Oil War-driven Recession We Had to Have

ABC Unleashed
Bob Ellis 05/05/2008

An employee of the Kuwait Oil Company looks at a Gathering Centre at the al-Rawdatain field, 100 kms north of Kuwait City, January 25, 2005.

Oil now costs $112 a barrel, up from $30 a barrel five years ago and this has caused inflation. The ARB has responded to this inflation in this past year by putting up the cost of living by $80 a week on average, thus causing more inflation. People are responding to this Reserve Bank-driven inflation by becoming 'stressed', becoming drunk, beating their wives and committing suicide. Noting this harmful effect, Glenn Stephens has signalled he won't put up interest rates any more.

Why did he put them up in the first place? Why did he and his Board do such harm to the economy, to shoe shops, toy shops, bookshops, bars, motels and cineplexes when they must have known ordinary working Australians don't put oil prices up, Americans Presidents and their Middle East wars do. They must have suspected what they should have been doing - the Bank of England and the Fed are doing it - is bringing interest rates down. But they've been putting them up instead and so increasing the cost of living and much adjacent suburban misery in order, they think, to 'fight inflation' - by raising the cost of things.

Why do banks and economists so often get it wrong when ordinary people queuing for petrol can see what the trouble is - the war, the greed of Big Oil, the shareholders, the CEOs, the banks, the craze for privatisation, the mania for water views - and usually get it right? Why are people better economists than economists? Why is it clear to them that putting the cost of living up causes inflation, but not clear to Glenn Stephens?

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