The well to do's insistence on joining the rich in the hedge fund bonanza has led to the subprime difficulties. Modelling counter-intuitive and ostensibly but not necessarily high risk/high return investment for the few has ended in the running of really high risk for the many. The gaderene rush of the middle classes to desirable positions has, as usual, ruined the place and created a bridge to the masses. A little bit of subpriming and smearing of the indigent and feckless over the financial good behaviour of the rest of us is profitable. Do it on a scale sufficient to satisfy the new hedgers and we're all in the ditch.
Those subprime losses need to be recovered : where to turn? A low dollar invariably means high oil prices, and high other- commodity prices too. So now there is a rock bottom dollar exporting inflation to the world, resulting high oil and commodity prices, and the transmission of wealth-seeking in financial markets to rising prices in basic household goods and the disruption of the budgets of us all.
As the distinguished banker and academic Marcello de Cecco states in a complex and detailed argument in La Repubblica, there is no more evidence of demand in India and China, problems in the Gulf of Mexico, or the war in Iraq and threats further afield in the Middle East, causing these high prices than there is for a driven low dollar /high oil and commodity prices scenario.
But while that is nasty for our people, it is the difference between life and death when it comes to kerosene for cooking, bread, and enough warmth to stay alive for the poorest of the earth.
In all the drivelled words from the Leader about Africa and our responsibility to the dispossessed, nothing has been heard on how those who have been beyond accountability must now be held to account.
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2 comments:
I wish you and Marcello de Cecco were right, and the price of oil is only driven up by large scale speculation rather than Chindia growth and the usual other factor.
For in that case we have nothing to worry about. Sooner or later the bubble will burst, those who blew it up first will take their winnings, the latecomers will pay dearly, as it is only fair that they should. And we consumers will go back to the benefits of $40 (or perhaps $30, or $25?) a barrel. And we'll all live happily everafter (till the next speculative bubble).
I wish you and de Cecco right but you provide no hard evidence whatever to support your views. I would put my money on a significant, medium-long term
oil price increase, probably to a plateau no lower than $60-$70. Or worse, not better, for civilisation as we know it.
There is no evidence presented in the post, C, but the source of the thoughts is much more complexly argued, as is noted.
It is the shift in access to even basic resources and the appearance of a relatively fast transmission system from profit-seeking to consumer suffering, resulting from much wider participation in speculation, that seemed interesting.
You are just asserting too, (although offering to put your money on it). It's probably the case that there has been a permanent shift upwards in oil prices, ( though readily accessible oil under current technologies is not as scarce as the-oil's-running-out brigade would have us believe).
But that doesn't rule out the profit-seeking scenario; some of both - as always. Except all the weight has been put on physical scarcity and new demand which, if it isn't the case, makes consumer suffering wilful not unavoidable; with consequently different political responses.
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