The Shocks So Far Were Precursors....

And I am not being mad-gloomy. California still does not have a budget and if it gets one today things are not going to be pretty. Pennsylvania is now paying people partial paycheques and encouraging short-term loans via political pressure for its own workers. The big American states are in fiscal trouble, which means that the worst predictions by the likes of me last year are starting to get a grip. America's congress might, like the grand old duke of york, be busy ordering millions of dollars up and down imaginary hills; but a battle of America is on in the States.

In Britain, at least half a million people have had to accept less pay or cuts in hours, which as far as I am concerned is unemployment. Officially, over two million people are unemployed; when one takes into account a fair portion of those on incapacity benefit, those whose incomes have now fallen so that bills have become a burden, and those who have not, possibly because of recent graduation, registered as unemployed, the figure is probably nearer four million than anyone in their right mind would be comfortable with.

In Spain, acknowledged unemployment has shot up to just under twenty per cent of the workforce, and the burden falls on the poor. That's why robberies are up. People are desperate for other people's money and some of them don't have degrees in banking.

In Ireland, where vigilantes have started distributing food from shops in places like Donegal according to anecdotal accounts, cuts of at least ten per cent in spending across the board are being forced on the state. Daily, headlines suggest worse to come.

So far, printing money and pretending that what is happening isn't has seemed enough. For what its worth, I think that our fever could be turned into our ruin by such an approach, but at least its a policy. We haven't had an oil or food shock, and swine flu hasn't hit the economy yet further. In Shipping indices worldwide, and in new oil production, and in the predictions of those aware of what an El Nino can do, those things are not far away, though.

Just wait. We face a deflationary, fiscal, and supply-side crisis at some point in September. It will represent the third wave of what we have been experiencing. American States will approach bankruptcy, or be confirmed as technically insolvent; demand will be withdrawn from the economy; supply will become extremely difficult.

The United States will be disrupted, but ultimately, they still make things and they have those twelve carrier battle groups, and the Asians need them. This economy, sacrificed to greed and a 'flexible market' that stole pensions and turned it into a debtors' prison, will have a far harder time.

I do not want this to be true. But, well--what is happening is not rocket science. Open your eyes, and protect your own.


Martin said…

In his book, 'The Storm', Vince Cable made an over-egged case that there was an oil shock in 2008.

Like the new look.
Martin Meenagh said…
Hi Martin

I take your point, but what I think Vince Cable is afraid to say--bcause it's not quite orthodoxy, except amongst oil company boards and engineers--is that we are at peak oil. That doesn't mean the oil is running out; it means oil at viable prices for the economy we have built around it is running out, which directly affects energy, food, plastics and transportation costs.

The oil shock I think Cable refers to--but you wrote that great critique of his work and would know more than I--is a demand shock, presumably linked to the rise of Indian and Chinese demand. Our systems are built around the capacity to overcome demand shocks. We're fighting the battles of 1973 and 78; the US, for instance, has massively expanded its strategic reserve and we have capacity stored in ships--but supply running down is a different thing. It isn't evident all at once and has a crazy relationship with the number of refineries, what they can produce, and the times that water-pumped oil from declining reserves takes to be refined.

So I wrote (though I may be wrong) that there was not a shock, and I also wrote that there wasn't a food shock. Many would take me to task for both or either propositions; but I'm convinced that, compared to what could be coming, we'll just see the adjustments in oil and food (unlike in commodities, which have become stores of value and ways to dump dollars) as only the beginning.

Many thanks for the compliment. It's always a pleasure to come over to your spot and read your blog.
Martin Meenagh said…
Martin--on reflection, I should just concede the point and rephrase; there may have been a demand shock extended over 2004 or 5 to 2008; but it is complacency to try to understand what's happening as just a consequence of that and in my opinion that is confusing a defined recoverable shock, associated with demand and with refineries, with peak oil. It's sneezing and seeing a cold when the flu is gathering, to use a fairly tasteless metaphor.

My apologies for any confusion.

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