 20th the administration of George W. Bush had decided to ask Congress to approve the use of a total of $700 billion of taxpayer's money to bail out an unspecified list of United States financial institutions:

The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.

A lot of commentators, including both presidential candidates, made the point that unconditionally committing that amount of money to the very people whose greed had caused the crisis in the first place was not self evidently a good use of public funds.  According to John McCain:

It has become clear that no consensus has emerged to support the administration's proposal. I do not believe that the plan on the table will pass as it currently stands, and we are running out of time… Every American has a stake in solving this crisis and saving our financial system from collapse.

Barack Obama put it this way:

The era of greed and irresponsibility, on Wall Street and in Washington, has led us to a financial crisis as serious as any we have faced since the Great Depression.

This morning in the United Kingdom the two most senior Archbishops in the Church of England condemned financial speculators. Rowan Williams, the Archbishop of Canterbury, said that the global financial crisis:

Exposes the element of basic unreality in the situation – the truth that almost unimaginable wealth has been generated by equally unimaginable levels of fiction, paper transactions with no concrete outcome beyond profit for traders. The biggest challenge in the present crisis is whether we can recover some sense of the connection between money and material reality. Given that the risk to social stability overall in these processes has been shown to be so enormous, it is no use pretending that the financial world can maintain indefinitely the degree of exemption from scrutiny and regulation that it has got used to.

John Sentamu, Archbishop of York, said to an audience of bankers yesterday that:

We find ourselves in a market system which seems to have taken its rules of trade from Alice in Wonderland. To a bystander like me, those who made £190m deliberately underselling the shares of HBOS, in spite of a very strong capital base, and drove it into the arms of Lloyds TSB, are clearly bank robbers and asset strippers. One of the ironies about this financial crisis is that it makes action on poverty look utterly achievable. It would cost $5bn to save six million children's lives. World leaders could find 140 times that amount for the banking system in a week. How can they tell us that action for the poorest is too expensive?

As I was returning to South West England from Amsterdam yesterday I was reading last week's edition of the New Scientist on the plane. In a letter to the editor Henry Northover from WaterAid pointed out that:

The water crisis is not a crisis of scarcity – yet – but a crisis of access, fuelled by weak international leadership. There is enough fresh water but the poorest billion people are missing out: 1 person in 8 does not have access to safe water, leading to at least 5000 preventable child deaths a day.

I have a couple of questions for Messrs Bush, Bernanke and Paulson. How much food would $700 billion provide to the world's hungry?  How much water would $700 billion provide to the thirsty around our planet?

The remnants of Hurricane Hanna arrived on the shores of South West England last weekend. Hanna still packed a bit of a punch, as you can see in this video that we shot at Woolacombe on Sunday:

I took the opportunity to inform any interested YouTubers out there about some of the things that have been going on here on the econnexus blog over the last two or three weeks. I hope they can hear me over Hanna's growling in the background.

Here's the point though. If you're a regular surfer off the coast of North Cornwall or North Devon you know in your bones that something is changing. When we were shooting our last video at Putsborough I was chatting to a surf instructor in the line up. Before I had a chance to mention EcoDriving, or Eco anything for that matter, he told me he'd never known a summer like it. Much less sun and much more swell!

This is what swells in the Caribbean looked like back in February 2005:

This is what they look like in September 2008:

Here's how Hanna arrived in Woolacombe via Haiti:

National Hurricane Centre graphics archive for Hurricane Hanna.

In a report on the UNFCCC climate change conference in Bali last December, David B. Sandalow of the Brookings Institution, the influential Washington based think tank, pointed out that:

The most important outcomes of the Bali climate change conference didn’t make the headlines… yet Bali produced three important outcomes. First, developing countries stepped up to the table… Second, a new consensus on deforestation emerged… Finally, “adaptation” moved toward center stage. Today the world faces a sobering reality: even the most aggressive plans will not prevent some amount of global warming in the decades ahead. The consequences for poor developing countries are predicted to be most severe.

Mr. Sandalow quoted Nobel peace prize-winner Al Gore as saying in Bali:

A sense of urgency that is appropriate to this challenge is itself a challenge to our moral imagination.

Last month the Brookings Institution held a conference on global poverty, at which Al Gore was one of the keynote speakers. At this conference a number of challenges to our collective moral imagination were presented.

The speakers at the conference were not debating whether climate change is happening or not, nor how to prevent it happening in the future. Their assumption was that climate change is inevitable, and their agenda was concerned with adaptation to that change. Evidence presented at the conference  suggested that climate change affects the poorest people on the planet most severely – A total of 1 billion people. Poor countries are vulnerable because the things the poorest depend on most are hit hardest by global warming: tropical forests, dry-land agriculture and subsistence fishing.

Yale University's Robert Mendelsohn outlined the effects of climate change on the global food crisis:

Potential reductions in global food production after 2050 would raise world food prices, creating hardships for many poor households. Low-latitude poor farmers, especially those dependent on rainfed agriculture, may face nearer term reductions in productivity. Water could also become scarcer for both the rural and urban poor. Changes in global agricultural production will affect every poor household in the world. All of the world’s poor spend a disproportionate share of their income on food so they are particularly vulnerable to changes in food prices.

Manish Bapna and Heather McGray of the World Resources Institute addressed the issue of how to finance adaptation efforts in developing countries:

Climate change is upon us. The earth is warming, seasons are shifting, species are moving, and water is flowing at different times and in different amounts. The accelerating and deepening impacts of climate change will touch everyone on earth in some way, but those who stand to suffer most are the poor… It is already too late to avert serious consequences, so we must also learn to adapt to a warmer world. The question of how humanity adapts to climate change is a pressing issue for national and international agencies tasked with providing financial and technical assistance to reduce poverty in developing countries… That the poor are the people least responsible for global warming makes these efforts all the more imperative.

Joshua W. Busby from the University of Texas at Austin emphasised the security implications:

Consensus over the links between climate change and international security is beginning to form among climate scientists, development academics, and policymakers. Developing countries are most vulnerable, partly as an accident of geography, but also because vulnerability is made worse by poverty, bad governance, and past conflict… Increased frequency of natural disasters may lead to increased frequency (and stretching) of military forces…  To reduce the impact of climate on security concerns, international actors should focus on mitigation, adaptation, and information generation. National actors can best respond by forming regional partnerships for responding to disasters. Private actors should study and respond to the impact climate change will have on their existing projects and help foster community resilience.

I'm not sure that I feel awfully like a "private actor", so I'll try and rephrase that last point:

Concerned citizens of this planet should study and respond to the impact climate change will have on their lives and the lives of other people.

I don't know if the Gallagher Report had any influence on their thinking, but the European Parliament's Committee on Industry, Research and Energy has decided to back the proposals put forward by Luxembourg Green MEP Claude Turmes to mandate the use of second generation biofuels as part of the overall EU targets for the adoption of biofuels.  The proposals also require that first-generation biofuels (manufactured from food crops such as corn,  sugar and rapeseed), would need to meet strict sustainability criteria in order to count towards EU targets. These include social factors such as fair pay for all workers and respect for the land rights of local communities, as well as a requirement for biofuels to reduce carbon emissions by at least 45% compared to fossil fuels,  rising to 60% in 2015.

The reactions of various interested parties were fairly predictable. Environmental groups welcomed the new proposals.  Adrian Bebb of Friends of the Earth Europe commented that:

The vote by the European Parliament recognises the serious problems associated with the large scale use of biofuels. This is a welcome step in the right direction but much still needs to be done. Using crops to feed cars is a false solution to our climate problems and could lead to irreversible loss of wildlife and misery for millions of people in the South.

and Frauke Thies from Greenpeace said that:

We are moving closer to the energy revolution in the fight against climate change. It´s now up to member states to seal the deal. Today´s vote in the Parliament shows that the tide is finally turning against unsustainable biofuels, but we´re not home and dry yet.

However members of the agrofuels industry expressed "deep disappointment".  Raffaello Garofalo of the European Biodiesel Board said that:

If this decision is confirmed in the forthcoming plenary vote, it will strongly affect the credibility of the European Parliament, especially with regard to past commitments. It is sad that legislators have been swayed by superficial arguments linking biofuels to food price rises. If the Parliament will go back on its word on 5,75%, regressing to a 4% target, should our industry dismantle over 4 million tonnes (the 1,5% difference) of its existing capacities? Can this be the acceptable result of a new Directive on the promotion of Renewable Energy Sources?

whereas Robert Vierhout of the European Bioethanol Fuel Association put it this way:

We welcome today’s recognition of the key role renewable energy plays in cutting carbon emissions. However, the amendments adopted by the European Parliament’s Industry Committee on biofuels are counterproductive in reducing our dependency on imported and polluting fossil fuels…. By hampering the European industry’s development, Europe risks missing a unique opportunity to be the best, not only in sustainable production but also in setting standards worldwide.

I wonder how the citizens of Darfur would vote, if they were given the opportunity of a referendum on the matter?

The September 2008 edition of Environment Magazine contains an article entitled "The Short List: The Most Effective Actions U.S. Households Can Take to Curb Climate Change".  The article is a collaboration between two scientists who specialize in the psychological aspects of climate change; the reasons why individual citizens do not take actions that would reduce their personal energy consumption, even when such changes can be achieved at no cost or allow money to be saved.

Paul C. Stern is director of the Committee on the Human Dimensions of Global Climate Change at the US National Research Council.  Gerald T. Gardner is professor emeritus of psychology at the University of Michigan-Dearborn.  Together they conclude that:

Households lack accurate, accessible, and actionable information on how best to achieve potential savings through their own steps.

I urge you to read their report in full. Do it now. More than once. If you need more convincing, here is why I say that.  They open by saying that:

The U.S. Congress, presidential candidates, lobbyists, and political commentators have focused much of their attention lately on the need for policies to limit the United States’ contribution to climate change….. The debates presume that these policies will reverberate through the entire economy, and their advocates seem willing to wait, in some cases for decades, for that to happen.

These policy discussions have been strangely silent about a huge reservoir of potential for reducing carbon emissions and mitigating climate change that can be tapped much more quickly and directly. U.S. households account for about 38 percent of national carbon emissions through their direct actions, a level of emissions greater than that of any entire country except China and larger than the entire U.S. industrial sector. By changing their selection and use of household and motor vehicle technologies, without waiting for new technologies to appear, making major economic sacrifices, or losing a sense of well-being, households can reduce energy consumption by almost 30 percent—about 11 percent of total U.S. consumption.

There. Now go read the article in full!

Still here and need more convincing? Stern and Gardner conclude that lack of enough accurate information is the main stumbling block:

From a householder’s perspective, a desire to reduce carbon emissions, even combined with knowledge that doing so has net financial and environmental benefits, is insufficient to yield effective action unless that person knows which actions will produce the benefits. Available evidence indicates that although many householders are motivated, they lack the necessary knowledge to act.

There are lots of facts and figures in there, but we are going to concentrate here on what the report concludes is the single most effective action an individual United States citizen can take to reduce their personal energy consumption. Change how you use transportation.

Immediate low or no cost actions can potentially save 17.6 % of your household energy consumption.  Longer term, higher cost, actions can save another 15.0%. You can save, on average, 4.2% by carpooling to work with one other person. The additional immediate 13.4% saving is achieved by improving how you drive and maintain your own automobile. Having read Stern and Gardner's report do something else straight away. Find out more about the econnexus Econometer™. At very low cost it will allow you to master the skills of EcoDriving™ quickly and easily. Once you are an EcoDriver™ it will then also alert you if your automobile's fuel consumption increases unexpectedly, meaning some form of maintenance is required in the very near future.