Bush: Before and After

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, Uranium 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!

So what has pushed up energy prices?

1) Catastrophic Events
9/11, the invasion of Iraq, a rash of oil fires and explosions, hurricane Katrina, the threat of US aggression against Iran. These are the kind of events which threaten to interrupt the supply of energy. Arguably, only one of these was not avoidable.

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 lost $6bn on a bet that the price of gas would go up in April 2007.

3) Increased Demand
Rapid industrial development in China and India means increased competition for oil. Meanwhile, light oil isn't flowing any easier.

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 bumper 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 show.

God Bless America.

Ends | 2 Nov 2007 | The Leg

comment | back to top | thoughts

Essential Reading:
It's growing, the gap between the rich & poor
Mobs, Messiahs, and Markets by William Bonner & Lila Rajiva
The Shock Doctrine by Naomi Klein

Related Viewing:


60 Minutes: How speculators benefited from volatility in oil prices


Global food inflation bites hard


The Shock Doctrine - Rise of disaster capitalism


$10 trillion hangover - Bilmes and Stiglitz on the economic cost of the Bush administration

Bush Legacy on the David Letterman Late Show


Bush Legacy: 8 years in 8 minutes


Related Articles

2013
I write this letter, my last letter, to you, Mr Bush & Mr Cheney

2011:
Volatily! Oil price collapses record $16 in a week
Swiss Franc hit record vs dollar
Ex-Amaranth trader fined $30m for energy market manipulation
UK Retail Price Index Inflation up 5.1% on 12 months ago
Oil back above $100
Fed denies its QE and low interest policy is inflating commodity prices
UN global food price index hits record high in January
Commodity Futures Modernisation Act of 2000 causing food crisis (p8)
UN food price index rises for sixth month to highest since June 08

2010:
Speculator buys more than half London metal exchange's Copper
Speculation in grains risks pushing prices beyond reach of the poor
Speculator buys cocoa bean mountain equal to Europe's needs
UK petrol prices hit record high at 120p a litre

2009:
NIESR says UK households lost 13% of their wealth in 2008
Single investor buys entire stock of tin of Londons Metals Exchange
What must an energy trader do to earn a $100m bonus?
Regulators considers ways to limit speculative trading in oil & gas
Bush & Co bullied Bank of America into rescuing Merrill Lynch?
Chevron and Shell - drill ... and kill
Weak pound inflates price of vegetables in UK by 19% in a year
Graph: Crude oil prices 1946 - 2009, plus adjusted for inflation
28% devaluation of sterling since Summer 07 inflates costs of imports
Graph: Sterling falls in value in dramatic style
BP reports record profit of $25.6bn for 2008
Exxon reports £45.2bn profit - the biggest ever by a US company
Shell posts £22 billion profit - one of biggest ever for a UK company

2008:
Madoff pyramid scheme revealed to be world's biggest financial fraud
Xmas UK consumers hit as inflation stays at twice BoE target
Bush sneaks through host of laws to undermine Obama
A nightmare inheritance for the next President
Exxon Mobil profit sets new quarterly record
UK's official inflation doubles in six months to hit 5.2%
UK food price inflation spirals to 9.5%
Exxon Mobil posts highest quarterly profits in corporate history
Energy prices set to raise UK inflation to 16 year high
Hedge funds lose bets lick wounds as oil unexpectedly falls
Centrica warns that UK domestic gas prices could rise by 70%
The UK price of staple groceries rose by 1/5 in year to July
FT: Oil price rises and falls in relation to rhetoric on Iran attack
Hedge fund manager: Causes of $140 oil are China & speculators
Businesses will feed oil costs down foodchain to consumers
The BIS graphs shout it out: speculation in commodities is rife
UK - Real Cost of Living Index actually rising at 9.5%
UK family's Food shopping bill just rose 20% in 12 months
Truckers & fisherman protest fuel costs in Europe and beyond
UK industry hit by fuel & materials costs - up 33% in 18mths
Global airlines predict heavy losses in 2008 if oil stays at $135
Ahmadinejad: high oil prices "completely manipulated"
UK fishers stage fuel prices demonstration
Global food crisis: Guardian investigation
Commodity-index investing up to $260bn in '08 from $13bn in '03
Some UK rents rose by as much 17% in 12 months to April
Germany in call for ban on oil speculation
Soros: Speculators responsible for oil price bubble
FileOn4: Big fund speculators to blame for food crisis
Deadly greed: speculators bid up the price of staple foods
Speculators feast: 2.5m corn contracts, up from 0.5m in 2003
Democrats table Bill to close speculation loophole
Is foundation of high oil prices "nothing more than speculation"?
Bank of France: world economy "has become very inflationary"
UK inflation just rose by 0.8% in a month
UK factory gate inflation hits 22 year high
Washington's Great "No Inflation" Hoax [seems familiar?!]
70% of Americans now disapprove of the President
BP & Shell rack up £7bn profits in 3 months
Inflation is about too many dollars, not too little food
UK family's Food shopping bill just rose 15% in 12 months
Speculators' rumour-mill helping hedge funds profit from Iceland?
Food riots in Haiti - price of rice just shot up 75% in last 2 months
UK: Annual rate of increase of manufacturing input costs hits 20%
Rice now costs the poor Bangladeshi half his income
Rice (staple food of 3bn people) rises in price by 50% in 2 weeks
Price of rice jumps 30%. Global stocks at lowest since 1976
Supermarket milk prices set to rocket
UK debt charities cast wary eye on waters as loan sharks circle
Rampant speculation abetted by huge concentration of wealth
Rice trading at 40% higher price in March than in January
UK supermarkets now forced to absorb food price increases
America was conned - who will pay?

High street baker attacks speculators for driving up wheat price
Poor regulation, lack of transparency, misguided incentives...
Fears of commodity crash as speculation outstrips demand
1 Euro now exchanges for $1.50. It bought just 85 cents in 2001
US house prices down 10% in 12 months whilst inflation climbs
Millions more face starvation: wheat price just doubled in 12 mths
High price of wheat threatens UK pig farmers
US core inflation is almost a joke - it excludes food and fuel
The next crisis will be over food
GM to offer 'early retirement' to 74,000 of its 110,000 US workers
Rising cost of essentials adding up to £1300 to family annual bills
UK factory gate inflation hits 16 year high
Wholesale price of wheat hits record on supply concerns
Cash rich financiers see crisis as an opportunity to buy companies

Shells' record $27.6bn profits in 2007 branded 'obscene' by Unite
US: Wholesale prices rose 6.3% in 2007 - largest rise in 26 years
The real cost of living: how inflation could hurt us all
ECB warns crashing dollar may stop further US interest rate cuts
Falling dollar results in 2300 job losses at Rolls-Royce
Oil price may include "speculative premium" of up to $57 a barrel
'Noise' and speculation has helped force oil up to $100
UK homeowners face 15% increase in energy bills
Oil & Gold prices peak like in 1980 - oil at $100, gold over $850

oil priced in Euro & US dollar 2000 vs 2008

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.

2007:
Rising food prices may dent consumer confidence in 2008
US food banks are experiencing shortages
Are commodities a bubble ready to burst?
US: the cost of energy, clothing and medication all rose in Nov
Made in the USA. 3.2% rise in factory gate prices in one month!
China: Cities told to store 10 days food and cooking oil reserves
Dollar's drop puts stock market gains in perspective
Low dollar 'threatens the life' of Airbus
Bush's call for crops for ethanol helps double the price of maize
China isn't alone in losing its appetite for the dollar
Reduced service: BP to sell off 700 US convenience stores
Chavez: Iran attack could spike oil prices to $200 a barrel
OPEC: $100 Oil caused by instability, speculators, failure to invest
Scottish truck drivers consider action against fuel price rises
UK factory gate inflation reaches 12 year high
Cost of basket of 25 staple goods rises 12% in 12 mths in UK
Peaking at the pump - graph of historical US gasoline prices
Could gasoline go up by 50% and winter heating bills double?
"A recession might be the least bad of the possible outcomes..."
7 Countries considering abandoning the US Dollar
30% surge in the forward price of UK electricity and gas
Investors threaten to kill analyst who warned about Citigroup
Food price inflation 18% in China, 10% in S.America, Russia, India
Petrol breaks £1 a litre barrier as oil nears $100 a barrel
Oil prices decoupled from fundamentals of supply and demand
By many measures, inflation is rising...
If central banks bail out investment crooks, inflation will result
Thousands in Mexico City protest rising food prices
More interest rate cuts will undermine dollar & raise cost of imports