From the heights of exuberant irrationality, to omens of the Great Depression, 2008 was a deal-breaking year. As long as the masses kowtowed to the gods of unfettered capitalism they were assured the majority would benefit. Ok, what the ruling class really meant was the majority representing the upper half of society. But still, many prospered: housing values spiked (against all reason, it should be added) providing the ownership class an easy ATM of lots of ready (unearned) cash; the stock market just kept going up keeping those 401k’s rising handsomely; hedge fund managers paid only 15% income tax on their spectacular megamillion dollar earnings – compared to the 35% rate paid by Average Joe Middle-Class - but that was the price of innovation, the ‘good greed’ that kept the money spigot going and exhibited the greatness of capitalism, American style.
But then a well worn quip comes to mind: If something can’t go on forever, it won’t. Think about the nature of a bubble: the bigger it gets, the thinner its walls and likeliness of bursting; when it does reach its limit it has a quick and exciting end and then disappears with hardly a trace.
It was a year of mind-boggling extremes. Crude oil is now barely more than 25% of its July high of $148. In mitigation, there were two special factors that contributed to that very high price. One was the drop in the value of the dollar of about 25% compared to the world’s other major currencies which would lop about $35 off that high price. Speculation was said to have caused another 30%. Minus those two factors the price would have been about $75 per barrel. Still, the speculation part only happened because demand was pushing up against supply.
In any case it was the world’s second oil price shock with a warning of future hard times implicitly included. The first, in 1973, came with a doubling of the price, long lines at the pump and stations running out in front of your very eyes – I was once the last to get filled up. It can’t be emphasized enough that the larger problem wasn’t the spike in prices, it was availability.
The breathtaking crash in oil prices should not lull one into thinking it’s time to rush down to the auto dealer for that giant dream machine. Even if demand remains low for years, the resource is finite and will be drawn down on a daily and yearly basis. Another spike, therefore, is inevitable.
To date, developed countries world wide have been rushing around frantically grasping at straws trying everything they can think of to revive the old economy; essentially to get people to return to their profligate, devil-may-care, heavily-indebted ways. Fortunately for the people the banks have taken their trillions of handouts and hoarded their cash; what little they have used has been expended doling out handsome salaries and bonuses.
This is good: the mindless consumerist ways of the past should die an ignoble death. Unfortunately, the old patterns won’t die easily. The leadership is hoping against hope that numbskull consumerism won’t be totally finished off; that at most it will only be held in abeyance temporarily until a new crop of buyers can be cajoled and manipulated into running up their 28% interest, credit cards to the max.
Ok, I’m being cynical; most people will recognize that is folly and instead get behind frugality and savings until some important change happens in the world. That being the case the one certainty surrounding the present economic crisis is that demand for goods and services will remain dismal, even abysmal. In that case, the only thing that makes sense is to shorten the work week to share what’s available and embrace the deflation that’s inevitable and necessary (and beneficial in the long run) if people are working and earning less.
What’s required is a total rethink of the purpose of economic life and the value of work. What’s needed is a transformation of the concept of Gross National Product (that we must see rise in perpetuity or we tear our hair out in panic) to an accounting of Gross National Health and Happiness.
To that end I propose a two month national holiday in which only emergency and necessary work takes place, which gives people the time to get together and discuss what they want their world to look like, not to mention lets inventories catch up with purchases. This would be organized on neighborhood and local levels with daily meetings and debates on desired futures. Everyone would be eligible for unemployment benefits for that period. All interest payments and accruing interest would drop to zero for that time and there would be a moratorium on foreclosures and credit defaults.
Time to take stock…
Not that I think any of this will happen, but the world still needs its dreamers.
Meanwhile on another topic: