Today I lost the last shred of confidence I had in the world economy. It started at about 1 o'clock in the afternoon, after reading Lisa O'Carrol's blog on the Guardian. She warned that unless Ireland experiences strong economic growth in 2011 then the shit will hit the fan. She also pointed out that she knew of no optimistic forecast for GDP growth in Ireland this year. Me neither.
This problem is not just repeated across on the continent with the PIGS (Portugal, Italy, Greece, and Spain) but the UK's own debt problems are spiralling out of control. According to data from the Economist, the UK's public sector deficit (the amount it borrows relative to the size of the economy) has risen from 10.1% to 13.5% since the coaltion government took office. The bond yields (the interest rate paid on new debts) has risen to a point in Greece where they are higher than when the Papandreous government when cap in hand to the IMF last year. But the government's deficit is just the tip of the iceberg. Every year, private sector corporations and individuals in the western world extent their leveraged lifestyle by securing debt on debt. The wild consumerist ponzi scheme of the 90s and 00s is coming to a brisk halt. The BBC reports today that mortgage lending fell 6% in december. The UK is paralysed by low growth and high inflation, leaving the Bank of England to choose between raising interest rates to tackle inflation, which would slow the economy and worsen the public sector debt problem, or leaving interest rates low, but further allowing inflationary pressures to force people into even more debt to get by. Commidty prices have soared in the last 3 months. Oil is up nearly 25%, many metals and foods have performed equally boyantly in the face of a burgeoning Chinese economy. Easyjets shares were down 16% yesterday, a sign of the fact that you cannot go on running budget airlines in a world of finite oil.
The flurry of news hype about "shale gas" is a ploy to alleviate fears of a major energy crunch. The energy guru's are pulling every rabbit out of every hat in an attempt to distract us from the facts. Even if shale gas will keep our homes warm in the decades to come, it will come at a significant price. The money need to make the neccecssary investments in shale gas infrastructure would be far better spent on secure renewable energy supplies. A new film "Gaslands" highlights the some of the side affects of shale gas extraction. Shale gas is extracted by conducting underground explosions in the shale beds, and pumping in chemicals (many of which are derived from oil, production of which has been flat for 6 years) to force the natural gas out of the rocks and up to the surface. This process invariably damages underground geological formations (you are setting off explosions), and in some cases the gas gets released into underground freshwater stores. Drink gas polluted water and you get very ill indeed.
A few weeks ago, I became concerned that rising oil prices and food shortages would manifest themselves with empty shelves in the near future. This is happening quicker than I could have ever imagined. I decided to select 50 food items from the Tesco UK website, and set off to see how many of these were in stock. How many? 44. So 12% were out of stock. Supermarket staff seem to have been pulling items to the front of shelves to give the impression that they are well stocked, but this is a gimmick. The shelves are far less densley stocked than in the past. This is partly due to market pressures. Supermarkets do not want to overstock. There is strong competition, and more people are ordering from home, but even so, when you find that 12% of the items on your shopping list are not avaiable, you should be concerned. Supplies of food are not low enough yet to fundamentally change the impression you get when you go shopping, yet slowly but surely we are going to see more and more of those empty shelves. It will probably take closer to 25% of shelves being empty before people take notice. The collpase is coming. Buy food. Buy oil. Sell stocks and shares and money.
No comments:
Post a Comment