Even though it seems we’ve seen the end of $4 gas, the economy is not quite out of the woods. Demand destruction and a severely constricting economy have driven down the price of oil and its distillates. But the resulting economic bounce has resembled a dead cat tossed off a skyscraper.
Cheap oil allowed the creation of suburbia. Cheap oil allowed us to use our houses as ATMs. Cheap oil allowed the banks to borrow money inexpensively and lend it slightly more expensively (but it was still cheap). Cheap oil allowed economic growth.
Those days are behind us.
Although they haven’t connected the dots between cheap oil and economic growth, the Associated Press is coming clean with the news that many more banks will fail in the coming year. I suppose they’ll admit all the banks will fail, but only after loss of power prevents them from running the printing presses.
Across the pond, Germany is attempting to rescue a monster European bank, Ireland and Greece had to rescue all thir banks, and The Netherlands nationalized their oil company. And the party’s over in Iceland. The country formerly atop the economic heap — as well as on top of the world — has seen its currency collapse in a matter of weeks. As a result, the cheap labor force has left the country, unwilling to work for worthless currency. Iceland is a mirror of, and a predictor for, the United States. And, much as Europe has caught a cold because Iceland sneezed, the world economy will fall when the U.S. economy collapses.
So, how are things working out here in the Empire? The $85 billion you and I spent to bail out AIG worked out nicely for AIG, but not for us: $61 billion is gone and AIG hasn’t begun to sell their assets, which is what we gave … er, loaned … them the money to do. California and Massachusetts are looking to the federal government for a similar bailout, but I doubt they get much help: Fascism is a pact between corporations and government, not between the nation and the states.
As the economy falters, Obama picks up support in the polls. Seems four more years of the last eight years is a little too much to fathom, even if it means returning to the original brand of neo-conservatism instead of the more recent, and more draconian, version.
How long can we avoid the Greatest Depression, which is already guaranteed? Nobody knows, but we can be certain the economic picture going to get a lot worse. Given the unprecedented acceleration of economic events, I’d bet on weeks, not months. And certainly not years.