Blog Credo

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

H.L. Mencken

Tuesday, December 30, 2014

Known Knowns and Known Unknowns

So, the mental and emotional recession is finally over.  We know that people tend to hang on to economic perceptions after things have already changed.  The Petite Depression of 2008 really began in 2007.  And it was largely over - under economic definitions - by 2010.  But so many other parts of the economy - wages especially - were stagnant.

It felt like crap.

The fallout from financial crises are often long and miserable, because the entire financial system is out of whack.  Plus you add bad policy like Europe did and you can drag this out forever.  But they do eventually end.

America emerged quicker, ironically because the US central bank embraced inflationary policies while the European central bank listened to those stupid Austrians.

But the final piece to click into place was the combination of falling unemployment - which will begin to put upward pressure on wages - and the relaxation of the "energy choke collar".

My own pet theory, backed by absolutely no data analysis, is that energy cost is the single most important factor in economic health in the modern world.

Which is why cheap, renewable energy is arguably the most important economic issue facing the world.  Every kWh produced by wind or solar is a kWh not produced by lighting hydrocarbons on fire.  You spend the sunk cost and then when it's paid off you have incredibly cheap energy.  And that leaves more money to be placed in people's bank accounts.

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