The Most Effective Thing any Environmentalist can do

Here are some things you can do to ease your load on the environment:

1. Drive less
2. Fly less (I’m a sinner on this one, though…)
3. Wear a sweater instead of turning up the heat
4. Use a clothesline instead of a dryer
5. Carry your own shopping bags
6. Avoid bottled water and over packaged products
7. Cancel cable TV (really, it’s complete junk)
8. Change to energy efficient light bulbs and turn off the lights you don’t need
9. Recycle your trash
10. Buy local

Aside from the obvious positive effect this has on the environment, it will make you healthier and save you money. Now, you’ve probably heard these suggestions a million times, so if you’re still reading, you likely care about the environment and wonder if there is something else that you can do. You didn’t think I would write a post with a bunch of old, off-the-shelf actions that you already knew of, did you?

Provided you have money in the bank, which you should have, since you’ve been saving money on the above actions, the most effective thing you can do is simple: Withdraw it.

The money in the bank is not just sitting there. It is continuously fueling someone else’s consumption and causing environmental mischief around the world. The bank takes your deposit and lends it to some schmuck, let’s call him Joe, who wants to buy something, say a car. Joe then takes the money and gives it to the seller of that car. The seller, James, deposits the money in the bank. Both you and James think you own the money in the bank now, but which one is it? The answer: The fastest one of you. Of course, you will have to outrun many others as well, since the bank takes James’ deposit and lends it to Jill, who hands that money over to Jack, who puts it in another bank and so it goes on.

The only thing that limits this monetary game of musical chairs, is the fraction of each deposit the bank is required by law to hold as a reserve. If the reserve requirement is 10%, then the bank can only lend 90% of your money to Joe. The total amount of money that can be created is 0.9 + 0.9^2 + 0.9^3 + … = 1/(1-0.9) – 1 = 9. That is, 9x the original amount. So while you may think you’re saving the environment by your frugal lifestyle, your savings account is hard at work wrecking environmental damage to the tune of 9x the amount you put in there.

Well, 9x is a very conservative measure. In the USA, the reserve requirement for checking accounts is 10%. The reserve requirement for savings accounts is 3%. So if you want to earn some small amount of interest on your money, it is wrecking damage to the tune of thirty-two times the amount you put in there. There are 32 James out there who think they own the same money you put into the bank. There are 32 Joes out there who are buying Hummers, constructing McMansions or are otherwise living beyond their means, courtesy of your nimbleness.

In most of Europe, the reserve requirement is 2% for checking and savings accounts. You get 50x the wasteful spending. If this makes you feel sick, let’s look at this system in another way: It’s a giant amplifier for your voice. By taking your money out of the bank, you also force all the Joes and Jills out there to live within their means and adapt the same frugal ways that the environment so craves. You destroy the wealth of the James and Jacks out there who sell crap that you (and they) can easily live without. The same excessive leverage that fueled this consumerist monster, is also making it extremely vulnerable: If only 1% of deposit holders in Europe did this, half of the credit-based over-consumption would stop.

Where do you store money if not in a bank? Well, you can put it in the bank’s safe deposit boxes. There exists a popular misconception that this is somehow illegal. It is not, as long as you report it on your tax return. The banks, earning most of their money on the crazy money expansion they do, are not particularly happy to store cash in their boxes (conflict of interest, anyone?). They usually have a clause that you may not store cash in the box in the lease agreement. This does not matter, because the bank does not have the private key to the box, and they don’t want to know what is in your box anyways. If you have very large sums, you can get a safe instead.

With the cash safely stored in a vault, enjoy your new fifty times greener conscience. Your hard-earned savings are no longer speeding around cutting down rainforests, enabling fifty Jills to drive gas-guzzlers or buying already filthy-rich CEOs palaces, yachts and learjets.