UK economy suffers 0.5% contraction

oscillating decline


Tipping point - page 30/31

Enjoy. have you noticed the price of crude in last couple of months?


Oscillating Decline

In this model, constrained or declining oil production leads to an escalation in oil (plus
other energy and food) prices. But economies cannot pay this price for a number of
reasons. Firstly, it adds to energy and food price inflation, which are the most non-
discretionary purchases. This means discretionary spending declines, from which follows
job losses, business closures, and reduced purchasing power. The decline in economic
activity leads to a fall in energy demand and a fall in its price. Secondly, for a country
that is a net importer of energy, the money sent abroad to pay for energy is lost to the
economy unless we export goods of equivalent value. This will drive deflation, cut
production, and reduce energy demand and prices. Thirdly, it would increase the trade
deficits of a country already struggling with growing indebtedness, and add to the cost of
new debt and debt servicing.

Falling and volatile energy prices mean new production is harder to bring on stream,
while the marginal cost of new energy rises and credit financing becomes more difficult.
It would also mean that the cost of maintaining existing energy infrastructure (gas
pipelines, refineries etc) would be higher, so laying the foundations for further reductions
in production capability.

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In such an energy constrained environment, one would also expect a rise in geo-political
risks to supply. Bi-lateral arrangements between countries to secure oil (or food) become
more likely, so reducing oil on the open market. It would also increase the inherent
vulnerability to highly asymmetric price/supply shocks from state/non-state military
action, extreme weather events, or other so-called black swan events.

When oil prices fall below what can be supplied above the marginal cost of production
and delivery, and oil price is what can be afforded in the context of decreased purchasing
power in the economy, the energy for growth is again available. Of course local and
national differences (for example energy import dependence, export of key production
such as food) could be expected to have shifted how regions have fared in the recession
and in their general ability to pick up again. Growth then might be assumed to kick off
again, focusing maybe on more „sustainable‟ production and consumption.

However, as growth returns, the purchasing power of the economy will not be able to
return to where it was before. Natural decline limits to oil production, lack of investment
and entropic decay of infrastructure will reduce the supply-demand price point further.
Again higher oil, food and energy prices would then drive another recession.

In the oscillating decline model: economic activity increases→energy prices rise→a
recession occurs→energy prices fall→economic activity picks up again but to a lower
bound set by declining oil production. In this model the economy oscillates to a lower
and lower level of activity. From our discussion about the origins of the current recession,
we see this process has already begun.
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drunkenmaster said:
Its pure madness, the thing is, it never made any sense, at all, will it all completely collapse one day, or will we go on pretending somehow it does add up and just fake lend everyone money as and when we need to?
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Agreed, it made me think of something I heard a while ago but couldn't paraphrase it accurately. Then I read badcompany's sig and realised I didn't have to!

badcompany said:
Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist
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BunnyKillBot said:
Ahahhahahahaha blame it on the weather. I laughed myself silly when i read that headline. Isn't this supposed to be the warmest year on record or something silly like that.

But no, its the weather. Yeah thats it. The weather. * sharks angry fist at sky*
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Err, you know we had two or three weeks of severe disruption due to snow? You don't think that might have disrupted people's spending patterns in the busiest time of year for retail. The snow by the way, was caused by the sea around the UK being unusually warm.
 
MadMossy said:
Name anyone in government that isn't!
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At least the rest are reasonable good at publicly defending themselves and government policy.

The interview he gave earlier basically said "oh poop, something’s gone really wrong and we're not sure why or what we're going to do about it".

He looked completely out of his depth, not a man you’d want to be steering the economy through a sticky patch.
naffa said:
Ken Clarke, I like Ken.
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I agree, ken would be much better.
 
Stretch said:
He looked completely out of his depth, not a man you’d want to be steering the economy through a sticky patch.
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...and the alterative is what? Ed "woof" balls who would simply get the countries credit card out again?

It really takes a special kind of retardation for a government to run a huge deficit during the longest boom for decades. Labour should never be forgiven for such reckless spending. Let's not forget who was whispering into the ear of Gordon Brown during that time too.
 
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Yeah, let's all jump back in bed with Labour. They promise not to make as many nasty cuts. A bit of debt never hurt anyone... Right?
 
BunnyKillBot said:
Actually, labour spent a huge amount of time and resource developing new and enterprise business to prevent the very thing we are experiencing now. That was the point of the election, oh hypocritical goldfish yourself. Brown - spend money to make money, Cameron - Cut now to save later
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If you really want to win this "who supports the biggest bunch of *********" contest, you should trot out how many manufacturing jobs were lost under labour, how our exports fared under labour, how many shops, pubs and car manufacturers closed under labour, and how many actual unemployed people they left behind even after they tried to hide loads of them in expensive non jobs.

Then lets talk about the artificially inflated housing market they created and the ******* great big mess that has left behind.
 
I love the moaning about manufacturing jobs lost... Because the only thing that ever makes money is heavy industry (car manufacturing, steel manufacturing etc), not the high tech manufacturing that has boomed in the UK over the last 10 years. The only problem with that is we need skilled workers to work in them rather than people with a couple of GCSEs.

Also shops and pubs? What does that have to do with anything? They are a supply and demand thing. Shops shut and open, as long as there are enough for the people in this country then it's fine...

(Not defending labour here, I think they made a mess of things).
 
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It isn't the first bad winter we've had either.

Kind of reminds me of HMV blaming a couple of weeks snow for closing 60 stores nationwide. Errr ok. ;)
 
Govt. 'We've messed up badly yet again, who can we blame it on this time?'

Advisers 'Terrorists?'

Govt. 'No, we've done that one to death, people aren't falling for it like they used to..'

Advisers 'Global Warming?'

Govt. 'Hmm, maybe, we can make stuff up to back our facts and figures, but we need something new and exciting, people have heard the Global Warming line too many times'

Advisers 'Well, you know how dumb the Public are, why don't you blame it on that bit of snow we had..?'

Govt. 'GENIOUS!! Now I know why we pay you £Millions, thanks guys!'
 
Phoenixdancer said:
well a reccesion wont bother me.. Im a student and will be for 3 more years.

couldnt care less tbh. it will fix itself
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Ha! You keep on telling yourself that. We all are going to get shafted for the next 5 years at least regardless if your student, employed, self-employed or even a dole dosser. Unless you can find a remote island were things are free and you dont pay tax. I'm still hoping to find mine:(
 
Does anyone care about meaningless GDP figures? No, I bet 99% of the general public literally do not care whether our GDP goes up or down. Tell me when it jumps 40% in either direction in one month.
 
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