I don't have a clearly thought out suggestion, but wanted to comment that this may be out of Greenspans hands. We know that adding liquidity may not result in added consumption. Therefore, the answer has to be fiscal policy.
The government must take that liquidity and apply it to productive projects of some fashion- ie the International Space station, environmental remediation, research education etc. I say this though I dislike debt and deficit spending.
They need to create enough work/demand to soak up the capacity, as many of us are busy enjoying our leisure and not thinking too much about how to apply our newfound wealth. At least not beyond throwing money at stocks and business managers who aren't sure how to deploy it.
I don't expect this to happen- instead I expect some level of capacity destruction. Hopefully of the creative kind providing a better future and not the destructive kind that results in us rebuilding, post war.
Now, I've been following the developments in the Oil sector, and find there some interesting tidbits that you all may be able to comment on.
From Message 6786165
According to senior Western diplomats in Tehran, the Iranian central bank paid only 10 per cent at the end of September of DM255m (£91.3m) due in principal and interest to Germany's AKA Ausfurkredit, a consortium of 42, mainly German banks, specialising in export credit. In October Sace, Italy's export guarantee agency, received only one $7m interest payment out of $61m due in principal and interest on total debt to Italy amounting to some $600m. According to the central bank, Iran has $3.3bn of 12-month debt maturing this fiscal year (to 20 March 1999), and a further $8.8bn "medium-to-long-term".
I have to wonder which Hedge funds\Banks are getting damaged by unanticipated oil price drops.
And if something completely out of the blue results in the Mideast being the next 'Third World Crisis'.
From a pure economics point of view, OPEC held prices artificially high, resulting in excess capacity development in the sector, and now a dislocation. From an environmental perspective, I'm happy to see the limited supply of fossil fuels preserved, but concerned that this development may result in bad things happening (TM).
Cross your fingers |
