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Tom Greco: Investing in Uncertain Times

Posted Aug 04 2010 11:00am

A few weeks ago, after I commented on something she said in her monthly newsletter, author and alternative financial consultant, Susan Boskey (Susan@AlternativeFinancialNow.com), asked me to write something about investing for a subsequent issue. (You can find additional information on her website ). Here is the article I wrote, which she has published. It expresses my idea about our current situation, and my advice about how to better use our resources in this time of transition.  – t.h.g.

Investing in Uncertain Times

Thomas H. Greco, Jr.

Many people today are in a quandary about their personal savings and investments. The conventional advice has it that every family should have three to six months’ living expenses squirreled away. But that begs another question which is, in what form should that ‘nest egg’ be held?

Is it safe and prudent to leave it in a bank? Should I buy bonds, or stocks, or real estate, or commodity futures? How can I balance risk with income and capital appreciation? These are questions that are difficult to answer even in “normal” times, but the present situation seems especially uncertain. The near financial meltdown of a couple of years ago coupled with the ongoing stream of bad economic news leads one to wonder, along with billionaire George Soros, is this the end of an era?

I think it is. My view on the matter is that the era of economic growth is over, kaput, finished. If you stop for a minute to think about it, you must admit that we live on a finite planet, that we are rapidly using up the available resources, that we are adding ever more pollution to our air, water and land, and that the distance (in time) between the end of the production line and regional dump is growing ever shorter. This cannot continue. Nature shows us that nothing grows forever. What would it be like if children never stopped growing? What happens as insect or animal populations grow? They either level off or experience a catastrophic collapse.

So, if we cannot expect the economy to return to what has been “normal” in our past, what can we expect? I believe that we must, and in fact are right now transitioning toward a steady-state economy, one in which overall quantitative growth is supplanted by qualitative development, i.e., an improvement in the conditions of life that really matter,

This is a transition that I compare to the metamorphosis of the caterpillar into the butterfly. The caterpillar’s role is to eat and to grow, i.e., to accumulate the resources that will be used during the chrysalis stage by the emergent butterfly as it assembles itself into a new and different creature. The butterfly behavior contrasts sharply with that of the caterpillar. While the caterpillar can be very destructive as it devours plants, the butterfly helps to pollinate them as it sips nectar from their blossoms.

So, if this is an apt description of what is going on, we ought to withdraw our resources from Wall Street investments that perpetuate “the Caterpillar economy” of endless consumption and despoliation, and start investing in “the Butterfly economy,” which is more equitable, sustainable and restorative of the environment upon which our lives ultimately depend.

This can be achieved through

As our communities become more self-reliant, we become more secure, providing for ourselves more of our food, energy, housing and other necessities of life.

Right now, the economy is in a depression because in the wake of the last bubble-bust cycle the private productive sector is being starved for credit while the wasteful government-military-industrial-financial sector is appropriating ever more resources to keep itself alive. There is not much we can do about that since the political power is mainly in the hands of those interests. But we can use our own resources in our own communities to secure a better future for ourselves and our descendants.

In a depression “cash is king” because many people don’t have enough of it to cover ordinary living expenses. At the same time, the money powers are inflating the currency at unheard of rates, so ultimately fixed-dollar securities, including bank deposits, will be eaten up by rising prices.

If savers and small investors can buy into local enterprises that provide returns as a share of their actual product, they can achieve some measure of security (in food and energy, for example) while transforming depreciating dollars into something (like food, or alcohol for fuel to replace gasoline) that will become increasingly valuable as time goes on. Use value is becoming more important than market value, and personal responsibility and local cooperation are becoming more important than reliance upon declining institutions and structures.

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Here are a few links to pertinent information:

Tom Greco is the author of Money , and The End of Money and the Future of Civilization , both available in our bookstore.

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