A world in economic crisis

An economy that is anaemic

Posted in Cap and Tax, stagflation, unemployment, watermelons aka Greens by Aussie on June 5, 2011

The economy in the USA remains more or less moribund. The official unemployment rate has once again increased to 9.1%, but of course the hidden unemployed – those who are no longer looking for work – means that the unemployment rate is a lot higher than the 9.1%.

According to this report, Larry Kudlow has a few things to say about the state of the US economy as a result of the latest figures. It is anaemic. Kudlow actually identifies a few factors which were present in the 1970s when we went through a period of prolonged stagflation:

“We’re not creating jobs,” he said, adding that “the energy spike, the energy price shock and the commodity price shock is basically eating into the economy.” For this he blamed the Federal Reserve and stimulus spending.

Read more: http://dailycaller.com/2011/06/03/economists-say-slow-economic-growth-evidenced-by-jobs-report-is-becoming-more-problematic/#ixzz1OOXGrIxL

There are at least 2 factors that he mentions that were considered a reason for the prolongation of the stagflation in the 1970s:
1. the oil price shock (there were 2 of those in the 1970s)
2. the energy spike
3. the commodity price shock
I note that he also blames the stimulus spending and the policies of the Federal Reserve. I agree with Kudlow in this instance. It is my belief that the stagflation of the 1970s was prolonged because of wasteful government spending, together with the other factors that were outside the control of any one country.
However, when you look at the factors he named, there is something that has struck me, with regard to the American situation: the oil price shock in the USA is a result of the deliberate policies of the Østupid Administration. The refusal to grant offshore leases, and the locking up of land that is oil rich has meant that these resources are not being mined, which in turn has been leading to an increase in world oil prices because countries without oil reserves are scrambling to obtain oil. 
The market for oil is one that is termed an oligopoly, that is the price is determined by a cartel, known as OPEC. It was the decision making of OPEC that caused the first oil shock, and the second was due to things like the takeover in Iran, followed by the Iran-Iraq war.
The next factor is that of the energy spike, and again there is a man-made element in that spike. Once again it is the activity of the watermelons aka the Greens, that is helping to cause the situation. It is the climate change crap that is causing governments to re-evaluate energy policy and to implement expensive and useless technology such as wind power and solar power. (The solar power is probably less useless than wind).  Those policies have also led to a rapid rise in the price of energy as some sources of energy generation are being shut down, and replaced by the more expensive alternatives. 
The commodity price shock sounds more like a description of inflation, which is on the rise in most countries, due in part to government policies relating to energy.
The stiumulus spending was never going to work because it was always the wrong remedy for the situation that had developed in 2008. A government led stimulus like we saw in the USA and also in Australia was nothing more than an exercise in pork-barrelling on steroids. In Australia we had the government wasting a budget surplus by giving money to people who had not paid taxes in the first place, whilst the middle income tax payers received no relief, and we also had things like:
1. the failed pink batt program (it caused fires and deaths);
2. the overpriced and failed schools BER program ( this one is really bad)
3. the white elephant NBN rollout which most householders will not be able to afford.
One of the problems that I see with the “stimulus” is that money was not being injected into the economy via the private sector, which led to government competing with the private sector for the investment dollar. It also meant that government was spending on a bunch of useless programs that were meant to benefit most the regions were the government had the most voters. 
An additional problem that can be identified, especially in Australia, is the uncertainty being created by the determination to introduce the useless price on carbon. Those who are clamouring for the introduction of this iniquitous tax do not seem to understand that putting a price on carbon-dioxide is not going to change anything. The whole thing is nothing more than a scam.

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