Countdown to $200 oil meets Anglo Disease

Jerome a Paris descibes what happens when the Countdown to $200 oil meets Anglo Disease. He sees the current economic problems as an aberration.

One of the more interesting things about this Friday's economic news was the very obvious connection between the unemployment number and oil prices. What links the two is debt, the defining feature of what I have called the Anglo Disease, ie the highly unequal economy whereby the rich and the financial sector (almost the same thing these days) capture most of the income but hide it by providing cheap debt to the middle classes so that they can continue to spend.

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He expands this point further:

in today's economy, the cannibalistic sector is not oil&gas, but finance. Bankers, through debt, have the ability to convert future cash-flows into immediate profits. Such immediate returns attract more capital, talent and resources (which cannot go to other sectors) and impose an iron discipline on the rest of the economy: those that provide the debt want to ensure that the future cash-flows will indeed materialize, and move in to ensure a relentless focus, in the underlying activities, on profitability at the expense of all other criteria. The immediate contribution of the financial world to measured GDP and growth makes it a popular industry, thus reinforcing its influence - and spreading out its way of thinking, focused on monetary gains and financial "efficiency." So not only the rest of the economy gets squeezed for any extra drop of profitability, but the language of financial analysts becomes the dominant one of not only economic discourse but also political discourse;

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This is how Capitalism is supposed to work. Investments flow to the sectors of the economy that that show the highest rates of return. There is no other criteria for a Capitalist investment choice.

What then is supposed to happen is that the rate of return on these new investments is supposed to revert to the mean once sufficient investment has been made. Unfortunately, the inertia of investment decisions means that over-investment occurs and large losses are experienced.

In order to justify this new regime of investment allocation, the spiritual producers are called upon to cast their spells, and wave their wands. The punditocarcy exists only to serve. To Serve Man up to the insatiable demands of Capital!

The author then goes onto explain that:

in a nutshell, the debt bubble hid the class warfare waged by the rich against everybody else, conveniently trapping those that could not or would not live within their means in the system, by making their livelihood increasingly dependent on not rocking the boat.

So close! Class warfare is reemerging in the consciousness of people.

So far, the article is mainly a litany of complaints. And his solution is:

So there you have it: wage stagnation (Anglo Disease) and oil production stagnation (the fundamental driver of the Countdown diaries) combining in a perfect storm. But hey, the financiers are still sitting pretty, and will say that more "reform" and "deregulation" and tax cuts are needed.

Maybe it's time to stop listening to what is highly self-interested drivel, and take back what they grabbed: it's not theirs. And maybe it's time to actually worry about using lots less oil (and gas and coal).

And, wonderfully, a programme to invest in housing and vehicle energy efficiency, renewable energy, and infrastructure, paid for by massive tax hikes on the rich, will help solve the current recession and the oil crisis.

After all that, the only suggestion is to take the rich. A reformist approach! As if the rich would stand aside for the rabble to despoil their ill-gotten gains!

This is a start. The acknowledgement of class warfare is a significant step forward. But it is only one step out of a journey.