Cross-Current: On the Productive Link between Energy and a Robust Economy

USA Skip LaitnerJohn A. “Skip” Laitner is the first guest contributor whom we are proud to welcome to the important Cross-Currents section of Exernomics.  Cross-Currents is intended to serve as a tribune for readers and colleagues who are working to develop new ideas and perspectives on the important topics focused on here — Energy, Growth and Democracy —  to share their work and ideas with our growing network of international readers. We welcome critical discussion and creative disagreement.

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How to Energise Economic Recovery

ayres bubble economy coverIt’s been almost six years since the fall of Lehman Brothers plunged the global economy into a deep recession. Recovery has been slow. Fiscal policy has been stalled due to a conflict, both real and idopogical, between those who advocate more tax reduction and those who worry about increasing government budget deficits. Monetary policy, a blunt tool at best, has been focused on cutting the cost of money to banks, in the hope that the banks would then increase their lending to businesses — especially to small and medium-sized companies, that are the biggest employers and job creators.  Unfortunately, the banks have not been very accommodating in this regard, since they – in turn – have to satisfy risk-minimization criteria set by the Bank of International Settlements (BIS) in Basel. What happens is that excess money not being invested in the “real” economy is likely to create another bubble. It may be real estate. It may be a commodity bubble (rare earths? platinum) or oil. It may be the stock market, whole or in part.

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Energizing Growth: Why have the economists got it so wrong for so long?

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Energy security is back in the news. The US 5th fleet based in Bahrein protects the flow of half of the world’s oil exports through the Straits of Hormuz, yet nine-tenths of that output goes to Europe and Asia. Russia, already the world’s largest producer, wants to drill in the Arctic with no interference from Greenpeace. China wants to enforce exclusive rights to drill in the South China Sea. The Obama administration is under heavy pressure to allow a controversial pipeline to move oil from Canadian tar sands to refineries on the US Gulf Coast. Underlying all this activity is a simple fact: every barrel of oil that once cost $1 to find and produce in Texas or Saudi Arabia has to be replaced by another one that will cost more than $100 to find and produce. And the economy of every industrial country now depends on oil.

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