| You are what you eat and what you drive |
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| Written by Daniel Steinmann | ||||
Page 2 of 2
Most important is perhaps the enduring easy-money policy of the United
States Federal Reserve starting in 2001, and still continuing despite
the short period of slightly higher interest rates. One simply does not
create money at such a rate without hyper consequences two or three
years down the economic road. I have repeatedly stated that easy money
only increases money supply and does not improve productivity, output
levels or real disposable incomes. The astronomical amounts of credit
that entered the global financial system through the American consumer
from 2001 to 2007 have created the biggest bubble in history with
negative spin-off effects in basically every other economy in the world.Following the series of links back to its origin then brings one to the conclusion that Asian growth would have been substantially less, were it not for the insatiable US economy. Of course I realise it is basically impossible for economists to accurately quantify and measure this web of complexities but there is one statistic that provides a basic benchmark to compare a host of distortions - the extremely out-of-balance US balance of payments measured against key trade partners. Another real primary cause I would consider is the activity of speculation by traders in the bigger financial markets. It is my opinion that our fuel price crisis is market-driven and for all the wrong reasons, chief amongst them again being the US credit policy. The distortive ability of the market is such that I have seen several reports lately all basically asking the question whether the free market has failed us or is in the process of failing us with dire consequences. I think this realisation is also the underlying motive for the many calls for a financial system overhaul, especially from American economists and policy makers. Then there are primary causes the nature of which makes it entirely impossible to measure and to plot. I suspect there is a good deal of the first economic effects of global warming mixed into the disrupted food and fuel price structure but I acknowledge it is still to early to tell. In any case, economists must first develop models to capture these perceived influences. Maybe in another five or ten years, we will be able to quantify the cost of global warming. And then finally, I believe there is a fair amount of political payback built into rising energy prices. Admittedly also impossible to measure, I see no reasons for constraints in crude supplies, yet OPEC adamantly sticks to punitive output levels. Maybe it is pay-back time and maybe, energy is the one factor where the enemies of America know they can nail the giant. |
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