Seven-step process in solving the problems of consumer debt and climate change

One of the fundamental root causes of consumer debt is the rising cost of living, and it is common knowledge that every time there is an increase in the cost of basic necessities in life, we always blame it to the increase in the price of oil, and also globalization.

The root cause of global warming and climate change is the increase in carbon dioxide emissions due to increase in fossil-fuel-dependent human activities as a result of our relentless campaign to accumulate wealth.


The seven-step process:

1. First step is to perform an assessment of your current level of energy consumption and carbon dioxide emission – we call this energy audit. I know this is absurd. Come on, let’s face the fact that if you want to solve your problems and the problems associated with it, you need to know where you are at this very moment and plan on where you want to go or what do you want to achieve. The next step is to calculate how much you owe the banks, what is your total monthly expenses, and also how much is your current income. The facts that you collected represents your baseline data, at least when you start to implement changes you already have a way to know whether you are succeeding or not.

2. Consumer debt and climate change are social concerns, let our leaders know that we are aware of the twin global crises, we are serious about it, and we want to help solve the problem. Our elected officials and business leaders need to listen from concerned citizens. Policy makers needed to get timely and accurate information in an effort to make informed decisions about the crises.

However, be prepared to face contradictions and oppositions. Because we are nobody in the society we live, our voice and the words we wrote may just be taken with a grain of salt. The reason is very simple, our leaders are cautious about introducing change, although they are aware that change is inevitable.

Here is how Alan Andreas described the dynamics of social change and the role of our leaders as gatekeepers:

“Societies are also constantly seeking change – seeking ways to overcome problems both grand and trivial and to make lives of individual and their environment significantly (or at least somewhat) better. They seek change through grassroots mobilization effects. They rely on major organizations such as UN to address problems. They work through non-profit organizations and ask legislators to pass laws and regulations.

Society also worries about preventing change. There are many problematic situations in which the goal is to prevent people from taking up behaviors – what I will call here conscious inaction.

People need to be motivated and empowered to make a difference. That is, greater social welfare comes about, only, through individual behaviors.

Of course many social movements involve crowds and community organizations. Even there, however, leaders must decide to act and followers need to get on board. How does one get people to act or not to act?

If we are to bring massive social change, however, a lot of people have to act in a lot of different ways or make irrevocable commitments not to act. For this to happen, there are roles for gatekeepers, community activists, and television and movie scriptwriters – and so on and on.”

The second step is we adopt Alan's social marketing approach to social influencing process. Go out and join support groups that deals with the issue at hand. Alan Andreas suggested eight (8) stages of social marketing, namely:(1) Inattention to the problem, (2) Discovery, (3) Climbing the agenda, (4) Outlining the choices, (5) Choosing courses of actions, (6) Launching initial intervention, (7) Reassuring and redirecting, and (8) Success, failure or neglect. I am not going to discuss all these stages for now, it is enough at this juncture that you are aware that you are in the first stage – inattention to the problems of consumer debt and climate change.


3. Look for business opportunity to network and do business in your areas of expertise that promotes green lifestyle and frugal living. I zenduse about eight (8) business opportunities lifted from the same Time website. Zenduse framework is very useful in this fourth step process[The eight(8) busines opportunities are discussed separately].

4. Change your lifestyle and abandon old habits. I zenduse from an article in Time’s website 20 ways of enabling change in our lifestyle that would help reduce global warming and at the same time reduce your expenses[The twenty(20) lifestyle change are discussed separately].

5. Participate actively in the areas of research looking for alternative sources of energy so that oil producers and distributors will not hold the world hostage for its energy needs. Solar panel, wind turbine, and bio-fuel researches are currently hot alternative energy sources. Similar to step number 4, Zenduse framework is a useful tool in this activity.

6. Support products and services that are environment-friendly, advertise them in your blog or website and let the companies know that you are advertising them. Who knows, you might generate advertising revenue out of it.

7. The last step and surely not the least, perform post-engagement audit of your energy consumption and carbon dioxide emission, including audit of your current financial standing. This will give you a precise measure of success. Then, review your success, failure or neglect.

The above seven-steps represent your pedal and a canoe to navigate your way out of your current problem. You will not be able to solve the the global problems alone by yourself, but who knows you can be the tipping point. You might be the person who can create a small change in the initial condition of the system, which causes a chain of events leading to the global solution.

You just need to enable change by following those steps. And as David Taylor suggests, the single most powerful way to make any change in life, is to act as if that change has already been made.


The following are areas of research and business opportunities intended to solve global warming or at least mitigate its impact:

1. Turn food into fuel. Help in developing innovative enzymes concoctions to make the process of producing bio-fuels more economical.

2. Change your light bulbs with energy saving lights. Help in the research on how to manufacture LED lights and lamps and band together with other like-minded with technical know-how and help manufacture them.

3. Recycle old clothes. A company estimates that making polyester fiber out of recycled garments, compared with using new polyester, will result in a 76% energy savings and reduce greenhouse gases 71%. To shear your own fleece, visit patagonia.com/recycle .

4. Invite friends over for a closet swap where everyone brings their clothes they want to trade.

5. Promote and evangelize personal paperless system. IT people can band together and develop personal paperless and wireless applications.

6. “Cosmetics” is one of the world’s in-demand consumer item. Invest in biodegradable and renewable resources and help promote and market organic personal care products.

7. Stop using chemical fertilizers and pesticides, and help promote the use of organic fertilizers.

8. Support the development and use of hybrid engines for machines and motor vehicles.


20 Ways to change your Lifestyle and abandon old habits

The following are collection of relevant articles related to lifestyle change that will help reduce carbon dioxide emission; an excerpt from an article in Time entitled 51 Things we can do to save the environment [http://www.time.com/time/specials/2007/environment/].

1. Hang Up a Clothes Line By Bryan Walsh

You could make your own clothes with needle and thread using 100% organic cotton sheared from sheep you raised on a Whole Foods diet, but the environmental quality of your wardrobe is ultimately determined by the way you wash it. A recent study by Cambridge University's Institute of Manufacturing found that 60% of the energy associated with a piece of clothing is spent in washing and drying it. Over its lifetime, a T shirt can send up to 9 lbs. of carbon dioxide into the air.

The solution is not to avoid doing laundry, tempting as that may be. Rather, wash your clothes in warm water instead of hot, and save up to launder a few big loads instead of many smaller ones. Use the most efficient machine you can find—newer ones can use as little as one-fourth the energy of older machines. When they're clean, dry your clothes the natural way, by hanging them on a line rather than loading them in a dryer. Altogether you can reduce the CO2 created by your laundry up to 90%. Plus, no more magically disappearing socks.


2. Ride the Bus By Bryan Walsh

With transport accounting for more than 30% of U.S. carbon dioxide emissions, one of the best ways to reduce them is by riding something many of us haven't tried since the ninth grade: a bus. Public transit saves an estimated 1.4 billion gal. of gas annually, which translates into about 14 million tons of CO2, according to the American Public Transportation Association.
Unfortunately, 88% of all trips in the U.S. are by car. Partly, that's because public transportation is more readily available in big urban areas. One promising alternative is bus rapid transit (BRT), which features extra-long carriers running in dedicated lanes. Buses emit more carbon than trains, but that can be minimized by using hybrid or compressed-natural-gas engines. A study last year by the Breakthrough Technologies Institute found that a BRT system in a medium-size U.S. city could cut emissions by as much as 654,000 tons over 20 years.

Thanks to high gas prices, miles driven per motorist dropped in 2005 for the first time since 1980, according to the Pew Research Center. The U.S. is ready to change. We're just waiting for the bus.

The original version of this article misstated the total amount of CO2 emissions saved annually by public transit. It is 14 million, not 1.5 million, tons.


3. Open a Window By Carolyn Sayre

Most of the 25 tons of CO2 emissions each American is responsible for each year come from the home. Here are some easy ways to get that number down in a hurry without rebuilding. Open a window instead of running the AC. Adjust the thermostat a couple of degrees higher in the summer and lower in the winter. Caulk and weatherstrip all your doors and windows. Insulate your walls and ceilings. Use the dishwasher only when it's full. Install low-flow showerheads. Wash your clothes in warm or cold water. Turn down the thermostat on the water heater. At the end of the year, don't be surprised if your house feels lighter. It just lost 4,000 lbs. of carbon dioxide.


4. Cozy Up to Your Water Heater By Carolyn Sayre

Improving your home's efficiency doesn't have to mean hours in the attic tearing out the insulation. It might be as simple as giving your dear old water heater a warm hug. Wrapping your heater in an insulated blanket—one costs about $10 to $20 at home centers—could save your household about 250 lbs. in CO2 emissions annually. Most water heaters more than five years old are constantly losing heat and wasting energy because they lack internal insulation. If the surface feels warm to the touch, get your heater an extra blankie. You'll both feel better.


5. Skip the Steak By Bryan Walsh

Which is responsible for more global warming: your BMW or your Big Mac? Believe it or not, it's the burger. The international meat industry generates roughly 18% of the world's greenhouse-gas emissions—even more than transportation—according to a report last year from the U.N.'s Food and Agriculture Organization.

Much of that comes from the nitrous oxide in manure and the methane that is, as the New York Times delicately put it, "the natural result of bovine digestion." Methane has a warming effect that is 23 times as great as that of carbon, while nitrous oxide is 296 times as great.
There are 1.5 billion cattle and buffalo on the planet, along with 1.7 billion sheep and goats. Their populations are rising fast, especially in the developing world. Global meat production is expected to double between 2001 and 2050. Given the amount of energy consumed raising, shipping and selling livestock, a 16-oz.T-bone is like a Hummer on a plate.

If you switch to vegetarianism, you can shrink your carbon footprint by up to 1.5 tons of carbon dioxide a year, according to research by the University of Chicago. Trading a standard car for a hybrid cuts only about one ton—and isn't as tasty.


6 Just Say No to Plastic Bags By Carolyn Sayre
The plastic bags you bring home from the supermarket probably end up in a landfill. Every year, more than 500 billion plastic bags are distributed, and less than 3% of those bags are recycled. They are typically made of polyethylene and can take up to 1,000 years to biodegrade in landfills that emit harmful greenhouse gases. Reducing your contribution to plastic-bag pollution is as simple as using a cloth bag (or one made of biodegradable plant-based materials) instead of wasting plastic ones. For your next trip to the grocery store, BYOB(Bring Your Own Bag).


7. Support your local farmer By Maryanne Murray Buechner

Fruit, vegetables, meat and milk produced closer to home rack up fewer "petroleum miles" than products trucked cross-country to your table. How do you find them? Search localharvest.org by ZIP code for farmers' markets, greengrocers and food co-ops in your area. The website, which includes handy contact information in its directory listings, also identifies restaurants that specialize in regional and seasonal ingredients. If you really want to get close to the farm, join a Community Supported Agriculture project, which lets you buy shares in a farmer's annual harvest. In return, you get a box of produce every week for a season. It will take more than a few visits to the farm stand to reduce the carbon impact of the U.S. food supply. In the meantime, here's another reason to go local: the taste is great.


8. Plant a bamboo fence By Maryanne Murray Buechner

Bamboo makes a beautiful fence, and because it grows so quickly (as much as 1 ft. a day or more, depending on the species), it absorbs more CO2 than, say, a rosebush. Most homeowners have to restrict its growth, lest it get out of control. Do this, however, and you reduce bamboo's capacity as a carbon sink. Only large-scale plantings, which absorb CO2 faster than they release it, can favorably tip the scales. How big is your yard?


9. Straighten up and fly right By Bryan Walsh

Until we can travel by fireplace, Harry Potter-style, the only way to get from Los Angeles to London is by carbon-spewing jet airliner. One simple change can help: adjust the exit and entry points each nation sets for its airspace so that planes can fly in as straight a line as possible. Last year the International Air Transport Association negotiated a more direct route from China to Europe that shaved an average 30 minutes off flight time, eliminating 84,800 metric tons of CO2 annually. Unifying European airspace as a "single sky" could cut fuel use up to 12%. Pilots could also change the way they fly. Abrupt drops in altitude waste fuel, so experts are advocating "continuous descent" until the plane reaches the runway—where it could be towed instead of burning fuel while taxiing. Of course, the best way to reduce plane emissions is to fly less; at least until the fireplace is ready for takeoff.


10. Have a green wedding By Catherine Sharick

You won't be able to stop global warming on your wedding day, but your choices can lessen the carbon footprint of your event. For example, if your guests are traveling long distances, offset the carbon emissions from their trips with a donation to renewable—energy projects. The sustainable—wedding website Portovert.com, in partnership with NativeEnergy, a renewable energy company, offers a wedding carbon calculator where couples can enter the number of guests and approximate miles traveled, to calculate the carbon impact of their wedding—related travel.
Wherever you celebrate, you can reduce your CO2 impact and often save money by giving your wedding a local touch. Buy wine from a nearby vineyard or beer from a neighborhood brewery. Get your wedding cake from a local bakery, and use seasonal flowers, not imports. "Why eat food or drink wine or beer that has traveled thousands of miles when you can choose local options that are just as good?" says Meghan Meyers, CEO of portovert.com.
Anything you do to make your wedding a little more modest—from wearing a borrowed wedding dress to choosing recycled paper or a website for your invitations—will lower its contribution to carbon emissions. Consider it your wedding gift to the planet.

11. Remove the tie By Bryan Walsh

How can a tie help fight climate change? When you leave it at home. In the "cool biz" summer of 2005, Japanese salarymen swapped their trademark dark blue business suits for open collars and light tropical colors. It was all part of the Japanese government's effort to save energy by keeping its office temperatures at 82.4?F throughout the summer.
The policy caused sartorial confusion but did make a dent in Japan's rising carbon emissions. In one summer, Japan cut an estimated 79,000 tons of CO2. If U.S. businesses eased off on their arctic-level air-conditioning, the gains could be significant. Time to make every summer day casual Friday?


12. Shut off your computer By Coco Masters

A screen saver is not an energy saver. According to the U.S. Department of Energy, 75% of all the electricity consumed in the home is standby power used to keep electronics running when those TVs, DVRs, computers, monitors and stereos are "off." The average desktop computer, not including the monitor, consumes from 60 to 250 watts a day. Compared with a machine left on 24/7, a computer that is in use four hours a day and turned off the rest of the time would save you about $70 a year. The carbon impact would be even greater. Shutting it off would reduce the machine's CO2 emissions 83%, to just 63 kg a year.


13. Kill the Lights At Quitting Time By Coco Masters

Assigning an office switch-off monitor might sound a little like third grade, but it could cut carbon emissions by reducing electricity use, not to mention extending equipment life and lowering maintenance costs. It's not exactly glamorous work: walking the halls to make sure that computers, monitors, desk lights, printers and fax machines are turned off daily. Air conditioners and overhead lights can be timed for turnoff: Aim for off-peak energy use to be about one-fifth of peak use. In the morning, the switch-on monitor takes over.


14. Think Outside the Packaging By Bryan Walsh

Paper or plastic? How about neither? All those Styrofoam peanuts and impregnable plastic CD cases cost energy to manufacture and deliver, and that means carbon. You can reduce the amount of packaging with a little consumer vigilance. Give back the extra napkins or unwanted sugar packets; carry that gallon of milk by its handle. True eco-nerds will even bring their own cup to a Starbucks.

Corporations are also beginning to pitch in. Hewlett-Packard announced in February that it would switch to lighter packaging for its printer cartridges, which will reduce carbon emissions by an amount equivalent to removing 3,500 cars from the road for a year. Megaretailer Wal-Mart, far out front in this effort, has trimmed everything from its rotisserie-chicken boxes to its water bottles, each now made with 5 g less plastic. The company plans to cut packaging 5% starting in 2008—enough to prevent 667,000 tons of carbon dioxide emissions.


15. Check Your Tires By David Bjerklie

So you own a plain-vanilla, nonhybrid, American-made gas guzzler and can't afford (or can't wait for) a hybrid. Now what? Just giving your engine a tune-up can improve gas mileage 4% and often much more. Replacing a clogged air filter can boost efficiency 10%. And keeping tires properly inflated can improve gas mileage more than 3%. The bottom line? If you can boost your gas mileage from 20 to 24 m.p.g., your old heap will put 200 fewer pounds of CO2 into the atmosphere each year.


16. Make One Right Turn After Another By Caroline Sayre

United Parcel Service took a detour to the right on its way to curb CO2 emissions. In 2004, UPS announced that its drivers would avoid making left turns. The time spent idling while waiting to turn against oncoming traffic burns fuel and costs millions each year. A software program maps a customized route for every driver to minimize lefts.

In metro New York, UPS has reduced CO2 emissions by 1,000 metric tons since January. Today 83% of UPS facilities are heading in the right direction; within two years, the policy will be adopted nationwide.


17. Plant a Tree in the Tropics By Bryan Walsh

It seems like simple arithmetic: a tree can absorb up to a ton of carbon dioxide over its lifetime, so planting one should be an easy way to mitigate climate change. Turns out it's not so simple. Recent studies have shown that trees in temperate latitudes—including most of the U.S.—actually have a net warming effect on the climate. The heat that dark leaves absorb outweighs the carbon they soak up.


18. Drive Green on the Scenic Route By Caroline Sayre

Going on vacation doesn't have to mean leaving your green conscience at home. The car-sharing service Zipcar rents hybrids cars in five U.S. cities, Toronto and London. A few specialty companies offer rental cars that run on biodiesel fuel, a clean-burning substance derived from renewable sources like vegetable oil. Bio-Beetle rents eco-friendly cars, ranging from Passats to Jeeps, in Hawaii and Los Angeles. A week's rental in L.A. runs from $200 to $300. And competitor EV Rental Cars has started to expand beyond the West Coast.


19. Be aggressive about passive By Stephanie Kirchner

Georg Zielke, his wife and kids share a five-bedroom "passive house" in Darmstadt, Germany, with heating costs 90% lower than their neighbors'. Extra insulation and state-of-the-art ventilation recycle the energy from passive sources such as body heat, the sun and household appliances to warm the air. When it gets really cold, the Zielkes just turn on the TV.

The German government has thrown its weight behind the idea, guaranteeing low cost loans for people who want to build a passive house. They cost about 5% to 8% more to build than a standard one. Invented in a German-Swedish joint-venture in he early 1990s, about 10,000 have been built in Europe so far, most of them in Germany—and just three in the U.S.

This is an extended version of the article that originally appeared in TIME Magazine.


20. Consume Less, Share More, Live Simply By Coco Masters

The chance to buy a carbon offset—in essence, an emissions indulgence—appeals to the environmental sinner in all of us. But there is an older path to reducing our impact on the planet that will feel familar to Evangelical Christians and Buddhists alike. Live simply. Meditate. Consume less. Think more. Get to know your neighbors. Borrow when you need to and lend when asked. E.F. Schumacher praised that philosophy this way in Small Is Beautiful: "Amazingly small means leading to extraordinarily satisfying results."

Chapter Three: The Solutions Design

Introduction

The problems that we face today cannot be solved in the same level of thinking when we first created them. The problems did not happen overnight nor did it happen over a period of one year or two; hence, the solution to the problem is a process that requires a framework for problem-solving, and must be based on a mutually agreed set of principles, and because it is global and social, any solution should have buy-in from the movers and shakers of the society locally and globally.

Before I proceed to discuss the solution, let me tell a story that happened long, long, long time ago. We were not there when it happened but the scientists and archeologists managed to pick up the scattered pieces, came out with a conclusion and consolidated them into a meaningful set of knowledge that we can now apply to our current situation.

This is about the story of the Dinosaurs that appeared 230 million years ago and disappeared 20 million years ago.

At the peak of the dinosaur era, there were no polar ice caps, and sea levels are estimated to have been from 100 meters (328 ft) to 250 meters (820 ft) higher than they are today. The planet's temperature was also much more uniform, with only +25 °C (77 °F) separating average polar temperatures from those at the equator. On average, atmospheric temperatures were also much warmer; the poles, for example, were +50 °C (122 °F) warmer than today[Wikipedia].

The atmosphere's composition during the dinosaur era was vastly different as well. Carbon dioxide levels were up to 12 times higher than today's levels, and oxygen formed 32 to 35% of the atmosphere, as compared to 21% today. However, by the late Cretaceous, the environment was changing dramatically. Volcanic activity was decreasing, which led to a cooling trend as levels of atmospheric carbon dioxide dropped. Oxygen levels in the atmosphere also started to fluctuate and would ultimately fall considerably. Some scientists hypothesize that climate change, combined with lower oxygen levels, and might have led directly to the demise of many species. If the dinosaurs had respiratory systems similar to those commonly found in modern birds, it may have been particularly difficult for them to cope with reduced respiratory efficiency, given the enormous oxygen demands of their very large bodies [Wikipedia].

Is there a semblance between the Dinosaurs of the Jurassic Age and the “Dinosaurs” in today’s age of globalization? Are the carbon dioxides exhaled by factories equal to or greater than the amount of carbon dioxide emitted by one gigantic dinosaur?

In terms of behavior, Dinosaurs’ survival instinct (e.g. Tyrannosaurus) is to attack and destroy either one of its own in competition with one another or as a predator to weaker and smaller animals. In today’s competitive globalization, our own “Dinosaurs” compete head on with other Dinosaurs and devour smaller ones in the so called innovative mergers and acquisition practices.

Vulnerable human beings like everyone from the middle to the bottom of the pyramid are not spared by the phantom menace, by today’s species of Dinosaurs – victims of predatory practices by our own species of Dinosaurs. “Predatory mortgage lending practices strips borrowers of home equity and threaten families with foreclosure, destabilizing the very communities that are beginning to enjoy the fruits of our nation’s economic success [Home and Communities: US Department of Housing and Urban Development]. The Dinosaurs today use credit as bait. You borrow their money to consume what society produced, and then when you are trapped in huge debt, they threaten you with foreclosure, taking every single property you own.

These practices by today’s Dinosaurs are not wrong; in fact they have been legalized. Gary North says the modern world economy rests on a gigantic system of promise to pay – promises that are never met. These promises, he says, are rolled over when they come due – replaced by new promises. Today, this system costs about USD$300 trillion worth of promises to pay and it is still in upward trend.

Taking into consideration the above premise from Gary North about debt and credit there appears to be some iota of hope in the middle of the pyramid. It looks like all we need to do is increase our credibility to pay and you are off the hook. However, that is just one side of the problem equation, what is disturbing is the threat of climate change and here we need to look at it with foresight and caution.

We continue to be myopic when it comes to the concept of wealth accumulation and we measure progress in terms of the number of shopping malls we built, number of factories and commercial buildings and skyways we erected whether they are built using borrowed money or not. But what we failed to see with our myopic eyes is the fact the cost of maintaining “progress” is in an upward trend – a city that is heavily dependent on a carbon dioxide-emitting fossil fuels that is not without limit. A city that needs more and more natural resources to sustain itself. The cost of living will continue to go up because the price of oil is going up, and the government needs to collect more taxes to sustain the high cost of maintaining the city, and because of globalization.

If the world will not collectively act now and do something, I will not be surprised when one day, our Dinosaurs will become extinct, the entire organic life annihilated, and mother earth goes back to ice age.

The collective act must be based on the sound principles of sustainability, social responsibility and a planet capable of sustaining life.

Cents of Humor: I have Arrived!!!

A Minneapolis couple decided to go to Florida to thaw out during a particularly icy winter. They planned to stay at the same hotel where they spent their honeymoon 20 years before. Because of their hectic schedules, it was difficult to coordinate their travel schedules. So, the husband left Minneapolis and flew to Florida on Friday, and his wife was flying down the following day.

The husband checked into the hotel, and unlike years ago, there was a computer in his room, and he decided to send an e-mail to his wife. However, he accidentally left out one letter in her e-mail address, and without noticing his error, sent the e-mail to the wrong address.

Meanwhile...somewhere in Houston ... a widow had just returned home from her husband's funeral. He was a Minister who was called home to glory after suffering a heart attack.

The widow decided to check her e-mail, expecting messages from relatives and friends. After reading the first message, she screamed and then fainted.

The widow's son rushed into the room, found his mother on the floor, and then glanced up and saw the computer screen which read:

To: My Loving Wife
Date: Friday, October 13, 2005
Subject: I have Arrived!

Dearest Love:

I know you are surprised to hear from me. They have computers here now, and you are allowed to send an email to your loved ones. I have just arrived and have been checked in. I see that everything has been prepared for your arrival tomorrow, and I look forward to seeing you then. Hope your journey is as uneventful as mine was.

P.S. It's sure is freaking hot down here!!!

Chapter Two: Summary

I would like to end this chapter with the following insights:

1. Today's civilization has indeed become more complex compared to those of the past civilizations. We have a well-developed division of labor, with jobs requiring specialized skills and training. We have hierarchical leadership structure with various levels of government. We have business structures that traverse national boundaries. We also have put in place a global economic system that governs global trading as well as global financial systems.

2. Another point to ponder is the fact the today's modern civilization demands more natural resources to sustain itself. As the society's modernization continues to flourish, it is also becoming more and more expensive to maintain with the cost of living going up everytime there is an oil price increase. We also blame globalization everytime we want to increase taxes or increase the salaries of our leaders.

3. The complex society that we have built so far has also become a problem-solving machine tackling crisis one after another.

Will it ever happen that our society may reach a certain point where the twin crises of consumer debt and climate change may have become the so called "last straw that would break the camel's back" and the complex civilizations that the human race had built over time will, one day, just reach its inevitable collapse?

4. We defined the problem of consumer debt and climate crises in the context of wealth accumulation. The motive of expansionism, other than religion, is to increase economic activities resulting in the accumulation of profit in the hands of those who own the means of production. As the propertied class becomes richer and richer, those at the middle of the pyramid precipitate to the bottom. They fund consumption using borrowed money and continue to be in that state.

5. It is clearer now that the only way out of the crises is to immediately find alternative sources of energy and eventually reduce our dependence on fossil fuels, and eventually reduce carbon dioxide emissions.

6. It is also clearer at this point in time that the middle class who are mostly affected by the consumer debt crisis can no longer survive with only one source of income. We should take advantage of the opportunity in using the internet and mobile phones to share knowledge for free or for a fee in system called "personal paperless system".


7. It also very clear that global warming requires a global solution - if necessary simultaneous global actions and not incremental global actions.

I will devote the next chapter entirely on this value proposition.

We dream of dreams dare no one dares to dream. We all know that all these are easier said than done, and conventional wisdom tells us that a journey to a thousand miles always begins with the first step.

In chapter three we will try to map out our first steps and suggest alternative global solutions to both the consumer debt and climate crises and formulate a framework in engaging the world towards a common exponential solution to the crises.

Historical Pattern in Human Activities

The history of mankind is fundamentally a history of expansionism motivated by the incessant desire to accumulate wealth.

Lets re-look at the past to prove my point and interpret it in our own context:

1. In the year 325 before Christ Era, Buddhism expanded and combined the powers of world religion, trade, economy and imperial armies for the first time. Alexander the Great sues for peace with Chandragupta at Gerosia. This event created an eastward link among overland routes between Mediterranean, Persia, India and Central Asia.

2. In the 1st centuries during Christ Era, Buddhism made its first major appearance in China under the Han dynasty, and consolidated the cultural links across the Eurasian Steppe into India. This marked the foundation of “silk road”.

3. In the period from 650 to 850 Islam expanded from the western Mediterranean to India.

4. From 960-1270, the Song Dynasty in China produced the economic output, financial instruments, technologies and created the momentum for the medieval world economy to flourish linking Europe and China by land and sea across Eurasia and Indian Ocean.

5. In 1100 Genghis Khan integrated overland routes across Eurasia.

6. In 1300 marked the birth of Ottoman Empire and its expansion in Europe, North Africa and Middle East connecting politically overland with dynasties in Central Asia and India. This event created the imperial arch of integration that spawned a huge expansion of trade with Europe but raised the cost of trade in Asia for Europeans as a result Genoese merchants moved their wealth to Spain in search for a Western Sea route to the Indies.

7. In 1492 and 1498 Columbus and De Gama traveled west and east to the Indies, inaugurating an age of European seaborne empires.

8. In 1650, the expansion of slave trade sustained the development of Atlantic economy, giving birth to integrated economic/industrial systems across the Ocean. This event has resulted in the accumulation of profits in Europe during the zenith of mercantilism and rise of the Enlightenment.

9. In 1776/1789, “US and French Revolutions” marked the creation of modern states based on alliances between military and business interests and on popular representation in nationalist governments. This event marked a new imperial expansion where economic interest of “the people” consolidated assets for economic growth. It also led to more militarized British, Dutch and French imperial growth in Asia. These national empires expanded during the industrial revolution provoking class struggles, and new ideas and revolutionary movements within national states.

10. In 1885, the treaties of Berlin marked the expansion by the European and American empires overseas. This was also the period where international law is established.

11. In 1929, the great depression hits all parts of the world at the same time. It was also the period where simultaneous price rise in most of the world happened and the 1st World War broke out.

12. Between 1944-1950, decolonization of European empires in Asia and Africa produced the world of national states and for the first time a world of legal-representative-economic institution called the United Nations is established along with the Bretton Wood System which is an international monetary management that established the rules for commercial and financial relations among the world’s major industrial states.

13. 1989 marked the end of cold war and the globalization of post-industrial capitalism.

In all the above expansionism, there are always victors as there are vanquished, there are losers and there are winners. What distinguishes today's expansionism is the fact that the losers are not only those at the middle of the pyramid but mother earth. You destroy the coral reefs and it will take a century to rebuild them. You destroy the rainforests and it will take another century to restore them . But you destroy the one and only planet earth, and your children and their generation will have no more place to live.

What is interesting and amazing in today's globalization is the availability of infrastructure that allows people to communicate beyond their borders. It somehow democratize information enabling knowledge to travel at the speed of the light.

This capability generates enormous potential for the knowledge-savvy middle class to perform a dual role of an employee locally and an entrepreneur globally selling his information or knowledge to the world outside.

Expansionism in that sense is no longer limited to the business empires of the world but to anyone who has the skills and knowledge needed to become an infopreneur in the global economy.

Source: http://www.sas.upenn.edu/~dludden/global1.htm

Cents of Humor: Join the Queue

One fine morning a man was leaving a cafe after his morning coffee, when he noticed a most unusual funeral procession A funeral coffin was followed by a second one about 50 feet behind the first.

Behind the second coffin was a solitary man walking with a black dog.

Behind him was a queue of about 2000 men walking in a single line. The man couldn't stand his curiosity. He approached the man walking with the dog, "I am so sorry for your loss, and I know now is a bad time to disturb you, but I've never seen a funeral like this with so many of you walking in single line. Whose funeral is it? "

The man replied, "Well, that first coffin is for my wife.

" What happened to her? "
The man replied, "My dog attacked and killed her. "

He inquired further, "Well, who is in the second coffin? " The man answered, "My mother-in-law. She was trying to help my wife when the dog attacked and killed her also. " A thoughtful moment of silence passes between the two men.

Then the first one asks in excitement "Can I borrow the dog? " The man calmly replied "Join the queue."

Another Success Story from ZenHabits

How I Ended My Love Affair With the Credit Card (and Why I Use Cash)


Confession time: My name is Leo, and I’m a recovering creditcardaholic.

When I was just starting out in the world of adulthood, I shied away from credit cards. My parents had had some troubles with them, so I had a bit of a phobia. In my early 20s, I caved in and got a card, simply to build credit. It only had a $500 limit, and I pledged to pay off the balance every month. I did this for a few years, but for one reason or another, eventually let the balance creep up until I could no longer pay the balance every year. I then paid it off and canceled the card, out of pure fear. I went without a card for a little while, and then came the bad days.

I need to buy something important, and didn’t have the cash. I got a card with a $5,000 limit, and felt the fear creep back in. The first charge was well over $1,000. Then there were other large charges — expenses I wanted to pay for, but didn’t have the cash. I tried to pay as much as I could each month, but when I started having other expenses, the credit card bill wasn’t a priority. I could pay it later.

Fast forward to a couple years ago: I could no longer afford to pay my minimum balance on my card. I had other bills that were also out of control. I canceled the card, and worked out a payment plan. I struggled with my other bills until the beginning of 2006, when I started getting things under control. But I still had a Mastercard debit card, and I used this to buy stuff over the Internet. Since it wasn’t a credit card, that was OK, right?

Today, I am scraping by, but here’s the cool thing: I don’t have a credit card at all. Not even the Mastercard debit card. I am paying off my debts (the card should be paid off this summer) and things are looking much rosier.
My recommendation: if you have problems paying off a card’s balance each month, and have a hard time resisting impulse purchases, cancel your credit card. Today. They are a plague.

This point can be debated ad naseum, so I’ll just say this: do what works for you, but be very careful with credit cards. They are dangerous, and have caused many financial wrecks for many families. The best policy for many people, and you may differ, is to go without a card for as long as possible.

But how do I live without a credit card? Here’s how:

1. I pay my bills online or through automatic deduction. It’s simple, convenient, and automatic. Hey presto!

2. I use cash for everything else. Everything else? Pretty much. Once in awhile I’ll write a check, or use my debit card (it doesn’t have a credit card label on it, so I can’t use it online), but those occasions are rare. I withdraw cash for groceries, gas and “spending”.

What about online purchases? Exactamundo! You’ve hit the nail on the head. One of the biggest dangers of credit cards these days is that they make purchases so darn easy. Doing some research on how to pay off your debt? Hey, there’s a great book about it by Dave Ramsey. One Click(tm) and it’s headed to my door. Credit cards allow you to buy stuff, anything really, without having to think about it. And that’s dangerous.

So if I REALLY need to buy something online, I might ask a relative to order it for me, and give them cash. Obviously, this is inconvenient and you don’t want to do this too often and wear out your welcome. Which is why it works. Before I canceled my Mastercard debit card last year (about four months ago), I bought stuff online at the rate of about two things a week. Not exactly a spending spree, but it adds up to a lot over the course of a year. In the last four months, I think I’ve ordered one item. A reduction of nearly 95% of my online discretionary spending.

I could also pay using PayPal or similar methods, but I haven’t yet. The point is that it’s much harder for me to buy things online now (and to some extent, in the real world too), so I rarely ever do. While we might think that buying things online is necessary, in almost every case, it’s not. Buying online simply makes you spend more than you normally would. Take it from me, someone who is living evidence.

Using cash has other benefits. I can see at a glance (looking in my envelopes for each cash spending category) how much I have left in that budget category. That’s hard to do when you’re using a credit card. Sure, you could check your balance online, but most people never do this. Sure, you could update Quicken or Money, so you know your available balance, but this is much harder to do, especially if you’re away from home, and so many people guesstimate their balance when they’re on the road, and sometimes don’t even bother to do that. With a credit card, you can worry about it later. At a high interest rate.

This has been a hot topic in the last month or so on personal finance blogs, with people weighing in on both sides. I think it’s a highly personal issue, and different methods work for different people. See posts on this topic from Get Rich Slowly, No Credit Needed, and Digerati Life. All good posts.

Source: http://zenhabits.net/2007/02/how-i-ended-my-love-affair-with-credit/

Consumer Debt Success Stories from ZenHabits

Before i summarize and zend a concluding statement for this chapter, let me share with you real-life stories from people who zenduse their stories in ZenHabits website. Here you go....



The 10 Key Actions That Finally Got Me Out of Debt; or, Why Living Frugally is Only Part of the Solution

This month, I paid off the loans for both my vehicles! I am debt free!
After focusing on getting out of debt for so long (a few years now), becoming debt free is a wonderful and amazing feeling.

It wasn’t easy — my wife and children and I all made sacrifices. It took perseverance. It took some creativity.

And unlike the common misconception about getting out of debt, it took more than frugality.

Background

Let’s take a little trip back in time and see how I got into debt to start with. For a large part of my early adulthood, I was very careful to have a small credit limit and to pay off any purchases on my credit card immediately. I had an auto loan that I paid off religiously, and later a mortgage that I also paid very conscientiously.
After a divorce, I came out debt free. We had paid off our car loan and credit card, and the mortgage was no longer my responsibility.

Then I entered a period that I like to call “frugal irresponsibility”. I made some bad choices, getting a car loan, a credit card with a higher limit, putting things on the credit card that I couldn’t afford, spending without a budget … not the smartest decisions.
The next period was one where I was crippled with debt, as well as trying to survive on a single income with no medical insurance. This was only recently (within the last few years). I wasn’t making enough to support my family, so we fell deeper into debt.

The most recent period has been my turnaround. I canceled the credit card, and began to live more frugally. I increased my income and saved an emergency fund. This is the part where I learned how to get out of debt. And this is what I’d like to share with you today, in hopes that it will help others struggling.

You won’t be able to replicate what I’ve done exactly … everyone has to deal with their situation in their own way … but my hope is that you’ll be able to glean something from my experiences. At the very least, a little inspiration. And that’s not such a small thing.

Finally Got Out of Debt

This hasn’t been the easiest of journeys for me, but I think because of the struggle that getting out of debt entails, the final destination is that much sweeter.
Here are the most important things that got me out of debt:

1. Cancelled the credit card. This item always draws a lot of debate, but I’ll say it anyway, because it’s been crucial in getting myself debt free: credit cards are extremely tempting, and with the high interest, they can be downright dangerous. It is possible to use them wisely and even profit from using them … however, most people don’t use them that way, and for people like me, it’s better to just cancel the card. I still had a big debt to pay on the card, but at least I wasn’t using it anymore. Rule #1: If you’re trying to get out of a hole, stop digging.

2. Eliminated non-essential expenses. This might seem extreme to many people, but remember: I have six kids and for awhile I wasn’t making enough income to support my family. I needed to cut back. So I eliminated everything I didn’t need: cable TV, most of my eating out, going to the movies (except on rare occasions), alcohol, eventually cigarettes (once I quit smoking in November 2005), buying new clothes (except when really needed), etc. I slowly re-learned what it was like to live frugally. This was also key, as it’s part of the “stop digging the hole” rule. See also: How to Stop Living Paycheck to Paycheck.

3. The spending plan. I don’t like to use the word “budget” because it strikes fear in the hearts of many readers, and blank stares in the eyes of others. Instead, I like the term “spending plan”, because it conjures images of creating a plan to achieve a goal, taking action, and doing something about your problems. Nevertheless, both concepts are essential the same: figure out how much you make, and consciously decide how you want to spend it this month. My plan actually budgets out each paycheck, because a monthly budget wasn’t useful to me: if I only do a budget for a month, how do I know what to pay when my first paycheck comes out? I like to be more specific.

Anyway, the spending plan is essential. You have to decide where your money is going to go before you actually spend it. It was when I was spending without a plan that I got into trouble. And remember: a plan should be flexible, and have wiggle room, because life changes.

4. Cash and online bill payments. One of the reasons I had a hard time controlling my finances in the past is that I was spending left and right with no easy way to track my finances or stay within budget. I was using a credit card, debit card, checks, constant ATM withdrawals, etc. I’m not good at writing down every penny. So I devised an easier way: pay all my bills online (including debts and savings), and then withdraw all the money I need for spending categories like eating out, groceries and gas. I use the envelope system, so that I always know how much I have left in each category. Simple and fail-safe.

5. The emergency fund. I think this was one of the most important things I did. I know, it’s very common advice, but it’s for a good reason: without an emergency fund, your finances are at the whim of any urgent situation that comes up. Unexpected medical bill? Home repair? Car repairs? Need to travel to see your sick relative? These things will have to be paid for somehow, and if you don’t have an emergency fund, you’ll either go into debt to pay for them, or you’ll sacrifice your debt repayment for this month to pay for it.

Without an emergency fund, it’s almost impossible to get out of debt. For myself, my debt reduction didn’t really start until I had saved at least a small emergency fund (shoot for $1,000 to start with, but at least a few hundred in the beginning).

6. The debt repayment plan. I like having plans. They’re how I get things done. I created a plan to get out of debt, using the debt snowball method. I tackled the small bills first, allowing myself to create a sense of accomplishment right away, and to free up some money to pay for the bigger bills. Although tackling the highest-interest debts first is smarter financially, the difference is small and the psychological boost of the debt snowball is huge.

7. Debt is my first bill. In the beginning, actually, saving for the emergency fund was my first bill. As soon as I got paid, I would go online, transfer money into my savings account, and only after that was done would I pay other bills and withdraw my spending cash. Once I had a $1,000 in savings, I began making debt repayment my most important bill, and I would pay those first. Savings second. All other bills third. By paying debts and savings first, you eliminate the common problem that people have when they make savings and debt the last thing they pay: if something else comes up, there’s not enough money left over for savings or debt.

8. Rewards. I am a strong believer in rewarding yourself and celebrating any accomplishment. When a debt was paid off, my wife and I would go out to dinner to celebrate. And we might do something nice for the kids. Sure, we were spending extra money, but that sense of accomplishment is important. It’s a long journey, and you need to be able to look back every now and then to see how far you’ve come. It’s very motivating, and it gets you to the finish line.

9. Increased income. Besides spending less and living more frugally, I also increased my income to make my financial situation more stable and to accelerate debt repayment. To do this, I got a full-time job (I was only doing freelancing before), and continued to do as much freelancing as possible. Then I started Zen Habits, and that became a steady and growing income stream. I also improved my freelancing gigs, and began to look for other ways to make money.

10. More increased income. With the increased income mentioned in the item above, I was in a much better situation financially. That gave me the courage to look for more. I sought donations, to help me achieve my dream of becoming a full-time blogger, and people were incredibly generous (and still are). I began to seek new opportunities, and have some projects coming up down the line. I sold my Zen To Done ebook, and that was a surprising success … it actually allowed me to get debt-free two months before I had anticipated. My wife went back to work, and that helped tremendously. And now my book agent is shopping around my print book proposal, and that could be another way for me to make more income. Always look for new ways to pursue your dreams and your passion … and to increase your income.

Why Living Frugally is Only Part of the Solution

I would not be debt-free today if I didn’t learn to live frugally. If you don’t stem the flow of blood, you’ll never heal the wound.

But frugal living is only one component. You have to learn to get your finances under control, and to plan your spending, and to create an emergency fund. You have to learn how to motivate yourself to finish the long journey.
And one of the most important steps, as mentioned above, was increasing my income in multiple ways, in a series of steps designed to get my finances in better shape and to pay off debt faster.

Living frugal should be the first thing you do, in my opinion. It is vitally important. But it’s only a part of the equation — spending less only gets you part of the way. Earning more gets you the rest of the way.

How can you increase your income? You won’t do it the same way I have. Sure, anyone can create a blog, write an ebook, freelance, write a print book. And I’ve talked about ways to do those things in various places before. But it doesn’t always work out for everyone.

The key is to find something you’re passionate about, and pursue that with all of your heart. That might mean educating yourself, and learning new skills. That might mean finding mentors, and starting at the bottom. But when you’re passionate about something, you’re more motivated to learn and to succeed. Really pour yourself into it, and you’ll find a way.

It’s also important to seek new opportunities, and don’t let good ones get away. If the opportunity doesn’t work out, well, drop it … but at least you gave it a shot. And who knows? One or more of those opportunities might turn into pure gold. They sure have for me, and I’m loving my life more than ever before.

What’s Next: My Credit-free Plan

So I’m debt-free … where do I go from here? My plan now is to continue to try to increase my income with new projects, to continue to follow my heart and my passion, and to see what comes up.

But I plan to still live frugally and to save and invest as much as possible. In truth, I haven’t done much investing yet (besides my 401k) … that’s my next financial project, once my emergency fund is where I want it to be.

There will be a little more spending, to be sure … I’ll be able to travel now (maybe a trip every year). I haven’t traveled in 6 or 7 years.

But one thing’s for sure: I’m not getting into debt again. I’m not taking out any credit cards, and I’m not going to take out any loans. This might be a little controversial, but I’m pretty adamant about this: I’m already saving for my next car, so I can buy it on cash. And I’m going to buy my home on cash too, someday. Until then, I can rent.

Debt is a dangerous game. Some people can succeed at it. The rest of us can’t. For me, getting out of debt has been like shedding a load of boulders from my back. Living without debt is wonderfully light, and I’m not giving that up. Sure, I’ll have to wait a little longer to get the things I want on cash … but that’s worth the wait. It really is.

I’m free!

Update: Read this amazing account of a similar journey to debt freedom by J.D. Roth of Get Rich Slow — J.D., by the way, has been one of my key inspirations on my own journey.


http://zenhabits.net/2007/12/the-10-key-actions-that-finally-got-me-out-of-debt-or-why-living-frugally-is-only-part-of-the-solution/

Finally Someone Listened

This news from Yahoo is fresh from the frying pan. I am quoting it completely to enphasize the importance of this matter to everyone.

By MIKE GLOVER, Associated Press Writer Mon Dec 3, 8:07 PM ET
DES MOINES, Iowa - Democrat Barack Obama called for new restrictions on "predatory" credit card companies he says deceive consumers into piling up massive debt they have little hope of repaying.

"The truth is, our middle-class families are not going to be secure so long as they can't get out of debt," Obama said Monday, sharpening the populist rhetoric of his presidential campaign. "If we're serious about stopping Americans from falling deeper in debt, we've got to crack down on predatory credit card companies that are pushing them over the edge."

Obama pointed to studies showing that consumers have an average personal debt of more than $8,000, a load driven higher by credit cards. He said soaring credit card debt could turn into a crisis as big as the one in the subprime mortgage industry.
"The larger risk is that what's happening in the housing market could lead to a slowdown in the entire economy," he said.

The Illinois senator made his comments in a statement and in a discussion with debt counselors and consumers who have struggled with credit card debt.
Obama's "credit card bill of rights" would force credit card companies to give consumers the option of dropping out of an agreement if the companies raise interest rates. It would ban increasing rates on past debts and prohibit charging interest rates on transaction fees. He would also force additional disclosures by credit card issuers of terms of the agreement.

"I've seen many Americans who have been driven into financial ruin as a result of all of this," said Obama.

He spoke as he opened his latest campaign swing in the state where precinct caucuses traditionally launch the presidential nominating season, and where polls find him in a dead heat with Hillary Rodham Clinton. Both have portrayed themselves as champion of the middle class.

Obama did so again by accusing credit card companies of deceptions.

"Many credit card companies are tricking Americans into agreements they can't afford because that's how they make big profits," he said. "Well, no company's bottom line should come before what's right for the American people."

He said many consumers are squeezed twice, with credit card debt forcing them into bankruptcy, where the odds are also stacked against them.

Obama also spoke of his opposition to an overhaul of bankruptcy laws that he said protects credit card companies more than consumers.

"Every American has a responsibility to pay what they owe, but we need to make sure that what they're paying is fair, and we've got to do more for those Americans who aren't able to climb out of debt and actually have to declare bankruptcy," he said, promising reform of bankruptcy laws if elected president. He said he opposed a 2005 bankruptcy bill because it protected lenders while "preventing middle-class Americans from getting back on their feet after a crisis — even if they've suffered an illness."

He said much credit card debt comes from consumers who have been forced to use credit cards to pay for medical costs.

Problem Solving Demands Cents of Humor

How smart is your dog

Four workers were discussing how smart their dogs were.

The first was an engineer who said his dog could do math calculations.
His dog was named "T-Square", and he told him to get some paper and draw a square, a circle and a triangle, which the dog did with no sweat.

The accountant said he thought his dog was better.
His dog was named "Slide Rule". He told him to fetch a dozen cookies, bring them back, and divide them into piles of three, which he did with no problem.

The chemist said that was good, but he felt his dog was better.
His dog "Measure" was told to get a quart of milk and pour seven ounces into a ten ounce glass. The dog did this with no problem.

All three men agreed this was very good and that their dogs were equally smart.
They all turned to the union member and said, "What can your dog do?".

The Teamster called his dog whose name was "Coffee Break" and said, "Show the fellows what you can do". Coffee Break went over and ate the cookies, drank the milk, went to the bathroom on the paper, claimed he injured his back while eating, filed a grievance for unsafe working conditions, applied for Workmen's Compensation and left for home on sick leave.

Source: http://www.tensionnot.com/jokes/office_jokes/how_smart_your_dog

Middle Class Barely Treads Water by Christine Dugas

Millions of middle-class families can no longer afford to live on two incomes.

A generation ago, a typical American middle-class family lived on the income of a single breadwinner. In recent years it has taken two working spouses to live the modern middle-class dream. Now, it seems even that is not enough to survive the skyrocketing cost of housing, health care and college while saving for retirement and shouldering growing debt loads.
Bill and Terry Will of Chesapeake, Va., together earn about $70,000 a year, and yet it's a struggle to provide for their family and pay off their credit card debt. Terry, 44, is a nurse and Bill, 50, manages a warehouse that ships food and supplies to other countries.
The Wills have five children at home, ages 2 to 17. They budget every penny and have no savings, no college fund, no retirement nest egg.

Like many middle-class families — often broadly defined as those earning $25,000 to $99,999 — the Wills have little room to maneuver if something unexpected comes up. They barely survived when Bill's job as an oil company sales manager was eliminated in 1999. They came close to losing their home and nearly ended up in bankruptcy before they went to a non-profit credit counseling agency for help.

What happened to the Wills is being repeated in legions of middle-class homes across the USA. With personal bankruptcy at an all-time high, it's mostly the middle class that gets trapped: 92% of the record 1.6 million filers in the year ended June 30 were middle class, according to a Harvard University study.

The Wills acknowledge that they didn't know much about managing money before they went into debt counseling, but they didn't live beyond their means.
"We didn't have cable TV before, and we still don't," Terry says. "We used credit cards to pay for diapers, food and school stuff."

It may be hard to believe, but the average family of four spends 21% less on clothes and 22% less on food — both at home and in restaurants — than a similar family did a generation ago, according to a new book, The Two-Income Trap. And though families may spend more today on things like Internet services, DVDs and airline travel, those increases are offset by declines in other expenditures.

Instead of splurging on gourmet meals and designer clothing, families are spending more on essentials such as day care, housing and health insurance.
"Costs are rising quickly, and benefits that used to be provided by employers now must be provided by workers themselves, including health insurance and retirement," says Christian Weller, an economist at the Economic Policy Institute.

The average employee contribution toward health insurance premiums is $2,412 for family coverage this year, according to the Kaiser Family Foundation. That's a 13% increase over 2002.
Housing also is eating up more of the average family's budget. About 80% of low- and moderate-income homeowners spent more than half of their income on housing in 2001, according to the Center for Housing Policy. Many experts say no more than 36% of gross monthly income should go toward credit card bills, car payments and mortgages combined.
Today, much of a family's second income goes to paying for a suburban home in a good school district, says Elizabeth Warren, Harvard law professor and co-author of The Two-Income Trap.
"Middle-class families are taking on ruinous mortgages just to find a home in the right ZIP codes," Warren says.

"The cost of living is crazy in the top-rated school district here," says Emily Derr, 25, a renter who lives in Houston with her husband, Jeremy, and their 5-month-old daughter, Madison. A house that costs $145,000 in that neighborhood would cost $20,000 less one suburb over, she says.

Using credit to make ends meet

The Derrs can't afford to buy a house yet. They have struggled since Jeremy got out of college with $16,000 in credit card bills and student loans.

Emily has a nursing degree. She had hoped that with two incomes they'd be fine. Instead, she says, "We were making a little more than minimum payments, but it didn't seem like it was going anywhere. I thought it was going to be 40 years before we'd be able to buy a house."

To economize, they moved into a cheaper apartment and sold one of two cars. But Jeremy made only $12,000 in his first year as a financial adviser for Morgan Stanley Dean Witter, and they paid $500 a month for health insurance. "I felt like I was drowning," Emily says.

Credit card debt became an albatross. Eventually, the Derrs went to a credit-counseling service for help. Jeremy joined the Army and is now in officer candidate school.
Credit card debt for middle-income families is soaring — up 75% to $5,031 between 1989 and 2001, according to a new report by Demos, a non-partisan public policy organization.

"Middle-class families are using credit cards to fill in a gap between their income and costs," says Tamara Draut, director of the economic opportunity program at Demos. "It's more about maintaining their standard of living than frivolous consumption."

At one point, when Bill Will had no income and no health insurance, he still had credit cards and continued to use them. "I did what I had to do for my family," he says.

Average card debt declined somewhat in 2001, according to Federal Reserve data. But some experts don't see much cause for optimism. Many families traded high-interest card debt for lower-rate home equity loans. That lowers debt payments but puts homes at risk. The percentage of homeowners facing foreclosure in the second quarter was 1.12%, down only slightly from the record 1.2% in the first three months of the year, according to the Mortgage Bankers Association of America.

Facing financial failure

As consumers shoulder more debt, bankruptcy filings have exploded. Nearly 90% of families with children who file for bankruptcy cite three reasons: job loss, divorce or medical problems, according to the Consumer Bankruptcy Project at Harvard University, the largest study of consumer bankruptcy in America. About one-third of the families owed an entire year's salary on their credit cards.

Single parents typically have the hardest time juggling financial obligations. A divorced woman with a child is nearly three times more likely to file for bankruptcy than a single person with no children, Warren says.

Pamela Robbins, 36, is a single mother of three children, ages 5, 11 and 12. Her problems snowballed after she split from the children's father about 10 years ago. "There were weeks when my groceries went on my credit cards," says the Mashpee, Mass., resident. "It was a matter of survival. I had to do it to pay the gas bill so it wouldn't get shut off."
Her credit card debt grew to $56,000. Creditors were calling. Robbins earned about $30,000 last year working two jobs to try to keep up. She runs a home day care business and works at a grocery store. Like Emily Derr, she says she felt like she was "drowning."

With bankruptcy looming, Robbins wanted to save her home. She went to Auriton Solutions, a credit-counseling agency. They negotiated with creditors to reduce her interest payments and put her on a repayment plan. "I am still stretched to the limit," Robbins says. "But in the last six months I've noticed the debt is going down. It's going to take a few years, but eventually it's going to get cleared up."

Putting retirement at risk

Many people like Robbins manage to avoid bankruptcy by going to a credit-counseling agency. Even then, it can take years to climb out of debt. Saving for retirement usually gets put on hold.
"I have no savings account," Robbins says. "I have no IRA — no retirement plan." And the need to save for college could put retirement further out of reach.

Most workers are on their own when saving for retirement as fewer companies offer traditional pensions. Nearly two-thirds of middle-income families in 2001 had only a 401(k) type of plan at work, according to a recent report by the Employee Benefit Research Institute. The median plan balance for families earning $25,000 to $49,999 was just $7,000.

Though many employers provide a matching contribution to 401(k) plans, during the economic downturn many suspended or reduced contributions.

Recent efforts in Congress to improve retirement programs have focused on increasing the maximum amount that workers can contribute each year to 401(k) plans and IRAs. "But if they can't afford to put in $2,000, they're not going to take advantage of the $3,500 limit," says
Cindy Hounsell, executive director of the Women's Institute for a Secure Retirement.
"Workers not only have to save for retirement, but they have to make wise financial decisions," Weller, the economist, notes. The nearly three-year stock market downturn underscored the potential for investment losses in nest eggs.

And during the mortgage refinancing boom, many families depleted their biggest asset: home equity. Last year alone, about $200 billion of home equity was cashed out as homeowners refinanced, according to economist Mark Zandi.

"The large mortgage payments will prevent many middle-income workers from retiring when they want," says Steve Brobeck, executive director of the Consumer Federation of America.
Despite their financial woes, middle-class families are often in a Catch-22 situation. They typically make too much to qualify for federal aid programs, and yet they don't earn enough to benefit much from expanded retirement plan limits, tax cuts on dividend income, capital gains and the like, consumer advocates say.

Bill and Terry Will, meanwhile, are doing the best that they can to remain positive. It will take the couple another three to five years to get rid of their debts.

They also have to think about college for their son, Michael, who is a senior in high school. And they have no retirement savings. Terry does not contribute to her 401(k) plan at work now because all their money is going to paying off their debt. "If we worried about all of this we'd be physically sick," Terry says. "We just have to trust in God to help us."

A crisis at the center

John Lee is a 38 years old migrant worker in Singapore. He left his family from a third world country in search for a greener pasture in a first world economy.

Two years after working as a contract staff in an IT company he made a major decision to uproot his family and bring them to Singapore, from then on he is forced by necessity to use credit cards and get into a cycle of debt.

His credit card debt climb up further when his application for permanent residency was approved and 20% of his salary has to go to his CPF. Every now and then he has to use his credit cards to pay the minimum balance of his other cards. A cosmetic solution, that he knows, does not address the real cause of his debt.

The reasons for his burgeoning debt is not about over-spending, it is about the increasing cost of the basic necessities in life like food, clothing and shelter.

This situation of migrant workers is common not only in Singapore more so in other first world economies in US, UK and Australia. High-paying middle class migrant workers are being lured into credit card spending. Every night they hear and watch the advertisements in TVs, flashing in web pages via Internet, and even in the billboards of bus stops and terminals showcasing the world of entertainment and consumption-driven urban culture. The problem is compounded by the fact that John Lee has no background in money management, and he was and he is in that stage of debt denial condition.

The causes and problems enumerated in the previous section suggest that the casualties of consumer debt crisis are those at the center of the pyramid. The middle class workers who need to go to office everyday, need to wear nice office attire, need to buy shoes, need to consume expensive perfume and cosmetics, need to pay phone bills, broadband bills, and PUB bills, need to consume shampoo, need to go to saloon, need to have a decent meal in the city and occasionally need to go out with friends and socialize, need to pay taxes, need to get into continuing education, need to rent a house and survive in a city life where the only thing constant is the rising cost of living.

They are the so-called “high paying” white collar jobs Walter Wriston of Citibank had thought about as he proposed to extend his credit card operation in South Dakota way back in 1980. 5

The same class of people who are there building the wealth of nations are the same people who are now drowning in huge debts and one day they will have to face the trauma, as Elizabeth Warren of the Center for American Progress 6 puts it, of home mortgage foreclosures, car repossessions, credit card defaults, and worst bankruptcy.

Consumers compulsively mortgage their future to boost society’s expenditures, manufacturers and producers exceed their consumption of fossil fuels to meet the demands of consumers and accumulate wealth.

Consumers are conditioned by media to do more and more shopping. The result is over-heating factories that produce air pollution and precipitate into climate change and global warming.

It looks good for the nation’s balanced economic scorecard as it translate into positive economic growth when the consumption + investments + production + distribution equal positive outcome. But when the consumption variable is driven by consumer credit card spending or through unsecured personal loans, risk and sustainability becomes a major concern. This problem is compounded by the net effect of global warming and climate change.

We need not an economist or a PhD title-holder; we don’t have to be an Albert Einstein to understand the gravity of the problems the world is facing.

Common sense dictates that sooner or later we will have to make a choice and the choice we make will have far reaching consequences impacting not only the future of our children but also the capacity of the planet Earth to support life.

To be fair, the biggest chunk of society’s expenditure is actually pumped by the government. The government would normally spend huge amount of money on strategic projects to boost economic growth. I understood this wisdom while reading a book from an economist himself, Stephen Leeb, PhD and I quote in part:

“Today we know that the right medicine in times of economic contraction is to spend like crazy and pump the economy full of money….

Regardless, the experience of the “Great Depression” and World War II taught America a clear lesson: Spending and creating liquidity is the way to stave off a severe economic decline, not balancing the budget.”

To solve the problems of consumer debt, the root causes identified in previous sections must be addressed both at the personal level and at a level that requires intervention by interest groups and other forums where the issues are properly ventilated, facts are gathered, dissenting opinions are heard, issues are further re-framed based on incoming anecdotal evidences, developing causal linkages between consumer debts and global warming issues, setting out options, and formulating solutions that are agreed upon by the affected sectors including the government.

We prescribe solutions to the problem at the personal level by picking up behaviors that addresses the root causes, has huge impact and does not require training and skills development. People just need to be motivated and empowered to make a difference through change in individual behaviors discarding old habits that commercial marketing has mold them to be.

Causes of Consumer debt: Explained

In the previous article i summarized the causes of consumer debt and illustrated them in a fishbone diagram. I also argued that the increase in oil prices would cause an increase in prices of basic necessities in life.

The following is a relevant literature review:

• T. Pettinger writes in his blog entitled “What causes an increase in consumer debt, ”:
  
  1. Lower Real interest rates. Low interest rates mean that loans are more attractive; therefore, it encourages a variety of borrowing, such as credit cards and loans.
  
  2. Confidence. Consumer confidence is important for encouraging people to borrow against the expectations of future earnings.
  
  3. Economic Growth. Higher economic growth tends to increase consumer confidence. When incomes are rising, people expect them to keep rising
  
  4. Supply of Finance. Greater supply of loans and credit cards. Banks more willing to lend to people with bad credit histories.
  

• Steve Bucci of Bankrate.com 2 enumerated top 10 causes of debt and I quote:
  

1. Reduced income/same expenses. Too often we delay bringing expenses in line with a reduction in income for a host of good reasons and let debt fill the gap. The sooner you 2. Divorce. More than half of us do it, some more than once. I can think of few things more expensive and likely to put you in debt. For those of you who have never done it and would like to get some idea of the impact, sell all your assets and get the money in $50 bills. Go to a hotel on a busy street, and you and your spouse open two windows and see who can throw the most money out the fastest. It can be breathtaking.

2. Poor money management. A monthly spending plan is essential. Without one you have no idea where your money is going. You may be spending hundreds of dollars unnecessarily each month and end up having to charge purchases on which you should have spent that money. Planning is no more difficult than writing down your expenses and income and reconciling the two. You will be surprised at how powerful you'll feel when you are making thoughtful decisions about where and when to spend your money.

3. Underemployment. A close cousin to No. 1, people who experience under employment may continue to think of it as only temporary or if they are coming off unemployment feel a false sense of relief. Yes, you deserve a break, but this is not the time. Get those expenses in line with your current income. Down the road if you increase your income due to more hours, a second job, or a better job, then is the time to start adding in some of the previous spending before you became underemployed.

5. Gambling. Call it America's new entertainment or (considering the boom in tribal casinos) the Indian's revenge. Either way there is a guaranteed exchange of money from you to "the house." It can be addictive, hard to stop and loans are freely available.

6. Medical expenses. Gaps in coverage, lapsed policies and increasingly costly alternatives make this a popular category. Just about every doctor I know now takes credit cards. If you think it's for convenience, think again. The medical industry wants to get paid at the time service is rendered. They know that if they don't, the chances of their getting paid drops. This means more debt for you, less for them. To be fair, they are not in the lending business, but this only masks a bigger problem

7. Saving too little or not at all. The simplest way to avoid unwanted debt is to prepare for unexpected expenditures by saving three to six months of living expenses. With a savings cushion in place, a job layoff, illness or divorce will not cause immediate financial strain and increase debt. You always hear, "Pay yourself first." Do it and it will grow and be there when you need it. No one has ever regretted having a savings cushion.

8. No money communication skills. It is important to communicate with your spouse or significant other and your children about finances. Keep the lines of communication open and discuss financial goals and spending styles. If you are married to a spender and you are a saver, you will want to map out a strategy for you both to get what you want. Know what credit accounts you each have and promise each other to be honest about what each other spends. Many people find out that their spouses have racked up thousands of dollars in credit card debt and they had no idea that the accounts even existed. This often leads to number 2 above.

9. Banking on a windfall. Spending tomorrow's money today is very tempting. Especially if you believe that tomorrow will come no matter what. A planned job bonus may not be a sure thing. The inheritance that you believe will come your way may not. The lesson is don't spend the money until the check clears.

10. Financial illiteracy. Many people don't understand how money works and grows, how to save and invest for a rainy day, or even why they should balance their checkbook. The schools don't teach it, your parents may not have sat you down and explained it. It doesn't matter. You are responsible for your life and your money anyway. Financial mistakes are increasingly expensive and complicated to resolve. Get educated and get in control.

• Paul Willis from Guardian Unlimited argued that uncertainties causes sharp rise in the cost of personal loans. “A host of lenders”, he said, “have raised their interest rates on personal loans, some by as much as four percentage points, as growing uncertainty in the fnancial markets takes its toll.

• Kirstin Downey of Washington Post pointed out, when asked why are Americans so deeply in debt, “Its not because they are using credit cards to buy plasma TVs, and premium coffe drinks at Starbucks. The real culprits, according to a new analysis, are the rising costs of housing, health care and education.”

Oil Price increase causes increase in the cost of living...

This is a modified version of fishbone diagram suggesting that oil price increase ( encircled) is apparently the root cause of consumer debt. This is just my own personal perception. This has to be supported by an empirical evidence.

Although, it is common knowledge that whenever the price of oil goes up, the cost of living goes up disproportionate to the increase in salaries and wages.

Because of this lopsided equation, consumers have no choice but to finance their consumption using borrowed money.

There are probably many other causes of consumer debt, but i choose this line of argument because oil consumption is one of the root causes of global warming. A link between consumer debt and global warming is obvious.

Sometimes we feel that there seems to be solution in sight. I am convinced that there is so much hope in the future. We just need to do something different.

Causes of Consumer Debt

The above fishbone diagram illustrates cause and effect relationship. The logical categorization of the various reasons why consumers are drowning into huge debt.

Causes of Consumer debt and their categories:

1. Economic and Investment Climate

a. Uncertainty in financial market causes interest rates hike and in effect affects interest on personal loans and various lines of credit.
b. Overconfidence in the economy encouraging people to borrow more.
c. False hope from the economic growth and forecast
d. Supply of finance where banks are more willing to lend people with bad credit histories.
e. Lower interest rates induce people to borrow more.

2. Income

a. Same level of income over the years while loans keep on going up
b. Limited opportunity to increase personal income
c. People are surviving on disposable income making them vulnerable to interest rates fluctuations
d. Reduced income specially when a person becomes less marketable in a competitive labor market
e. Saving too little or none at all


3. Culture and Lifestyle

a. No money communication skills. Spouses have differences in the way they spend their money. Most of the time spouses are hiding from each other their expenditures.
b. Addicted to entertainment including but not limited to watching movies, playing games, video-karaoke, and other form of entertainment.
c. Divorce and marital break-ups
d. Financial Illiteracy

4. Cost of Living

a. Hand phones, which in fact are becoming more fads and crazes instead of necessity.
b. Rising cost of healthcare as reflected in medical expenses.
c. Rising cost of education.
d. Hike in transport fare
e. GST hike
f. Rising cost of housing
g. Needs for broadband connection to gain access to the World Wide Web.


5. Employment

a. Automation displaces human labor.
b. Company mergers and acquisition causing lay offs on redundant workforce.
c. Underemployment
d. Downsizing of companies
e. Managerial jobs are taken over by intelligent systems.
f. Job losses
g. Retrenchment

6. Behavior (Psychological)

a. Financial phobia where people keep on denying their indebtedness.
b. Banking on windfall.Compulsive shopping.

Annotation:

There is still a need to gather anecdotal evidences through real life stories from the middle class who have personally experience those problems. Then create statistical pattern that points to the very root of the problem.

This evidences can only come out if people are willing to talk about it. They dont have to say who they are. They just need to zenduse their stories and compound it.

Another way of doing it is through focus group brainstorming activity. This will require more time and effort and the results will definitely be more productive and a great learning experience.

Worrying Signs says Mr Paul Kasriel

The credit spread has not just widened, it has become global....

Source: The Straits Times, Friday, November 30, 2007

Recession in US Economy due to Consumer Debt Crisis

Consumer debt crisis in US rising sea level in South East Asia. Events taking place at the same time. Is this not a case of a Twin Crises? or just a coincidence....

Singapore's The Straits times, Friday, November 30, 2007

Rising Sea Level in Indonesia

When are we going to start to embrace the inconvenient truth?

Singapore's The Straits Times, Friday, November 30, 2007

Flash flood in Singapore: This is just the beginning

This is not an isolated case. The Philippines and Indonesia shared the same stories.

Singapore's The Straits Times, Friday, November 30, 2007