Our Peak Oil, Financial Bubble and
Global Warming
Table of Contents
2008
Stagflation Will Produce Votes for Change – 7/21/2006
Stagflation – 10/26/07
What Is Causing Our
Financial Insecurity? - 11/9/07
Worker Layoffs Are a
Drain of Social Capital - 11/9/07
Welfare for the Well Off - 11/9/07
Is It Your
Money? Can You Spend It Best? -12/7/07
Stagflation: Causes
and Solutions – 2/8/08
Our Stagflation Is
Rapidly Getting Worse - 3/14/08
More
about Stagflation – 3/21/08
Federal Bailout for Fraudulent Financial Institutions – 3/21/08
Deregulation Has
Devastated Our Economy 4/4/08
Goodbye
Manufacturing. Hello Financial
Services. Also Health Services – 5/2/08
Oil: Who’s Got
It? Where Do We Get It? – 5/2/08
High Gas Prices Are Finally Affecting Consumption – 5/2/08
How Will We Spend Our Stimulus Payment? – 5/2/08
The Party’s Over – 5/2/08
Hello $200 Oil. Goodbye Economy. – 5/16/08
Are Corporations
People? – 5/30/08
Bye Bye
Manufacturing. Now Bye Bye Hi
Technology. – 6/6/08
Whither Our
Economy? Yuk! – 6/6/08
Reducing Our Military
Spending – 6/6/08
Global Warming Feeds
Itself – 6/20/08
Oil Drilling in
Bye Bye Oil. Bye Bye Lifestyle – 6/27/08
Bye Bye Water. Bye Bye Fertilizer. Bye Bye Food – 6/27/08
Three
Crises. Wasted Years. – 6/27/08
Is Speculation
Affecting Oil Prices? – 6/27/08
Hello Debt. Bye Bye Credit. – 7/4/08
Global Warming and
Barack Obama’s Plan – 7/11/08
Commodity Prices:
Market or Speculation Produced? – 7/11/08
Oil Prices per Barrel
– 7/11/08
Four Dollar Gas Isn’t
All Bad – 7/11/08
Housing Loan
Regulators Are Missing in Action – 7/18/08
Obama’s Approach to
Creating a Fair Economy – 7/18/08
Naomi Klein: Shock
Crony Capitalism – 8/1/2008
To
Revive our Economy, Investment or Consumption* – 8/1/2008
Free Choice Act ->
Unionization -> Social Benefits – 8/1/2008
How Can We Resist and
Turn Back Neo-Conservatism? – 8/8/2008
Corporations: Three
Strikes and You’re Out – 8/8/2008
Do We Need More or
Less Credit? – 8/8/2008
Economics Without
Money – 8/15/2008
Our Debt Crisis* – 8/22/2008
What’s with Recent Oil Price
Declines? – 8/22/2008
Economic Bubbles Are
Fueled by Institutional Greed* – 9/5/2008
Replacing Useless
Work with Useful Work* – 9/5/2008
Fannie May, Freddie
Mac Are Largest Bailouts Ever – 9/12/2008
Our Economy Isn’t Fundamentally Sound – 9/19/2008
No End In Sight of Failed Financial Companies – 9/19/2008
Restoring Credit Is Immediately Necessary – 9/26/2008
Our Most Important
Task Is Creating Needed Jobs* – 9/26/2008
Stopping Fraud* – 9/26/2008
Restricting
Speculation* – 9/26/2008
Producing and
Ameliorating Employment Shifts* – 9/26/2008
Our Financial
System’s Problems and Solutions – 9/26/2008
Our Golden Era. Wrecked by Conservatives* – 10/3/2008
How Should We Restore
Credit? A Better Approach* – 10/3/2008
Will You Accept a Financial
Loss for a Better Future? – 10/3/2008
The Bailout: The Good
and the Bad – 10/10/2008
A
Strengthening Our
Good Banks – 10/10/2008
Ouch! Reducing Our Speculative Gains Is Painful – 10/10/2008
Personal Finances:
Then and Now – 10/10/2008
Small Is Beautiful – 10/17/2008
Two Opposing Approaches to Our Economic Crisis – 10/17/2008
JOBS! JOBS! JOBS – 10/17/2008
Avoid Foreclosures and Produce Affordable Housing –
10/17/2008
Another Stimulus Package? – 10/24/2008
Should We Eliminate 401(k) Retirement Plans? – 10/24/2008
What Happened to Oil Prices? – 10/31/2008
Bailout Money Is Being Misused – 10/31/2008
Do We Need Micro-Credit in Our
Correcting Our Housing Market
– 11/7/2008
Bretton
Woods II – 11/14/2008
Chinese
Stimulus Package – 11/14/2008
Reclaiming Our American Dream – 11/21/2008
Bailing Out Bad Financial Companies – 11/21/2008
Substitute Affordable Housing for Foreclosure – 11/21/2008
2008 Stagflation Will Produce Votes for Change – 7/21/2006
I believe that conditions will change markedly
by 2008, especially our economy. Our
weak recovery is reaching its maximum.
Oil prices are driving inflation, forcing the Federal Reserve to raise
interest rates, which deflate our housing bubble, reduce home equity
refinancing and loans and thus reduce demand.
The result is stagflation in the direction of the economy under
President Carter in the late 1970s, which ended 30 years of enormous well
distributed economic growth.
Our enormous federal and trade deficits are
weakening our dollar which makes foreign imports more expensive and allows our
businesses to also increase their prices, adding to the inflation. We are also vulnerable to foreigners who may
tire of holding our debts, such that the government must raise interest rates
to attract borrowers, causing more depression.
Ain’t economics fun? It sure gets
complicated in a hurry.
More than disgust with deception, incompetence
and corruption, anxiety about a poor
economy will motivate voters to vote for a change. The former are corrosive, but the latter have
immediate direct impacts. An added
factor is two more years of the
If Democrats take control of our government in
2008 without the Trojan horse of southern conservatives in their midst, we may
see sweeping initiation of liberal measures.
Improving our environment, energy sourcing, consumer protection, health
care, education, jobs, support for labor unions, minimum wage, retirement and
much else may occur. This will occur
much easier if our Democrats are truly liberal without being in thrall to
petroleum, pharmaceutical, health insurers, agro-business, media and other
powerful industries. Key reforms will be
procedural: elections, lobbying, legislative rules and others to which voters
give little attention.
Stagflation –
10/26/07
As you may have noticed, I enjoy making
predictions. Even though it is
risky. Sometimes I’m wrong. Generally because I am too optimistic that
events will turn out the way I want.
Maybe making predictions is a way of showing off. Or maybe it provides a service by stimulating
thought, although that might be done by raising questions instead of making
predictions.
Whatever.
Some months ago, I predicted that we are likely to experience
stagflation before the 2008 election, even though Business Week and others were
predicting that the housing sub-prime mortgage meltdown and higher gas prices
wouldn’t have a major impact on the economy.
Now it appears increasingly that I have been right. Oil prices are headed toward $90 a
barrel. Sub-prime mortgages are creating
major problems for both borrowers and lenders.
The dollar is depreciating relative to other currencies, making oil
cheaper abroad.
To assist borrowers and lenders, the Federal
Reserve is likely to cut interest rates further. This may help them, but not stimulate much
economic activity. As housing prices are
stagnant or declining and lenders are more cautious, house owners can’t easily
refinance to have more spending money.
People won’t borrow to invest, if consumers don’t buy, due to having
less discretionary income after paying for increased gas, food and health
costs. Food costs are increasing as corn
is directed toward ethanol for fuel.
Health costs are increasing as insurers have captive audiences and
employers pay less of the costs. Lower
interest rates will also lower the price of the dollar, making imports
expensive, but often not deterring them because our products are not
competitive.
I have mixed feelings about the coming
stagflation. I dislike seeing Americans
suffer from stagflation. But the
solution is regulating financial transactions to prevent bubbles such as our
housing lending bubble, finding other sources of energy than corn, investing in
American physical and social infrastructure, and other measures. These will not occur until problems become
apparent and until Democrats assume power.
Stagflation will contribute to a big Democratic win in 2008.
What Is Causing Our Financial
Insecurity? - 11/9/07
During the last 30 years, deregulation has
occurred, our financial economy has become more speculative and corrupt,
public, labor union, and employer safety nets have been dismantled and our
lives have become more risky. Robert
Reich and Robert Kuttner (both well known authors about economic change and
leaders of the American Prospect) discuss this. They
largely agree. But they disagree about
why this has occurred. Robert Reich
believes that technological change has caused increased competition, to the
detriment of safety nets. Robert Kuttner
believes that market fundamentalism and deregulation are the causes, enabling
competition to run amok.
Why is this important. Because it would be almost impossible to
reverse technological change. But we can
reverse our economic ideology and create government programs and regulation
which again share our risks and enable us to cooperate to prevent or mitigate
them. I encourage you to read their
argument carefully to understand what we must do to restore our American
Dream. Dave Thomas
Worker Layoffs Are a Drain of Social Capital - 11/9/07
We have recommended various books which describe the lives of those
who work several minimum wage jobs. Also
books which describe our overworked and overspent middle class. Louis Uchitelle’s 2006
book, The Disposable American, Layoffs
and Their Consequence describes what happens when middle class Americans
get laid off. Social capital is lost and
most laid off workers suffer an enormous malaise, harming both them and their
families. This is a major problem, yet
it has generally fallen below the radar of Liberal as well as Conservative
politicians. Instead of trying to create
increased job stability, most attention is given to assisting the laid off
person to obtain training for another job.
This clearly has not worked.
Welfare for the Well Off - 11/9/07
The other recommended book this week, The
Conservative Nanny State by Dean Baker, shows how the wealthy who decry welfare
for our middle and poorer classes, eagerly create and consume government
welfare assistance for themselves. They
restrict competition at the top, stimulate high executive pay, protect their
products from competition, allow them bankruptcy not allowed the rest of us,
protect them from lawsuits, enable them to escape taxation and more. Most of us are playing against a stacked
deck.
Is It Your Money? Can You Spend
It Best? -12/7/07
Our
President George Bush favors tax cuts, especially for our wealthy. He often tells audience, “It’s your money. You can spend it best. But he is often wrong on both counts.
If
you use other people’s capital in your enterprise, you must pay them. The money you give them is theirs, not
yours. If you use other people’s labor,
you must pay them. The money you give them
is theirs, not yours. If you use our
social heritage, you should pay to sustain it.
Our
social heritage consists of both physical infrastructure (transportation,
communications, and other facilities) and social infrastructure (our legal,
education, family and other systems).
Without capital, labor and our social heritage, your enterprise could
not prosper as it does. Your share of
the money to sustain our heritage belongs to the public, not to you. So not all of the money you receive is
yours. Only what’s left after you pay
for your factors of production is yours.
Progressive personal and corporate income taxes and inheritance taxes
direct the money wealthy people and enterprises owe for the benefits they
receive from our social heritage.
Conservatives
deceptively claim that inheritance taxes tax wealth twice. But much inherited wealth consists of stocks
which have appreciated without being taxed.
Capital gains taxes are not levied against the stocks when they are
inherited. Instead they are forgiven. Without inheritance taxes, much inherited
wealth would never be taxed.
Can
you spend your money better than the government? Would
Stagflation: Causes
and Solutions – 2/8/08
Stagflation is a combination
of increased inflation, reduced demand and increased unemployment. We might think that this would be
impossible. When unemployment increases,
decreasing demand for consumer goods should cause deflation of prices of
consumer goods. Similarly when
unemployment decreases, prices should increase in response to higher demand.
Trade with Foreign Countries
But stagflation occurred
during the Carter administration and is occurring now. In both cases, stagflation is the result of
our trade with foreign countries. We
purchase more petroleum from abroad because our consumption in increasing while
our domestic supply is decreasing. We
purchase more manufactured goods from abroad because we have reduced tariffs
which used to protect our domestic producers from foreign producers who pay
lower wages and pay less environmental and other social costs. We are also outsourcing service jobs to
foreign countries.
Causes of Inflation.
When petroleum prices
increase as occurred in the 1970s and is occurring now, increased energy and
transportation costs cause increased prices of other goods. As we attempt to substitute ethanol made from
grain for gasoline, the prices of our food which include or depend on grain
increase.
Our inadequate maintenance
and improvement of our physical infrastructure causes increased transportation
and communication inefficiencies and costs.
The poor quality education that many of our students receive produces
labor inefficiencies and costs. Too
little competition among colleges and universities increases costs. Receiving little student assistance from our
government, many high school graduates can’t afford to attend college. Less educated labor imposes costs on
producers.
Our unique health care
system which depends upon private insurance coverage is producing
out-of-control cost increases, inefficiencies and inadequate care for many of
us. Sick people increase both health
care and labor costs.
Our producers also face
job (FICA) taxes and health insurance costs not shared by their foreign
competitors. This increases their
prices, reduces their competitiveness and reduces the numbers of workers they
employ.
The Deregulation which
began during the Carter administration has introduced huge inefficiencies into
our economy. In many industries,
competition has declined, resulting in price increases. Savings and loan, dot.com and housing bubbles
have occurred, producing much inefficient investment. Corruption has hugely increased, resulting in
negative effects upon our environment, our quality of consumer goods, the
treatment of our workers and our shareholders.
One major form of deregulation has been the deterioration of labor
rights to unionize and bargain. Another
cost of inadequate regulation has been corporate rigging of the books to
deceive investors, resulting in bankruptcies which impose enormous costs upon
investors and employees.
The contracting out of
government services without competitive bidders to campaign contributors by our
Bush administration has produced huge inefficiencies, including over-billing,
poor quality services and mistreatment of labor. Government payments for services we don’t
receive is a form of inflation.
So is earmarked pork (by
most members of both political parties) which forces our government to buy
unneeded services from campaign contributors.
Our Occupation of Iraq,
military spending not oriented to dangers we face, and many internal security
measures are spending enormous sums, creating additional long term costs and
diverting workers from productive domestic jobs to military service
abroad. As our government borrows from
aboard, interest payments are a further drain on our economy, increasing our
costs and reducing our demand for domestic goods and service.
Causes of Unemployment
Our increased purchase of
foreign goods and services is draining money from our economy, resulting in
reduced domestic demand and employment.
As people consume oil and
other goods dependent upon oil, they have less money to spend for other
goods. Money is drained off to oil
producing countries abroad Demand for
domestic consumer goods and services declines.
Unemployment increases.
We are also experiencing
increased competition from foreign countries in East and South Asia,
Wages (in real terms) for
most Americans have stagnated or declined during the last 30 years. Even with more family members seeking work
and borrowing heavily through credit cards and home equity, family incomes have
stagnated. A lesser proportion of us
have middle incomes, as some are receiving higher incomes and many are
receiving lower incomes. This has been
aggravated by tax decreases for our wealthy and reduced support for our
poor. The higher a person’s income and
wealth, the less the proportion they spend upon domestic consumer goods and
services. Our increasing financial
inequality is reducing our demand and increasing our unemployment. For more. For
more.
Contrary to Conservative
claims, the Bush income and estate tax cuts oriented heavily toward our wealthy
have harmed our economy, producing the slowest economic growth in decades. The proposed tax stimulus package will
similarly provide inadequate stimulus. For
more.
To Stop Stagflation
The above examination of
factors producing stagflation suggests these remedies:
·
Prioritize our
internal security measures based upon likelihood and magnitude of threats.
·
Restrict our
national guard to internal security duties, except for congressionally declared
foreign emergencies.
·
Support
creation of an international justice and peace capability, so we aren’t tempted
to police the world.
·
Downsize our
military to orient only to probable military challenges.
·
Bring our
troops home from
·
Reduce
consumption of foreign oil through conservation, recycling and alternative
energies.
·
Invest in
producing alternative energies
·
Invest in
producing vehicles and other machines which conserve energy and use sustainable
energy.
·
Use grains to
provide food instead of fuel.
·
Protect our
environment to deduce public costs.
·
Invest to
maintain and enhance our physical infrastructure.
·
Invest to
provide quality care and education to every child and person from birth
throughout their life.
·
Provide
sufficient educational assistance to qualified students.
·
Invest to
provide quality cost controlled health care to all.
·
Allow our
government to bargain with health care providers.
·
Substitute
public health care insurance for private insurance.
·
Substitute
consumption taxes for job (FICA) taxes.
·
Restore and
enhance worker rights, including especially the rights to unionize and bargain.
·
Create a fair
progressive income tax which doesn’t contribute to unwarranted financial
inequality.
·
Create
measures to provide adequate incomes to workers and disabled people.
·
Regulate
industries and businesses to restore appropriate competition; reduce
corruption; prevent bubbles; and protect our employees, investors, suppliers,
consumers and environment.
·
Eliminate
privatization of government work, with no-bid contracts to campaign
contributors.
·
Eliminate both
Republican and Democratic earmarked pork contracts to campaign contributors.
·
Regulate
foreign trade to require competitors to improve their labor, consumer and
environmental standards.
·
Ease
immigration of needed students and workers to our county.
The government can be a problem
through doing too much or too little. It
is a necessary solution to many of our challenges.
Our Stagflation Is Rapidly Getting Worse - 3/14/08
Causes
Since
a comprehensive analysis of the causes of stagflation and its solutions has
been presented here previously and posted on
our website, this will only briefly describe what is happening now. Our stagflation results from three factors,
each of which has been made worse by the Bush Administration’s economic
policies.
1.
Our dependence
upon importing increasingly expensive oil is increasing our cost of living and
draining money to oil producing countries, leaving less money for spending
here. For seven years, our Bush administration
has done nothing to make us use alternative energy sources or use our energy
more efficiently.
2.
President
Bush’s tax cuts for those with high incomes, left them with more money which
they did not spend domestically, thus reducing the demand for
3.
Deregulation
which has continued and increased since the Carter Administrations, has left us
vulnerable to various bubbles. Our
current collapse of our housing market and lending institutions resulted from
inadequate regulation of lending practices and deceptive packaging and resale
of faulty loans.
Inadequate Solutions and Alternatives
Composed
primarily of bankers, our Federal Reserve System is lowering interest rates and
putting money into our banking system.
These are helping our banks.
These do not stimulate borrowing by consumers who are already heavily in
debt. They do not stimulate consumer
spending and job creation,
Various
measures are being proposed and passed to assist home loan borrowers, but these
are not targeting those who were most defrauded. Imagine instead that we insist that lenders
of faulty loans should be forced to adjust them (both the amounts and the
interest rates) so that borrowers can repay them. In addition, money should be provided to
local governments to work with voluntary agencies to purchase foreclosed houses
to make them available as affordable housing (either for sale or for rent).
A
stimulus package has been passed which primarily gives tax cuts to people who
will only spend a small part to stimulate the economy. Better alternatives would give money to those
who deserve it and would immediately spend it: increasing our Earned Income Tax
Credit, increasing our Unemployment Insurance Payments, and granting a tax
credit to workers who pay no more than $1000 in job (FICA) taxes.
Taking
slightly longer perhaps would be the provision of funds to state and local
governments for spending on our physical and social infrastructure. And for spending on production of alternative
energies and reduction gases which contribute to global warming.
For the Longer Run
Even
if we immediately begin responding appropriately, our stagflation would worsen
and continue. There is little that can
be done in the short run to reduce oil imports.
For more. Conservation measures should be quickly
adopted. Subsidies should be provided to
stimulation production of alternative energies.
But these would take some time to affect our inflation of oil prices.
We
need to reverse the Bush tax cuts, but this won’t occur for at least a
year. And we need to regulate our
various financial markets to prevent future fraud and bubbles. Our worsening stagflation will add to the
Democratic electoral victories this fall.
But it will present a major challenge to the incoming
administration. A key indicator of
success, will be whether the new administration adopts the appropriate measures
described above. Or whether it simply
continues to steer money to those with middle and upper incomes and to
producers.
More about Stagflation
– 3/21/08
We published a concise analysis of our stagflation, its causes and
solutions and posted it on our website. It is worsening, and none of the Federal
actions are likely to make much difference to our average American. For a more technical analysis, see Business
Week. For
more about the effects of deregulation.
For more about our falling
dollar compared to other currencies.
For more about
the job cost of our military and war in Iraq. The war costs everyone,
but oil producers and private military services contractors. We shopped ‘til we
dropped. And Bush
appears carefree.
Note that
Federal Bailout for Fraudulent Financial Institutions –
3/21/08
Federal
Reserve loans predatory lenders $200 million, guaranteeing their mortgage
backed junk bonds. We taxpayers may
end up paying investors who bought fraudulent mortgage loans. Notice that 2 million mortgage loans are
expected to default. If the average loan
is $300,000, the total would be $600 billion.
Hundreds of billions of bad debt is still mingled with other debt, and
thus hidden until the actual defaults occur.
What happened to moral hazard?
Conservatives typically claimed that granting assistance to needy
people, provided a moral hazard which tempted them to avoid taking
responsibility for improving their lives.
But we hear little these days about moral hazard, when the Federal
Reserve bails out fraudulent financial institutions. Corporations hate government when it
regulates, but they
love it when it provides them welfare.
The Federal Reserve argues that letting Bear Sterns and similar
fraudulent institutions fail would eliminate credit necessary to our
economy. But how about making extra
funds available to those banking institutions which avoided the fraudulent selling
and repackaging of household mortgages?
Let the ones like Bear Sterns fail.
Can’t we ensure the availability of credit, without rewarding fraudulent
institutions? For more. For
more.
Deregulation Has Devastated Our Economy 4/4/08
Powerful corporations were formed after the civil
war, which immediately began to use their power to give higher priority to
their profits than to serving the public.
Under presidents Theodore Roosevelt and Franklin Roosevelt, regulations
were passed to protect consumers, workers, suppliers and investors from
corporate abuses.
Appropriate competition produces fairness and
efficient allocation of resources and production to meet consumer demands. But too little competition gives producers
too much power, while too much competition gives producers too little
power. Depending upon industry
circumstances, regulations should be implemented to produce appropriate
competition. This requires that the
general public instead of powerful corporations control the decisions
concerning regulation.
President Ronald Reagan expressed a conservative
viewpoint that instead of being abusers, corporations were victims of abuse by
our government which regulated them, when he said’ “Government is not the
solution. It is the problem.” Beginning with President Carter’s
administration, we have removed many regulations of companies, industries and
markets. In many cases, the deregulation
has allowed abuses to occur.
Is our telephone industry more innovative and
efficient now than it would be if we had not dismantled our regulated Bell
Telephone monopoly? Has our airline
industry functioned better since our former regulations were removed? While these deregulations to allow more
competition may be mixed blessings, much more damage has resulted from our
deregulation of our financial industries.
For
more. For more.
The recent proposals to combine financial regulatory
agencies just rearrange existing responsibilities without extending regulation
to hedge funds and other entities which are now unregulated and have been
responsible for much of our current financial collapse. For more. For
more.
Goodbye
Manufacturing. Hello Financial
Services. Also Health Services – 5/2/08
Since the 1970’s, manufacturing production has
decreased from 25% of a growing GNP to 12%.
While financial services has increased from 12% to 20%. Health care services has also increased to
about 14%, including many paper pushers.
Wouldn’t it be wonderful if we could reduce the number of people in
financial and health care services, spending the money instead on training caregivers
and paying them better.
Why have financial services grown so much? Through tax cuts, government debt has
grown. 1983 tax changes have encouraged
corporations to replace equity financing with borrowing, so their debt has
grown. Easier credit (both credit cards
and household second mortgages) and stagnant incomes have stimulated an
increase of household debt. More
employees have be able to make own decisions concerning their retirement
investments. Financial deregulation has
stimulated the growth of many new types of financial services. More financial employees are needed to manage
this borrowing, lending and investing.
Due to their influence on both Republican and
Democratic legislators, it may be virtually impossible to regulate financial
services. Without regulation, bubbles,
their collapse and government bailouts will continue. Regulation will need to begin with our
Federal Reserve, which is controlled by bankers and puts their interests before
the interests of our workers and consumers.
Instead of reducing the proportion of our workers, engaged in financial
(and health care) services, they may increase until our whole financial system
collapses. For more.
Oil:
Who’s Got It? Where Do We Get It? – 5/2/08
Who’s Got It? Where
Do We Get It?
U.A.E 7%