July 11, 2008
Skewered
One of the few things we have in common with John McCain, our jowls not withstanding, is our abject ignorance about the economy. With the thought of plumping up a few atrophied brain cells. we have gathered some economically related tidbits for your perusal.
First, the official word -- the administration is nervous (forgive the ad, meditate for 14 seconds -there's simply no getting around it)
Although we've all heard that the sub prime mortgage crisis is responsible for much of this anxiety, how many of us understand what it is, how it happened and why it affects the world economy? As always, Wikipedia comes through, completely and succinctly, but perhaps you'd prefer a more visually based information package - a cartoon or a movie or two.
The somewhat mysterious escalating price of oil is another baffling economic phenomenon that confounds the econaif. We all understand the increasing world demand as China and India modernize, we also know that the Bush administration has had their heads where the sun don't shine around energy policy, but what's this about speculators? In his excellent piece for the Beijing Star (of all places), Michael T. Klare offers this view of why oil prices are so high
But the Bush administration's greatest contribution to rising oil prices is its steady stream of threats to attack Iran, if it does not back down on the nuclear issue. The Iranians have made it plain that they would retaliate by attempting to block the flow of Gulf oil and otherwise cause turmoil in the energy market. Most analysts assume, therefore, that an encounter will produce a global oil shortage and prices well over $200 per barrel. It is not surprising, then, that every threat by Bush/Cheney (or their counterparts in Israel) has triggered a sharp rise in prices. This is where speculators enter the picture. Believing that a U.S.-Iranian clash is at least 50 per cent likely, some investors are buying futures in oil at $140, $150 or more per barrel, thinking they'll make a killing if there's an attack and prices zoom past $200.It follows, then, that while the hike in prices is due largely to ever-increasing demand chasing insufficiently expanding supply, the Bush administration's energy policies have greatly intensified the problem. By seeking to preserve an oil-based energy system at any cost, and by adding to the "fear factor" in international speculation through its bungled invasion of Iraq and bellicose statements on Iran, it has made a bad problem much worse.
..... it is only by reducing demand that fundamental market forces can be addressed.
This is best done through a comprehensive program of energy conservation, expanding public transit and accelerating development of energy alternatives. It will take time for some of these efforts to have an impact on prices; others, like reducing speed limits and adding bus routes, would have a more rapid effect.
And if this administration truly wanted to spare Americans further pain at the pump, there is one thing it could do that would have an immediate effect: declare that military force is not an acceptable option in the struggle with Iran. Such a declaration would take the wind out of the sails of speculators and set the course for a drop in prices.
You noticed that this was published in Beijing.
To add to upcoming economic concerns, Robert Silverberg reminds us that oil isn't the only non renewable resource that will be depleted all too soon. In his article The Death of Gallium, he points out that we are running out of elements -- perhaps we can do without gallium, but we will be in tough shape when zinc and copper go. So if you want to speculate on metals futures, consider that a tip.
We don't know about you, but our brain cells are sufficiently fluffed.
Photo note: an elusive metaphorophoto - whale (of a problem) skewered by a pole wrapped in vestiges of the American flag, stretched thin.
Posted by Dakota at July 11, 2008 12:01 PM