Check out this TED talk by Al gore on the global climate crisis. I just watched it and something hit me square in the face that I had not considered before. He reduced the entire solution down to one activity:

Put a price on carbon.

And that seems logical, right? Penalize the people who produce the most pollution. But what I had never considered is the secondary (and more important) effect this would have: by taxing carbon-based systems and making them financially less-viable, you attract entrepreneurs to create substitutes for a profit motive. You could be an entrepreneur with not one ounce of altruism and be motivated to solve the global warming problem simply because with the carbon tax, there’s now an opportunity to make money.

I had been thinking of the carbon tax purely as a punishment and had never considered the displacement this creates and the consequent incentive effect it has on pulling bright people out of the woodwork to solve the problem. Books like Freakonomics and playing with Kiva.org make me realize the solution to a lot of problems involves ensuring two things: that a) incentives are structured properly and b) entrepreneurs are aware of these incentives/opportunities and have the resources to go make money solving the problem. In hindsight this realization resolves a question that has been subconsciously nagging me: “Why are VC’s so bullish green technology?” It’s definitely not because they’re the most altruistic people in the world- it’s because they realize the magnitude of the opportunity as carbon-based fuels become impractical.

Can anyone think of a reason why the carbon tax doesn’t make 100% sense? AFAIK, the people that would suffer most are the Exxon’s of the world (but with a $500BN market cap I don’t have much sympathy). Everyone else (including me and my SUV) will be hit to a lesser extent- but we should be. I drive a big Tahoe now and I admittedly have some cognitive dissonance about this because I know that I’m contributing more to pollution than drivers of smaller vehicles. But at the end of the day, I don’t want a yugo or a hybrid. However, if a carbon tax made it financially painful for me to keep the Tahoe, I would probably get rid of it. For better or worse, practicality trumps altruism.

I saw a movie last week called the 11th hour – it was like Gore’s Inconvenient Truth in its mission to raise awareness of global warming. The trouble is, awareness is not the issue anymore, awareness of how to realistically act and contribute is. The idea of switching to CFC light bulbs just seems like a feel-good gesture that doesn’t truly help the situation. But implementing the Carbon Tax – now that makes perfect sense to me and is a real, actionable activity that I can get behind. It seems like VC’s with heavy investments in green tech would stand to benefit most from the carbon tax. I wonder if they have the wherewithal to organize and help in the lobbying effort…

If you’re interested in learning more about this stuff, here’s Carbon Tax Web Site.

Watch this youtube series when you have an hour to kill- it’s extremely thought-provoking:

I knew we had long since departed from the gold standard but I had no idea of the ratios by which banks are legally able to fabricate and disburse new money in the form of debt. Apparently this is authorized for banks under a rule called the fractional reserve. As with any opinionated piece, take this with a grain of salt but there are some interesting thoughts:

The system in its current form is a treadmill that by nature guarantees the slowest runners to fall off no matter how fast they run. With a finite money supply of X required to pay X+Interest – it’s not possible for everyone to make it. Worse still, the treadmill once in motion must continuously accelerate in order to function. Common sense tells you that you can’t speed up a treadmill indefinitely and hope to stay on it.

Nowhere in any school system or mass media channel are these mechanics ever explained, or even acknowledged for that matter. We outlaw ponzi schemes and yet condone a financial system which is functionally equivalent? Given the inevitability of the outcome, the universal impact to every citizen, the magnitude of the impending damage and the potential curability of the problem (these are things we have the ability to change today- not like trying to stop an asteroid or reverse the greenhouse effect), why are lesser problems that are beyond our control getting all the attention? The silence around the acknowledgment of this issue and the search for a viable solution is eerie.

The argument that banks need to be for-profit institutions charging their customers interest in order to survive is usually backed by the idea that repayment failures cause losses and need to be offset somehow. If you dissect the process though, the interest rates and penalties are what cause most of the foreclosures and forfeitures in the first place. How’s that for a super-sized chicken/egg sandwich?

For all the sound and fury around the importance of our government establishing a balanced budget, it’s a meaningless activity until the currency behind it is stabilized. It’s like negotiating a salary while leaving the currency type as a variable – you’d probably be stoked about securing a $1MM figure until you realize the currency is in Lire or Yen.

It’s annoying to find fault and propose no solution. The proposal of the video is to convert all banking institutions to become non-profit entities that distribute dividends to their customers, abolishing what is effectively usury. I don’t know anything about the entity that funded the creation of the video and I haven’t given more than a few hours of thought to the implications of this proposal but I believe they’re essentially calling for banks to become credit unions. I can’t think for the life of me what kind of personal gain the author of the video stands to make by proposing this- which means I’m inclined to believe he/she is suggesting it for the right reason.

Bottomline, this is a thought provoking video series. There are no doubt entities that stand to make huge profit by keeping the broken system exactly the way it works now. Learning that the Federal Reserve is neither a government entity nor does it have any reserves was a shocking discovery – maybe others knew this already but that is a mind-blowing revelation to me. So my questions in thinking about this stuff at this point are:

What is the agenda behind this video? What are the downsides of the ideas proposed here that I’m missing (other than the obvious short term inability for banks and government to fabricate money when they need it)?

How can I become a bank (just kidding)?

Who are beneficiaries behind the Federal Reserve and why isn’t this entity named something more indicative of it’s private, for-profit status?

Is it truly feasible that the beneficiaries of the Federal Reserve would ever allow it to be dismantled and replaced by “credit union only” type system?

Wouldn’t achieving a more even distribution of wealth have positive effects on the economy for the same reasons that breaking up power monopolies fosters health in the form increased competition, activity and exchange?

If money were only allowed be conjured into existence when it was used to create tangible and immediately-usable infrastructure that facilitated more efficiency and growth in the economy, why would we not pass such a rule (the modern day gold standard where the gold equivalent is infrastructure of provable value)?

What is the most fair and plausible way to correct this broken system at this point and make it sustainable so everyone lands on their feet?

How many watch lists do you get added to when you suggest ideas like these? I guess I’ll find out…

Why does Ron Paul appear to be the only candidate addressing this issue?

If there’s anyone who is knowledgeable on this subject who wants to get together and talk over coffee- I’m interested in wading through the issues and understanding this better.