• Post Reply Bookmark Topic Watch Topic
  • New Topic
permaculture forums growies critters building homesteading energy monies kitchen purity ungarbage community wilderness fiber arts art permaculture artisans regional education skip experiences global resources cider press projects digital market permies.com pie forums private forums all forums
this forum made possible by our volunteer staff, including ...
master stewards:
  • Carla Burke
  • Nancy Reading
  • John F Dean
  • r ranson
  • Jay Angler
  • paul wheaton
stewards:
  • Pearl Sutton
  • Leigh Tate
  • Devaka Cooray
master gardeners:
  • Christopher Weeks
  • Timothy Norton
gardeners:
  • thomas rubino
  • Matt McSpadden
  • Jeremy VanGelder

Mortgages, Debt, and Permaculture Asset Classes

 
author
Posts: 35
13
forest garden urban woodworking
  • Likes 4
  • Mark post as helpful
  • send pies
    Number of slices to send:
    Optional 'thank-you' note:
  • Quote
  • Report post to moderator
I love all the discussions here around debt and mortgages! Permaculture Founder Bill Mollison had a thought tool for this topic that I haven’t seen in any of the discussions yet: Permaculture Asset Class Analysis.

Both he and Rosemary Morrow have called the asset classes the most important topic in all of Permaculture! I agree, and hardly a day goes by that I don’t think about this tool. And yet, a lot of permies have never heard of this “most important topic in Permaculture.”

For the sake of a short introduction, there are 4 or 5 asset classes, depending on which edge of the Permie community you’re talking in. In Growing FREE, we use: Degenerative Assets, Durable Assets, Generative Assets, Procreative Assets, and Transformative Assets.

This gives us a way of thinking about how we’re investing and spending our money, and whether or not our spending is going to lead to more freedom or less.

At the bottom of the scale, “Degenerative Assets” or degenerating assets, are things that break down and lose value over time. Whenever we buy a degenerating asset, we’re giving ourselves another financial burden to carry.

So whenever we can trade out a purchase of a degenerative asset for one of the other asset classes, we’re giving our future selves a gift.

Durable assets last a lifetime and hold value well.

Generative assets can be used to generate cash flow, like an apple tree that produces apples or a cider press that can produce cider.

Procreative assets are things like apple trees, which not only produce apples, they also can produce new apple trees!

As a former farm loan operation lackey, I saw a lot of farmers use debt to buy degenerating assets like non-durable hoophouses, or equipment with high upkeep and low economic value. It almost always ended poorly for the farmers.

But there’s one asset class that is particularly great to invest in, and using debt to buy it is almost always a good idea.

Like anarchist philosopher James C. Scott, and Toby Hemenway, Bill Mollison pointed out in some of his PDCs that some of history’s best models of communities that grew land-based wealth used debt to buy these kind of assets. In fact, Scott points out in some of his books that whole communities lifted themselves out of poverty to become well-to-do, using this strategy.

And these are Transformative Assets, assets that both cash flow (enough to pay the mortgage even in year 1) AND that appreciate well over time enough to be legitimately good investments. Ideally that means they appreciate exponentially (at least to a point.)

And in my 40 years of experience, EVERYONE who I’ve seen become successful in creating a resilient Permaculture lifestyle has invested in some form of Transformative Assets.

To give an example of what this means, blueberry bushes can be used to sell blueberries. So they’re a generative asset.

They can also be used to propagate more blueberry bushes, so they’re a procreative asset.

But they only become a transformative asset if the plant capital is valuable enough that the plants will be highly valuable and maintain value as the stock increases for some time into the future.

A mortgage can be a degenerative asset! Using debt to buy a degenerating asset is a bad idea. But with the right planning, it can be a transformative asset that can lead to a lot of economic resilience and financial freedom.
350F499E-19E8-4C6D-BFC2-A6AE52B250BF.jpeg
[Thumbnail for 350F499E-19E8-4C6D-BFC2-A6AE52B250BF.jpeg]
 
Posts: 36
Location: British Columbia, Canada
12
  • Likes 2
  • Mark post as helpful
  • send pies
    Number of slices to send:
    Optional 'thank-you' note:
  • Quote
  • Report post to moderator
Interesting classification of asset types.  It makes a lot of sense.  My particular perspective is Anarcho-Capitalist Libertarian and I have developed an edible landscape of apple and other fruiting trees and shrubs.  I manage it not only for fruit production trialing cultivars, but as a nursery reproducing and marketing rootstocks, Scion wood, and seedlings.  

When it comes to mortgages and debt,  I practice debt avoidance at all times.  I have used debt over short time frames of less than 5 years for land and education and less than a year for autos.  In good economic times debt is a gamble with lower risks.  Times like now, are a very bad time for debt, even if you think it’s spent on a so called “Good” asset that conforms to permacultural values.  At all times debt borrows your prosperity in the future and gives it to you now, while ensuring you will be poorer tomorrow.  From my perspective the proliferation of debt has done nothing but create asset bubbles in every sector and driven prices far beyond any rational economic level.  
The productive business that is vital to to the real economy of essential goods and services is handicapped,  while non productive sectors propped up by debt now dominate .  I don’t think we go from here to a better future simply by developing a new ideological framework.  There must and will be an utter collapse of all that is built on debt before we can ever pick up the pieces and rebuild.
 
Hey cool! They got a blimp! But I have a tiny ad:
Switching from electric heat to a rocket mass heater reduces your carbon footprint as much as parking 7 cars
http://woodheat.net
reply
    Bookmark Topic Watch Topic
  • New Topic