Both the stock market and oil prices have been plunging. Is this «just another cycle,» or is it something much worse? I think it is something much worse.
Back in January, I wrote a post called Oil and the Economy: Where are We Headed in 2015-16? In it, I said that persistent very low prices could be a sign that we are reaching limits of a finite world. In fact, the scenario that is playing out matches up with what I expected to happen in my January post. In that post, I said
Needless to say, stagnating wages together with rapidly rising costs of oil production leads to a mismatch between:
- The amount consumers can afford for oil
- The cost of oil, if oil price matches the cost of production
This mismatch between rising costs of oil production and stagnating wages is what has been happening. The unaffordability problem can…
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