So far, energy costs have not been central either to the analysis of our current Great Recession or of the recovery now struggling to announce itself.

This article in London’s Guardian pushes the cost of oil back to center stage.  The news: the US government during the Bush administration (should we call it the Cheney-Bush administration?) apparently lobbied the International Energy Agency to underplay peak oil.  Result: IEA estimates show unlikely growth in oil production.  Note how much the forecast production relies on sources not yet known.

We’re not going to have to wait long.  As energy demand grows with economic recovery oil prices will climb, maybe into the stratosphere.

One more reason to expect an “L” of a recovery, one more reason for very cautious government budgets.

Update: study that chart for a minute.  Imagine what happens to us if the ‘not yets’ are not found.  We’re in for hard times soon.

Gloomy picture in the UK.  Expecting the 3rd quarter data to show a bit of growth signaling the technical end of the recession, the turnaround wasn’t there as noted by the Telegraph’s economics editor. This despite ‘quantitative easing’ (massive gov’t. spending) paralleling our huge stimulus efforts.  Here’s his chart.

London Times editors note that our economists are having a hard time forecasting — one more worry.

And click to continue to see a British comparison of this recession/depression with others since the 30s. Read the rest of this entry »

headed down?

Not necessarily says Washington Post columnist Robert Samuelson — see this sobering column.

His main points:

1. our youngest generations seem to be headed for a worse economic future, partly because
2. health care reform generally transfers resources from the healthier younger to the sicker older.

Samuelson sees signs of overall downward mobility — hitting our young generations hardest and lasting for a generation:

Downward mobility is possible. Expanding health spending would raise taxes (to pay for government insurance), lower take-home pay (to pay for employer-provided insurance) or increase out-of-pocket medical costs. Other drains also loom: higher energy prices to combat global warming; higher taxes to pay for underfunded state and local government pensions and repair aging infrastructure; higher federal taxes to cover deficits and payments to retirees (much of which reflect health spending). The pressures will undermine private living standards and other public services (schools, police, defense).

The young’s future has been heavily mortgaged. Taken together, all these demands might neutralize gains in per capita incomes, especially if the economy’s performance, burdened by higher taxes or budget deficits, deteriorated. One study by Steven Nyce and Sylvester Schieber of Watson Wyatt Worldwide, a consulting firm, examined just health spending. The continuation of present trends would result in “falling wages at the bottom of the earnings spectrum and very slow wage growth on up the earnings distribution. These dismal wage outcomes would persist over at least the next couple of decades.”

See the item below for more on the jobs-health connection.

The estimable Robert Fisk reports in the London Independent that a group of nations — the Arab oil-exporting states joined by China, France, Russia, Brazil and others — have been secretly talking about replacing the dollar with a basket of currencies for global oil trading.  OMG to the max for the US.

Fisk notes the ramifications of this self-protective move away from the volatility and declining value of the dollar not only are a blow to the already-reeling US economy but possibly portend increased US-China conflict.

The independent editorializes “the end of the dollar spells the rise of a new order.”

But the significance of this development goes much further. Since the end of the Second World War the dollar has been the bedrock of world trade. The pre-eminence of the American currency flowed naturally from the economic dominance of the US. Virtually everyone traded with America so it made sense to use their currency.

But the US is not the dominant power that it once was. The financial crisis has left it hobbled with significant government and household debts and sharply reduced prospects for growth. Developing nations such as China, Brazil and India, on the other hand, have weathered the economic storm significantly better. So while this latest proposal is born of financial calculation, it is also a reflection of a new economic world order.

Mark this day on your calendar.  If these folks succeed we’re in for another huge blow to our economy — a fundamental reset.  One more reason to get our financial house in order — most especially including health care reform — faster than asap.

Update: Here is the Washington Post following with a useful survey of the pressures on the dollar. This underscores how precarious is our situation.

For those of you wishing to hear from some experts, here is an excellent, 20 minute discussion online among three experienced researchers in health care economics. Note this is moderated by the now-famous Dr. Atul Gawande, Harvard surgeon and New Yorker author.

Click here.  Note that the discussion is sub-divided into 7 topical parts if you wish to skip around.

Definitely worth your time.

Writing in the prestigious New England Journal of Medicine, two doctors say the current health care reform bills do not do enough for cost control.  They propose an all-payer regulation strategy.  The full text of their short article is below the jump.  The spine of their argument:

Successful health care reform requires effective control of health care spending - without it, rising costs will continue to strain federal and state budgets, businesses, and families, jeopardizing gains in insurance coverage. The reform legislation now before Congress, however, cannot be relied on to control spending.

…

The missing link in reform legislation, then, is any mechanism with the potential for systemwide control of medical spending. One straightforward way to achieve that goal would be to adopt a single-payer plan - but that would displace the private insurance industry and remains politically infeasible.

There is, however, another option that could control spending across both the public and private insurance pools. Other countries that have multiple insurers, such as Germany, Japan, and the Netherlands, use all-payer regulation to control costs. In these countries, insurers come together to negotiate, or the government takes the lead in setting, common payment rules for medical care. With a few exceptions, payments to all doctors in a given geographic area follow a standard fee schedule. Hospitals are also paid on comparable terms.

They see 4 advantages: lower overall costs, less cost shifting, simplicity, and successful coexistence of public and private plans — advantages which ought to appeal to business, citizens and the health care industry alike.   Good thinking, definitely worth considering.  Click below to read the whole article.

Read the rest of this entry »

Belgian economist Dr. Paul De Grauwe recently published an important article in the Financial Times.  His argument: classical macroeconomics is not working — it may be elegant and appealing, but we need to shift paradigms if we are to understand the modern economy and our policy choices. As the cartoon suggests, it is causing a real stir among economists.  Worth thinking about — especially now when we’re betting the farm (i.e. national economy) on health care reform.  I find his thinking quite persuasive.

I’ve included the full text below the jump. Read the rest of this entry »

The Bureau of Labor Statistics tracks a stacked series of 6 unemployment measures. You’ll find below the jump their latest rackup of all six.

This chart shows the baseline “U-3″ numbers and the all-in U6 data:

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And please go here to read Jeff Frankels’ excellent summary of which unemployment statistics to track.

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Taking Frankels’ advice to look to the employment rate, click on ‘read the rest…’ below for the latest BLS WA employment data. Note the strong downturn in total employment and he recent uptick.

Read the rest of this entry »

4 month trends

The Christian Science Monitor (always an excellent newspaper — Carla and I publish there) asks if international investors are loosing faith in the dollar.

The chart shows how the dollar has been losing ground against the British pound for a couple of months — the months when our huge, Keynsian debt has been mounting.

The Monitor reports:

• a sense of risk among investors that the US could lose its AAA credit rating in ‘3 to 4 years.’ The UK — formerly the world’s financial superpower and still a main hub of global finance — also has an AAA rating.  But that rating’s trend was just regraded from ’stable’ to ‘negative.’  Could that happen to the US? Yes it could.
• a recognition of the total debt burden in the US — the gargantuan federal debt, the sum of state debts, and the massive personal debt levels.  We’re suddenly starting to save, but we’re a long way from being a creditor nation as we have traditionally been. Read the rest of this entry »

This chart from Paul Krugman shows the remarkable decline in employment (and rise in unemployment) of the Bush years compared to US employment patterns since WWII.   This is one reason we are falling so fast now–the job market has been thinning out year after year for 8 years!

think of the human pain behind this line!