August 21, 2018
01.04.2011 - 09:28PM
By CSRwire Contributing Writer Francesca Rheannon
I'm no more psychic than the next person, but when the house of cards that was the housing bubble fell with a crash in 2007 and the finance markets toppled a year later, it didn't surprise me. Over the previous five years, as I watched housing prices soar into the stratosphere while wages stagnated, I suspected the good times weren't going to roll for long. Simple logic - not ESP - told me so. But one never knows when the cookie is going to crumble.
So this week, as I turned over my New Year's cup of fair trade, organic green tea to read the leaves for 2011, I spied some trends emerging. But I offer no guarantees that they'll ripen this year, later -- or never.
1. Another financial crisis is in the wings
A lot of folks on Wall Street are acting like the light of prosperity is looking brighter at the end of the tunnel. But consumers in the U.S. and Europe are not so sure.
Government obsession with deficit reduction is one reason. Massive layoffs are becoming de jure, from the UK to those announced by newly crowned New York Governor Cuomo. Cuomo's plans are emblematic of the national and international trend that will, eventually, lead to another crisis.
Jobs cuts will have a multiplier effect, putting a downward pressure on demand, leading to more job losses (something Cuomo evidently forgot when he swore his priority was "jobs, jobs, jobs," just before announcing the layoffs.) Services will be slashed just as more people will need them, biting into discretionary spending even more.
But deficit reduction is only waged on the poor and middle class. Tax cuts for the rich and bloated defense spending (both global and in the U.S.) will combine with persistent unemployment and eroding wages to hobble recovery and could lead to another crash. The fundamentals are not sound -- not even in developing countries.
2. States will slide toward bankruptcy
The failure to let the Bush tax cuts expire and states' reluctance to increase (or preserve) taxes on the wealthy will mean massive cuts in (or deferral of) government spending on exactly those things which would have boosted employment: infrastructure, the safety net and the new energy economy. More jobs means more state revenue; less jobs means less.
That will deepen the states' slide toward the brink in California and Illinois, with other states set to follow. They are likely to drag Wall Street down with them (see prediction #1,) not only because of private investment already in them, but also because they are trying to sell their debt to Wall Street, ready to be sliced into CDOs and other highly risky (and still unregulated) financial instruments. U.S. states could find themselves in the same situation as Greece, Ireland, and, potentially, Italy and Portugal.
3. Resource prices will skyrocket
Another drag on recovery world-wide will be rising prices for resources; the prices of gasoline and diesel are already edging up, with some predicting crude at $100/barrel this year. And analysts have been warning about looming supply crunches in rare earths, needed for tech goods and renewable energy. Other commodity prices are heating up, too: wheat, corn and rice soared 26 percent from June to November 2010, threatening another food crisis. But one resource will be falling in price: natural gas. Which leads to prediction #4…
4. Natural gas will threaten investment in renewables like wind and solar
The global glut in natural gas will stretch out the payback time for wind and solar power, ensuring the bumpy ride for investors will continue. Some projects have already been cancelled. All the more reason for more government spending to subsidize renewables and level the playing field. But federal help for green energy investments is looking dicey with the new Congress...
5. Clean energy will suffer major body blows from a Congress weighed down by climate change deniers
My tea leaves took their cue from two Congressmen (there are more), both beholden to fossil-fuel enriched Koch Industries for major campaign contributions. One is incoming energy chair Fred Upton (R-Michigan,) who pledged to disband the entire congressional panel on global warming and declared war on EPA curbs on GHGs. The other is John Shimkus (R-Illinois), who thinks the earth is "carbon starved" and cited Scripture to prove there's no problem with climate change because God promised not to destroy the earth. He's the incoming chair of the House Energy and Commerce Committee overseeing the nation's environmental regulation.
Investment in a clean energy economy is the real road to recovery. But with state revenues down due to tax and job cuts, high unemployment, increasing poverty and spending gushing out for rising war costs and exploding state debts, it could take a lot longer than the next 12 months to see any real improvement.
About Francesca Rheannon
CSRwire Talkback's Managing Editor is Francesca Rheannon. An award-winning journalist, Francesca is co-founder of Sea Change Media. She produces the Sea Change Radio's series, Back to The Future, and co-produces the Interfaith Center of Corporate Responsibility's podcast, The Arc of Change. Francesca's work has appeared at SocialFunds.com, The CRO and E Magazine, and she is a contributing writer for CSRwire. Francesca hosts the nationally-syndicated radio show, Writers Voice with Francesca Rheannon.
This commentary is written by a valued member of the CSRwire contributing writers' community and expresses this author's views alone.
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