Debt Rattle February 7 2016
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DPC Chamber of Commerce, Boston MA 1904 • $100 Trillion Up in Smoke (Mauldin) • As Big Oil Shrinks, Boards Plot Different Paths Out Of Crisis (Reuters
[See the full post at: Debt Rattle February 7 2016]The problem for Big Oil (and oil extraction generally) will never go away: how to sell a barrel for more than it costs to extract it. As time marches on, it will eventually become impossible. Is that day 15 years in the future or 100? Capital investment v production since 2000 suggest it’s a lot closer to 15.
In regards to Steve Keen’s article, our economies have become dysfunctional because our consumers don’t have enough income to consume their own production. Debt has replaced that shortage of income. The shortage starts with less than parity prices at the raw materials level. That’s where the economy starts. That shortage cascades throughout the whole economy. With raw material (commodity) prices being as low as they are today, we certainly are on the deflationary road. As we know, a depression is a manifestation of severe deflation. You still have the natural resources. You still have the labor. But trade grinds down like a slow death.
We can avoid the booms and busts by maintaining income through a balanced, fair trade economy. However, those that profit off debt and maintain their power through it, don’t seem to want it that way.
Chris makes the absolutely fundamental point about our economic system, ” our economies have become dysfunctional because our consumers don’t have enough income to consume their own production”.
Lets simplify it a little. Lets say there is only one company that produces everything and employs all workers to make the stuff. Since the wages are only part of the cost of production, and since the only customers of the company are either their own workers directly through their wages or indirectly via the government which will take taxes and then buy goods and services from the company at retail.
If the sale price of all goods to be bought by all wages paid exceed the value of the wages, the system must fail. It can paper over the cracks by exploiting the powerless and by issuing debt that, by definition, can never be repaid, but all these processes have a finite limit and when that limit is reached, like now, the system has no option but to fail.
The costs of all products ad services can NEVER be paid for by the wages of those who produce those goods and services as long as there are also profits to be extracted and production methods that deplete finite resources or generate pollution.
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