The “this” I’m talking about is: all *this* deficit spending, a global contagion, to bail out this and that corporation, centered in the banking industry but now spreading to other sectors like manufacture.
Plus the newly-contemplated U.S. deficit spending to build up infrastructure–largely the kind of infrastructure to support the petroleum-fueled motor vehicle industry (roads, highway bridges etc.).
Plus, the newly-contemplated deficit spending to put money in consumer pockets (”stimulus” spending or tax rebates even to those who pay no Fed. income taxes, such as me).
Plus, the newly-contemplated deficit spending to put money in corporate and household coffers [while starving the federal treasury adding to deficits] through tax credits for renewable energy sources (not that these don’t need building).
The conventional wisdom consensus seems to be building–and i even heard this from Nouriel Roubini AKA “Doctor Doom” on the financial front–that we can’t worry about the aftermath of this flood of cheap money, because the alternative is further freeze-up of the global economy, a Great Depression II.
The other conventional wisdom, that of the more libertarian bent, is that all this deficit spending will lead to huge inflation, even hyper-inflation, as the flood of paper money engulfs the whole global economy. It’s not just the USA doing these bailouts, it extends throughout Europe, Central Asia, East Asia, Latin America, etc.
However, all the conventional wisdom seems to be breaking down under the torrent of novelty ingressing into realtime. The old models aren’t working and nobody has any new models that aren’t merely refurbished old models. For instance, in spite of all the money already flooding out of the US Treasury and Federal Reserve, we don’t have inflation, but instead apparent deflation or a plunge in prices, quite perplexing to the libertarians’ camp. How come gold and silver aren’t racing to new high prices?
Sure, say the libertarians, but just wait–the laws of the market will assert themselves and before long, it’s shopping carts full of paper money a la Weimar Republic.
The new administration in D.C. says don’t worry, because all this stimulation will someday lead to more jobs and of course, more economic growth. And we must have growth at all costs, because we have to grow our way out of these deficits. There goes more wildlife habitat, more eco-systems, more greenhouse gasses if you “believe” in GHGs.
Here’s why this will end badly: grow how? I bet you the unspoken assumption of all these economic teams hard at work around the globe is that cheap energy is back, and has become the new norm, and all that “peak oil” meant was that oil *prices* were peaking just as the number of doomsaying peak oil *stories* in mass media were peaking, and the collapse in oil prices is permanent. Somehow, the oil supply problem was solved–or turned out to be an urban legend.
Actually, I heard Larry Kudlow, ever the capitalists’ cheerleader, say just that on CNBC this morning–cheap gasoline prices are now permanent. Problem: Solved!
Let’s hope so. Or, well, you can go ahead and hope so. But keep in mind, all prior recession recoveries, from the early 1900s on, were based on ever-cheapening abundant energy supply. That is the key to putting up productivity to ever-higher levels (squeezing more Gross Domestic Product from the same, or less, numbers of workers with ever-declining real wages). Now oil and gas exploration is coming to a halt everywhere, shut down by “deflation.”
But me, since I have not concluded that the data shows that the global peak of oil production was a rumor, an urban legend, based on faulty data, etc., I conclude that all this bailout-stimulus- cut-you- a-check stuff is going to end badly. Then, we’ll be living on money borrowed from all over the world, spending currency backed by the full faith and credit of our free trade partners, with a third-rate manufacturing base, and facing a horrendous fuels shortage in every category, unprepared as usual.
Yet, after it has ended badly, we are still going to need energy, food production, health care, means of obtaining credit and getting around from community to community. Maybe after the era of ending badly, we can somehow arrive at a means of doing these things co-operatively under community control, owned and operated by each community, county or state and under the firm control of the people doing the work and needing the services provided, where we save up our money and loan it to one another to enable commerce. Wouldn’t that be a novel new world order?
Meanwhile, enjoy those cheap fill-ups at the gas pumps.
Bobby G.