by Robert Gore
Last December, in “Oil Ushers in the Depression,” SLL said that oil was on the leading edge of global economic and financial contraction.
The future is now. The carnage in the oil sector, where a glut has knocked over a third off its price in less than five months, is not an aberration, but a harbinger—the shape of things to come across sectors and around the world. It kicks off the depression, or more accurately, the resumption of the depression that started in either 2000 or 2007 (let the statisticians quibble about that determination).
That forecast may have seemed extreme at the time. The global economy was still growing, albeit slowly. Mainstream economists were predicting that 2015 would be the year it reached liftoff velocity, thanks to central banks’ quantitative easing and interest rate suppression. Those predictions betrayed appalling ignorance of the central force in the global economy—debt—and its dynamics during expansions and contractions, what SLL has termed “debtonomics.” (See the Debtonomics Archive for more.)
Now, after a rout in commodities, dwindling or negative growth worldwide, and widespread financial turmoil, including a rough third quarter for most equity markets and steadily widening credit spreads, the forecast looks less extreme. Even mainstream economists, in their ever cautious, toe-in-the-water way, are acknowledging that there might, just might, be a possibility (usually expressed in terms of a percentage in the neighborhood of 10 to 25 percent) that the economy heads into a recession. When the depression resumes, they’ll go back and cite that kind of well-hedged piffle as proof positive that they knew it all along.
Cutting through the weaselly verbiage, the global economy is at a precipice the likes of which it has never been at before, and it’s look-out-below time. Oil continues to offer the perfect economic, financial, and geopolitical analytical template, at the nexus of debt, blood, and governments’ incompetence and corruption.