Before we enjoyed his cheeky grin, his straight-forwardness, his comical
abuse of the queen's English. 7 years later, with energy prices at an
all time high, liking the President is hard.
The US President's approval rating has sunk to an all time low of 24%.
Voters are responding to escalating living costs, extreme indebtedness,
and a drop in purchasing power not seen since... oh well, suffice to say,
the answer is depressing.
So, let's talk about the good news - inflation. We're constantly told
that this is holding steady at around 2%
a year. This is good in theory, because it should mean that, provided
our pay is rising by the same small amount, we can still afford the same
basket of goods.
Trouble is - nobody believes it. It has become a useless gauge for the
health of the nation. For one thing, it doesn't prepare us for the scale
of those costs that have been put off, but must still be repaid. If your
mortgage is resetting now,
you'll know what I mean.
I'd love to know for whom 2% inflation is a reality. Did annual house
price inflation remain steady at 2% over the last 7 years? Did energy
prices increase by 2% a year? Are rent-rises now holding steady at 2%?
Let's compare commodity prices around 1999|2000 (before Bush came into
power) and in 2007, after 7 years of Bush.
What this exercise shows us is that energy prices and commodity prices,
far from standing still, have actually rocketed. Wholesale Natural
Gas is up by a factor of 3, Oil
x 9, Gold x 3,
x 11 and Wheat x 4.
With the exception of gold, these commodities are the kind of things
which put heat and light in our homes, fuel in our cars, even bread on
the table. When they surge in price, the effect on consumers is sure to
be one of two things - either higher bills or reduced service.
Should we blame the government for high energy prices? I mean... Bush,
Cheney, Rice and Co all declared their vested oil interests didn't they?
I repeat. Oil is up by a factor of nine, from a low of $10 dollars (in
Feb 1999) to $93 a barrel. We've just witnessed the sharpest rise in the
price of oil since OPEC cut supplies to Western Nations in 1973.
A $10 barrel of oil which went up in price by a steady 2% a year over
7 years would cost $11.50, not $93!
2) Rampant Speculation
Some 500 hedge funds now specialise in energy trading. The scale of the
bets can be enormous. One hedge fund trader from Amaranth Advisors famously
$6bn on a bet that the price of gas would go up in April 2007.
So what went wrong? Or, conversely, for whom did it go right?
Exxon Mobil posted record
profits of $39.5 billion in 2006. Financial wheeler dealers also enjoyed
bonuses. And boy, didn't we all party
when interest rates were low.
But something fundamentally less celebratory was going on at the same
time. The dollar has fallen by 30% against
the euro since Bush arrived in the White House.
In practical terms, this means the buying power of American wage earners,
compared to Europeans, has been dropping by the equivalent of 5% a year.
In 2000, 1 dollar bought you 1 euro. Today it only buys you 0.69.
So we might as well ignore the 2% inflation mantra. The real picture
is that the basic cost of living is rising in the US, whilst the exchangeable
value of American wages is dropping year on year.
I don't see many US presidential candidates talking candidly about this,
with the exception perhaps of Ron Paul. The repercussions for the UK only
recently started to become obvious.
Easy cheap loans have been like lullabies to us. Too
much money, too readily created and too loosely lent, led us to this
place. This is the place where vultures and loan sharks start to circle
round struggling businesses and households. It's where pyramid schemes
resurface and wealth further concentrates
as the asset fire sales begin.
In 1971, The Who wrote us an anthem to ensure we never got fooled again.
What happened on Bush's watch? Another bunch of 18 year olds got waved
off to war. Meanwhile, the non-combatant binged on credit, set the bath
running, then promptly fell asleep in front of the latest 'reality' TV
Table: Note the relative % increase in the price of a barrel of oil in
US dollars compared to Euros since Autumn 2000. You'd expect this result
if the number of dollars in circulation was being disproportionately inflated
and/or trust in the dollar was sliding.