Green Options

The world’s economy is suffering more from the loss of forests than from the current crisis on Wall Street, according to a new EU-commissioned study.

The study says that the cost of deforestation annually is between $2 and $5 trillion dollars.  These numbers were arrived at after researchers put value on, and then added together,  the many ways in which forests “work” for us, including absorbing CO2 from the air, and providing potable water.

The idea behind the study is that as forests disappear, the natural world no longer provides services which it used to provide for free.

So, the human economic system must step in and find a way to provide these same services, for example  through building reservoirs or building infrastructure to catch carbon dioxide.

“Whereas Wall Street by various calculations has to date lost, within the financial sector, $1-$1.5 trillion, the reality is that at today’s rate we are losing natural capital at least between $2-$5 trillion every year,” Pavan Sukhdev, who led the study, told the BBC.

The review is called The Economics of Ecosystems and Biodiversity (Teeb), and was initiated by Germany, although the European Commission provided the funding.

Like many of you, I’m sure, I have been glued to the news…online, on screen and in casual conversation. If you’ve actually figured out what when wrong with the debts and swaps and mortgages and hedges…you’re way ahead of the Wall Street mavins and most of the rest of the world.

To most Americans, the real impact so far has been watching 401Ks and various other stock accounts plummet in value. To others, the inability to acquire a mortgage has been the only real sign of trouble.

But, like most businesses, small and medium-sized ones have a different take on the situation. As they are closer to the credit markets, the real impact of a tight market for money impacts entrepreneurs first.

Businesses need money to grow, to meet short term obligations like payroll and to pay suppliers. The immediate impact of the credit crisis has been increased borrowing costs for short-term loans. For manufacturing based businesses that rely on working capital to fund purchases this creeping interest rate increase means either a profit squeeze or potentially increasing prices which, as we know, should be undertaken with caution in a recessionary climate. For any business with employees, tight credit can mean the ability to meet payroll each month is compromised.

Add to that, how Entrepreneur.com puts it:

…. most small businesses are constantly struggling to get the capital they need to launch and grow their businesses. This is especially true when the founders have poor personal credit, as so many displaced corporate workers and other potential entrepreneurs do now.

So you may be concerned and probably should be. Most entrepreneurs are.

As the government begins to unleash a highly criticized bailout plan for Wall Street’s toxic mortgage backed assets, it is worth taking a step back to understand how the problem actually arose.
Investing In Real Estate

It all started with real estate investing which involves the purchase, ownership and sale of real estate for profit. Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and [...]

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, will inject 900 billion yen ($8.4 billion) into Morgan Stanley to help it transition to a bank holding company. Goldman Sach’s strategy is slightly different albeit with the same ultimate objective i.e. to become a commercial bank. According to Bloomberg, Goldman already has in excess of $20 billion in customer deposits in two subsidiaries and is creating a new one, GS Bank USA, that will have more than $150 billion of assets, [...]

The financial markets unraveled so rapidly last week, it’s still hard to process all the developments and likely consequences. But there’s no doubt that events on Wall Street carry serious implications for our energy and environmental future as well.

I can’t wrap my head around all the pieces yet (and I’m not sure if I’ll ever be able to), but here are some random thoughts about what the market meltdown might mean for oil prices, oil production, renewable energy development and climate change:

In view of the current Wall Street crisis, America’s credibility as a bastion of free markets has come under the radar. The Fed’s recent bailout of AIG, Fannie and Freddie are perceived by many as a free market detour.

The government’s latest bailout news involves a plan to make the biggest intervention in the financial markets since the 1930s. Central to this plan would be a mechanism to bad assets off the balance sheets of financial companies or instead perhaps [...]

In view of the current financial crisis, it is hard to grasp the fact that overnight investment banks once regarded the kings of Wall Street, are teetering on the edge of stability. The bankruptcy of Lehman Brothers has threatened the survival of Morgan Stanley in spite of the fact that it has just declared great earnings. All eyes are on Morgan and Goldman Sachs, the two big I-banks left standing. Will they go next? What will this mean for corporate [...]

 From Green Options’ The Inspired Economist

In view of the current financial crisis, it is hard to grasp the fact that overnight investment banks once regarded the kings of Wall Street, are teetering on the edge of stability. The bankruptcy of Lehman Brothers has threatened the survival of Morgan Stanley in spite of the fact that it has just declared great earnings. All eyes are on Morgan and Goldman [...]

I had read in Grist on April 15 that Warren Buffett’s Berkshire Hathaway had cancelled six proposed coal plants, but now it seems that opposition to building new coal plants is spreading, among Wall Street investors and the American public. Back in August 2007, 1600 Utahans signed a petition asking Buffett to cut Rocky Mountain Power’s dependence on coal, with the added message that Utahans want their utilities to investigate cleaner energy sources.

The most recent issue of Solar Today includes an article by Lester Brown of the Earth Policy Institute about the public outcry all across American which, in addition to the cost of the plants, has led to the cancellation of hundreds of coal plant construction projects. And a survey conducted by the Opinion Research Corporation, published yesterday, shows that “79% of respondents would prefer to try and meet demand through greater energy-efficiency and conservation before building more coal-fired plants. Only 19% say they disagree.” With that kind of public opposition, it’s not surprising that Wall Street is cooling on coal plants, too.