SUBHEAD: The liquidity trap and corporate greed are green after all! Who would have guessed?
Image above: Green dressed factory workers in Antwerp, Belgium, celebrating the closing of their GM Opel plant (with a generous severance pay). From (http://www.thetruthaboutcars.com/gm-commits-532m-to-antwerp-plant-shutdown).
By Steve Ludlum on 4 September 2010 in Economic Undertow -
(http://economic-undertow.blogspot.com/2010/09/greening-of-america.html)
Everywhere you look there is the torrent/onrush of bad economic and political news.
After two years of recession and substantial intervention on the part of spending authorities, US un(der)employment is essentially unchanged at a depressionary 17%. Entrained within this is a corresponding absense of final demand for goods and services other than what is the minimum required for survival.
Robert Reich:
The number of Americans willing and able to work but who cannot find a job hasn’t stopped growing since the start of 2008. All told, about 22 million Americans are now jobless. Add in those who are working part-time who’d rather be working full time, and we’re up to 25 million. And because most families depend on two paychecks, the practical impact is almost double.
All this has a negative multiplier on the economy. If families can’t pay their bills, their mortgages become delinquent (that’s why mortgage delinquencies keep rising), their credit card bills go unpaid (we’re seeing a notable rise in credit card defaults), and they can’t afford to buy anything other than necessities (hence auto sales have plummeted, new homes sales are down, and retail sales are in the pits).
As a result, more and more businesses decide to lay off workers (or refrain from adding them) because they can’t sell the goods and services they produce.
If jobless Americans aren't consuming, they aren't harming the planet. There is something deliciously ironic about corporations greening the country by firing their help.
China - which makes cheap domestic/household goods - exports the goods we cannot afford to make ourselves to us; our ability to provide for our own at a profit ... has vanished.
The lack of final demand is
eroding retailers other than those who sell the cheapest (Chinese) goods. (Video) Empty stores do not spew hydrocarbons or CO2 into the atmosphere. Vanishing retail is good for the environment!
Also vanished alongside retail is good government. The country is in trouble when charlatans such as
Glenn Beck and Sarah Palin are in ascendency.
What has allowed Beck to occupy center stage is the failure of rational political figures to articulate the terms of the convulsion that American society faces, brought about not by communists and other John Bircher hobgoblins but by the forces of history. The failure at the political center is a conscious one of nerve and will, of elected officials in both major parties playing desperately for advantage in defiance of the truth -- this truth being that the USA went broke trying to swindle itself into prosperity. Add to this the failure of the law to go after the swindlers, which has undermined the fundamental belief in the rule of law that enabled this society to function as well as it did previously.
Malfunctioning government is bad for business ... but excellent for the environment. When thriving businesses are replaced by weed- strewn lots the winners are the weeds.
State and local governments are also on the ropes as tax revenues show no sign of recovering to pre- crisis levels. As property values plunge, more layoffs are in the pipeline. When this vicious cycle really heats up the consequent vacant and crumbling housing in abandoned suburbs across America will be prime habitat for coyotes, mountain lions, ground squirrels and deer.
The German military has
joined the US's in taking imminent peak oil - and its consequences - seriously. Unlike the rest of the establishment, militaries operate in reality- based environments.
3.2 Systemic risks after reaching a “tipping point”
In addition to the gradual risks, there might be risks of non-linear events, where a reduction of economic output based on Peak Oil might affect market-driven economies in a way that they stop functioning altogether, leaving the possibility of a relatively steady downward trajectory.
Such a scenario could develop through an initially slow decline of trade and economic activity, combined with higher stress on government budgets from lower tax income, higher social cost and growing investment into alternative technologies.
Investment will decline and debt service will be challenged, leading to a crash in financial markets, accompanied by a loss of trust in currencies and a break-up of value and supply chains – because trade is no longer possible. This would in turn lead to the collapse of economies, mass unemployment, government defaults and infrastructure breakdowns, ultimately followed by famines and total system collapse.
I could have written this myself! Sounds like an environmental silver lining, right?
Floods and droughts worldwide suggest that rising global climate instability may not be a left- wing fraud after all. Al Gore may be right! A consequence of the horrendous weather has been
a sharp rise in food prices. A rise in food price does not lead to demand destruction as is the case with 'luxury good' petroleum. People will pay whatever price is commanded for something to eat.
It goes without saying that widespread famines are good for the environment. Less people means less pressure on vital ecosystems. In this light, biofuels diverting food from humans to cars is good for the planet!
Soylent Green is People!
As David Goldman suggests the opportunity for the US to imitate Japan and slip into a genteel senescence is a mirage. Not only does the US not save enough ... it really cannot:
The question we discussed was not whether America would suffer a “Japan-style stagnation,” but whether America would be lucky enough to sustain a Japanese style stagnation. We’ve been taking about the comparison to Japan for quite some time. During Japan’s “lost decade” of the 1990s, everyone was working, everyone kept their homes, everyone maintained their lifestyle (minus some shopping trips to Paris), and life carried on more or less the same. America enters the second decade of the millennium with un- and underemployment around 20%.
Japan went through its great retirement wave in the 1990s, just as America must during the 2010s. But the Japanese for years had saved massively, and exported massively in order to do so. If a country’s population ages rapidly, the soon-to-retire cohort will shift from consumption into savings. Japan had insufficient young people to absorb the investment requirements of the 40- and 50-year-olds, and therefore had to invest overseas. Japan’s industrial genius made it the world’s premier exporter, and Japan was able to save successfully to fund the retirement wave–even though consumption remained weak and real estate prices fell and the stock market fell to a third of late 1980s peak.
How are Americans going to save? They can’t buy home mortgages; they could buy US Treasuries at 2.5% for a 10-year maturity; they can buy the junk bonds now flooding the market; or they can leave their money in cash at a fraction of a percent. As aging American shift from consumption to saving, they must do so by reducing domestic purchases.
Which erodes final demand, which increases joblessness which shrinks the amount of money available for savings. Everywhere there is another vicious cycle becoming entrenched. Where is the 'good news' to propel economies and markets higher? Where is the big idea - a new 'Internet' or jet airplane or diesel engine or typewriter or sewing machine or bicycle - that will spawn a hundred- thousand new factories? America manufactures
bailouts and poverty. What is the ticker symbol for poverty?
Does it have an Exchange Traded Fund?
Meanwhile, the government lacks the tools to be able to much influence events; one sock puppet can only gesture to the other. What remains is the Federal Reserve. What (worthless) asset will it buy next to support the dwindling rally on Wall Street?
Treasuries do not need the assist as erosion worldwide directs a flow of dollars into Treasury safe- havens.
More likely is the Fed's renewed purchase of mortgage- backed securities, to add more base money
(triggering more joblessness?) and prop up sagging real estate sales. Another $2 trillion added to its balance sheet would in effect be new money, it would not be inflationary (it would be hoarded by corporations and those closest to the money spigot) and would answer the call for otherwise useless asset swap Quantitative Easing (QE). It would also mean the next call for QE will require a $4 trillion balance sheet expansion and a $8 trillion after that. A trillion here, a trillion there, pretty soon it adds up to real money!
For the Fed, the road to irrelevance is paved with paper dollars.
Not that these paving stones are
sans value; quite the contrary, all dollars priced in crude oil have value (even though
the Japanese yen has greater value in the FX market). As crude becomes more dear it will be hoarded at a remove by the requirement that Americans save. Since ordinary Americans cannot save, the corporations will 'save' for them by hoarding cash and in the process ... oil.
The liquidity trap and corporate greed are green after all! Who would have guessed?
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