PRICES AT the pumps have fallen by an average of 20 per cent since the collapse in the oil price. Can we expect a similar reduction in the cost of electricity? Since oil is priced in dollars and the dollar has strengthened against the euro by the same amount one would think not.
But oil has more than halved in value from its high of $147 a barrel to around $60. Simple maths would suggest that electricity prices should fall by at least 30 per cent. But they won’t. Governments like hiking yet hate reducing. Besides, what with us being in a world recession industrial consumption will fall dramatically and so will company profits.
Recessions have the same effect on individuals as wars. The only difference is the killing. Does any good ever come out of war? Not really; one world order replaces another and in today’s world the killing goes on in places like Iraq, Sudan and Afghanistan. The sad truth is that man, be he capitalist or communist, is viewed by most as an evil and greedy beast.
When the Berlin Wall came down in 1989 it sounded the death knell to Communism… or did it? It certainly gave carte blanche to stock markets throughout the world to behave irresponsibly; the RTS (Russian stock exchange) more than most.
Muscovites became the worst of capitalists, milking their economy and exporting the proceeds to places like Cyprus, English football clubs and the Côte d’Azur. The discovery of vast reserves of oil and natural gas in Siberia and the Stans of the Steppes became a prime cause célèbre for world powers.
The wasteful burning of oil, whether it be in power stations, trains, cars, boats and planes is the major cause of climate change and our economic woes. I know, you don’t want to know. But you do want to know whether your employment will still be secure this time next year. Order books are contracting, factories are closing, production lines are coming to a halt, retailers are already hanging their tongues out, government debt is increasing and unemployment is rising everywhere. Civil servants excluded, many of us will suffer untold hardships.
Stock market performance reflects and projects. If you had invested $100 at the time of the dotcom boom eight years ago, it would now be worth $68 not allowing for inflation at an average of three per cent per annum (in real terms your investment is now worth around $50).
If you stuck the same amount in a building society at an average of six per cent interest compounded, it would be worth $150 – half as much again. Given that most investment funds are down by around 40 per cent from their highs earlier this year, making money on the stock market has become nigh impossible for the pension funds although fund managers and merchant bankers have pocketed millions in bonuses.
Governments who can afford to are now bailing out their banks. The IMF is bailing out entire countries; Iceland, Ukraine, Hungary and others. Governments will take control of their banks, probably invest in their manufacturing industries to keep jobs and increase public spending to avoid internal collapse. So what is the difference today between capitalism and communism? With projected government interference very little.
What was the outcome of the 1929 slump and the impoverishment throughout the 30s of entire nations? World war! But we can’t go there anymore and now have world wide recession in its place.
Wars have always brought about innovation, invention and increased efficiency. What good will come from this recession? Perhaps we might look at less polluting forms of producing energy. We might learn not to waste, overindulge and banks will stop us from borrowing beyond our means. One thing for certain is that this worldwide recession will put a stop to China’s massive industrial growth, and their national anthem:
“Wake up! People who do not want to become slaves.
Let’s use our bodies to build the New Great Wall.
The Chinese people are living in dangerous times.
All of our tribes united will cry the last bellow.
Wake up! Wake up! Wake up!
We will greet the enemy’s bullets.
We will greet the enemy’s bullets.
Forward! Forward! Forward!”
…will ring dull.
Yet I believe that this recession has united the world in a common cause. The opportunity to bring about change for the good has never been better. Perhaps the G8 planned this economic disaster intentionally. I would like to think so and justify my faith in man’s capacity to be an instrument of real progress rather than him being a perpetually avaricious beast. A new world map is needed. Existing highways have been submerged in invisible earnings. A change in direction is essential. I call for us to go forward unto new horizons!
I apologise to those of you who think I sound like Adolf, Benito or Chairman Mao. But sometimes I get so carried away and just can’t control myself from making something out of nothing. I should have been a merchant banker.
