Da Inflation

Shock/Inflation Adv Northwestern
Jeff Zhang/Gautam Uphadya/Raj Patel Antonnuci/Paul/Mulholand
Index 1
Index.......................................................................................................................................................................................................... .....................1
Explanation: Shocks........................................................................................................................................................................................... .............4
Explanation: Inflation............................................................................................................................................................................................. .........5
Shock 1AC [1/6]............................................................................................................................................................................................................ ..6
Shock 1AC [2/6]............................................................................................................................................................................................................ ..7
Shock 1AC [3/6]............................................................................................................................................................................................................ ..8
Shock 1AC [4/6]............................................................................................................................................................................................................ ..9
Shock 1AC [5/6]......................................................................................................................................................................................................... ...10
Shock 1AC [6/6]..................................................................................................................................................................................................... .......11
Uniqueness/Impact: Spikes Coming................................................................................................................................................................. .............12
Uniqueness: Shocks Coming.......................................................................................................................................................................... ...............13
Shocks Coming: Middle East................................................................................................................................................................... .....................14
Brink: Recession........................................................................................................................................................................................................... .16
Internal: Prices kill Economy................................................................................................................................................................... .....................18
Internal: Prices kill Economy................................................................................................................................................................... .....................19
Internal: US Econ K2 Glob Econ.................................................................................................................................................................................. .20
................................................................................................................................................................................................................ .....................20
Impact: Stagflation kills Economy............................................................................................................................................................................... ..21
Impact: Econ/War [1/2].............................................................................................................................................................................. ...................22
Impact: Econ/Enviro/War [2/2].................................................................................................................................................................................... ..23
Stiglitz (mpx author) is awesome!................................................................................................................................................................... ..............24
Impact: Airline [1/2]........................................................................................................................................................................................... ...........25
Impact: Airline [2/2]........................................................................................................................................................................................... ...........26
XT: Shocks Hurt Airlines........................................................................................................................................................................ ......................27
XT: Shocks Hurt Airlines........................................................................................................................................................................ ......................28
XT: Airlines K2 Econ...................................................................................................................................................................................... ..............29
Impact: Econ K2 Environment..................................................................................................................................................................... .................30
XT: Impact: Econ K2 Environment................................................................................................................................................................ ...............31
................................................................................................................................................................................................................ .....................31
Impact: Econ K2 Prolif............................................................................................................................................................................................ ......32
Impact: Econ K2 Heg..................................................................................................................................................................................... ...............33
Impact: Econ K2 Terrorism....................................................................................................................................................................... ....................34
Impact: Econ K2 Democracy...................................................................................................................................................................................... ...35
Impact: Econ K2 Disease............................................................................................................................................................................................... 36
Impact: Econ K2 Poverty....................................................................................................................................................................... .......................37
XT: Impact: Econ K2 Poverty.................................................................................................................................................................. .....................38
A2: Circuit Breakers Solve................................................................................................................................................................................... .........39
A2: SPR Solves.............................................................................................................................................................................................. ...............40
A2: ANWR Solves.................................................................................................................................................................................... ....................41
A2: Shocks good ( renewables)............................................................................................................................................................. ....................42
A2: Economy Resilient............................................................................................................................................................................................... ...43
A2: Shocks Empirically Denied............................................................................................................................................................. .......................44
A2: Econ Collapse Empirically Denied........................................................................................................................................................... ..............45
A2: Alt Causes........................................................................................................................................................................................................... ....46
A2: high growth disproves............................................................................................................................................................................................ .47
A2: Price Increases Only Temporary.............................................................................................................................................................. ...............48
A2: Middle East = Reliable Oil.................................................................................................................................................................. ...................49
A2: Recession Inevitable.................................................................................................................................................................................. .............50
Inflation 1AC [1/7].............................................................................................................................................................................................. ..........51
Inflation 1AC [2/7].............................................................................................................................................................................................. ..........52
Inflation 1AC [3/7].............................................................................................................................................................................................. ..........53
Inflation 1AC [4/7].............................................................................................................................................................................................. ..........54
Inflation 1AC [5/7].............................................................................................................................................................................................. ..........55
Inflation 1AC [6/7].............................................................................................................................................................................................. ..........56
Inflation 1AC [7/7].............................................................................................................................................................................................. ..........57
Uniqueness: Stagflation Now...................................................................................................................................................................... ..................58
Uniqueness: Stagflat Killing Glob Econ............................................................................................................................................................. ...........61
Uniqueness: Consumer Spending.................................................................................................................................................................. ................63
XT: Fed Rate Hikes Uniqueness/Link..................................................................................................................................................... ......................64
Zarefsky Juniors 2008 1

Inflation/stagflation distinction............................................................................................................................................................. .............66
Inflation greater than Recession.................................................................................................................................................................. .......67 2
Hyperinflation Coming............................................................................................................................................................................................ ......68
Hyperinflation  Dollar Decline............................................................................................................................................................... ...................69
Solvency: Stagflation................................................................................................................................................................................................... ..70
Impact: Stagflation Kills Economy........................................................................................................................................................................... .....73
Impact: Fed Rate Hikes [1/2].................................................................................................................................................................................... .....76
Impact: Fed Rate Hikes [2/2].................................................................................................................................................................................... .....77
A2: Food Price is alt cause......................................................................................................................................................................... ...................78
A2: Alt Causes (general).............................................................................................................................................................................................. ..79
A2: Fed Will Balance................................................................................................................................................................................ ....................80
A2: Econ Self-Balancing................................................................................................................................................................................... ............81
A2: high consumer spending disproves....................................................................................................................................................... ..................82
A2: Consumer Spending Turn.................................................................................................................................................................... ...................83
A2: Consumer Spending Turn.................................................................................................................................................................... ...................84
Turn: Consumer Spending Bad................................................................................................................................................................................. .....85
XT: Turn: Consumer Spending Bad.......................................................................................................................................................................... .....86
A2 Dollar Decline Good: = recession................................................................................................................................................................ ............87
A2 Dollar Decline Good: A2 trade def..................................................................................................................................................... .....................88
A2 Dollar Decline Good: A2 trade def..................................................................................................................................................... .....................89
A2: Dollar Decline Good: A2 trade def...................................................................................................................................................... ...................90
A2: Dollar Decline Good: A2 trade............................................................................................................................................................. ..................91
A2: China no dump b/c dependence.............................................................................................................................................................. ................92
A2: China no dump (generic)...................................................................................................................................................................... ..................93
Weak Dollar  China Dump...................................................................................................................................................................................... ...94
Weak Dollar  China Dump...................................................................................................................................................................................... ...95
Weak Dollar  Hyperinflation.................................................................................................................................................................................. ....96
Paul Craig Roberts Is Awesome............................................................................................................................................................................... ......97
Brink: China Dump..................................................................................................................................................................................... ..................98
Dollar Decline Crushes Econ: 6 Reasons..................................................................................................................................................................... ..99
Impact: Hegemony................................................................................................................................................................................... ...................100
Impact: XT: Hegemony.............................................................................................................................................................................. .................101
Impact: Dollar Dump (Economy)................................................................................................................................................................. ...............102
US-Sino coop good (5 mpx)........................................................................................................................................................................... .............103
[NEG] Prices Falling.................................................................................................................................................................................... ...............104
[NEG] Prices Falling.................................................................................................................................................................................... ...............105
[NEG] Oil Shocks Gradual................................................................................................................................................................................ ..........106
[NEG] High Prices Don’t Affect Econ..................................................................................................................................................................... ....107
[NEG] SPR Solves Shocks............................................................................................................................................................................ ..............108
[NEG] ANWR Solves Shocks................................................................................................................................................................. ....................109
[NEG] A2: ANWR Not Cheaper............................................................................................................................................................................. .....110
[NEG] Shocks  Alternative Energy....................................................................................................................................................... ...................111
[NEG] Empirically Denied.......................................................................................................................................................................... ................112
[NEG] Economy Resilient.............................................................................................................................................................................. .............113
[NEG] Alt Causes.......................................................................................................................................................................................... ..............114
[NEG] Alt Causes.......................................................................................................................................................................................... ..............115
[NEG] Circuit Breakers Solve................................................................................................................................................................... ..................116
[NEG] Inflation Uniqueness....................................................................................................................................................................... .................117
[NEG] Inflation Uniqueness....................................................................................................................................................................... .................118
[NEG] Fed Balance.............................................................................................................................................................................. .......................119
[NEG] Fed Won’t Raise Rates........................................................................................................................................................................ .............120
[NEG] Fed Won’t Raise Rates........................................................................................................................................................................ .............121
[NEG] Inflation Good............................................................................................................................................................................................... ...122
[NEG] Inflation NOT a concern................................................................................................................................................................ ..................123
[NEG] Alt Causes.............................................................................................................................................................................................. ..........124
[NEG] Consumer Turn............................................................................................................................................................................. ...................125
[NEG] Energy Dependence Untrue........................................................................................................................................................ .....................126
Defense vs China Dollar Dump...................................................................................................................................................................... .............127
China Won’t Dump............................................................................................................................................................................................... .......128
China Won’t Dump............................................................................................................................................................................................... .......129

Dollar Decline Not Bad............................................................................................................................................................. ......................130
Dollar Decline Inevitable....................................................................................................................................................................... ..........131 3
Impact: Econ Comp K2 Heg..................................................................................................................................................................................... ...132
XT: Impact: Econ Competition............................................................................................................................................................................. .......133
XT: Impact: Econ Competition............................................................................................................................................................................. .......134

Explanation: Shocks 4
Pretty simple advantage: our dependence on foreign oil results in a vulernability to market forces. Oil shocks
(unexpected price surges) result in economic collapse and a Chinese dollar dump.
Currently, China owns over a trillion dollars in bonds and stocks. Basically, if they see the U.S. dollar declining,
they’ll dump it altogether. That causes bad things, notably Chinese expansionism and a Sino-American conflict.
SPR stands for Strategic Petroleum Reserve, an emergency reserve to be used in the event of a natural disaster or a
cutoff of production. As of right now, it holds about 700 million barrels.
Market circuit breakers are triggered when the markets suffer too precipitous of a decline. The circuit breakers
trigger temporary shut downs of the market, depending on the severity of the decline.
Economy impacts were included so you can access the other team’s impacts.
Everything else should be pretty self-explanatory.
*NOTE* – The shock advantage may have relevant cards and answers that apply to inflation, and vice versa.

Explanation: Inflation 5
NOTE: You CANNOT run FRB overreaction with INFLATION/ECON COLLAPSE & DOLLAR DUMP – FRB
overreaction CONTRADICTS the other two.
Another relatively simple scenario: Current oil prices are fueling domestic inflation. That causes economic
collapse and a Chinese dollar dump.
Currently, China owns over a trillion dollars in bonds and stocks. Basically, if they see the U.S. dollar declining,
they’ll dump it altogether. That causes bad things, notably Chinese expansionism and a Sino-American conflict.
All of the Fed Rates arguments simply refers to the fact that the FRB (Federal Reserve Board) adjusts interest
rates in accordance with the economy. Aff says rate hikes bad, neg says rates won’t change.
Also, the economy impacts for shock (i.e. econ k2 environment) apply for inflation as well.
Inflation is a rise in the general level of prices of goods and services over time. "Inflation" is also sometimes used to
refer to a rise in the prices of some specific set of goods or services, as in "commodities inflation" or "core
inflation". It is measured as the percentage rate of change of a price index.
Stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain
unchecked for a period of time.
In economics, hyperinflation is inflation that is "out of control," a condition in which prices increase rapidly as a
currency loses its value.
Everything else is self-explanatory.
*NOTE* – The inflation advantage may have relevant cards and answers that apply to shock, and vice versa.

Shock 1AC [1/6] 6
ADVANTAGE ____ IS SHOCK
Scenario 1: The Economy
An oil shock is coming.

Vancouver Sun 7-2-08
[“Oil shock looms as prices stay high,” http://www.canada.com/vancouversun/news/story.html?id=7325c853-fbef-49c2-b714-3fb72eac145f]
Forget about any relief from high gasoline prices, and start worrying about global "oil shock." Oil producers around
the world are working flat out, but still can't get far enough ahead of demand to cause prices to fall, the International
Energy Agency said Tuesday in a study of oil price trends through 2013. That means consumers hoping for a drop in gasoline
prices to dampen some of the impact of the B.C. carbon tax that came into effect on Tuesday should stop holding their
breath. The agency, which analyses national and international energy supply trends for countries including Canada, says market
fundamentals are behind the doubling of oil prices over the past 12 months. "OPEC [the Organization of the Petroleum
Exporting Countries] production is at record highs and non-OPEC producers are working at full throttle, but stocks show no
unusual build [of supply]," the report said. The agency suggested in a news release accompanying the report that the world may be going
into "oil shock" for the third time in history -- "record oil prices in recent months have become a threat to the global
economy and social welfare of millions of people."
Oil shocks destroy the economy: hurting consumption, causing inflation, decreasing wages, and preventing
recovery.
The Economist 04
[“Crude arguments: Markets should worry about the surging oil price,” http://www.ftlcomm.com/ensign/desantisArticles/2003_800/desantis886/economist.pdf]
China is already on the verge of overheating. But inflationary pressures are mounting elsewhere in the region. If companies do not or cannot
pass on the rise in their input costs to consumers, they will either have to cut costs by sacking people (not a policy that finds much favour in
China) or accept lower profits. The effect of the rising oil price on America could be even more disturbing. America may be
more efficient than it was, but it is far from immune to higher prices. For consumers, the recent sharp rise in petrol prices-which hit an
all-time high this week- is, in effect, an increased tax burden . And it comes just as the effects of Mr Bush's (official) tax cuts start to wear off.
But there is an indirect effect on consumption, too. Costs are rising for companies as the price of oil and other
commodities goes up. In the past, this would have been inflationary: companies simply passed these higher costs on to consumers. But as
Stephen King, the chief economist at HSBC, points out, that link seems to have gone, perhaps because of excess capacity at home, or because
China's increasing presence in world trade pushes the prices of manufactured goods and labour down. As a result, wholesale prices have been
rising much faster than the price at which companies are able to sell their wares. To stop profits from falling, American companies must
keep a tight lid on labour costs. As Mr King puts it, shareholders have been benefiting at the expense of those who work for them
(though not CEOs, of course). A prolonged rise in the price of oil and other commodities would make this problem still
more acute: America's jobless recovery is likely to stay jobless. This would eventually kill the recovery, since
consumers in fear of their jobs are unlikely to carry on splurging. Goldman Sachs now thinks the American economy will grow
by only 2.75% (on an annual basis) in the second half of this year and the first half of next-a forecast it has revised down by three-quarters of a
percentage point. It might, Buttonwood thinks, even turn out lower than that. Slower economic growth in turn bodes ill for
stockmarkets and corporate-bond markets. And if markets tumble, consumer confidence will surely follow. The rise in
the oil price, in other words, may leave nerves not so much frayed as in tatters.

Shock 1AC [2/6] 7
Economic collapse leads to extinction.

Bearden 2k, Retired LTC, US Army, CEO of CTEC Inc., Director of the Association of Distinguished American Scientists
[Tom, June 12, “The Unnecessary Energy Crisis: How to Solve it Quickly,” http://www.cheniere.org/techpapers/Unnecessary%20 Energy%20Crisis.doc]
History bears out that desperate nations take desperate actions. Prior to the final economic collapse, the stress on nations will have
increased the intensity and number of their conflicts, to the point where the arsenals of weapons of mass destruction (WMD) now
possessed by some 25 nations, are almost certain to be released. As an example, suppose a starving North Korea launches nuclear
weapons upon Japan and South Korea, including U.S. forces there, in a spasmodic suicidal response. Or suppose a desperate China -- whose
long-range nuclear missiles (some) can reach the United States -- attacks Taiwan. In addition to immediate responses, the mutual treaties
involved in such scenarios will quickly draw other nations into the conflict, escalating it significantly. Strategic nuclear
studies have shown for decades that, under such extreme stress conditions, once a few nukes are launched, adversaries and potential
adversaries are then compelled to launch on perception of preparations by one's adversary. The real legacy of the MAD concept is this
side of the MAD coin that is almost never discussed. Without effective defense, the only chance a nation has to survive at all is to launch
immediate full-bore pre-emptive strikes and try to take out its perceived foes as rapidly and massively as possible. As the studies showed,
rapid escalation to full WMD exchange occurs. Today, a great percent of the WMD arsenals that will be unleashed, are already on
site within the United States itself. The resulting great Armageddon will destroy civilization as we know it, and perhaps most of
the biosphere, at least for many decades.

Shock 1AC [3/6] 8
Scenario 2: Dollar Decline
Higher oil prices directly result in a declining dollar

Feldstein 5-27-08, Martin: president and CEO of the National Bureau of Economic Research, George F. Baker Professor of Economics at
Harvard, former chairman of the Council of Economic Advisers and former chief economic advisor to President Ronald Reagan
[“The Dollar and the Price of Oil,” http://www.nber.org/feldstein/dollarandpriceofoil.syndicate.08.pdf]
The coincidence of the dollar decline and the rise in the oil price suggests to many observers that the dollar’s decline caused the
rise in the price of oil. That is only true to the extent that we think about the price of oil in dollars, since the dollar has
fallen relative to other major currencies. But if the dollar-euro exchange rate had remained at the same level that it was last May,
the dollar price of oil would have increased less. The key point here is that the euro price of oil would be the same as it
is today. And the dollar price of oil would have gone up 56 percent. The only effect of the dollar’s decline is to change the price in
dollars relative to the price in euros and other currencies. The high and rising price of oil does, however, contribute to the
decline of the dollar, because the increasing cost of oil imports widens the US’ trade deficit. Last year, the US spent
US$331 billion on oil imports, which was 47 percent of the US trade deficit of US$708 billion. If the price of oil had
remained at US$65 a barrel, the cost of the same volume of imports would have been only US$179 billion, and the
trade deficit would have been one-fifth lower. The dollar is declining because only a more competitive dollar can shrink the US trade deficit to
a sustainable level. Thus, as rising global demand pushes oil prices higher in the years ahead, it will become more difficult to
shrink the US trade deficit, inducing more rapid dollar depreciation.
If the dollar's decline continues, China will dump.

New York Times 07
[“Markets and Dollar Sink as Slowdown Worry Increases,” http://www.nytimes.com/2007/11/08/business/08econ.html?_r=1&hp&oref=slogin]
The most immediate trigger for the sell-off in the dollar, traders said, was a jarring signal that suggested China might
shift some of its enormous hoard of foreign currency reserves — worth more than $1.4 trillion, primarily in dollars
and dollar-denominated assets — into other currencies to get a better return on its money. "We will favor stronger
currencies over weaker ones, and will readjust accordingly," Cheng Siwei, vice chairman of the Standing Committee
of the National People's Congress told a conference in Beijing on Wednesday. A Chinese central bank vice director, Xu Jian, said the dollar
was "losing its status as the world currency," according to Bloomberg News. Mr. Cheng later told reporters he was not saying
China would buy more euros and dump dollars. But as markets opened across Europe, those words echoed as an invitation to sell the American
currency. The dollar fell to its lowest level against the Canadian dollar since 1950, the British pound since 1981, and
the Swiss franc since 1995. The euro rose to a new record, $1.4729, before retreating.

Shock 1AC [4/6] 9
A Chinese dollar dump causes Chinese expansionism and the decline of US hegemony.
Rense 06
[“Report - China To Dump One Trillion In US Reserves,” http://www.rense.com/general74/report.htm]
In speaking with the contact at the Pentagon, I am able to now report the Pentagon views this currency-killing as a cunning
military aspect to Chinese plans: The Pentagon says that while China has a 2 Million man army, they lack the logistics and heavy lift
capability to move that army and supply it. They can, however, get that military to South Korea and to Japan. The Chinese see that the
U.S. Military is over-stretched and almost exhausted by its globe trotting Commander-In-Chief. They feel that by
intentionally destabilizing the dollar, the U.S. economy will fail, putting tens of millions of Americans on the
unemployment line and putting unbearable pressure on the US Government. Then, with the U.S. economy in
shambles and its manufacturing base eroded by a steady stream of manufacturing plants moving out of the US., the
American government will be too occupied with troubles at home to do much internationally. America will be in no
position to challenge China, allowing the Chinese to act militarily elsewhere in the world; Further, if the U.S.
attempted to intervene against any Chinese military action, the only plant in the world which can manufacture the
specialized gyros needed for U.S. Cruise Missile guidance systems, is now located in. . . . .China. China could
prevent that plant from shipping to the U.S., and once our arsenal of cruise missiles was depleted, it would take a long time to re-tool
a plant to make more gyros and resupply cruise missiles for battle. The Chinese feel they could accomplish certain military goals before the
U.S. could re-tool. They are also confident the U.S. will never "go nuclear" as long as the U.S. itself is not attacked.
The Pentagon source went so far as to say "Even if China was to lose the entire one trillion in cash to a collapse of
the Dollar as a currency, they will have succeeded in taking the U.S. off the world stage as any type of effective
military or economic power -- without firing a shot!" A 'classic' Sun Tzu paradigm of victory - the art of fighting, without fighting.
The crippling of the US is a highly desirable military benefit for China at a relatively cheap price since it will leave
their human capital and infrastructure assets in place; assets they know they would lose if a hot war erupted with the
US.
Chinese expansionism causes international coalitions balancing against China, conflict over Taiwan, and Sino-
American conflict.
Mearsheimer 05, John: R. Wendell Harrison Distinguished Service Professor of Political Science at the University of Chicago
[“The rise of China will not be peaceful at all,” LEXIS]
THE question at hand is simple and profound: will China rise peacefully? My answer is no. If China continues its impressive
economic growth over the next few decades, the US and China are likely to engage in an intense security competition with
considerable potential for war. Most of China's neighbours, to include India, Japan, Singapore, South Korea, Russia and Vietnam,
will join with the US to contain China's power. To predict the future in Asia, one needs a theory that explains how rising powers are
likely to act and how other states will react to them. My theory of international politics says that the mightiest states attempt to establish
hegemony in their own region while making sure that no rival great power dominates another region. The ultimate goal of every great
power is to maximise its share of world power and eventually dominate the system. The international system has several
defining characteristics. The main actors are states that operate in anarchy which simply means that there is no higher authority above them. All
great powers have some offensive military capability, which means that they can hurt each other. Finally, no state can know the future
intentions of other states with certainty. The best way to survive in such a system is to be as powerful as possible, relative to potential rivals.
The mightier a state is, the less likely it is that another state will attack it. The great powers do not merely strive to be the strongest great
power, although that is a welcome outcome. Their ultimate aim is to be the hegemon, the only great power in the system. But it is almost
impossible for any state to achieve global hegemony in the modern world, because it is too hard to project and sustain power around the globe.
Even the US is a regional but not a global hegemon. The best that a state can hope for is to dominate its own back yard. States that gain
regional hegemony have a further aim: to prevent other geographical areas from being dominated by other great powers. Regional hegemons, in
other words, do not want peer competitors. Instead, they want to keep other regions divided among several great powers so that these states will
compete with each other. In 1991, shortly after the Cold War ended, the first Bush administration boldly stated that the US was now the most
powerful state in the world and planned to remain so. That same message appeared in the famous National Security Strategy issued by the
second Bush administration in September 2002. This document's stance on pre-emptive war generated harsh criticism, but hardly a word of
protest greeted the assertion that the US should check rising powers and maintain its commanding position in the global balance of power.
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Shock 1AC [5/6] 10
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China -- whether it remains authoritarian or becomes democratic -- is likely to try to dominate Asia the way the US dominates
the Western hemisphere. Specifically, China will seek to maximise the power gap between itself and its neighbours,
especially Japan and Russia. China will want to make sure that it is so powerful that no state in Asia has the
wherewithal to threaten it. It is unlikely that China will pursue military superiority so that it can go on a rampage and conquer other Asian
countries, although that is always possible. Instead, it is more likely that it will want to dictate the boundaries of acceptable
behaviour to neighbouring countries, much the way the US makes it clear to other states in the Americas that it is the boss. Gaining
regional hegemony, I might add, is probably the only way that China will get Taiwan back. An increasingly powerful
China is also likely to try to push the US out of Asia, much the way the US pushed the European great powers out of the Western
hemisphere. We should expect China to come up with its own version of the Monroe Doctrine, as Japan did in the 1930s.
These policy goals make good strategic sense for China. Beijing should want a militarily weak Japan and Russia as its
neighbours, just as the US prefers a militarily weak Canada and Mexico on its borders. What state in its right mind
would want other powerful states located in its region? All Chinese surely remember what happened in the 20th century
when Japan was powerful and China was weak. In the anarchic world of international politics, it is better to be Godzilla than Bambi.
Furthermore, why would a powerful China accept US military forces operating in its back yard? American policy-makers,
after all, go ballistic when other great powers send military forces into the Western hemisphere. Those foreign forces are invariably seen as a
potential threat to American security. The same logic should apply to China. Why would China feel safe with US forces deployed on its
doorstep? Following the logic of the Monroe Doctrine, would not China's security be better served by pushing the American military out of
Asia? Why should we expect the Chinese to act any differently than the US did? Are they more principled than the Americans are? More
ethical? Less nationalistic? Less concerned about their survival? They are none of these things, of course, which is why China is likely to
imitate the US and attempt to become a regional hegemon. It is clear from the historical record how American policy-makers will react if
China attempts to dominate Asia. The US does not tolerate peer competitors. As it demonstrated in the 20th century, it is determined
to remain the world's only regional hegemon. Therefore, the US can be expected to go to great lengths to contain China and
ultimately weaken it to the point where it is no longer capable of ruling the roost in Asia. In essence, the US is likely to
behave towards China much the way it behaved towards the Soviet Union during the Cold War. China's neighbours
are certain to fear its rise as well, and they too will do whatever they can to prevent it from achieving regional
hegemony. Indeed, there is already substantial evidence that countries such as India, Japan, and Russia, as well as smaller
powers such as Singapore, South Korea and Vietnam, are worried about China's ascendancy and are looking for ways
to contain it. In the end, they will join an American-led balancing coalition to check China's rise, much the way Britain, France, Germany,
Italy, Japan, and even China, joined forces with the US to contain the Soviet Union during the Cold War. Finally, given Taiwan's strategic
importance for controlling the sea lanes in East Asia, it is hard to imagine the US, as well as Japan, allowing China to
control that large island. In fact, Taiwan is likely to be an important player in the anti-China balancing coalition, which
is sure to infuriate China and fuel the security competition between Beijing and Washington. The picture I have painted of
what is likely to happen if China continues its rise is not a pretty one. I actually find it categorically depressing and wish that I could tell a more
optimistic story about the future. But the fact is that international politics is a nasty and dangerous business and no amount
of goodwill can ameliorate the intense security competition that sets in when an aspiring hegemon appears in Eurasia.
That is the tragedy of great power politics.

Shock 1AC [6/6] 11
US-China war will go nuclear and destroy the planet

Straits Times 2k
[“Regional Fallout: No one gains in war over Taiwan,” Jun 25, LN]
THE high-intensity scenario postulates a cross-strait war escalating into a full-scale war between the US and China. If Washington
were to conclude that splitting China would better serve its national interests, then a full-scale war becomes unavoidable. Conflict on such a
scale would embroil other countries far and near and -- horror of horrors -- raise the possibility of a nuclear war. Beijing
has already told the US and Japan privately that it considers any country providing bases and logistics support to any US forces
attacking China as belligerent parties open to its retaliation. In the region, this means South Korea, Japan, the Philippines and, to a
lesser extent, Singapore. If China were to retaliate, east Asia will be set on fire. And the conflagration may not end there as
opportunistic powers elsewhere may try to overturn the existing world order. With the US distracted, Russia may
seek to redefine Europe's political landscape. The balance of power in the Middle East may be similarly upset by the
likes of Iraq. In south Asia, hostilities between India and Pakistan, each armed with its own nuclear arsenal, could enter
a new and dangerous phase. Will a full-scale Sino-US war lead to a nuclear war? According to General Matthew Ridgeway, commander
of the US Eighth Army which fought against the Chinese in the Korean War, the US had at the time thought of using nuclear weapons against
China to save the US from military defeat. In his book The Korean War, a personal account of the military and political aspects of the conflict
and its implications on future US foreign policy, Gen Ridgeway said that US was confronted with two choices in Korea -- truce or a broadened
war, which could have led to the use of nuclear weapons. If the US had to resort to nuclear weaponry to defeat China long before the latter
acquired a similar capability, there is little hope of winning a war against China 50 years later, short of using nuclear
weapons. The US estimates that China possesses about 20 nuclear warheads that can destroy major American cities.
Beijing also seems prepared to go for the nuclear option. A Chinese military officer disclosed recently that Beijing was
considering a review of its "non first use" principle regarding nuclear weapons. Major-General Pan Zhangqiang, president of the military-
funded Institute for Strategic Studies, told a gathering at the Woodrow Wilson International Centre for Scholars in Washington that although the
government still abided by that principle, there were strong pressures from the military to drop it. He said military leaders considered the
use of nuclear weapons mandatory if the country risked dismemberment as a result of foreign intervention. Gen
Ridgeway said that should that come to pass, we would see the destruction of civilisation. There would be no victors in such a
war. While the prospect of a nuclear Armaggedon over Taiwan might seem inconceivable, it cannot be ruled out entirely,
for China puts sovereignty above everything else.

Uniqueness/Impact: Spikes Coming 12
Super-spikes in oil prices are coming and will destroy the U.S. and global economies.
AFP 5-22-08, Agence France Presse: the oldest news agency in the world, and one of the three largest with Associated Press and Reuters
[“Oil may deal blow to sputtering world economy,” http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/23-May-2008/Oil-may-deal-blow-to-
sputtering-world-economy]
The feared super-spike in crude oil prices that appears to be underway could deal a crippling blow to a global
economy already reeling from the US housing slump and tight credit, analysts say. Yet some argue that the surge may be a
speculative bubble, and could end up self-correcting as demand softens from weaker economic growth and energy efficiency measures.
Crude futures in May soared past the level of $130 a barrel for the first time, having more than doubled in the past
year. The jump appeared to fulfill predictions from some analysts of a super-spike that could take oil up as far as
$200 a barrel. Goldman Sachs analyst Arjun Murti added to the speculative fever earlier this month with a dire prediction
of higher prices, citing “a lack of adequate supply growth” and still-strong demand. “The possibility of $150 to $200
per barrel seems increasingly likely over the next six to 24 months,” he said in a research note. The reality of sky-high
energy costs could mean a darker outlook for the US and global economy, by raising the price of a variety of goods
and services. The notion of a quick recovery in the struggling US economy would likely be put in doubt, and the rest
of the world would suffer as well. “A super-super spike would most likely put a stake in the heart of global economic
growth,” says Ed Yardeni, economist at Yardeni Research. “A global economic downturn would be the most likely outcome,
led by a longer and deeper recession in the US.”

Uniqueness: Shocks Coming 13
Oil shocks 70s-style are coming.

Lane 5-2-08, Thomas: former journalism faculty member at Cameron State University and Murray State College
[“INTERVIEW ROB HOPKINS ECO WORRIER,” LEXIS]
The era of cheap oil is over and our economic system is doomed, believes environmentalist Rob Hopkins. So is he gloomy? Not
a bit of it. Its such a tremendous opportunity 2 May 2010. The world wakes up to news that the United States Air Force has
started bombing Iran. With its country deep in recession, the US government needed something to divert attention
from its domestic problems and Irans rapidly developing nuclear programme provided the perfect opportunity. But
the plan quickly starts to unravel. A furious Iran suspends all oil exports to the West, as does its ally Russia. Anti-US
riots in Saudia Arabia force its government to follow suit, a pattern that is swiftly repeated across the Arab world
The oil shortage sees prices rapidly quadruple to nearly $500 a barrel. The price of all basic commodities rocket and
stabbings at garages become a daily occurrence in queues for rationed fuel. A protest lobby calls for fuel duty to be scrapped, then blocks
motorways when the government says no. The resultant panic-buying clears supermarket shelves and thousands are left without food. As fear
grips the nation, one person remains calm. His name is Rob Hopkins and he lives in Totnes, south Devon. After all, hes been expecting this for
years This scenario may be fictional, but it has echoes of the 1973 oil shock. "There is a feeling we are coming to that
time again," says Hopkins who, at 39, just about remembers it first time round And he is well prepared if we do run out of fuel. Already
his office, above a shop on Fore Street in Totnes, is barely heated and he wears a thick woollen jumper to keep warm This office is the nerve
centre of Transition Network, a movement pioneered by Hopkins to help communities prepare for "the end of cheap oil". Its message is that
once the world hits peak oil production - that is, when there are no big reserves left to discover and supply is heading downhill -
prices will rise uncontrollably, destroying in a stroke the foundations of the worlds economy
Demand for oil will cause oil shocks.

World Bank 3-10-08
[“Volatile Oil Prices Subject of Forum,”
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21678343~pagePK:64257043~piPK:437376~theSitePK:4607,00.html]
Oil prices aren't just rising, "but the volatility is also worsening-fluctuations are more pronounced than they were in
the 1990s," says WBI Senior Economist Yan Wang, the task manager of the forum. "Unlike the previous oil shocks which
were largely supply induced, price hikes this time reflect growing energy demand in emerging markets especially
China and India. International capital flows seeking investment opportunities in the face of a declining dollar have also played an important
role." The price of oil has escalated much more than expected. "It's caught most by surprise," says World Bank Senior
Energy Economist Shane Streifel, a panelist at the forum's session on whether high and volatile prices are here to stay. That's
happened even though oil stocks around the world are not "critically low," and oil output by the Organization of the
Petroleum Exporting Countries (OPEC) has recently edged higher. Streifel says the oil boom of the last few years has been
driven by a combination of factors: the loss of oil surplus capacity, "moderate" demand growth worldwide, with
developing countries, especially in Asia, offsetting falling demand in OECD countries; disappointment that non-
OPEC supplies have not increased in larger quantities; rising costs; and OPEC's cuts in production-most recently by
1.5 million barrels in 2006 and 2007.

Shocks Coming: Middle East 14
Considering the amount of oil located in the Middle East, we are at a high risk for inflation.
Markey 05, Edward J.: Congressman and Chair of the Subcommittee on Telecommunications and the Internet for the House of Representatives
[“Oil Shock – Potential for Crisis,” http://globalwarming.house.gov/tools/assets/files/0190.pdf]
45 percent of the world’s oil is located in Iraq, Iran and Saudi Arabia – and almost two-thirds of known oil reserves are
in the Middle East. Events in that part of the world have a dramatic impact on oil prices and on our national security.
In the late 1970s, the Oil Embargo, Iranian Revolution and Iran/Iraq war sent the price of oil skyrocketing. Yesterday, oil surged to a new
record of $97 a barrel amid government predictions of tightening domestic inventories, bombings in Afghanistan and an
attack on a Yemeni pipeline that took 155,000 barrels a day off the markets. And with Al Qaeda threatening to attack
Saudi Arabian oil, with our continuing struggles in Iraq, and with yesterday’s announcement that Iran now has 3,000 operating
centrifuges for enriching uranium, each day carries with it the possibility of major oil supply disruptions leading to
economic recession and political or military unrest.

Brink: Shocks
15
The U.S. is in a uniquely vulnerable position: any intermediary disruption would cause global economic collapse.
National Commission on Energy Policy 05
[“Report Highlights U.S. Vulnerability to Oil Shocks,” http://www.energycommission.org/ht/display/ReleaseDetails/i/1552/pid/500]
Amid high global oil and U.S. gasoline prices, a report released today by Securing America's Future Energy (SAFE) and the
National Commission on Energy Policy (NCEP) demonstrates that the United States is vulnerable to much more severe oil
shocks should even relatively small amounts of oil be withdrawn from the global market due to terrorism, political
unrest or additional natural disasters. The report details the findings of Oil Shockwave, an oil crisis simulation
conducted earlier this summer, which found that taking less than 4% of oil off the global market due to small
incidents of political unrest and terrorism would cause prices to rise dramatically to more than $161 bb. It also showed
that once an oil supply disruption occurs there are few short-term options for protecting the U.S. and global economy.
The simulation was conducted by former high ranking government officials, experts in the fields of national security
and economics, and energy industry specialists. Today at a Senate Energy and Natural Resources Committee Hearing on Global Oil
Demand and Gasoline Prices, John Dowd, a Senior Analyst at Sanford C. Bernstein & Co. who provided expert advice to the simulation,
posited “the situation depicted in Oil Shockwave—where a global supply shortfall of less than 4 percent produces a world oil price of $160 per
barrel—looks prescient." "The threat is real and urgent, requiring immediate and sustained attention at the highest levels
of government" stated Dr. Robert Gates, former Director of Central Intelligence and the Oil ShockWave National
Security Advisor. "To protect ourselves, we must transcend the narrow interests that have historically stood in the way of a coherent oil
security strategy and implement policies that will meaningfully address both the supply and demand aspects of our current oil dilemma." The
Shockwave scenario included civil unrest in Nigeria, terrorist attacks on energy infrastructure in Alaska and in Saudi
Arabia, and unpredictable weather conditions. The scenario created a shortfall of approximately 3 million barrels of oil from a global
market of more than 84 million barrels, resulting in gasoline prices of $5.74 per gallon and heating oil prices of $5.57 per gallon, partly due to
the lack of spare capacity in global oil production.

Brink: Recession 16
We’re on the brink of recession – multiple reasons – this directly affects other economies.
Roubini 7-15-08, Nouriel: former senior advisor to the U.S. Treasury and the IMF; Member, Council on Foreign Relations Roundtable on the
International Economy; Research Fellow, Centre for Economic Policy Research; Research Fellow, National Bureau of Economic Research; Professor
of Economics at the Stern School of Business at NYU; Chairman of RGE Monitor, a global economic and financial analysis firm
[“Nouriel Roubini predicts the worst financial crisis since the Great Depression,” http://winnipeg.indymedia.org/item.php?18440S]
New York, July 15, 2008- In a series of recent writings on the RGE Monitor Nouriel Roubini – Chairman of RGE Monitor and Professor of
Economics at the NYU Stern School of Business - has argued that the U.S. is experiencing its worst financial crisis since the
Great Depression and will undergo its worst recession in the last few decades. His analysis leads to the following conclusions: * This is by
far the worst financial crisis since the Great Depression * Hundreds of small banks with massive exposure to real estate (the average
small bank has 67% of its assets in real estate) will go bust * Dozens of large regional/national banks (a’ la IndyMac) are also
bankrupt given their extreme exposure to real estate and will also go bust * Some major money center banks are also semi-insolvent and
while they are deemed too big to fail their rescue with FDIC money will be extremely costly. * In a few years time there will be no major
independent broker dealers as their business model (securitization, slice & dice and transfer of toxic credit risk and piling fees upon fees rather
than earning income from holding credit risk) is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental
flaw in their structure (i.e. the four remaining U.S. big brokers dealers will either go bust or will have to be merged with traditional commercial
banks). Firms that borrow liquid and short, highly leverage themselves and lend in longer term and illiquid ways (i.e. most of the shadow
banking system) cannot survive without formal deposit insurance and formal permanent lender of last resort support from the central bank. *
The FDIC that has already depleted 10% of its funds in the rescue of IndyMac alone will run out of funds and will have to be recapitalized by
Congress as its insurance premia were woefully insufficient to cover the hole from the biggest banking crisis since the Great Depression *
Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well
connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out
shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders
such a plan bails out shareholders, managers and creditors at a massive cost to U.S. taxpayers. * This financial crisis will imply credit
losses of at least $1 trillion and more likely $2 trillion. * This is not just a subprime mortgage crisis; this is the crisis of an
entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to
unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds
that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump
from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds
and where counterparty risk – and the collapse of many counterparties – will lead to a systemic collapse of this market. * This will be the most
severe U.S. recession in decades with the U.S. consumer being on the ropes and faltering big time as soon as the temporary effect of
the tax rebates will fade out by mid-summer (July). This U.S. consumer is shopped out, saving less, debt burdened and being hammered by
falling home prices, falling equity prices, falling jobs and incomes, rising inflation and rising oil and energy prices. This will be a long,
ugly and nasty U-shaped recession lasting 12 to 18 months, not the mild 6 month V-shaped recession that the delusional consensus
expects. * Equity prices in the US and abroad will go much deeper in bear territory. In a typical US recession equity prices fall by an average
of 28% relative to the peak. But this is not a typical US recession; it is rather a severe one associated with a severe financial crisis. Thus,
equity prices will fall by about 40% relative to their peak. So, we are only barely mid-way in the meltdown of stock markets. * The rest of
the world will not decouple from the US recession and from the US financial meltdown; it will re-couple big time.
Already 12 major economies are on the way to a recessionary hard landing; while the rest of the world will
experience a severe growth slowdown only one step removed from a global recession. Given this sharp global economic
slowdown oil, energy and commodity prices will fall 20 to 30% from their recent bubbly peaks. * The current U.S
recession and sharp global economic slowdown is combining the worst of the oil shocks of the 1970s with the worst of
the asset/credit bust shocks (and ensuing credit crunch and investment busts) of 1990-91 and 2001: like in 1973 and 1979 we are facing a
stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an
outright recession. Also, like 1990-91 and 2001 we are now facing another asset bubble and credit bubble gone bust big time: the housing and
overall household credit boom of the last seven years has now gone bust in the same way as the 1980s housing bubble and 1990s tech bubble
went bust in 1990 and in 2000 triggering recessions. And a similar housing/asset/credit bubble is going bust in other countries – U.K., Spain,
Ireland, Italy, Portugal, etc. – leading to a risk of a hard landing in these economies. * But over time inflation will be the last
problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in
inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in
labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order
of 20-30% will further reduce inflationary pressure. The Fed will have to cut the Fed Funds rate much more – as severe downside risks to
growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a
collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end
of this financial disaster and severe recession cycle.
Solvency: Shocks
17
Shifting to Alternate Energy is the only way to stop oil prices from hiking higher.
Financial Sense, 5/7/08
OIL SHOCK AND ENERGY TRANSITION, Financial Sense, by Andrew McKillop, Chief Strategist, Vertus Sustineo Asset Management, New York Former Expert-Policy, and
programming, Divn A-Policy, DGXVII-Energy, European Commission Presentation, to POGEE Conferece, Karachi, May 7, 2008
This factor also applies to world oil, natural gas, and coal. Increasing prices are not producing an 'instant kick' upwards in supply. In fact,
world production is tending to stagnate for natural gas and coal, as well as oil, exactly at the time prices soar to all-
time records ! Energy trading, to be sure, also magnifies price rises in just the same way it intensifies price crashes,
due to speculation and greed or the 'poker table and casino-type' basis of commodities and energy trading. Finally we can cite strong
seasonality of demand for oil, as another factor that generates big price swings, but on the supply side, since Q3 or Q4 2007, seasonal variation
of Isupply is now very low, due to depletion, resulting in possible price peaks over 150 USD/bbl for this Summer 2008, when the North
hemisphere car and air travel season drives up demand for gasoline and kerosene, resulting in strong demand for crude oil. There is one
very simple 'bottom line': Energy Transition towards reduced energy intensity in OECD countries, development of
alternate and renewable energy, and reduction of dependence on all fossil fuels is becoming imperative. In other
words we have less and less choice. Organized and coherent transition however requires high and stable energy
prices, led by oil, ensuring sufficient financial resources and demand signals for energy transition, also providing the
public opinion and political impetus to act now for energy transition.

Internal: Prices kill Economy 18
Raising oil prices threaten U.S. and global economic stability.

Kaletsky 5-23-08, Anatole: associate editor of Britain's The Times and a leading commentator on economics
[“A crude detachment from the real world,” The Australian, LEXIS]
The doubling of oil prices is being driven by a financial bubble, advises Anatole Kaletsky This would be a disaster far
more momentous than the repossession of a few million homes JUST as the credit crunch seemed to be passing, at
least in the US, another and much more ominous financial crisis has broken out. The escalation of oil prices, which this
week reached a previously unthinkable $US130 ($135) a barrel (with predictions of $US150 and $US200 soon to come),
threatens to do far more damage to the world economy than the credit crunch. Instead of just causing a brief recession, the oil
and commodity boom threatens a prolonged period of global stagflation, the lethal combination of high inflation and
economic stagnation last seen in the world economy in the 1970s and early '80s. This would be a disaster far more momentous
than the repossession of a few million homes or collapse of a couple of banks. Commodity inflation is far more
lethal than a credit crunch for two reasons. It prevents central banks in advanced economies from cutting interest rates to
keep their economies growing. Even worse, it encourages the governments of developing countries to turn their backs on
global markets, resorting instead to price controls, trade restrictions and currency manipulations to protect their citizens
from the rising costs of energy and food. For both these reasons, the boom in oil and commodity prices -- if it lasts much longer -- could
reverse the globalisation process that has delivered 20 years of almost uninterrupted growth to America and Europe and rescued
billions of people from extreme poverty in China, India, Brazil and many other countries.
High oil prices are hurting consumers which will lead to a major recession.
Reuters, 5/23/08
Oil shock threatens lasting changes to U.S. economy, Emily Kaiser and Matt Daily – Analysis,
http://uk.reuters.com/article/businessNews/idUKN2320596920080523?pageNumber=3&virtualBrandChannel=0&sp=true
Hamilton sees the beginnings of permanent changes in consumer behaviour. Even if gasoline prices moderate from current levels, consumers
are shunning SUVs, he said. Trips to suburban strip malls are becoming less popular as Americans balk at driving an extra 10 or 15 miles just to
save a dollar or two at a national chain store. The economic implications are huge. Consumer spending accounts for some
two-thirds of U.S. economic activity, and there is no denying the slowdown. The Commerce Department's retail sales
data shows demand down sharply for autos and furniture, as well as at department stores. The retail category showing
the sharpest gain is gasoline stations, evidence of the higher prices. When consumers curb spending, companies
retrench, manufacturing falters, and employment dips. That is precisely what is happening now, and it points to a
dangerous slowdown in the U.S. economy already grappling with the worst housing slide since the Great Depression.

Internal: Prices kill Economy 19
Oil shocks have an impact on the US economy

Roubini and Setser 04 (Nouriel Roubini is from Stern School of Business, NYU, and Brad Setser is Research Associate, Global Economic Governance Programme,
University College, Oxford, http://pages.stern.nyu.edu/~nroubini/papers/OilShockRoubiniSetser.pdf)
The U.S. economy has other sources of vulnerability as well. U.S. consumers are by many measures already overstretched:
consumption growth has been spurred by borrowing in the face of stagnant real incomes for many wage earners. High oil prices might
dent their confidence. Recent data suggests that a slowdown in consumer spending linked in part to higher oil prices
accounted for the fall in the pace of U.S. growth in the second quarter of 2004. The Fed also has less room to direct monetary
solely toward policy to maintaining output than it did in 2000: unlike in 2000, when inflation was falling, inflation was already picking up in
2004 - admittedly from a very low level - prior to the recent surge in oil prices; and recent inflation news have shown a worrisome pick-up in
the inflation rate. The combination of low pre-existing rates, a weak dollar and high oil prices limit the Fed’s ability to
maneuver. With some concerned that the Fed is already “behind the curve” in terms of responding to the recent
inflation increase, the Fed would have to increased the Fed Funds rate more and faster than currently expected by the
markets if further oil price shocks were to feed into the inflation rate.
3 internal links to economic collapse

FESA 04, Foundation for the Economics of Stability
[“The three crises: oil prices, climate change and international debt,” http://www.feasta.org/documents/energy/three_crises.htm]
This is because higher oil prices affect oil demand and the level of activity in an economy in three ways: 1. When oil
is expensive, people try to use less of it. They may reduce the amount they drive, or reduce the temperature to which they heat their
houses. Their minor economies have very little effect on oil consumption. 2. Higher oil prices also mean that consumers have
less money to spend on other things. This reduces the amount of oil the economy uses because most of the goods and services
the consumers would have bought would have required the use of oil for their production and delivery. 3. If higher
oil prices reduce consumer demand very much, manufacturers and retailers will find that their profits suffer and that
they have surplus capacity. They will therefore defer their plans for expansion. This will result in very large energy savings,
because construction work is energy intensive. Indeed, it has been estimated that around half of all the energy used in a wealthy country is
necessitated by projects designed to expand the economy. But that's not all. The people who would have worked on the cancelled
projects lose their jobs. They consequently have less money to spend; they buy less, and that saves the energy that
would have been used to make and deliver the products they would have bought. It also puts other people out of
work, and these people then spend less too. The economy risks entering a downward spiral with one set of job losses
leading to others, which in turn lead to others still, each causing less energy to be used.

Internal: US Econ K2 Glob Econ 20
That collapses the global economy

Stein 02 (Charles, Business Columnist for the Globe , Boston Globe , March 31, Lexis)
A coincidence? No way. More than any time in the recent past, the United States is the key player in the world economy. "We are
the only locomotive of growth," said Nariman Behravesh, chief economist at DRI-WEFA, a Lexington forecasting firm.
America's dominance is a function both of our strength and the rest of the world's weakness. Europe and Japan, for different reasons,
aren't in a position to make much of a contribution. How did we get here? And what are the implications of our leadership role? The
answer to the first question is easier. America is more critical to the world's economy, in part, because it represents a
growing slice of the pie. According to Economy.com, a Pennsylvania research firm, the United States now accounts for 32 percent
of the world's economic output, up from 25 percent in 1990, and 24 percent in 1980. The numbers climbed because America grew faster
than its competitors, especially in the 1990s, and because the US dollar, the measuring stick, has appreciated in value. The laws of arithmetic
dictate that when you get as big as America, you have a major impact on the other players in the game. In some countries that impact is
particularly large. In Singapore, for example, exports to the US account for 27 percent of the gross domestic product. In Hong Kong, the
comparable number is 28 percent. In Mexico, about 25 percent. Simply put, when we stop buying, these countries stop selling. And
growing.

Impact: Stagflation kills Economy 21
Oil shocks have a stagflationary effect that will eventually collapse the US economy
Roubini and Setser 04 (Nouriel Roubini is from Stern School of Business, NYU, and Brad Setser is Research Associate, Global Economic Governance Programme,
University College, Oxford, http://pages.stern.nyu.edu/~nroubini/papers/OilShockRoubiniSetser.pdf)
Oil prices shocks have a stagflationary effect on the macroeconomy of an oil importing country: they slow down the
rate of growth (and may even reduce the level of output – i.e. cause a recession) and they lead to an increase in the price level and
potentially an increase in the inflation rate. An oil price hike acts like a tax on consumption and, for a net oil importer like the
United States, the benefits of the tax go to major oil producers rather than the U.S. government. The impact on
growth and prices of an oil shock depends on many factors: - The size of the shock, both in terms of the new real
price of oil and the percentage increase in oil prices. At its close of $43 a barrel on July 30, 2004, the current real price of oil is high
– well above the levels during the 1990 and 2000 oil mini-shocks, but it remains well below the peak real oil price of $82 in 1980, and equal to
the post 73 real price of $43. The recent 65% increase in oil prices (since the 2002 average price)3 is comparable to the increase in 2000 (60%,
but from a very low starting point, as oil prices had fallen to a low of around $15 in 1999), higher than the increase in 1990 (40%), but much
smaller than the increases in 1973 (210%) and 1979-80 (135%). - The shock’s persistence. This will depend on many things, many as much
political as economic, since the current high oil price reflects both booming Asian demand (China alone is expected to account for roughly 40%
of the increase in demand for oil in 2004) and geopolitical risk in the Middle East (the “fear premium” estimated to add between $4 and $8 to
current prices). - The dependency of the economy on oil and energy. The U.S. economy is much less energy intensive than it was
in the 1970s, but it also much bigger and produces comparatively less domestic oil. Net oil imports of 1.2% of GDP in 2003
are higher than net oil imports of 0.9% of GDP in 1970. - The policy response of monetary and fiscal authorities These effects are not
trivial: oil shocks have caused and/or contributed to each one of the US and global recessions of the last thirty years.
Yet while recent recessions have all been linked to an increase in the price of oil, not all oil price spikes lead to a
recession. The 2003 spike associated with the invasion of Iraq is a good example.

Impact: Econ/War [1/2] 22
Oil shocks result in resource wars

Stiglitz 7-9-08, Joseph Eugene: former Senior Vice President and Chief Economist of the World Bank, most cited economist in the world as of
June 2008 (cited here: http://ideas.repec.org/top/top.person.all.html), recipient of the Nobel Prize in Economics and John Bates Clark Medal, chairs
the University of Manchester's Brooks World Poverty Institute
[“Oil Shock: the Coming Economic Unraveling & How We Can Adjust,” http://www.casavaria.com/hotspring/2008/07/149/oil-shock-the-coming-economic-unraveling-how-we-can-
adjust/]
As things stand, the International Energy Agency’s director for oil markets and emergency preparedness, Didier
Houssin, warns “It’s hardly conceivable the world could function without oil”. The problem is in part due to a lag in production
of new technologies and a reliance on political and military clout to ensure that supplies remain relatively constant. With more far-
reaching economic markets competing for key resources than ever before, and the global security environment
deteriorating at the seams, this dependence is an unsustainable economic vulnerability, with potentially disastrous
consequences. For security reasons as much as for environmental reasons, every nation that can must begin to diversify
at wartime speed its prevailing energy sourcing options: the US could power its entire consumer and industrial economy with the
immense wind resources of the Great Plains, while many of the world’s poorest nations could, if able to build the infrastructure, speed their
economic development with state of the art solar farms, freeing them of the volatility of the oil markets and related security risks. The
potential economic and geopolitical fallout of allowing the full-blown “oil shock” to hit lies beyond the furthest
horizon of what we can envision, even amid the economic strain of the present situation. The time is now for a major
paradigm shift in thought about energy production: how we do it, what the goal is, what the standards are for economic viability, environmental
sustainability and security requirements. What may be a coming age of resource-wars (petroleum, water, grain and arable land),
means we must move to methods that have no geopolitical fallout built in.
Resource wars result in nuclear proliferation and extinction.

Klare 06, Michael: Five Colleges professor of Peace and World Security Studies, defense correspondent of The Nation magazine, serves on the
boards of directors of Human Rights Watch, and the Arms Control Association
[“The coming resource wars,” http://www.energybulletin.net/node/13605]
It's official: the

era of resource wars is upon us. In a major London address, British Defense Secretary John Reid warned that global
climate change and dwindling natural resources are combining to increase the likelihood of violent conflict over land,
water and energy. Climate change, he indicated, “will make scarce resources, clean water, viable agricultural land even scarcer”—and this
will “make the emergence of violent conflict more rather than less likely.” Although not unprecedented, Reid’s prediction of an upsurge in
resource conflict is significant both because of his senior rank and the vehemence of his remarks. “The blunt truth is that the lack of water
and agricultural land is a significant contributory factor to the tragic conflict we see unfolding in Darfur,” he declared.
“We should see this as a warning sign.” Resource conflicts of this type are most likely to arise in the developing world, Reid
indicated, but the more advanced and affluent countries are not likely to be spared the damaging and destabilizing effects of
global climate change. With sea levels rising, water and energy becoming increasingly scarce and prime agricultural lands turning into deserts,
internecine warfare over access to vital resources will become a global phenomenon. Reid’s speech, delivered at the prestigious Chatham
House in London (Britain’s equivalent of the Council on Foreign Relations), is but the most recent expression of a growing trend in
strategic circles to view environmental and resource effects—rather than political orientation and ideology—as the most potent
source of armed conflict in the decades to come. With the world population rising, global consumption rates soaring,
energy supplies rapidly disappearing and climate change eradicating valuable farmland, the stage is being set for
persistent and worldwide struggles over vital resources. Religious and political strife will not disappear in this scenario,
but rather will be channeled into contests over valuable sources of water, food and energy. Prior to Reid’s address, the most significant
expression of this outlook was a report prepared for the U.S. Department of Defense by a California-based consulting firm in October 2003.
Entitled “An Abrupt Climate Change Scenario and Its Implications for United States National Security,” the report warned that global climate
change is more likely to result in sudden, cataclysmic environmental events than a gradual (and therefore manageable) rise in average
temperatures. Such events could include a substantial increase in global sea levels, intense storms and hurricanes and continent-wide “dust
bowl” effects. This would trigger pitched battles between the survivors of these effects for access to food, water, habitable land and energy
supplies. “Violence and disruption stemming from the stresses created by abrupt changes in the climate pose a different type of threat to
national security than we are accustomed to today,” the 2003 report noted. “Military confrontation may be triggered by a desperate
need for natural resources such as energy, food and water rather than by conflicts over ideology, religion or national honor.”

Impact: Econ/Enviro/War [2/2] 23

Until now, this mode of analysis has failed to command the attention of top American and British policymakers. For the most part, they insist
that ideological and religious differences—notably, the clash between values of tolerance and democracy on one hand and extremist forms of
Islam on the other—remain the main drivers of international conflict. But Reid’s speech at Chatham House suggests that a major shift in
strategic thinking may be under way. Environmental perils may soon dominate the world security agenda. This shift is due in part to the
growing weight of evidence pointing to a significant human role in altering the planet’s basic climate systems. Recent studies showing the rapid
shrinkage of the polar ice caps, the accelerated melting of North American glaciers, the increased frequency of severe hurricanes and a number
of other such effects all suggest that dramatic and potentially harmful changes to the global climate have begun to occur. More importantly,
they conclude that human behavior—most importantly, the burning of fossil fuels in factories, power plants, and motor vehicles—is the most
likely cause of these changes. This assessment may not have yet penetrated the White House and other bastions of head-in-the-sand thinking,
but it is clearly gaining ground among scientists and thoughtful analysts around the world. For the most part, public discussion of global
climate change has tended to describe its effects as an environmental problem—as a threat to safe water, arable soil, temperate forests, certain
species and so on. And, of course, climate change is a potent threat to the environment; in fact, the greatest threat imaginable. But viewing
climate change as an environmental problem fails to do justice to the magnitude of the peril it poses. As Reid’s speech and the 2003 Pentagon
study make clear, the greatest danger posed by global climate change is not the degradation of ecosystems per se, but rather the disintegration
of entire human societies, producing wholesale starvation, mass migrations and recurring conflict over resources. “As famine, disease, and
weather-related disasters strike due to abrupt climate change,” the Pentagon report notes, “many countries’ needs will exceed their carrying
capacity”—that is, their ability to provide the minimum requirements for human survival. This “will create a sense of desperation, which is
likely to lead to offensive aggression” against countries with a greater stock of vital resources. “Imagine eastern European countries, struggling
to feed their populations with a falling supply of food, water, and energy, eyeing Russia, whose population is already in decline, for access to its
grain, minerals, and energy supply.” Similar scenarios will be replicated all across the planet, as those without the means to survival invade or
migrate to those with greater abundance—producing endless struggles between resource “haves” and “have-nots.” It is this prospect, more
than anything, that worries John Reid. In particular, he expressed concern over the inadequate capacity of poor and unstable countries to cope
with the effects of climate change, and the resulting risk of state collapse, civil war and mass migration. “More than 300 million people in
Africa currently lack access to safe water,” he observed, and “climate change will worsen this dire situation”—provoking more wars like
Darfur. And even if these social disasters will occur primarily in the developing world, the wealthier countries will also be caught up in them,
whether by participating in peacekeeping and humanitarian aid operations, by fending off unwanted migrants or by fighting for access to
overseas supplies of food, oil, and minerals. When reading of these nightmarish scenarios, it is easy to conjure up images of desperate, starving
people killing one another with knives, staves and clubs—as was certainly often the case in the past, and could easily prove to be so again. But
these scenarios also envision the use of more deadly weapons. “In this world of warring states,” the 2003 Pentagon report
predicted, “nuclear arms proliferation is inevitable.” As oil and natural gas disappears, more and more countries will
rely on nuclear power to meet their energy needs—and this “will accelerate nuclear proliferation as countries develop
enrichment and reprocessing capabilities to ensure their national security.” Although speculative, these reports make one thing clear: when
thinking about the calamitous effects of global climate change, we must emphasize its social and political consequences as much as its purely
environmental effects. Drought, flooding and storms can kill us, and surely will—but so will wars among the survivors of
these catastrophes over what remains of food, water and shelter. As Reid’s comments indicate, no society, however
affluent, will escape involvement in these forms of conflict. We can respond to these predictions in one of two ways: by relying
on fortifications and military force to provide some degree of advantage in the global struggle over resources, or by taking meaningful steps to
reduce the risk of cataclysmic climate change. No doubt there will be many politicians and pundits—especially in this country—who will tout
the superiority of the military option, emphasizing America’s preponderance of strength. By fortifying our borders and sea-shores to keep out
unwanted migrants and by fighting around the world for needed oil supplies, it will be argued, we can maintain our privileged standard of
living for longer than other countries that are less well endowed with instruments of power. Maybe so. But the grueling, inconclusive war in
Iraq and the failed national response to Hurricane Katrina show just how ineffectual such instruments can be when confronted with the harsh
realities of an unforgiving world. And as the 2003 Pentagon report reminds us, “constant battles over diminishing resources” will “further
reduce [resources] even beyond the climatic effects.” Military superiority may provide an illusion of advantage in the coming struggles over
vital resources, but it cannot protect us against the ravages of global climate change. Although we may be somewhat better off than the people
in Haiti and Mexico, we, too, will suffer from storms, drought and flooding. As our overseas trading partners descend into chaos, our vital
imports of food, raw materials and energy will disappear as well. True, we could establish military outposts in some of these places to ensure
the continued flow of critical materials—but the ever-increasing price in blood and treasure required to pay for this will
eventually exceed our means and destroy us. Ultimately, our only hope of a safe and secure future lies in substantially reducing our
emissions of greenhouse gases and working with the rest of the world to slow the pace of global climate change.

Stiglitz (mpx author) is awesome! 24
Prefer our evidence – Stiglitz is THE most qualified source on this subject: multiple warrants.
Columbia University 08
[“Brief Biography of Joseph E. Stiglitz,” http://www2.gsb.columbia.edu/faculty/jstiglitz/bio.cfm]
Joseph E. Stiglitz was born in Gary, Indiana in 1943. A graduate of Amherst College, he received his PHD from MIT in 1967, became a full
professor at Yale in 1970, and in 1979 was awarded the John Bates Clark Award, given biennially by the American
Economic Association to the economist under 40 who has made the most significant contribution to the field. He has
taught at Princeton, Stanford, MIT and was the Drummond Professor and a fellow of All Souls College, Oxford. He is now
University Professor at Columbia University in New York and Chair of Columbia University's Committee on Global Thought. He is also the
co-founder and Executive Director of the Initiative for Policy Dialogue at Columbia. In 2001, he was awarded the Nobel
Prize in economics for his analyses of markets with asymmetric information, and he was a lead author of the 1995 Report of the
Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize. Stiglitz was a member of the Council of Economic
Advisers from 1993-95, during the Clinton administration, and served as CEA chairman from 1995-97. He then became Chief Economist and
Senior Vice-President of the World Bank from 1997-2000. In 2008, he was appointed by French President Nicolas Sarkozy to chair a
Commission on the Measurement of Economic Performance and Economic Progress.

Impact: Airline [1/2] 25
Oil shocks affect the Airline industry causing them to collapse

American Chronicle 08 (U.S. Airline Industry Headed Toward 'Catastrophe', http://www.americanchronicle.com/articles/65776, June 21)
At current oil prices, several large and small U.S. airlines will default on their obligations to creditors beginning at
the end of 2008 and early 2009, according to a study issued today by AirlineForecasts, LLC and the Business Travel Coalition. The
study shows that $130/barrel oil prices will increase yearly airline costs by $30 billion, while airlines will be able to
generate only $4 billion in fare increases and incremental fees. The implication of this alarming trend is that several
large and small airlines will ultimately end up in bankruptcy, and of those, some will be forced to liquidate. "If oil prices stay
anywhere near $130/barrel, all major legacy airlines will be in default on various debt covenants by the end of 2008 or early 2009," the study
conducted by AirlineForecasts for BTC states. "U.S. commercial aviation is in full blown crisis and heading toward a
catastrophe."
Oil fueled airline liquidation would cripple the US economy

Reuters 08 (Oil-Fueled Catastrophe in the Airline Industry Would Cripple U.S. Economy and Eliminate... ,http://www.reuters.com/article/pressRelease/idUS29898+23-Jun-
2008+PRN20080623, June 23)
The skyrocketing price of aviation fuel will have devastating implications far beyond new surcharges for checked bags and in-
flight beverage services according to a new study prepared by the Business Travel Coalition (BTC). Not only are U.S. airlines and their
passengers facing their darkest future, but fast-approaching airline liquidations will cripple the U.S. economy that
depends on affordable, frequent intercity air transportation. Massive job losses, supply chain disruption, declining
business activity, shrinking tax revenues, weakened American competitiveness, devastated communities, and reduced
tourism are just some of the predictable results from airline liquidations that could happen as early as the second half
of 2008 as a direct result of unsustainable fuel prices. The paper, "Beyond the Airlines' $2 Can of Coke: Catastrophic Impact on
the U.S. Economy from Oil-price Trauma in the Airline Industry," expands on the analysis released on June 13, 2008 by AirlineForecasts, LLC
and BTC and points to the real news about the airlines' fuel problems: how multiple liquidations at legacy U.S. airlines -- now a serious
possibility -- would have a wide-ranging impact on many facets of the U.S. economy. The report will be presented and discussed during a U.S.
House Small Business Committee hearing scheduled by Chairwoman, Nydia M. Velazquez (D-NY) for Thursday, June 26. "The airline
industry stimulates so much economic activity -- much more than many people currently understand," said BTC
Chairman Kevin Mitchell. "Airline networks are an integral part of the transport grid that supports the U.S. economy, and
without immediate action to bring down fuel costs, we face the economic equivalent of a major blackout later this
year or early next. Unlike in a blackout, however, the cabin lights may never come back on for many U.S. airlines." "The runaway price of
oil is seriously hurting working families at every level, and as the airline fuel crisis intensifies, the risk of major job losses in all travel and
tourism sectors and in other airline-dependent industries increases as well," stated Jean McDonnell Covelli, BTC member and President of The
Travel Team, Inc., a wholly owned subsidiary of Rich Products Corporation. "As a matter of highest priority, elected officials must focus on
devising an energy policy that will keep Americans productively traveling and working." According to the paper, "Airlines move people, but
also high-value, time-sensitive or perishable cargo. Failure of one large airline would disrupt the travel of 200,000 to 300,000
passengers per day and thousands of tons of goods. The almost-full planes of remaining airlines would not be able to
absorb much of these volumes. Failure of multiple airlines would paralyze the country and our American way of life, leaving us less
productive, more isolated, less happy and more vulnerable." The paper points to nine specific impacts of a collapse of the industry: --
Direct Employment. Between 30,000 and 75,000 would lose work immediately with just one airline failure, with payroll
losses of $2.3 billion to $6.7 billion. -- Indirect Community Impact. Losses would ripple throughout communities given
that each airline job creates large numbers of indirect local jobs, and other economic activity.

Impact: Airline [2/2] 26


XT: Shocks Hurt Airlines 27
Oil shocks will lead into liquidation of many Airline carriers

Dispatch Online 08 (Oil price shock puts red light on at US airlines, http://www.dispatch.co.za/article.aspx?id=218193, June 28)
The recent drastic increase in oil prices has created a looming catastrophe for the airline industry that could result in
the liquidation of major carriers, according to a leading industry observer in the US. But one industry analyst said the
report may be too dire. “Airlines are paying about twice as much for fuel as they were just a year ago, and roughly
four times as much as in 2000,” a new report from the Business Travel Coalition said. Carriers were scrambling to
raise fares and fees as a way to compensate, but “what makes this race an uphill climb is that oil prices continue to
rise to previously unthinkable levels – and pushing air travel far beyond affordability for the vast majority of the
traveling public”, the report said. “Multiple US airlines are poised to lose the race for survival, some perhaps before
the end of 2008.” Last week, the price of oil rose 2.69 to close at 134.62 a barrel on the New York Mercantile
Exchange. Congress should be alerted to the magnitude of the airline industry’s problems and the economic fallout
that would result from the failure of one or more major carriers, said Business Travel Coalition chairperson Kevin
Mitchell, whose group represents the interests of business travellers. Airlines collectively had been able to raise
prices by about 3billion annually in recent years, but that gain was now being overwhelmed by an industry-wide
annual fuel-cost increase of 25bn – only 6bn of which had been ameliorated by hedging, he said. After “turning the emergency sirens
on”, legislators and others must take measures to “stabilise the patient, help airlines’ bottom lines” and “get carriers through the winter”, he
said. Airline industry expert Robert Mann said the travel coalition’s vision of the future may be a bit too apocalyptic. The fuel-price crisis “is
serious” but it was “not unforeseeable”, said Mann, whose firm, RW Mann & Co of Port Washington, New York, performs industry analysis
and consulting. Carriers have had the option of hedging against fuel-price spikes for years, yet most, with the exception of Southwest Airlines,
“either were not smart enough or did not care enough” to do so, Mann said. “Still, major carriers probably have enough cash to keep going if
they stop the bleeding.” To do that, airlines must “cut out flying that does not make sense”, Mann added, which they would begin to do after
Labour Day (the first Monday in September) when carriers were to pare less productive routes from their schedules. In addition, fuel-cost
surcharges and other fare increases were likely to ground “whole classes of customers” that airlines could no longer support with budget fares,
Mann said. Network airlines may have to “walk away from huge segments of the population” to concentrate on “relatively high- fare business
travellers” and those who have to fly because of a personal emergency, he said. It would be a “less populist industry”. — © (2008) The New
York Times

XT: Shocks Hurt Airlines 28
Oil shocks are hurting airlines.

Sify Business News 7-21-08
[“Airlines struggle as air travel loses its charm,” http://sify.com/finance/fullstory.php?id=14719882&cid=20742]
The flight purser on my US Airways flight from Philadelphia to Milan announced the name of the movie that would be screened and offered to
provide us headphones for $5 or 5 euros. That did not make sense on two levels. Firstly, $5 (Rs 215) is not the equivalent of five euros (Rs
340). Secondly, after having collected several hundred dollars from me for the ticket, they now wanted an additional five for headphones? Air
travel isn’t the same anymore. There was a time when long distance travel by air meant perquisites like good hot food and metal utensils,
alcoholic drinks, and a range of entertainment choices that came with the package. Now, some airlines are either giving them up or charging
extra for them, making what was part of the product now becoming priced support services. These may well emerge as a basis for competition
in the future. Perhaps the airlines will allow competing food services (McDonald’s or Taj Catering?) to offer their meals in the flight for a fee
and you choose your travel depending on whose food you want! Soaring costs But US Airways has been profitable during the last two years,
after two consecutive years of losing money. Although they are underperforming market averages, they are doing better than
other network carriers. Costs of running an airline are soaring as it should at today’s oil prices. But charging extra for
headphones is hardly going to cut it. US Airways has since announced that it would remove in-flight movie systems from domestic aircraft. The
number of people paying for the headphones had dropped and the systems added weight to the aircraft, increasing fuel use. The airline is
expected to save about Rs 43 crore a year on fuel because of this decision. Air travel has changed in many other ways too, driven by factors that
have had both positive and negative effects on the GNP. The increased security checks and restrictions on what can be carried as part of hand
baggage is a new irritant that seems difficult to get used to. But think of all the hundreds now employed to do security checks, and the new
technologies that have emerged for x-ray scanning of persons and luggage. And the hundreds of bottles of liquids (water, juice, shampoo, etc.)
that have to be thrown out by absent-minded travellers and re-purchased once they cross the security gates. It certainly must have added a per
cent to global growth, and I have not heard of a single thanks expressed to the terrorists by any of the world leaders. Turnaround measures
Major airlines in the US are hurting and searching for turnaround measures. Unlike the oil companies which, blessed with inelastic
demand, continue to make profits like highway thieves in an era of high fuel costs, airlines are in a more competitive
environment. Jet fuel costs have increased over 80 per cent in the last year and are cutting what thin margins were
left. Union agreements undertaken in times of plenty keep costs at a level that does not leave much room to play with. This has reduced many
airlines to desperate measures that have provided fodder for the stand-up comedians of the late-night television shows. Beginning last year,
one by one, they have announced extra charges for checked bags. Only what you carry on-board is included in the ticket price.
(Can you visualise all the passengers now wheeling one of those small suitcases on board and trying to stuff it in the overhead carriage while
you wonder if it will fall on you?)

XT: Airlines K2 Econ 29
Airlines are a primary source of transportation – key to economic development

American Chronicle 08 (U.S. Airline Industry Headed Toward 'Catastrophe', http://www.americanchronicle.com/articles/65776, June 21)
WASHINGTON and RADNOR, Pa. -- At current oil prices, several large and small U.S. airlines will default on their obligations to creditors
beginning at the end of 2008 and early 2009, according to a study issued today by AirlineForecasts, LLC and the Business Travel Coalition.
The study shows that $130/barrel oil prices will increase yearly airline costs by $30 billion, while airlines will be able to generate only $4
billion in fare increases and incremental fees. The implication of this alarming trend is that several large and small airlines will ultimately end
up in bankruptcy, and of those, some will be forced to liquidate. "If oil prices stay anywhere near $130/barrel, all major legacy airlines will be
in default on various debt covenants by the end of 2008 or early 2009," the study conducted by AirlineForecasts for BTC states. "U.S.
commercial aviation is in full blown crisis and heading toward a catastrophe." "Airlines are the primary source of inter-city
transportation, critical to national and local economic development, the flow of human capital, movement of just-in-
time parts for manufacturing, perishable food and other goods critical to our economy," the study says. "With airlines
gravely threatened, so is our economic well-being." Findings: The top 10 U.S. airlines will spend almost $25 billion in higher fuel
costs this year over last year when jet fuel averaged $2.11 per gallon. Fuel hedge benefits could offset $5 to $6 billion of the increased fuel
costs. Earnings for the group, when one-time reorganization charges are removed, were less than $4 billion in 2007, the only year of
profitability this decade. The group could lose as much as $9 billion over the next 12 months if the current range of oil
prices holds. Industry fares will have to increase at least 20% -- across the board and on average -- just to cover the
dramatic gap-up in fuel costs from 2007. This is not possible given the level of uneconomic seat capacity in the
system today. The upshot of higher fares is less traffic, and given a reasonable estimate of price elasticity, the industry will eventually be
forced to shrink its seat capacity by 15% to 20%. However, there is no guarantee that a transition to a smaller, more expensive (for the
consumer) airline industry would be successful and sustainable. Airlines have the ability to raise some cash, and moreover, suppliers such as
aircraft manufacturers, leasing companies and travel management companies will have an incentive to support large airlines that provide a
stream of value. Nevertheless, without a swift reduction in the price of fuel, the industry is headed toward a massive failure that will result in
more bankruptcies, including liquidations. "The U.S. airlines, and those who depend on them, are watching with growing alarm as their cash
reserves fall precipitously toward zero as the price of oil, already at unsustainable levels, continuously spikes into uncharted territory," the
study says. "These airlines have never faced a darker future." "Brand name legacy carriers that we and American communities from coast to
coast have depended upon for decades to provide us with affordable, frequent air service are running out of cash, and therefore, toward a date
with bankruptcy and liquidation," the report warns. "Airlines can attempt to radically shrink the industry," the study states. "But given the
competitive situation they face, it's highly unlikely that they will have the ability to reduce capacity to levels that will allow all of them to
survive. Instead, absent direct policy intervention, the likelihood is several airlines will fail." "Stabilizing this ailing industry must
become a national policy priority," the report states. "Many Members of Congress, federal regulatory officials, state
legislators and Governors have yet to fully appreciate the devastating impact an oil-crippled airline industry will
wreak on our culture and our national and local economies."

Impact: Econ K2 Environment 30
Economic collapse destroys the environment.

Barry 1-14-08, Glen: President and Founder of Ecological Internet, ecognized internationally by the environmental movement as a leading public
intellectual and global visionary committed to communicating the severity of global ecological crises
[“Economic Collapse And Global Ecology,” http://www.countercurrents.org/barry140108.htm]
Humanity and the Earth are faced with an enormous conundrum -- sufficient climate policies enjoy political support only in times of rapid economic growth. Yet this growth is the
primary factor driving greenhouse gas emissions and other environmental ills. The growth machine has pushed the planet well beyond its ecological carrying capacity, and unless
With every economic downturn, like the one now looming in the
constrained, can only lead to human extinction and an end to complex life.
United States, it becomes more difficult and less likely that policy sufficient to ensure global ecological sustainability
will be embraced. This essay explores the possibility that from a biocentric viewpoint of needs for long-term global ecological, economic and social sustainability; it would
be better for the economic collapse to come now rather than later. Economic growth is a deadly disease upon the Earth, with capitalism as
its most virulent strain. Throw-away consumption and explosive population growth are made possible by using up
fossil fuels and destroying ecosystems. Holiday shopping numbers are covered by media in the same breath as Arctic ice melt, ignoring their deep connection.
Exponential economic growth destroys ecosystems and pushes the biosphere closer to failure. Humanity has proven itself unwilling and unable to
address climate change and other environmental threats with necessary haste and ambition. Action on coal, forests, population,
renewable energy and emission reductions could be taken now at net benefit to the economy. Yet, the losers -- primarily fossil fuel industries and their bought oligarchy --
successfully resist futures not dependent upon their deadly products. Perpetual economic growth, and necessary climate and other ecological policies, are fundamentally
incompatible. Global ecological sustainability depends critically upon establishing a steady state economy, whereby production is
right-sized to not diminish natural capital. Whole industries like coal and natural forest logging will be eliminated even as new opportunities emerge in solar energy and
environmental restoration.
Environmental degradation results in extinction.

Diner 94
(Diner, David N. B.S. Recipient. Ohio State University. J.D. Recipient. College of Law. Ohio State University. LL.M. The Judge Advocate General’s School. United States Army.
Judge Advocate’s General’s Corps. United States Army. “The Army and the Endangered Species Act: Who’s Endangering Whom?” Military Law Review. 143 Mil. L. Rev. 161.
Winter, 1994. Lexis-Nexis.)
No species has ever dominated its fellow species as man has. In most cases, people have assumed the God-like power of life and death --
extinction or survival -- over the plants and animals of the world. For most of history, mankind pursued this
domination with a single minded determination to master the world, tame the wilderness, and exploit nature for the
maximum benefit of the human race. n67 In past mass extinction episodes, as many as ninety percent of the existing species perished, and yet
the world moved forward,and new species replaced the old. So why should the world be concerned now? The prime
reason is the world's survival.Like all animal life, humans live off of other species. At some point, the number of species could decline
to the point at which the ecosystem fails, and then humans also would become extinct. No one knows how many
[*171] species the world needs to support human life, and to find out -- by allowing certain species to become extinct -- would not be
sound policy. In addition to food, species offer many direct and indirect benefits to mankind. n68 2. Ecological Value. -- Ecological value is the value that species have in
maintaining the environment. Pest, n69 erosion, and flood control are prime benefits certain species provide to man. Plants and animals also provide additional ecological services --
pollution control, n70 oxygen production, sewage treatment, and biodegradation. n71 3. Scientific and Utilitarian Value. -- Scientific value is the use of species for research into the
physical processes of the world. n72 Without plants and animals, a large portion of basic scientific research would be impossible. Utilitarian
value is the direct
utility humans draw from plants and animals. n73 Only a fraction of the [*172] earth's species have been examined, and
mankind may someday desperately need the species that it is exterminating today. To accept that the snail darter, harelip sucker, or
Dismal Swamp southeastern shrew n74 could save mankind may be difficult for some. Many, if not most, species are useless to man in a direct
utilitarian sense. Nonetheless, they may be critical in an indirect role,because their extirpations could affect a directly useful species negatively. In a
closely interconnected ecosystem, the loss of a species affects other species dependent on it. n75 Moreover, as the number of species decline, the
effect of each new extinction on the remaining species increases dramatically. n76 4. Biological Diversity. -- The main premise of species preservation is
that diversity is better than simplicity. n77 As the current mass extinction has progressed, the world's biological diversity generally has decreased. This trend
occurs within ecosystems by reducing the number of species, and within species by reducing the number of individuals. Both trends carry serious future implications. Biologically
diverse ecosystems are characterized by a large number of specialist species, filling narrow ecological niches. These ecosystems inherently are more stable than less diverse systems.
"The more complex the ecosystem, the more successfully it can resist a stress. . . .like a net, in which each knot is
connected to others by several strands, such a fabric can resist collapse better than a simple, unbranched circle of
threads -- which if cut anywhere breaks down as a whole." n79 By causing widespread extinctions, humans have
artificially simplified many ecosystems. As biologic simplicity increases, so does the risk of ecosystem failure. The spreading Sahara Desert in Africa, and the dust
bowl conditions of the 1930s in the United States are relatively mild examples of what might be expected if this trend continues. Theoretically, each new animal or
plant extinction, with all its dimly perceived and intertwined affects, could cause total ecosystem collapse and human extinction. Each new
extinction increases the risk of disaster. Like a mechanic removing, one by one, the rivets from an aircraft's wings, [hu]mankind may be edging closer to the abyss.

XT: Impact: Econ K2 Environment 31
Economic Growth is key to environmental protection – on balance economic strength is good for the environment
Zey 97 (Michael, Professor of Management at Montclair State University, The Futurist, “The Macroindustrial Era: A New Age of Abundance and Prosperity”, March/April,
http://www.zey.com/Featured_2.htm)
This brings me to one of my major points about the necessity of growth. A recurring criticism of growth - be it industrial, economic, or
technological - centers around its negative consequences. A good example of this is the tendency of economic and industrial growth to
generate pollution. However, I contend that growth invariably provides solutions to any problems it introduces. The
following examples will illustrate my point.Although economic growth can initially lead to such problems as pollution and waste, studies show
that, after a country achieves a certain level of prosperity, the pendulum begins to swing back toward cleaner air and water.
In fact, once a nation's per capita income rises to about $4,000 (in 1993 dollars), it produces less of some pollutants per capita. The
reason for this is quite simple: Such a nation can now afford technologies such as catalytic converters and sewage systems
that treat and eliminate a variety of wastes. According to Norio Yamamoto, research director of the Mitsubishi Research Institute, "We
consider any kind of environmental damage to result from mismanagement of the economy." He claims that the pollution
problems of poorer regions such as eastern Europe can be traced largely to their economic woes. Hence he concludes that, in
order to ensure environmental safety, "we need a sound economy on a global basis."

Impact: Econ K2 Prolif 32
Declining economies result in prolif.

Silk 93, Leonard: Distinguished Professor of Economics at Pace University and Senior Research Fellow at the Ralph Bunche Institute on the
United Nations at the Graduate Center, City University of New York, former economics columnist of The New York Times
[“Dangers of Slow Growth,” From Foreign Affairs, America and the World 1992/3, http://www.foreignaffairs.org/19930201faessay5926/leonard-silk/dangers-of-slow-growth.html]
In the absence of human and capital resources to expanding civilian industries, there are strong economic pressures on
arms-producing nations to maintain high levels of military production and to sell weapons, both conventional and
dual-use nuclear technology, wherever buyers can be found. Without a revival of national economies and the global, the
production and proliferation of weapons will continue, creating more Iraqs, Yugoslavias, Somalias, and Cambodias-
or worse. Like the great Depression, the current economic slump has fanned the fires of nationalist ethnic and religious hatred around the
world. Economic hardship is not the only cause of these social and political pathologies, but it aggravates all of them, and in turn they feed
back on economic development. They also undermine efforts to deal with such global problems as environmental pollution, the production and
trafficking of drugs, crimes, sickness, aids and other plagues. Growth will not solve all those problems by itself. But economic growth-and
growth alone-creates the additional resources that make it possible to achieve such fundamental goals as higher living
standards, national and collective security, a healthier environment, and more liberal and open economies and societies.
Proliferation leads to nuclear war

Utgoff 02, Deputy Director of the Strategy, Forces, and Resources Division of the Institute for Defense Analyses
[Survival, vol. 44, no. 2, Summer 2002, pp. 85–102 “Proliferation, Missile Defence and American Ambitions”]
In sum, widespread proliferation is likely to lead to an occasional shoot-out with nuclear weapons, and that such shoot-outs
will have a substantial probability of escalating to the maximum destruction possible with the weapons at hand. Unless nuclear
proliferation is stopped, we are headed toward a world that will mirror the American Wild West of the late 1800s. With most, if
not all, nations wearing nuclear ‘six-shooters’ on their hips, the world may even be a more polite place than it is today, but every
once in a while we will all gather on a hill to bury the bodies of dead cities or even whole nations.

Impact: Econ K2 Heg 33
Collapse of the U.S. economy would kill heg.

Khalilzad 95, Defense Analyst at RAND
(Zalmay, "Losing the Moment? The United States and the World After the Cold War" The Washington Quarterly, RETHINKING GRAND STRATEGY; Vol. 18, No. 2; Pg. 84)
The United States is unlikely to preserve its military and technological dominance if the U.S. economy declines
seriously. In such an envioronment, the domestic economic and political base for global leadership would diminish
and the United States would probably incrementally withdraw from the world, become in-ward looking, and abandon more and
more of its external interests. As the United States weakened, others would try to fill the vacuum.
The result is global nuclear exchange

<Under the third option, the United States would seek to retain global leadership and to preclude the rise of a global rival or a return to
multipolarity for the indefinite future. On balance, this is the best long-term guiding principle and vision. Such a vision is desirable not as an
end in itself, but because a world in which the United States exercises leadership would have tremendous advantages. First, the
global environment would be more open and more receptive to American values -- democracy, free markets, and the rule of law. Second, such a
world would have a better chance of dealing cooperatively with the world's major problems, such as nuclear proliferation,
threats of regional hegemony by renegade states, and low-level conflicts. Finally, U.S. leadership would help preclude the
rise of another hostile global rival, enabling the United States and the world to avoid another global cold or hot war and all the
attendant dangers, including a global nuclear exchange. U.S. leadership would therefore be more conducive to global
stability than a bipolar or a multipolar balance of power system.

Impact: Econ K2 Terrorism 34
Economic decline results in terrorism.

Bloomberg and Hess 02, S. Brock Bloomberg: Economics Department Claremont McKenna College; Greg Hess: Vice President for Academic
Affairs and Dean of the Faculty/Russell S. Bock Chair of Public Economics and Taxation
[“Terrorism From Within: An Economic Model of Terrorism,” August 2002, http://www.claremontmckenna.edu/econ/papers/2002-14.pdf]
In this paper, we develop and explore the implications of an economic model that links the incidence of terrorism in a country to the economic
circumstances facing that country. We briefly sketch out a theory, in the spirit of Tornell (1998), that describes terrorist activities as
being initiated by groups that are unhappy with the current economic status quo, yet unable to bring about drastic
political and institutional changes that can improve their situation. Such groups with limited access to opportunity
may find it rational to engage in terrorist activities. The result is then a pattern of reduced economic activity and
increased terrorism. In contrast, an alternative environment can emerge where access to economic resources is more abundant and
terrorism is reduced. Our empirical results are consistent with the theory. We find that for democratic, high income countries,
economic contractions (i.e. recessions) can provide the spark for increased probabilities of terrorist activities.
B. Terrorism causes extinction.

ALEXANDER 2k: Yonah, professor and director of the Inter-University for Terrorism Studies in Israel and the United States
[“Terrorism myths and realities,” The Washington Times, 8-28-03, LEXIS]
Last week's brutal suicide bombings in Baghdad and Jerusalem have once again illustrated dramatically that the international
community failed, thus far at least, to understand the magnitude and implications of the terrorist threats to the very survival
of civilization itself. Even the United States and Israel have for decades tended to regard terrorism as a mere tactical nuisance or irritant
rather than a critical strategic challenge to their national security concerns. It is not surprising, therefore, that on September 11, 2001,
Americans were stunned by the unprecedented tragedy of 19 al Qaeda terrorists striking a devastating blow at the center of the nation's
commercial and military powers. Likewise, Israel and its citizens, despite the collapse of the Oslo Agreements of 1993 and numerous acts of
terrorism triggered by the second intifada that began almost three years ago, are still "shocked" by each suicide attack at a time of intensive
diplomatic efforts to revive the moribund peace process through the now revoked cease-fire arrangements [hudna]. Why are the United States
and Israel, as well as scores of other countries affected by the universal nightmare of modern terrorism surprised by new terrorist "surprises"?
There are many reasons, including misunderstanding of the manifold specific factors that contribute to terrorism's expansion, such as lack of a
universal definition of terrorism, the religionization of politics, double standards of morality, weak punishment of terrorists, and the
exploitation of the media by terrorist propaganda and psychological warfare. Unlike their historical counterparts, contemporary
terrorists have introduced a new scale of violence in terms of conventional and unconventional threats and impact. The
internationalization and brutalization of current and future terrorism make it clear we have entered an Age of Super
Terrorism [e.g. biological, chemical, radiological, nuclear and cyber] with its serious implications concerning national,
regional and global security concerns.

Impact: Econ K2 Democracy 35
Economic democracy is one of the U.S.’s principal methods of democracy.

Asia Times 7-22-08
[“Debt capitalism self-destructs,” http://www.atimes.com/atimes/Global_Economy/JG22Dj06.html]
Deeply rooted in US political culture is the view that credit is a financial public utility, much like air and water, and should
be equally accessible to all, not just to the rich. Economic democracy has been the core strength of US political democracy.
Government loan guarantees for students and home mortgages for low- and moderate-income groups and loans to
small business are based on this principle. Yet from time to time, this principle of economic democracy is overshadowed by free-
market extremism to push the nation's economy into extended depressions.
Absent democracy, every impact is more likely.

DIAMOND 92, Larry: senior research fellow at the Hoover Institution at Stanford University
[“Promoting Democracy,” Foreign Policy, No. 87 (Summer, 1992), pp. 25-46, JSTOR]
The impact on democracies demonstrates the fallacy in thinking that “real” interests can be distinguished from the U.S. interest in fostering
democracy. A more democratic world would be a safer, saner, and more prosperous world for the United States. The
experience of this century bears important lessons. Democratic countries do not go to war with one another or sponsor
terrorism against other democracies. They do not build weapons of mass destruction to threaten one another. Democratic
countries are more reliable, open, and enduring trading partners, and offer more stable climates for investment.
Because they answer to their own citizens, democracies are more environmentally responsible. They are more likely
to honor international treaties and value legal obligations since their openness makes it much more difficult to breach them in
secret. Precisely because they respect civil liberties, rights of property, and the rule of law within their own borders, democracies are the
only reliable foundation on which to build a new world order of security and prosperity. A truly new world order means a
qualitatively different world, not just the temporary leashing of dictatorships or incremental progress on arms control, terrorism, and trade.
Promoting democracy must therefore be at the heart of America’s global vision. Democracy should be the central focus—the defining feature—
of U.S. foreign policy.

Impact: Econ K2 Disease 36
Economic collapse fuels the spread of diseases

Goklany 02
(Indur M., D&D Foundation Julian Simon Fellow at the Political Economy Research Center, CATO Policy Analysis #447, “The Globalization of Human Well-Being”, August 22,
http://www.cato.org/pubs/pas/pa447.pdf)
<The United States was able reduce deaths from AIDS because it both was wealthy and had the human capital to address this
disease. But despite the fact that the necessary technology now exists and, in theory, is available worldwide, similar improvements
have yet to occur in Sub-Saharan countries because they cannot afford the cost of treatment, unless it is subsidized by the
governments, charities, or even industries of the richer nations. And indeed such subsidies are exactly what the worldwide effort to contain
HIV/AIDS hopes to mobilize. This is as clear an illustration as any that the greater the economic resources, the greater the
likelihood not only of creating new technologies but, equally important, of actually putting those technologies to use. And
unless technologies are used, they will sit as curios on a shelf, providing no benefit to humanity.>
Specifically – mutated and adapted old diseases are the most likely scenario for extinction
SOUDEN 2k, former Research Fellow in History at Emmanuel College, Cambridge, consultant to the Cambridge Group for the History of
Population and Social Structure
[David, “Killer Diseases,” Factsheet, http://darrendixon.supanet.com/killerdiseases.htm]
Fifty years ago, when penicillin was fairly new, it could cure almost every case of infection caused by the common staphylococcus
bacteria. Over time however, bacteria have absorbed part of penicillin's genetic material into their DNA, and as a result penicillin
has been rendered ineffectual - curing only 10 per cent of cases today. This pattern has been repeated with each successive
advance in antibiotics as the targeted bacteria evolves to outwit the treatment. Today there is a whole new breed of bacteria that cause
'old' diseases (such as pneumonia, sexually transmitted diseases, dysentery and tuberculosis) that are now resistant to traditional
antibiotics. The situation has been worsened by the over-prescription of antibiotics for all manner of ailments, by patients not finishing their
antibiotics, and by the extensive use of antibiotics in animals intended for human consumption. The bacterium Eschericia coli (E. coli) is one
of the common bacteria that people carry in their intestines. However, a dangerous form of E. coli (0157:H7), that causes intestinal
haemorrhaging, has emerged due to evolutionary processes and through the unregulated use of antibiotics for livestock. There have been
serious outbreaks in Britain, the USA and elsewhere: in 1997, a Scottish outbreak infected hundreds, especially the very young and the elderly,
and killed at least twenty people. The source of infection was eventually traced to cooked meats supplied by a butcher. Basic food hygiene
precautions are usually all that is required to prevent the spread of infection. New diseases are not just a problem of the poor, some emerge
specifically because of our wealthy western society. In1976 a strange new disease emerged affecting members of the American Legion who had
attended a convention in a grand Philadelphia hotel. Exhaustive tests failed to find the cause, until finally a rare type of bacterium - legionella -
was discovered. Legionella lives in a film of scum on the surface of water, in dark, oxygen deficient places. In the case of the first outbreak, it
was inhaled from air conditioning units. Although many air conditioning systems have been redesigned to prevent further infection, legionella
still lurks. The disease has been identified in many places since, although usually as an isolated incident rather than mass infection, and it has
even been found in showers. Of those who contract it one in every ten will die. Humans again, unwittingly, created the environment for new
disease by radically changing the wooded environment in inhabited parts of the world. As a result of clearing forests, particularly in New
England in the USA, ticks that usually fed on mice and deer began to feed off humans and passed them a bacterium. The resulting Lyme
disease (named after the Connecticut town where it was first identified) has since been found in many different parts of the world. It causes
similar symptoms to rheumatoid arthritis and can cause long-term disability and even death. No new disease has gripped the imagination and
the world to a greater extent than AIDS and HIV (the human immuno-deficiency virus that is associated with it - (WRONGLY, see vaccines
List ... Ed). Its origins are obscure. Scientists believe that it originated from an isolated and rare virus in Africa, which exploded on to the world
scene in the 1980s. It is most commonly transmitted sexually, or through contaminated blood products. Its spread has also been encouraged by
extensive international travel, war and particularly by sexual liberation and intravenous drug-abuse. AIDS is the number one killer virus and
has the potential to cripple the human race. Its effects are at their starkest in many of the poorest parts of Africa, where poverty means that
drugs to control infection are not available and a lack of effective sex education hastens its spread. The UN conference on AIDS in Africa, held
in July 2000, highlighted the bleak future for many African countries, with extremely low life expectancies, the varying degrees of success in
dealing with the problem, and the potential loss of a whole generation. Few were hopeful, and some predicted chaos and war in the wake of
AIDS. Nature's ability to adapt is amazing - but the consequences of that adaptation are that mutations of old diseases, we
thought were long gone, may come back to haunt us. But of all these new and old diseases, AIDS poses the greatest threat. It has the
capacity to mutate and evolve into new forms, and the treatments that are being developed have to take account of that. Yet the recent
history of life-threatening and lethal diseases suggests that even if we conquer this disease, and all the others described here, there may be yet
another dangerous micro-organism waiting in the wings. The golden age of conquering disease may be drawing to an end. Modern life,
particularly increased mobility, is facilitating the spread of viruses. In fact, some experts believe it will be a virus that
leads to the eventual extinction of the human race.

Impact: Econ K2 Poverty 37
Growth solves Poverty

Vásquez 2001
(Ian, Director of the CATO Institute’s Project on Global Economic Liberty, Economic Perspectives, “Ending Mass Poverty”, September, http://www.cato.org/research/articles/vas-
0109.html)
Economic growth is the "only path to end mass poverty," says economist Ian Vásquez, who argues that redistribution or
traditional poverty reduction programs have done little to relieve poverty. Vásquez writes that the higher the degree of
economic freedom -- which consists of personal choice, protection of private property, and freedom of exchange -- the greater the
reduction in poverty. Extending the system of property rights protection to include the property of poor people would be one of the most
important poverty reduction strategies a nation could take, he says.
The historical record is clear: the single, most effective way to reduce world poverty is economic growth. Western
countries began discovering this around 1820 when they broke with the historical norm of low growth and initiated an era of
dramatic advances in material well-being. Living standards tripled in Europe and quadrupled in the United States in that century,
improving at an even faster pace in the next 100 years. Economic growth thus eliminated mass poverty in what is today
considered the developed world. Taking the long view, growth has also reduced poverty in other parts of the world: in 1820, about 75
percent of humanity lived on less than a dollar per day; today about 20 percent live under that amount.
Even a short-term view confirms that the recent acceleration of growth in many developing countries has reduced
poverty, measured the same way. In the past 10 years, the percentage of poor people in the developing world fell from 29 to 24 percent.
Despite that progress, however, the number of poor people has remained stubbornly high at around 1,200 million. And geographically,
reductions in poverty have been uneven.
B. The systemic impacts of poverty are the same as that of a nuclear war.
ABU JAMAL 98: Mumia, former Black Panther Party activist
[“A Quiet And Deadly Violence,” http://www.mumia.nl/TCCDMAJ/quietdv.htm]
"[E]very fifteen years, on the average, as many people die because of relative poverty as would be killed in a nuclear
war that caused 232 million deaths; and every single year, two to three times as many people die from poverty
throughout the world as were killed by the Nazi genocide of the Jews over a six-year period. This is, in effect, the equivalent of an
ongoing, unending, in fact accelerating, thermonuclear war, or genocide on the weak and poor every year of every decade,
throughout the world." [Gilligan, p. 196] Worse still, in a thoroughly capitalist society, much of that violence became internalized,
turned back on the Self, because, in a society based on the priority of wealth, those who own nothing are taught to loathe
themselves, as if something is inherently wrong with themselves, instead of the social order that promotes this self-loathing. This intense
self-hatred was often manifested in familial violence as when the husband beats the wife, the wife smacks the son, and the kids
fight each other. This vicious, circular, and invisible violence, unacknowledged by the corporate media, uncriticized in substandard educational
systems, and un-understood by the very folks who suffer in its grips, feeds on the spectacular and more common forms of violence that the
system makes damn sure -- that we can recognize and must react to it. This fatal and systematic violence may be called The War
on the Poor. It is found in every country, submerged beneath the sands of history, buried, yet ever present, as
omnipotent as death. In the struggles over the commons in Europe, when the peasants struggled and lost their battles for their communal
lands (a precursor to similar struggles throughout Africa and the Americas), this violence was sanctified, by church and crown, as the "Divine
Right of Kings" to the spoils of class battle. Scholars Frances Fox-Piven and Richard A Cloward wrote, in The New Class War (Pantheon,
1982/1985):

XT: Impact: Econ K2 Poverty 38
Economic growth is key to solving Poverty

UN 06
(http://www.unis.unvienna.org/unis/pressrels/2006/envdev891.html, May 5)
Sustained economic growth, driven by industrial development, was key to poverty eradication and the achievement of
development goals, the Commission on Sustainable Development heard today, as it continued its fourteenth session. At its current
session, the Commission is reviewing progress in meeting internationally agreed goals and targets in the areas of
energy, industrial development, air pollution and climate change. (For background on the session, see Press Release
ENV/DEV/887 .) Many developing countries had experienced significant economic growth rates, owing to industrial
development and their ability to benefit from globalization, it was noted in one of four panel discussions held today. However,
that was not the case for some, particularly the least developed countries and some small island developing States. "The rising tide of
prosperity had led Africa far, far behind", noted Ahmed A. Hamza, Professor Emeritus of Environmental Engineering at Alexandria University
in Egypt, who attributed Africa's lag in industrial development to, among other things, inadequate infrastructure.

A2: Circuit Breakers Solve 39
Turn: While certain aspects of circuit breakers may be beneficial, it results in irrational decision making and
unnecessary investor panic, further worsening the condition of the economy.
Ackert, Church, and Jayaraman 02, Lucy F. Ackert: recipient of a Smith Breeden Prize for Distinguished paper in the Journal of Finance
Professor of Finance in the Michael J. Coles College of Business at Kennesaw State University and Visiting Scholar at the Federal Reserve Bank of
Atlanta; Bryan K. Church: faculty director of the Accounting PhD Program at Georgia Insitute of Technology; and Narayanan Jayaraman: Area
Coordinator for Finance at the Georgia Institute of Technology
[“Circuit Breakers with Uncertainty about the Presence of Informed Agents: I Know What You Know . . . I Think,” http://www.frbatlanta.org/filelegacydocs/wp0225.pdf]
This study examines the effect of circuit breakers on market behavior when agents are uncertain about the presence of private
information. Circuit breakers have the potential to play a useful role under these conditions if unwarranted price movements are
tempered. Most notably, if agents mistakenly infer that others possess private information, circuit breakers may prevent prices from deviating
from the uninformed expectation. Our results indicate unequivocally that circuit breakers have no beneficial effect in
tempering unwarranted price movements. In fact, breakers that trigger a temporary halt appear to have a detrimental
effect. Our data suggest that with a temporary halt, agents are more likely to mistakenly infer that others possess private
information, which causes price to move away from the uninformed expectation. We do not find a similar result with market
closure. Notably, in periods without private information, price deviations from the uninformed expectation are greater in markets with
temporary halts than in those with market closure. This result raises an interesting question. If temporary halts fail to prevent unwarranted price
movements, why would the possibility of market closure cause prices to be closer to the uninformed expectation? When faced with the
possibility of a trading interruption, agents in our markets, as in securities markets like the NYSE, are faced with
making decisions under time pressure. In such a situation, the decision-maker faces a real dilemma because mistakes
can be made by acting too quickly or by waiting too long, particularly as windows of opportunity may no longer be
available (Payne, Bettman, Luce (1996)). In the case of a temporary halt, windows of opportunity re-open as the market does. With market
closure looming, traders are subject to greater time pressure. They have fewer opportunities to reverse decisions or
act on information. A vast literature in psychology and decision-making examines how people respond under time pressure. Importantly,
individuals may adapt and accelerate information processing and focus on important information (Ben Zur and Breznitz (1981)). With
moderate time pressure, decision makers’ performance improves, as they focus on relevant cues and exclude the peripheral (Easterbrook
(1959)). Decision makers increase speed so that they can incorporate more relevant information in the time available. Consistent with this
evidence, in our experiment the threat of market closure may have the effect of forcing participants to rapidly assimilate
relevant, available information. As pointed out by Eisenhardt (1993, page 121), in environments with great stress due to
time pressure, “the decision-making dilemma … comes from the fact that it is easy to make mistakes by deciding too
soon and equally ineffective to delay choices or to imitate others.” Traders are time constrained so that the risks inherent in
imitating others are significant. They must focus on important information and avoid dwelling on extraneous cues. By comparison, in markets
with temporary halts, agents have extra time on their hands when the circuit breaker rule is triggered. The temporary halt may cause agents to
focus on irrelevant information, which has an unfavorable effect on price behavior. Our results suggest that further research is necessary
to systematically investigate the effects of time pressure and introspection on investors’ behavior. A laboratory setting
provides a conducive environment to perform such research. The data fail to suggest that circuit breakers have a
significant impact on trading volume or allocative efficiencies in our markets. We conclude that circuit breakers play
no useful role whatsoever in our experimental asset markets.

A2: SPR Solves 40
Utilizing the SPR would endanger security and simply not work.
KSBW News 7-17-08, NBC affiliate for the Monterey-Salinas-Santa Cruz, California
[“Editorial: Strategic Oil Reserve,” http://www.ksbw.com/editorials/16924693/detail.html]
Farr along with many other lawmakers thinks the President should open the nation’s Strategic Petroleum Reserve to increase supply…and, in
theory lower prices. The Strategic Petroleum Reserve – the “SPR” - was setup after the huge Gas Crisis back in ’73-‘74, and
it’s basically a place where the federal government stores oil to use in case this nation’s oil supply is disrupted. Its
mission is to prevent a national emergency from becoming a national disaster by providing at least a short term oil
supply during a crisis. It is not – nor should it become – a device to try to get the government in the way of free
market forces. Yes, we’re all feeling the pain at the pump, but putting the nation’s security at risk for each of us to save just a
few cents is, quite literally, penny wise but pound foolish. It’s questionable if releasing any oil from the SPR would actually
have an impact on prices. And if it did, it would likely be only for a few days. But there’s no question that it would drain our
rainy-day oil supply when there is no true national emergency. President Bush is right to resist pressures to open the SPR. Congressman Farr
and other lawmakers who disagree should stop pandering to voters with their quick-fix scheme, and get on with talking about real, substantive
solutions to our nation’s energy challenges.
The SPR simply wouldn’t work: four reasons.

Chicago Tribune 7-14-08
[“Strategic Petroleum Reserve not the right answer,” http://www.chicagotribune.com/news/opinion/letters/chi-080714oil_briefs,0,1429479.story]
Some politicians and pundants are talking about using the Strategic Petroleum Reserve to try to fix prices. 1) It was
not and is not intended to be used for market influence. 2) It is not the job of the government to become a player in
any market. 3) It will not have significant effect if any. 4) If there is a disruption due to war, terrorism, accident, or
natural disaster, depletion of the reserve will prevent it from fulfilling its proper purpose.

A2: ANWR Solves 41
Drilling in ANWR would take decades to occur and only lower prices by a few cents – shocks would still occur –
only a shift to alternative energy would solve.
Wall Street Journal 6-27-08
[“Drilling in ANWR Isn't the Answer,” http://online.wsj.com/article/SB121453925066710195.html?mod=googlenews_wsj]
The views expressed by your paper's editors ("McCain's Energy Drill," June 18) and two days later by American Petroleum Institute President
Red Caveney ("The 'Idle' Oil Field Fallacy," June 20) miss the point on many counts. The Arctic National Wildlife Refuge has no
"proven" reserves, as your June 18 editorial states. The most recent estimates from the U.S. Energy Information
Administration suggest that oil drilling in the Arctic Refuge would have practically no effect on gasoline prices. The
destruction of this pristine protected wildland would help consumers save only a few pennies per gallon, two decades
down the road. The U.S. uses nearly 25% of the world's oil, yet has only 3% of the world's oil reserves. This fundamental imbalance
between supply and demand would not change -- and therefore would be incapable of driving down prices at the pump -- even if we were to
drill every square inch of every acre of protected public lands. To address the problem of high gas prices, we must move away
from oil and toward national policies that reward conservation and speed the development of renewable energy
sources. The oil industry has a vested interest in continuing the energy policies of the 20th century. Real leaders will understand that
we will never be able to drill our way to energy independence and will move aggressively to pursue 21st-century
solutions.

A2: Shocks good ( renewables) 42
Shock-induced alternative energy simply wouldn’t work – we must begin investing immediately. Such a transition
would be a violent crash, rather than a soft landing recession.
Heinberg 10-6-04, Richard: Senior Fellow of Post Carbon Institute
[“The Consequences of Oil Dependency,” http://www.energybulletin.net/node/2431]
However, the long-term implications of our dependency on quickly depleting non-renewable oil are seldom explored. Oil and gas account for
the lion’s share of US energy consumption and are critical to transportation, home heating, and electricity generation. Soon we will have less
of these fuels to go around, despite an expanding population and the constant demand for more energy to fuel economic growth. Economists
tell us that higher oil prices will stimulate investment in energy alternatives. However, the prospects for a painless
market-driven transition away from fossil fuels are hardly encouraging. Globally, trillions of dollars will have to be
spent on research and on new infrastructureÑtens or hundreds of billions per year, starting immediately. We are not
seeing anything like that level of investment now; we have to assume that it will begin after the global oil peak (that is,
after an obvious price signal making alternatives more attractive). But then, with less energy available to fuel the economy, we
will have trouble simply maintaining basic services. There won’t be any surplus to jumpstart the new energy
infrastructure, which will take decades to build. High energy prices will cause recessions, destroying demand. Then,
reduced demand will lead to partial relaxations of energy prices. Temporarily lowered prices will stimulate economic recovery and hence
renewed demand, which will again be constrained by declining rates of oil extraction, leading to more recessions, and so on. In other words,
as demand begins to exceed supply, expect increasing price volatility, with a general upward and steepening
underlying price trend. The ultimate consequence will be a global depression worse than that of the 1930s.
Oil shocks do not spur energy renewable sources – they just create havoc
Gupta 08 (A.K., The Indypendent, http://www.indypendent.org/2008/07/19/oil-shock/, July 19)
The 1970s oil shock was due to geopolitics — rising nationalism, the 1973 Arab-Israeli War and the overthrow of the Shah in 1979.
The causes of this energy crisis are similar. The U.S. invasion of Iraq, saber-rattling and sanctions against Iran, attempts to topple Venezuela’s
Hugo Chavez and energy nationalization from Bolivia to Russia has crimped supplies. So if there is another significant recession, demand will
eventually drop, surplus capacity will rise and prices will tumble, ending any marketbased incentive to move away from
fossil fuels. In the meantime, the oil shock will cause a rapid economic transition. A poll conducted earlier this year in the
Sacramento, California, area found that gasoline prices were the top concern and “12 percent of respondents had changed jobs or moved in the
past year to shorten their commute to work.”

A2: Economy Resilient 43
The economy is not resilient, we’re on the brink of recession – multiple reasons.
[“Nouriel Roubini predicts the worst financial crisis since the Great Depression,” http://winnipeg.indymedia.org/item.php?18440S]
New York, July 15, 2008- In a series of recent writings on the RGE Monitor Nouriel Roubini – Chairman of RGE Monitor and Professor of
Economics at the NYU Stern School of Business - has argued that the U.S. is experiencing its worst financial crisis since the
Great Depression and will undergo its worst recession in the last few decades. His analysis leads to the following conclusions: * This is by
far the worst financial crisis since the Great Depression * Hundreds of small banks with massive exposure to real estate (the average
small bank has 67% of its assets in real estate) will go bust * Dozens of large regional/national banks (a’ la IndyMac) are also
bankrupt given their extreme exposure to real estate and will also go bust * Some major money center banks are also semi-insolvent and
while they are deemed too big to fail their rescue with FDIC money will be extremely costly. * In a few years time there will be no major
independent broker dealers as their business model (securitization, slice & dice and transfer of toxic credit risk and piling fees upon fees rather
than earning income from holding credit risk) is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental
flaw in their structure (i.e. the four remaining U.S. big brokers dealers will either go bust or will have to be merged with traditional commercial
banks). Firms that borrow liquid and short, highly leverage themselves and lend in longer term and illiquid ways (i.e. most of the shadow
banking system) cannot survive without formal deposit insurance and formal permanent lender of last resort support from the central bank. *
The FDIC that has already depleted 10% of its funds in the rescue of IndyMac alone will run out of funds and will have to be recapitalized by
Congress as its insurance premia were woefully insufficient to cover the hole from the biggest banking crisis since the Great Depression *
Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well
connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out
shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders
such a plan bails out shareholders, managers and creditors at a massive cost to U.S. taxpayers. * This financial crisis will imply credit
losses of at least $1 trillion and more likely $2 trillion. * This is not just a subprime mortgage crisis; this is the crisis of an
entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to
unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds
that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump
from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds
and where counterparty risk – and the collapse of many counterparties – will lead to a systemic collapse of this market. * This will be the most
severe U.S. recession in decades with the U.S. consumer being on the ropes and faltering big time as soon as the temporary effect of
the tax rebates will fade out by mid-summer (July). This U.S. consumer is shopped out, saving less, debt burdened and being hammered by
falling home prices, falling equity prices, falling jobs and incomes, rising inflation and rising oil and energy prices. This will be a long,
ugly and nasty U-shaped recession lasting 12 to 18 months, not the mild 6 month V-shaped recession that the delusional consensus
expects. * Equity prices in the US and abroad will go much deeper in bear territory. In a typical US recession equity prices fall by an average
of 28% relative to the peak. But this is not a typical US recession; it is rather a severe one associated with a severe financial crisis. Thus,
equity prices will fall by about 40% relative to their peak. So, we are only barely mid-way in the meltdown of stock markets. * The rest of
the world will not decouple from the US recession and from the US financial meltdown; it will re-couple big time.
Already 12 major economies are on the way to a recessionary hard landing; while the rest of the world will
experience a severe growth slowdown only one step removed from a global recession. Given this sharp global economic
slowdown oil, energy and commodity prices will fall 20 to 30% from their recent bubbly peaks. * The current U.S
recession and sharp global economic slowdown is combining the worst of the oil shocks of the 1970s with the worst of
the asset/credit bust shocks (and ensuing credit crunch and investment busts) of 1990-91 and 2001: like in 1973 and 1979 we are facing a
stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an
outright recession. Also, like 1990-91 and 2001 we are now facing another asset bubble and credit bubble gone bust big time: the housing and
overall household credit boom of the last seven years has now gone bust in the same way as the 1980s housing bubble and 1990s tech bubble
went bust in 1990 and in 2000 triggering recessions. And a similar housing/asset/credit bubble is going bust in other countries – U.K., Spain,
Ireland, Italy, Portugal, etc. – leading to a risk of a hard landing in these economies. * But over time inflation will be the last
problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in
inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in
labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order
of 20-30% will further reduce inflationary pressure. The Fed will have to cut the Fed Funds rate much more – as severe downside risks to
growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a
collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end
of this financial disaster and severe recession cycle.
A2: Shocks Empirically Denied 44
The situation is different now, being a combination of oil shocks and credit problems.
[“A deadly cocktail mix: the 1973 & 1979 “Stagflation” meets the 1990 and 2001 “Asset/Credit Bust” with the result being an ugly U.S. recession and sharp global slowdown,”
Roubini Global Economics, http://www.rgemonitor.com/blog/roubini/252887/]
It now appears that the U.S. and global economy is facing the worst of the shocks that led to the U.S./Global
recessions of 1974-75 and 1980-82 (stagflationary shocks from oil prices) together with the shocks (asset/credit bubbles
gone bust) that led to the recessions of 1990-91 and 2001. The combined mix of the worst shocks that led to the last
four U.S. and global recessions (1974-75, 1980-82, 1990-91, 2001) is thus quite deadly and therefore one of the reasons
why this will not be a short and shallow recession (V-shaped and lasting only 6 months) in the U.S. but rather a longer, uglier
and deeper one (U-shaped and lasting 12 to 18 months).
Not true – conditions are different now.

IHT 6-30-08, International Herald Tribune
[“Inflation, oil dependence and the Fed's next step,” http://www.iht.com/articles/2008/06/30/opinion/edoil.php]
The Fed is in a bind. If it keeps rates low and loans plentiful to combat a recession, inflation could worsen. If it raises rates and tightens the
money spigot to fight inflation, the downturn could be deepened and prolonged. History may not be a reliable guide. It is easy to
draw analogies to eras like the stagflationary 1970s. Then, high prices led to higher wages and the dreaded wage-
price spiral. Raising interest rates increased unemployment and slowed wage growth, choking inflation. But today,
wages are barely budging, even as prices go up. Rate hikes to fight today's inflation - which stem from commodity
prices, not wages - may not be the fix they once were.

A2: Econ Collapse Empirically Denied 45
Not true – modern technologies that we didn’t have in the ‘20s puts us at an even greater risk.
Champion 99, Scott: international finance expert for Share International
[“To the precipice,” http://www.shareintl.org/archives/economics/ec_sctoprecipice.htm]
With the sophistication of computers and modern telecommunications, we have placed ourselves in a much greater
risk position than in 1929. It is not a question of whether or not the system will fail, but when. The Law of Cause and
Effect ever holds sway. Ultimately, the world's central bankers will not have the ability to prop up the world's collapsing
financial structure. The last deflation ended with the advent of World War II as the Allied forces increased economic
production to fight the Axis powers. It may well take a similar coming together of the world's peoples to end the next
deflation. Let each of us in the West hope that, if it takes a war, it will be the coming war to end for ever the suffering of the world's poor and
neglected, their hunger and hopelessness, and our shame.

A2: Alt Causes 46
Alt causes are irrelevant – oil prices are the ONLY thing that can cause a recession.
Gosselin, 5-24-08 Peter G.: Los Angeles Times Staff Writer, economics correspondent for The Boston Globe
[“Relentless rise in oil prices tests economy's resilience,” http://www.latimes.com/business/la-fi-econ24-2008may24,0,6841046,full.story]
WASHINGTON -- Only a few weeks ago, prominent policymakers and economists were cheerfully asserting that the
U.S. economy would dodge recession and keep chugging forward despite a housing bust, a credit crunch and continuing
job losses. "The data are pretty clear that we are not in recession," said President Bush's chief economist, Edward
Lazear. Treasury Secretary Henry M. Paulson Jr. declared "the worst is likely to be behind us" and confidently predicted that more than $100
billion in tax rebates would help create half a million new jobs by the end of the year. But instead of clearing, the skies over the
economy have ominously darkened in recent days. The chief reason is oil. And there are signs the nation may have
reached an economic tipping point after years of shrugging off the petroleum problem. "We may finally have crossed
the line where the price of crude actually matters for most companies," said Peter Boockvar, equity strategist at New York
financial firm Miller Tabak & Co. "The stock market has been in la-la land when it comes to oil, but they got a pretty good
dose of reality the last few days." The ill effects of the latest price hikes would not be so surprising if it were not for the fact that the
nation's economy and financial markets remained blissfully unruffled by oil's upward march during most of the last five years. Until this week.
"The economic outlook has been taken hostage by the relentless surge in oil prices," said Robert V. DiClemente, chief U.S.
economist at Citigroup in New York. "We're seeing an inexorable increase, and it doesn't seem like anybody's in charge or
can do anything about it," added Bank of America senior economist Peter E. Kretzmer.

A2: high growth disproves 47
High growth forecasts now don’t disprove the shock risk

New Zealand News 7-16-08
[“US economy still at risk – Bernanke,” http://www.radionz.co.nz/news/latest/200807160729/26d848a]
The head of the United States central bank has warned there are still what he calls "downside risks" to economic growth
in the world's largest economy. In remarks to the US Senate Banking Committee on Tuesday, Federal Reserve chairman Ben
Bernanke said rising energy and food prices are raising inflation risks. Dr Benanke also said that financial markets and
institutions are under great stress. He stressed that the outlook for economic growth and inflation was unusually
uncertain. The Fed has raised its inflation forecast to a range of 3.8% - 4.2%, up substantially from its previous
projection of 3.1% - 3.4%.

A2: Price Increases Only Temporary 48
Our current dependence on foreign oil creates a never-ending cycle where increases in production directly increase
oil prices as well. Absent a shift to renewables, the price of oil will continue increasing.
Alan Reynolds 05, Senior Fellow at the Cato Institute, formerly Director of Economic Research at the Hudson Institute, Research Director with
National Commission on Tax Reform and Economic Growth, advisor to the National Commission on the Cost of Higher Education
Oil Prices: Cause and Effect; CATO INSTITUTE; http://www.cato.org/pub_display.php?pub_id=3947
U.S. industries use petroleum to produce the synthetic fiber used in textile mills making carpeting and fabric from
polyester and nylon. U.S. tire plants use petroleum to make synthetic rubber. Other U.S. industries use petroleum to
produce plastic, drugs, detergent, deodorant, fertilizer, pesticides, paint, eyeglasses, heart valves, crayons, bubble
gum and Vaseline. When the cost of oil goes up, production costs are increased and profits reduced for industries that
depend on oil. Producer costs -- not consumer gasoline costs -- are the reason high oil prices threaten to shrink industrial
production of goods directly affected and also of energy-intensive products such as aluminum and paper. This threat
affects all new and old industrial economies, whether those nations import or export oil.

A2: Middle East = Reliable Oil 49
The market is uniquely vulnerable to non-OPEC countries, especially in Africa.

CFR 05, Council on Foreign Relations
[“The Pernicious Effects of Oil,” http://www.cfr.org/publication/8996/pernicious_effects_of_oil.html]
Given the tight supply and surging demand of the world oil market, small countries that produce oil can have a major
impact on global markets. This is in contrast to many previous oil shocks, when international cartels like the
Organization of Petroleum Exporting Countries (OPEC) effectively controlled world oil supply. As a result, the impact of
corruption and mismanagement in countries like Angola, Chad, and Nigeria-which can lead to unrest and force halts
to production-are magnified on a global scale. For example, ethnic strife in the southern Nigerian town of Warri in March
2003 shut down 40 percent of Nigeria's oil production for several weeks. "When the market's as tight as it is now,
every barrel of export counts," says Richard Karp of the American Petroleum Institute, a trade organization. "Community strife or local
unrest" in small countries can raise oil prices around the world, he says.

A2: Recession Inevitable 50
Recession is inevitable, but we must keep the soft landing recession – decreasing fossil fuel reliance is the best way.
Christian Science Monitor, 5/12/08
Christian Science Monitor, May 12, 2008, Monday, Oil Shock 2?, BYLINE: Mark Clayton Staff writer of The Christian Science Monitor, SECTION: Money & Values; Pg. 13
Unlike the 1970s, when an oil embargo left Americans waiting in long lines at gasoline stations and paying higher prices, today's
oil crisis
has been stealthy. Its economic impact has been masked by consumers tapping credit cards and home equity to cover
the rising cost of energy and some consumer goods. "We're having a replay of the 1970s without the Arab oil embargo part, so it's
been hard for many people to see," says Amy Myers Jaffe, an energy scholar at the Baker Institute at Rice University in Houston. Even with US
airlines cutting flights and SUV sales now tanking, the effects of expensive oil on the American family could be stark, Wescott's report says. In
2003, with oil approaching $40 per barrel, the average US family spent about $1,900 (4.8 percent of its income) on natural gas, heating oil, and
gasoline. But today at the $120 per barrel level, a family will spend about $6,000 a year or about 15 percent of total annual income, Wescott's
report predicts. Compared with the oil crises of the 1970s, the US paradoxically is in a bit better, yet also worse, position. The good news is
the US economy is less energy intensive - using only about half the energy it did in the 1980s to produce a dollar of
economic growth. That should make it more resilient. But the bad news is that imported oil has risen to about 12
million barrels a day, about 60 percent of the 21 million barrels the US consumes daily. That financial drain at $120
per barrel is jamming the brakes on the US economy and inflating the trade deficit, economists agree. "The question
now isn't whether we're going into recession, it's whether there will be a soft landing ... or we have a hard landing,"
Ms. Jaffe says. Nariman Behravesh, chief economist at Global Insight, Lexington, Mass., has done economic projections with oil at even higher
prices. While oil at $120 a barrel "makes a mild recession a little deeper," the results of oil at $150 would be much
worse with the nation "looking at a fairly serious recession." But where there is awareness of the problem there is
hope. Perhaps nobody knows better what the nation could do - but mostly has not yet done - than Amory Lovins. An
American energy guru since the gas lines of the 1970s, he has focused like a laser beam on how the nation can save
energy. "What we need to do to cut oil consumption is quite clear," says the cofounder of the Rocky Mountain
Institute, an energy think tank in Snowmass, Colo. "But attention keeps getting focused on the wrong things - like
subsidies for the oil industry to find more oil. That's the wrong way to go."

Inflation 1AC [1/7] 51
ADVANTAGE ____ IS INFLATION
Scenario 1: Inflation
Oil prices are pushing cost push inflation higher, though wage price remains unaffected.
Christian Science Monitor, 7/17/08
Christian Science Publishing Society, All Rights Reserved, Christian Science Monitor, July 17, 2008, page 1, Thursday
Inflation surge puts Fed in a quandary, Mark Trumbull Staff writer of The Christian Science Monitor
The troubling part was not so much the headline [inflation number]," says Jay Bryson, an economist at Wachovia Corp. in Charlotte, N.C.
While the overall rate is what burdens consumers, the bigger worry for Fed policymakers was a sign that higher oil
prices are feeding into a more generalized rise in prices. The so-called core rate of inflation, with food and energy
prices stripped out, rose 0.3 percent for the month. Rising oil prices have been a global phenomenon, driven largely
by demand in emerging markets, that the Fed has little control over. But if last month's rise in the core rate persists, it
would be a sign of a widening inflation problem, Mr. Bryson says. "You're looking at a 3.5 percent [annual] core
inflation rate, which is way too high for the Fed's liking," he says. So far, prices for one of the key costs businesses face
- labor - show little sign of spiraling out of control. Because wages aren't rising very fast, that also limits the ability of businesses to
pass along price hikes.
Unrestrained inflation will cause us to go into a Great Depression through hyper-inflation.

Williams, 4/8/08
Shadow Government Statistics, http://www.shadowstats.com/article/292, Walter J. "John" Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth
College in 1971, and was awarded a M.B.A. from Dartmouth's Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his
career as a consulting economist, John has worked with individuals as well as Fortune 500 companie, “That began a lengthy process of exploring the history and nature of economic
reporting and in interviewing key people involved in the process from the early days of government reporting through the present. For a number of years I conducted surveys among
business economists as to the quality of government statistics (the vast majority thought it was pretty bad), and my results led to front page stories in the New York Times and
Investors Business Daily, considerable coverage in the broadcast media and a joint meeting with representatives of all the government's statistical agencies. Despite minor changes to
the system, government reporting has deteriorated sharply in the last decade or so. -- John Williams”
From the Fed’s standpoint, it can neither stimulate the economy nor contain inflation. Lowering rates has done little
to stimulate the structurally-impaired economy, and raising rates may become necessary in defense of the dollar.
Similarly, raising rates will do little to contain a non-demand driven inflation, such as seen in the current
circumstance that is so heavily affected by high oil prices. By the time hyperinflation kicks in, the economy already
should be in depression, and the hyperinflation quickly should pull the economy into a great depression. Uncontained
inflation is likely to bring normal commercial activity to a halt. Such is consistent with the final graph in this group, which shows
household income dispersion at historic highs.

Stagflation is being fueled by cost push inflation, and can only be avoided if cost burden is taken off consumers.
Toronto Star, 4/20/08
Copyright 2008 Toronto Star Newspapers, Ltd. The Toronto Star, April 20, 2008 Sunday, EDITORIAL; Pg. A16
Economy needs a break
Stagflation. With oil and grain prices soaring to record highs at the same time that growth in the world economy is
being dragged down by recession in the U.S., that ugliest of economic words is being heard more and more often.
When the two diseases that make up stagflation - weak growth and rising inflation - come together, the problem is
that policy-makers' attempts to confront one only worsen the other. For example, lowering interest rates to boost
growth tends to feed the inflationary fires and exacerbate that problem. By the same token, raising interest rates to
reduce inflation also has the effect of sucking even more life out of an already stagnant economy. It's a no-win situation,
as Canadians learned the hard way in the 1970s and early 1980s. But while inflation is up in the U.S. (4 per cent), Europe (to a
16-year high of 3.6 per cent) and China (8.7 per cent in February), in Canada it continues to decline. Last Thursday,
Statistics Canada reported that despite a 5.4 per cent rise in the price of energy, the overall Consumer Price Index increased only 1.4 per cent
(year over year) in March, its fourth consecutive monthly decline. With no evidence that inflation is picking up in Canada, the Bank of Canada
has a great deal of leeway in focusing on the problem of weak growth, as it said it would do in recent pronouncements. Although the U.S.
is following the same stimulative policy with even larger interest rates cuts because of fears of a deepening recession,
some economists worry that it could be setting the stage for a period of stagflation. So what has set Canada apart in
creating the policy flexibility that other countries do not enjoy? The fact is that Canada has bought - and paid for -
this flexibility, partly through its rising dollar and partly through its reaction to the competitive squeeze the dollar
created. While the rise in the dollar has helped moderate inflation by keeping import prices down, it has also made it that much more difficult
for Canadian producers, and especially manufacturers, to compete globally for business. The overall Consumer Price Index suggests that
Canadian business has swallowed a large part of the increases in energy costs instead of passing them on to consumers. This can even be seen
in the food index: Despite the steep 9 per cent increase in the price of bakery products caused by the run-up in grain prices (wheat prices have
more than doubled in the past year), overall food prices have increased by only 0.4 per cent.
The settling stagflation will result in a global economic collapse.

Hendon, 7/10/08
Ray Hendon has business degrees from the University of Alabama (B.S. in Commerce and Business Administration) and Louisiana Tech University [MBA] as well as advanced
graduate studies at New York University School of Business in economics, statistics and finance. He is a member of the honorary scholastic society, Beta Gamma Sigma. He taught
economics and finance in several universities in the United States, and is now retired and lives in northern California. He continues advising a small clientèle on portfolio
construction, and writes on financial matters. Seeking alpha. http://seekingalpha.com/article/84368-stagflation-and-the-limits-of-growth
Regardless of where you look, there are clouds either overhead, as in the U.S., or on the horizon and blowing towards shore, as in Europe, Asia,
Africa, and Latin America. The old giants are staggering, and the new ones will be soon! The table below (click to enlarge), taken from
Bloomberg, is a little outdated in what to expect in terms of real growth, but it is the latest available. In my view, and increasingly that
of many others, real GDP growth in the U.S. and probably Europe will decline for 2008, and not be much better in
2009. Stagflation will not be a purely local affair for us. Of course, there is no agreement about the severity or
longevity of the downturn. There never is. But slower times are upon us, and the greater fear is that it could turn into
a 1930s scenario of economic activity spiraling downward. This scenario unfolds like this: to protect themselves, the
developed nations (the U.S. and Euroland, e.g.) will blame everyone else and begin pulling back from their bilateral
and multilateral trade agreements. This they will do, trying to protect their domestic workforce from falling real
wages and businesses from the effects of higher commodity prices. This, in turn, would be met by retaliation of our
former partners in the developing world, in the form of trade embargoes, higher tariffs and inflated currencies. World
trade plummets, and the heady times of ever expanding world economies comes to an end. It’s a horror of a scenario,
and it did happen in the early stages of the 1930s depression.

A global effort to shift to alternate energy is critical to keep the economy going and to avoid stagflation.
Washington Post, 7/3/08
Ban Ki-Moon, The Washington Post, EDITORIAL COPY; Pg. A17, Global Action to Save Global Growth
Global growth is the leitmotif of our era. The great economic expansion, now in its fifth decade, has raised living standards worldwide and
lifted billions out of poverty. Yet today, many wonder how long it can last. The reason: Plenty comes at an increasingly high price.
We see it daily in the rising cost of fuel, food and commodities. Consumers in developed countries fear the return of
"stagflation" -- inflation coupled with slowing growth or outright recession -- while the world's poorest no longer can
afford to eat. Meanwhile, climate change and environmental degradation threaten the future of our planet. Population growth and rising
wealth place unprecedented stress on the Earth's resources. Malthus is back in vogue. Everything seems suddenly in short supply:
energy, clean air and fresh water, all that nourishes us and supports our modern ways of life. As the leaders of the Group of
Eight gather here, we know that these issues affect us all: north and south, large nations and small, rich and poor. And we know we must find
ways to extend the benefits of the global boom to those who have been left behind, the so-called "bottom billion." In dealing with problems of
such dimension and complexity, there is only one possible approach: to see them for what they are -- as parts of a whole requiring a
comprehensive solution. A big part of that solution should be a "global supply-side response," as some economists put it, grounded in
sustainable development -- nations, international financial organizations, the United Nations and its various agencies working as one. Begin
with the global food crisis. It has many causes, among them a failure to give agricultural development the importance it deserves. What's
needed, in effect, is a "green revolution" of the sort that once transformed Southeast Asia, this time with a focus on small farmers in Africa.
With the right mix of programs, there is no reason productivity cannot be doubled within a relatively short span, easing scarcity worldwide.
We've seen it happen in Malawi, which, with international assistance, has shifted within a few years from being a country plagued by famine to
one that exports food. In Hokkaido, I will call on G-8 nations to triple official assistance for agricultural research and development over the
next three to five years. We must act immediately to get seeds, fertilizers and other agricultural "inputs" to farmers in vulnerable countries in
time for the coming harvests. We must encourage nations to eliminate the export restrictions that many placed on foodstuffs this spring, as well
as the more long-standing subsidies that many developed nations provide their farmers. Such artificial barriers distort trade patterns and drive
up prices, deepening the immediate crisis and jeopardizing global growth. With climate change, as well, sustainable development figures large
in the solution. Most experts agree that we are nearing the end of cheap energy. Alternative technologies are among our
best hopes for cleaner, affordable power. Here, too, a new "green revolution" is underway. The United Nations
Environment Program has found that $148 billion in new funding went into sustainable energy last year, up 60 percent
from 2006 and accounting for 23 percent of new power-generating capacity. Our job, as national and international leaders, is to
assist in guiding and hastening this nascent economic transformation. We need to change social behavior and
consumption patterns throughout the developed world. And we must help developing countries "green" their
economies by spreading climate-friendly technologies as broadly as possible. We can take a big step forward in Hokkaido.
Mindful of our responsibilities to the poorest nations most vulnerable to climate change, we must fully fund the global Adaptation Fund and
make it operational. Looking forward to the December climate change summit in Poznan -- and to Copenhagen in 2009 -- we must push ahead
with negotiations for a comprehensive agreement limiting greenhouse gases. Above all, we need to inject a sense of urgency and real leadership
into this quest. It is not enough to set goals for 2050, far down the road. We need a middle-term timeline to 2020 if we are serious about
promoting change now. Lastly, Hokkaido will test our commitment to the Millennium Development Goals. For Africa alone, donors have
pledged $62 billion a year by 2010. Those in need have faces: mothers who die needlessly in childbirth, infants stunted through life because
they do not receive adequate nutrition during their first two years. We promised this assistance. Now is the time to provide it. Never in
recent memory has the global economy been under such stress. More than ever, this is the moment to prove that we
can cooperate globally to deliver results: in meeting the needs of the hungry and the poor, in promoting sustainable
energy technologies for all, in saving the world from climate change -- and in keeping the global economy growing.

Scenario 2: Dollar Decline
Higher oil prices directly result in a declining dollar, NOT the other way around.
Feldstein 5-27-08, Martin: president and CEO of the National Bureau of Economic Research, George F. Baker Professor of Economics at
Harvard, former chairman of the Council of Economic Advisers and former chief economic advisor to President Ronald Reagan
[“The Dollar and the Price of Oil,” http://www.nber.org/feldstein/dollarandpriceofoil.syndicate.08.pdf]
The coincidence of the dollar decline and the rise in the oil price suggests to many observers that the dollar’s decline caused the
rise in the price of oil. That is only true to the extent that we think about the price of oil in dollars, since the dollar has
fallen relative to other major currencies. But if the dollar-euro exchange rate had remained at the same level that it was last May,
the dollar price of oil would have increased less. The key point here is that the euro price of oil would be the same as it
is today. And the dollar price of oil would have gone up 56 percent. The only effect of the dollar’s decline is to change the price in
dollars relative to the price in euros and other currencies. The high and rising price of oil does, however, contribute to the
decline of the dollar, because the increasing cost of oil imports widens the US’ trade deficit. Last year, the US spent
US$331 billion on oil imports, which was 47 percent of the US trade deficit of US$708 billion. If the price of oil had
remained at US$65 a barrel, the cost of the same volume of imports would have been only US$179 billion, and the
trade deficit would have been one-fifth lower. The dollar is declining because only a more competitive dollar can shrink the US trade deficit to
a sustainable level. Thus, as rising global demand pushes oil prices higher in the years ahead, it will become more difficult to
shrink the US trade deficit, inducing more rapid dollar depreciation.
China has expressed views that if the dollar's decline continue at high rates, they will dump it.
New York Times 07
[“Markets and Dollar Sink as Slowdown Worry Increases,” http://www.nytimes.com/2007/11/08/business/08econ.html?_r=1&hp&oref=slogin]
The most immediate trigger for the sell-off in the dollar, traders said, was a jarring signal that suggested China might
shift some of its enormous hoard of foreign currency reserves — worth more than $1.4 trillion, primarily in dollars
and dollar-denominated assets — into other currencies to get a better return on its money. "We will favor stronger
currencies over weaker ones, and will readjust accordingly," Cheng Siwei, vice chairman of the Standing Committee
of the National People's Congress told a conference in Beijing on Wednesday. A Chinese central bank vice director, Xu Jian, said the dollar
was "losing its status as the world currency," according to Bloomberg News. Mr. Cheng later told reporters he was not saying
China would buy more euros and dump dollars. But as markets opened across Europe, those words echoed as an invitation to sell the American
currency. The dollar fell to its lowest level against the Canadian dollar since 1950, the British pound since 1981, and
the Swiss franc since 1995. The euro rose to a new record, $1.4729, before retreating.

A Chinese dollar dump would result in an expansionist China and the decline of American hegemony.
Rense 06
[“Report - China To Dump One Trillion In US Reserves,” http://www.rense.com/general74/report.htm]
In speaking with the contact at the Pentagon, I am able to now report the Pentagon views this currency-killing as a cunning
military aspect to Chinese plans: The Pentagon says that while China has a 2 Million man army, they lack the logistics and heavy lift
capability to move that army and supply it. They can, however, get that military to South Korea and to Japan. The Chinese see that the
U.S. Military is over-stretched and almost exhausted by its globe trotting Commander-In-Chief. They feel that by
intentionally destabilizing the dollar, the U.S. economy will fail, putting tens of millions of Americans on the
unemployment line and putting unbearable pressure on the US Government. Then, with the U.S. economy in
shambles and its manufacturing base eroded by a steady stream of manufacturing plants moving out of the US., the
American government will be too occupied with troubles at home to do much internationally. America will be in no
position to challenge China, allowing the Chinese to act militarily elsewhere in the world; Further, if the U.S.
attempted to intervene against any Chinese military action, the only plant in the world which can manufacture the
specialized gyros needed for U.S. Cruise Missile guidance systems, is now located in. . . . .China. China could
prevent that plant from shipping to the U.S., and once our arsenal of cruise missiles was depleted, it would take a long time to re-tool
a plant to make more gyros and resupply cruise missiles for battle. The Chinese feel they could accomplish certain military goals before the
U.S. could re-tool. They are also confident the U.S. will never "go nuclear" as long as the U.S. itself is not attacked.
The Pentagon source went so far as to say "Even if China was to lose the entire one trillion in cash to a collapse of
the Dollar as a currency, they will have succeeded in taking the U.S. off the world stage as any type of effective
military or economic power -- without firing a shot!" A 'classic' Sun Tzu paradigm of victory - the art of fighting, without fighting.
The crippling of the US is a highly desirable military benefit for China at a relatively cheap price since it will leave
their human capital and infrastructure assets in place; assets they know they would lose if a hot war erupted with the
US.
Chinese expansionism results in international coalitions balancing against China, conflict over Taiwan, and Sino-
American conflict.
Mearsheimer 05, John: R. Wendell Harrison Distinguished Service Professor of Political Science at the University of Chicago
[“The rise of China will not be peaceful at all,” LEXIS]
THE question at hand is simple and profound: will China rise peacefully? My answer is no. If China continues its impressive
economic growth over the next few decades, the US and China are likely to engage in an intense security competition with
considerable potential for war. Most of China's neighbours, to include India, Japan, Singapore, South Korea, Russia and Vietnam,
will join with the US to contain China's power. To predict the future in Asia, one needs a theory that explains how rising powers are
likely to act and how other states will react to them. My theory of international politics says that the mightiest states attempt to establish
hegemony in their own region while making sure that no rival great power dominates another region. The ultimate goal of every great
power is to maximise its share of world power and eventually dominate the system. The international system has several
defining characteristics. The main actors are states that operate in anarchy which simply means that there is no higher authority above them. All
great powers have some offensive military capability, which means that they can hurt each other. Finally, no state can know the future
intentions of other states with certainty. The best way to survive in such a system is to be as powerful as possible, relative to potential rivals.
The mightier a state is, the less likely it is that another state will attack it. The great powers do not merely strive to be the strongest great
power, although that is a welcome outcome. Their ultimate aim is to be the hegemon, the only great power in the system. But it is almost
impossible for any state to achieve global hegemony in the modern world, because it is too hard to project and sustain power around the globe.
Even the US is a regional but not a global hegemon. The best that a state can hope for is to dominate its own back yard. States that gain
regional hegemony have a further aim: to prevent other geographical areas from being dominated by other great powers. Regional hegemons, in
other words, do not want peer competitors. Instead, they want to keep other regions divided among several great powers so that these states will
compete with each other. In 1991, shortly after the Cold War ended, the first Bush administration boldly stated that the US was now the most
powerful state in the world and planned to remain so. That same message appeared in the famous National Security Strategy issued by the
second Bush administration in September 2002. This document's stance on pre-emptive war generated harsh criticism, but hardly a word of
protest greeted the assertion that the US should check rising powers and maintain its commanding position in the global balance of power.

China -- whether it remains authoritarian or becomes democratic -- is likely to try to dominate Asia the way the US dominates
the Western hemisphere. Specifically, China will seek to maximise the power gap between itself and its neighbours,
especially Japan and Russia. China will want to make sure that it is so powerful that no state in Asia has the
wherewithal to threaten it. It is unlikely that China will pursue military superiority so that it can go on a rampage and conquer other Asian
countries, although that is always possible. Instead, it is more likely that it will want to dictate the boundaries of acceptable
behaviour to neighbouring countries, much the way the US makes it clear to other states in the Americas that it is the boss. Gaining
regional hegemony, I might add, is probably the only way that China will get Taiwan back. An increasingly powerful
China is also likely to try to push the US out of Asia, much the way the US pushed the European great powers out of the Western
hemisphere. We should expect China to come up with its own version of the Monroe Doctrine, as Japan did in the 1930s.
These policy goals make good strategic sense for China. Beijing should want a militarily weak Japan and Russia as its
neighbours, just as the US prefers a militarily weak Canada and Mexico on its borders. What state in its right mind
would want other powerful states located in its region? All Chinese surely remember what happened in the 20th century
when Japan was powerful and China was weak. In the anarchic world of international politics, it is better to be Godzilla than Bambi.
Furthermore, why would a powerful China accept US military forces operating in its back yard? American policy-makers,
after all, go ballistic when other great powers send military forces into the Western hemisphere. Those foreign forces are invariably seen as a
potential threat to American security. The same logic should apply to China. Why would China feel safe with US forces deployed on its
doorstep? Following the logic of the Monroe Doctrine, would not China's security be better served by pushing the American military out of
Asia? Why should we expect the Chinese to act any differently than the US did? Are they more principled than the Americans are? More
ethical? Less nationalistic? Less concerned about their survival? They are none of these things, of course, which is why China is likely to
imitate the US and attempt to become a regional hegemon. It is clear from the historical record how American policy-makers will react if
China attempts to dominate Asia. The US does not tolerate peer competitors. As it demonstrated in the 20th century, it is determined
to remain the world's only regional hegemon. Therefore, the US can be expected to go to great lengths to contain China and
ultimately weaken it to the point where it is no longer capable of ruling the roost in Asia. In essence, the US is likely to
behave towards China much the way it behaved towards the Soviet Union during the Cold War. China's neighbours
are certain to fear its rise as well, and they too will do whatever they can to prevent it from achieving regional
hegemony. Indeed, there is already substantial evidence that countries such as India, Japan, and Russia, as well as smaller
powers such as Singapore, South Korea and Vietnam, are worried about China's ascendancy and are looking for ways
to contain it. In the end, they will join an American-led balancing coalition to check China's rise, much the way Britain, France, Germany,
Italy, Japan, and even China, joined forces with the US to contain the Soviet Union during the Cold War. Finally, given Taiwan's strategic
importance for controlling the sea lanes in East Asia, it is hard to imagine the US, as well as Japan, allowing China to
control that large island. In fact, Taiwan is likely to be an important player in the anti-China balancing coalition, which
is sure to infuriate China and fuel the security competition between Beijing and Washington. The picture I have painted of
what is likely to happen if China continues its rise is not a pretty one. I actually find it categorically depressing and wish that I could tell a more
optimistic story about the future. But the fact is that international politics is a nasty and dangerous business and no amount
of goodwill can ameliorate the intense security competition that sets in when an aspiring hegemon appears in Eurasia.
That is the tragedy of great power politics.

US-China war will go nuclear and destroy the planet

Straits Times 2k
[“Regional Fallout: No one gains in war over Taiwan,” Jun 25, LN]
THE high-intensity scenario postulates a cross-strait war escalating into a full-scale war between the US and China. If Washington
were to conclude that splitting China would better serve its national interests, then a full-scale war becomes unavoidable. Conflict on such a
scale would embroil other countries far and near and -- horror of horrors -- raise the possibility of a nuclear war. Beijing
has already told the US and Japan privately that it considers any country providing bases and logistics support to any US forces
attacking China as belligerent parties open to its retaliation. In the region, this means South Korea, Japan, the Philippines and, to a
lesser extent, Singapore. If China were to retaliate, east Asia will be set on fire. And the conflagration may not end there as
opportunistic powers elsewhere may try to overturn the existing world order. With the US distracted, Russia may
seek to redefine Europe's political landscape. The balance of power in the Middle East may be similarly upset by the
likes of Iraq. In south Asia, hostilities between India and Pakistan, each armed with its own nuclear arsenal, could enter
a new and dangerous phase. Will a full-scale Sino-US war lead to a nuclear war? According to General Matthew Ridgeway, commander
of the US Eighth Army which fought against the Chinese in the Korean War, the US had at the time thought of using nuclear weapons against
China to save the US from military defeat. In his book The Korean War, a personal account of the military and political aspects of the conflict
and its implications on future US foreign policy, Gen Ridgeway said that US was confronted with two choices in Korea -- truce or a broadened
war, which could have led to the use of nuclear weapons. If the US had to resort to nuclear weaponry to defeat China long before the latter
acquired a similar capability, there is little hope of winning a war against China 50 years later, short of using nuclear
weapons. The US estimates that China possesses about 20 nuclear warheads that can destroy major American cities.
Beijing also seems prepared to go for the nuclear option. A Chinese military officer disclosed recently that Beijing was
considering a review of its "non first use" principle regarding nuclear weapons. Major-General Pan Zhangqiang, president of the military-
funded Institute for Strategic Studies, told a gathering at the Woodrow Wilson International Centre for Scholars in Washington that although the
government still abided by that principle, there were strong pressures from the military to drop it. He said military leaders considered the
use of nuclear weapons mandatory if the country risked dismemberment as a result of foreign intervention. Gen
Ridgeway said that should that come to pass, we would see the destruction of civilisation. There would be no victors in such a
war. While the prospect of a nuclear Armaggedon over Taiwan might seem inconceivable, it cannot be ruled out entirely,
for China puts sovereignty above everything else.

Uniqueness: Stagflation Now 58
The U.S.’s current dependence on oil fuels a cycle where the dollar continues to fall while prices continue to rise.
Reuters 7-14-08
[“Shadow of 1970s inflation starting to worry bondholders,” http://www.reuters.com/article/reutersEdge/idUSN1456888520080714?sp=true]
Stagflation, or anemic growth combined with high inflation was last seen in the United States in the 1970s and early 1980s. Now,
some economists believe it has already returned. Since 2000 oil prices have quintupled from around $30 a barrel to
nearly $150 a barrel, while U.S. inflation has risen to over 4.0 percent per year, and the benchmark U.S. Treasury bond yield
has risen to around 3.90 percent. Rising bond yields are likely to raise borrowing costs for corporations and consumers, at a time when banks
are reducing lending in the wake of the global credit squeeze of the past year. While the U.S. and European economies are seeing
economic growth slow this year, thanks to the credit crunch and soaring energy prices, demand from emerging markets is likely
to keep oil prices high, analysts said. Meanwhile, a slowing U.S. economy may continue to undermine the U.S. dollar in which oil is
priced and provide another reason for oil prices to rise further. The U.S. economy's dependence on oil may not be as great as
three decades ago, and a domestic wage-price spiral has yet to materialize, but these factors may not be enough to cushion the United
States from global inflation pressures, analysts said. "The old world is in stagflation because the new world is in inflation." said
Jan Loeys, head of global asset allocation with JPMorgan in London. Developed countries such as the United States are already
suffering from stagflation, albeit not as extreme as three decades ago, he said. Meanwhile, China, India and other emerging economies are
driving global inflation pressures. "The new world is booming and competing for the resources by bidding up the price,
while the old world has its problems with ageing populations and falling productivity which is depressing growth," Loeys said. The
closest comparison is the 1970s, he said. Now, record gasoline prices and escalating food costs will likely push annual U.S.
consumer price inflation above 5.0 percent in August this year, from 4.2 percent, some economists forecast.
High oil prices are leading the economy in an era of stagflation

Fitzgerald 08 (Jay, jouralist for Boston Herald, “Stagflation’ fears on rise”, http://news.bostonherald.com/news/regional/general/view.bg?articleid=1107335, July 16)
Nervous Americans barely able to make ends meet now face the dual threat of a faltering economy and wholesale inflation
running at a 27-year high, according to new economic data that suggest the nation could be headed for a dreaded
1970s-like era of “stagflation.” Federal Reserve Chairman Ben Bernanke and economists warned that the economy -
battered and bruised by high oil prices and a financial sector reeling from the subprime-mortgage meltdown - is entering a tenuous and
dangerous stage. Bernanke warned of “significant downside risks” to economic growth and “significant challenges” for fed policymakers as
they keep a nervous eye on inflation at the same time. The Labor Department reported yesterday that wholesale prices rose at their fastest clip
since 1981, just prior to a brutal recession in the early 1980s. Wholesale prices soared by 9.1 percent over the past 12 months alone, the
department warned. “We’re getting hit from multiple sides right now,” said Russ Koesterich, who helps oversee $2 trillion as head of
investment strategy at Barclays Global Investors in San Francisco. “There’s further evidence of deceleration in the economy.” That
double-whammy hit led some economists to speculate whether the nation might be entering a period of “stagflation”
- or an economy suffering from stagnant economic growth while inflation soars upward, eating away at consumers’
purchasing power and elderly citizens’ investment nest eggs. “For a brief period, it will be stagflation,” said John Bitner, chief economist
at Boston’s Eastern Bank. “We haven’t seen the worst yet.” Robert MacIntosh, chief economist for Boston’s Eaton Vance, said inflation
hasn’t yet taken hold in wages and salaries - so it may not run wild in coming months. But he predicted a period of “very, very low growth”
for the economy. David Wyss, an economist at Standard & Poor’s, predicted the economy will only get rougher through the end of this year
and into next year. Wall Street appeared to have a split personality yesterday, initially sending stocks plunging amid fears that the
government’s plan to bail out mortgage giants Fannie Mae and Freddie Mac wasn’t enough to ease financial worries in markets. But stocks
crept back up upon news that crude oil prices had fallen by their largest amount in 17 years, declining $6.44 to about $138. Even that seemingly
positive oil-market development, though, was based on speculators’ fears that the U.S. and global economies faced a downturn that could
reduce demand for petroleum products. The Dow finished yesterday below the 11,000 mark for the first time in two years, closing at at
10,962


Oil will send us into stagflation
AFP 08 (“US inflation soars at 26-year high on energy prices”, http://afp.google.com/article/ALeqM5hY5o_vyFmCDYRKgGAgNgevb2XGrA, July 16)
Soaring energy costs drove US consumer prices up 1.1 percent in June to an annual pace of 5.0 percent, data showed
Wednesday, prompting a central bank warning and rising stagflation concerns. The monthly advance in the Labor
Department's consumer price index (CPI) was the sharpest since June 1982, while a 0.3 percent rise in core CPI excluding energy
and food was the strongest since January. The surprisingly stiff momentum in consumer prices exceeded analysts' consensus forecasts of a gain
of 0.7 percent in headline inflation and a 0.2 percent rise in core inflation. In May, headline inflation was up 0.6 percent from
April and the core rate increased 0.2 percent. On a 12-month basis, CPI was up 5.0 percent in June, the hottest
annual inflation level since May 1991. Core CPI was 2.4 percent higher than in June 2007, the strongest rate since
March. The report underscored Federal Reserve concerns about rising inflation and sluggish growth -- the noxious combination of stagflation
-- as the economy battles fierce headwinds from financial turmoil and the worst housing crisis in decades. "Inflation is currently too high," Fed
chairman Ben Bernanke said in a second day of testimony to Congress, speaking after the CPI data release. "And it's a top priority of the
Federal Reserve to run a policy that's going to bring inflation to an acceptable level consistent with price stability as we go forward," he told the
House of Representatives in his second day of semiannual testimony to Congress. Bernanke, however, emphasized that "the enormous jumps
in oil prices and other commodity prices are to some extent at least due to real factors out of the control of the Federal Reserve." "It's the
global supply and demand conditions which are affecting those particular things to the most significant extent," he added, a day after delivering
a grim report to the Senate. The Fed chief's remarks indicated the central bank, which has slashed its key interest rate to 2.0 percent in recent
months, would be hard-pressed to loosen monetary policy in the face of accelerating inflation. "Inflation is the bind that ties the Fed and it is
quite tight right now," said Joel Naroff of Naroff Economic Advisors. Bank of America economist Peter Kretzmer said that in light of
Bernanke's testimony Tuesday indicating both downside risks to the economy and upside risks to inflation, "this morning's extreme spike in
headline inflation and unfavorable core reading are particularly unwelcome." "The CPI report underlines the current stagflation,
and points to the variety of difficulties faced by the Fed," he added. Kenneth Beauchemin, US economist at Global Insight, said
the inflation trend combined with the current growth outlook signals the Fed "will take a pass on rate hikes until 2009. Indeed, the remote
chance for financial disaster in the coming months keeps a rate cut on the table." The Labor Department said that energy prices accounted "for
around two-thirds" of the rise in overall inflation in the world's biggest energy consumer. Energy prices advanced a whopping 6.6 percent in
June, following a 4.4 percent increase in May. Gasoline prices rose a searing 10.1 percent, accounting for slightly more than
half of the total advance in CPI in June, and were 32.8 percent higher than in June 2007.
Stagflation is going to cause the US major losses. To avoid it price burdens must be removed from consumers
shoulders.
Toronto Star, 4/20/08
Copyright 2008 Toronto Star Newspapers, Ltd. The Toronto Star, April 20, 2008 Sunday, EDITORIAL; Pg. A16
Economy needs a break
Stagflation. With oil and grain prices soaring to record highs at the same time that growth in the world economy is being dragged down by
recession in the U.S., that ugliest of economic words is being heard more and more often. When the two diseases that make up
stagflation - weak growth and rising inflation - come together, the problem is that policy-makers' attempts to confront
one only worsen the other. For example, lowering interest rates to boost growth tends to feed the inflationary fires
and exacerbate that problem. By the same token, raising interest rates to reduce inflation also has the effect of
sucking even more life out of an already stagnant economy. It's a no-win situation, as Canadians learned the hard way in the 1970s
and early 1980s. But while inflation is up in the U.S. (4 per cent), Europe (to a 16-year high of 3.6 per cent) and China
(8.7 per cent in February), in Canada it continues to decline. Last Thursday, Statistics Canada reported that despite a 5.4 per cent
rise in the price of energy, the overall Consumer Price Index increased only 1.4 per cent (year over year) in March, its fourth consecutive
monthly decline. With no evidence that inflation is picking up in Canada, the Bank of Canada has a great deal of leeway in focusing on the
problem of weak growth, as it said it would do in recent pronouncements. Although the U.S. is following the same stimulative
policy with even larger interest rates cuts because of fears of a deepening recession, some economists worry that it
could be setting the stage for a period of stagflation. So what has set Canada apart in creating the policy flexibility
that other countries do not enjoy? The fact is that Canada has bought - and paid for - this flexibility, partly through its
rising dollar and partly through its reaction to the competitive squeeze the dollar created. While the rise in the dollar has
helped moderate inflation by keeping import prices down, it has also made it that much more difficult for Canadian producers, and especially
manufacturers, to compete globally for business. The overall Consumer Price Index suggests that Canadian business has swallowed a large part
of the increases in energy costs instead of passing them on to consumers. This can even be seen in the food index: Despite the steep 9 per cent
increase in the price of bakery products caused by the run-up in grain prices (wheat prices have more than doubled in the past year), overall
food prices have increased by only 0.4 per cent.

Oil driven stagflation is occurring now.

Eugene 7-9-08, Joseph: former Senior Vice President and Chief Economist of the World Bank, recipient of the John Bates Clark Medal and the
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, chairs the University of Manchester's Brooks World Poverty
Institute, most cited economist in the world, as of June 2008 (http://ideas.repec.org/top/top.person.all.html)
[“Oil Shock: the Coming Economic Unraveling & How We Can Adjust,” http://www.casavaria.com/hotspring/2008/07/149/oil-shock-the-coming-economic-unraveling-how-we-can-
adjust/]
Petroleum is the most pervasive base resource other than water in the global economy of the 21st century, and as demand
is exploding, production is nearing its geological peak, and untenable price increases are hitting a strained economy
hard. Oil prices could be in a stagflation lock, unable to readjust to consumers’ means, unable to compete as emerging energy
sources repeatedly slash development and commercial prices. Whatever factors are at play, crude oil prices have jumped over 900%
since 1998, and it looks like production cannot meet global demand.

Uniqueness: Stagflat Killing Glob Econ 61
The world’s economy is on the brink and is beginning to succumb to the dangers of stagflation.
The Daily Telegraph, 5/15/08
WORLD ECONOMY OECD warning as stagflation goes global, Ambrose Evans-Pritchard, The Daily Telegraph, CITY; Pg. 4, http://web.lexis-
nexis.com/scholastic/document?_m=144c839a25a900b8c5f855530264f6ef&_docnum=12&wchp=dGLzVzz-zSkVk&_md5=fb07980d671df55675346223436283a0
THE OECD's early warning signal is flashing clear signs of economic weakness across the world, with mounting
evidence that China, India, and Brazil may soon succumb to the downturn. The closely-watched gauge - known as
the Composite Leading Indicators (CLI) - has picked up a sharp deterioration in the eurozone in March, notably in
Italy and France, where the advance signals are falling even faster than in Britain. The measure tends to anticipate
the industrial cycle by about six months. While growth continues to power ahead in most emerging markets,
rampant inflation is starting to damage business confidence. "The latest data point to a potential downturn in
Brazil, China, and India,'' said the OECD, the club of rich nations. Russia is the only country still in full boom
among the so-called BRIC quartet of rising powers, but the country's inflation rate reached 14.3pc in April as oil
and gas wealth the flooded the economy. Price pressures across the emerging world are reaching levels that may
soon threaten stability unless governments jam on the brakes. Inflation rates have reached: Venezuela (22pc),
Vietnam (21pc), Latvia (18pc), Qatar (17pc), Pakistan (17pc), Egypt (16pc) Bulgaria (15pc), The Emirates (11pc),
Estonia (11pc), Turkey (9.7), Saudi Arabia (9.6pc), Indonesia (9pc), Argentina (8.9pc), Romania (8.6pc), China
(8.5pc), Philippines (8.3pc), India (7.6pc). Many of these countries are now suffering the worst prices spiral in
thirty years, setting off widespread riots. India's government has suspended futures for a clutch of key
commodities as states resort to draconian measures. While the soaring cost of food and energy is the key driver for
the poorest countries, others are ensnared by their own currency pegs. Most Gulf states are linked to the dollar,
forcing them to shadow the US Federal Reserve's super-loose interest rate policy, with inevitable over-heating.
China operates a semi-fixed rate, or "dirty float''. Christian Noyer, governor of the Bank of France, said this week
that the pegs had become a major headache. "The world environment has become very inflationary. Many
emerging economies are partially 'importing' US monetary policy, although their position in the economic cycle is
fundamentally different,'' he said. Stock markets have already fallen sharply in China, India, and Vietnam as the
authorities rein in credit. Morgan Stanley has advised clients to cut their holdings of emerging market stocks,
warning that surging prices have started to queer the pitch - at least in the "near term''. Europe faces an incipient
"stagflation'' as inflation of 3.3pc combines in a nasty cocktail with slowing growth. The mix poses an acute
dilemma for the European Central Bank. It fears that 1970s-style inflation could become lodged in the system as
workers push for higher wage deals. Jean-Claude Trichet, the ECB's president, warned of a return to "mass
unemployment'' if Europe repeats the errors of the 1970s. "We would make an enormous mistake, which is
precisely the mistake we made in the first oil shock,'' he said.

Window: Stagflation 62
It’s a perfect storm – current conditions create a unique window for stagflation
Reuters, 2/29/08
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080229&id=8262427, MSN money,Reuters, Consumer spending up, inflation erodes gain,
February 29, 2008 9:46 AM ET
The personal consumption expenditure price index, a key inflation gauge, rose 0.4 percent in January after an upwardly
revised increase of 0.3 percent in December. The index has surged 3.7 percent over the past year, the biggest year-on-
year gain since September 2005. Excluding volatile food and energy costs, the index was up 0.3 percent -- in line
with analysts' expectations and the steepest monthly rise since September. On a year-over-year basis, this "core" price index
rose 2.2 percent, matching the prior month's gain. Many officials at the Federal Reserve, which has cut interest rates sharply
since mid-September in a bid to combat recession risks, have said they prefer to keep the core price gauge in a 1
percent to 2 percent range. Higher-than-expected inflation readings at a time when the U.S. economy is struggling
under the weight of a deep housing downturn and tight credit conditions have led some economists to warn of the
risk of "stagflation" -- a combination of stagnant growth and spiraling prices.

Uniqueness: Consumer Spending 63
Consumer Spending is Really low right now, and inflation is about to start rising.
Reuter, 6/13/08
MGPS: Consumer Spending Down, TORONTO--(Business Wire)--
, http://www.reuters.com/article/pressRelease/idUS115209+13-Jun-2008+BW20080613
Consumer spending is down across the U.S. as consumers feel the impact of rising fuel costs along with rising food
prices. While inflation is currently low, there is the fear among consumers that prices in other areas could climb even
as retailers are feeling the squeeze on margins while they struggle to maintain current prices. Meanwhile, debt
continues to increase, further placing pressure on consumers to curtail spending. Banks are placing more restrictions
on lending, limiting access to capital. Loan delinquencies and mortgage foreclosures continue to rise with no end in
sight even as housing prices continue to fall with some major markets reporting price drops of 20% over last year.
The result is reduced spending by consumers, which impacts not only retail, but numerous other sectors. Consumer spending drives
much of the U.S. economy so many sectors are hit including the financial sector, the housing sector, the automotive sector and the
manufacturing sector among others.
Although some predict consumer spending will slowly rise, during this period of our economy it will remain low.
TheCapital Spectator, 2/29/08
http://www.capitalspectator.com/archives/2008/02/whats_up_or_dow.html,
On the surface, consumer spending appears to be holding up, and surprisingly well, considering the barrage of
discouraging economic and financial trends harassing the waking hours of our hero, Joe Sixpack, of late. This
morning's update on personal income and spending in January reveals that personal consumption expendtires rose 0.4% last
month, up slightly from December's 0.3%. That's about average if we look at the past two years of monthly PCE spending patterns. If we
leave it there, we can say that Joe's spending habits haven't changed much, at least in nominal terms. Extending the thought, perhaps worries of
recession are excessive. Consumer spending, after all, represents 70% or so of GDP; if Joe's still pulling out his wallet as always, the odds of a
deep and/or lasting economic stumble may be overbaked. But as regular readers of this site are all too aware, we're never willing to
"leave it there." Obsessed with the idea that there may be a more granular truth lurking in the numbers, we push on,
wondering if we've missed something in the 30,000-foot survey. On that note, let's dive a bit deeper into today's spending update by noting that
the 0.4% rise in PCE last month all but evaporates when we adjust for inflation. Real PCE spending was unchanged (based on rounding to one
decimal point) in January. In fact, that's the second month running that real PCE was flat, and it was the third instance in
the last four months. Stepping back and looking at the broader trend in real personal consumption spending only
reaffirms the message in the last few months, namely, a slowdown in Joe's willingness and/or ability to spend after
stripping out inflation, as our chart below illustrates. If the trend raises questions about the future, breaking out real
spending by the major categories provides even more incentive for staying cautious on the question of, What's next? Durable
goods spending last month fell by 1.3% last month from December, measured in real terms at a seasonably adjusted rate--the fourth monthly
decline in a row. Nondurable goods spending slipped too, albeit at a comparatively modest -0.2%. Only services-related spending managed to
rise in real terms last month, advancing by 0.4%. The implication: consumer spending, after cutting away the distorting cloud
of inflation, is generally falling, and arguably looks set for more of the same in the foreseeable future. The hope is
that the Fed and Congress can arrest the trend via rate cuts and fiscal stimulus, respectively. Perhaps, although there's
a cost to everything, starting with the risk of trading a cyclical downturn for higher inflation. In addition, there's the added
worry that even if Washington is able to engineer a bounce in consumer spending, the effect will be temporary and so a "W" recovery may be
coming. That is, we'll see a modest bounce down the road, but it'll give way to another dip before the real upturn takes root.

XT: Fed Rate Hikes Uniqueness/Link 64
Rising inflationary pressures will soon force the Fed to raise rates.
Hutchinson, 5/28/08
By Martin Hutchinson Contributing Editor, Money morning, http://www.moneymorning.com/2008/05/28/with-oil-speculators-blitzing-the-fed-needs-to-call-an-interest-rate-reverse-
play/
The inflationary reality that we as consumers have been living for months may finally be starting to dawn on the U.S.
Federal Reserve. The minutes of the last policymaking Federal Open Market Committee (FOMC) meeting, released
on Wednesday, showed that the Fed’s inflation forecast was raised from a range of 2.1%-2.4% to a range of 3.1%-
3.4%. Add the zooming oil prices we have seen recently into the mix, and the conclusion is inevitable: The nation’s
central bank will soon have to reverse course and start raising interest rates - and probably in a hurry, too, if the Fed
wants to keep oil prices on this side of the stratosphere. That’s no small shift: After all, for nearly eight months the
central bank has been mounting one of the most aggressive rate-cutting campaigns on record, slashing the benchmark
Federal Funds rate from 5.25% down to 2.0%.

inflation/stagflation distinction 65
Stagflation poses a major threat since avoiding the harms is virtually impossible.
Chaudhuri, 2008
Adhip Chaudhuri, a visiting professor of economics at Georgetown University's campus in Doha, Qatar, explains the cause and effect of high oil prices.
http://english.aljazeera.net/business/2008/07/200879184520258575.html
Recessions and the low growth rates represent stagnation and hence connote the 'stag' part of "stagflation", and high
oil prices have a lot do with it. Oil prices, together with simultaneous, huge increases in food prices, have increased
worldwide inflation rates. Both China and India now have high inflation rates with China at almost 8 per cent and India at 11 per cent.
The rising inflation is the "flation" part of "stagflation". The worse thing about stagflation is that the central banks find
themselves in a dilemma. If they lowered interest rates to spur growth, they would raise inflationary expectations. On
the other hand, if they fought inflation by raising interest rates, the reduction in money supply will have
contractionary effects on the GDPs of their countries.
Stagflation’s distinct because the Fed can’t control it.

Times Online, 2/26/08
http://business.timesonline.co.uk/tol/business/columnists/article3433830.ece, The Times, February 26, 2008, Fed struggles to halt march of stagflation, Gerard Baker: American View
, Gerard Baker is United States Editor and an Assistant Editor of The Times. He joined in 2004 from the Financial Times, where he had spent over ten years as Tokyo correspondent
and Washington Bureau Chief. His weekly oped column appears on Fridays in The Times.
This is why people in the United States are worrying openly about stagflation. The rising inflation trend seems, at
least so far, to be impervious to the weakening economy. Even as price pressures have picked up, the signs of
recession have proliferated. In January total employment contracted, house prices and construction continued to fall
and business and consumer confidence plummeted. In the first few weeks of February it looks as though
manufacturing production may have fallen off a cliff. All this makes the Federal Reserve's job much harder than it has been in the
recent past. Back in 2001, during the last recession, the US had no serious inflation threat to speak of. The central bank
could be as aggressive in stimulating the economy as it wanted. There was virtually no risk that it would generate
much inflation. In fact, there was so much slack in the economy that, for at least a year after the Fed had stopped
cutting interest rates, the biggest concern of policymakers and markets was deflation - broad-based price declines. This
time the Fed doesn't have that luxury. Frederic Mishkin, a member of the Board of Governors of the Federal Reserve,
has been one of the most outspoken proponents of really aggressive monetary policy action to avoid the risks of
serious financial dislocation and to shield the economy from its effects. But he has argued that inflation could
seriously crimp the Fed's freedom of manoeuvre even in a crisis: "The flexibility to act pre-emptively against a
financial disruption presumes that inflation expectations are firmly anchored and unlikely to rise during a period of
temporary monetary easing," he told a conference in New Hampshire this month.
Stagflation’s uniquely threatening because businesses can’t pass inflationary costs onto consumers
Reuter, 5/12/08
What if slow U.S. economy doesn't cure inflation?, By Emily Kaiser and Brad Dorfman – Analysis,
http://www.reuters.com/article/sphereNews/idUSN1251357920080512?sp=true&view=sphere
The central bank says the U.S. economic slowdown will help keep a lid on inflation by curbing demand for labor and
materials. Chicago Federal Reserve Bank President Charles Evans said on Monday that inflationary pressures would likely diminish because
"the ability of businesses to pass along price increases is not as high" in a weak economy. So far, the signs are pointing the other way.
A Morgan Stanley survey of equity analysts found that 63 percent of the companies they track had raised prices this
year. "Investors hoping for the ideal scenario of a mild global slowdown, a stronger (U.S.) dollar, cooling inflation
and lower interest rates abroad seem likely to be disappointed," said Richard Berner, Morgan Stanley's chief
economist. "The baseline I see will involve an unappetizing combination of slower growth, high inflation, and little
decline in interest rates," Morgan Stanley's Berner said.

66
Inflation/stagflation distinction
Inflation is now occurring due to oil prices (cost push), not demand pull.
The San Diego Union-Tribune, 3/24/08
http://www.signonsandiego.com/uniontrib/20080324/news_1n24inflate.html, Neil Irwin.
“It just doesn't seem like anything is cheap these days,” said Faith Tyler, 41, a personal trainer from Baltimore who has reacted to the higher
prices for necessities by cutting back on luxuries. “I don't eat out very much, no vacations, nothing extravagant unless it's on sale.” This bout
of inflation is not occurring because labor markets are tight or because the U.S. economy has been overstimulated; if
that were the case, wages would be driving inflation upward, leaving ordinary households in decent shape and doing
more damage to those who lent money at fixed interest rates. Instead, this inflation is driven by global commodity
markets. China, India and other developing countries have been acquiring a thirst for oil faster than producers can
quench it, sending the price of oil up about 60 percent since 2006. Prices for oil and other commodities fell last week, though
they remain at very high levels by any historical standard. Expensive crude oil has translated into higher costs to drive to work.
The average middle-income household must spend an extra $378 per year on gasoline than in 2006 if it consumes the
same amount. The rapid growth of those developing nations, combined with increasing dedication of agricultural
space to production of ethanol, has led to more demand than supply for food. That middle-income family is spending an extra
$253 on groceries each year, assuming it did not change its buying patterns.

Inflation greater than Recession 67
The threat of inflation right now is greater than the threat of recession.
The Australian, 6/2/08
The Australian, July 2, 2008 Wednesday , 1 - All-round Country Edition, Oil prices the key to economic recovery - FINANCIAL TURMOIL, BYLINE: ANATOLE KALETSKY,
SECTION: FINANCE; Pg. 31
To try to understand the gyrations of financial markets -- or at least to respond to them in a calm and rational manner -- is therefore an essential
part of the policy-orientated economist's job. What, then, can we sensibly say about the awful developments in all the financial markets this
month? There seem to be three main anxieties linked to the present bear markets: the fear of recession, the risk of
inflation and the spiralling price of oil. The possibility of a serious US recession, which has dominated most media and market
comment since the credit crunch began in America, is in my view the least plausible of these threats. Statistics suggest that the US
economic slowdown is already at or near its low point and the risks of a serious recession are rapidly diminishing.
GDP, consumption, industrial activity and employment have all been consistent with a fairly typical mid-cycle
slowdown and none have fallen sufficiently to signal even a mild recession. Of course it is possible that the US
economy will deteriorate in the months ahead, but this seems unlikely, given the huge tax cuts and interest rate reductions to
which US consumers are likely to start responding in the second half of this year. But if a global recession is likely to be avoided,
why are investors in such a funk? The answer is that most now see inflation as a much greater threat than recession.
This makes sense, but only up to a point. The bad news is that inflation is much harder to cure than weak growth or
unemployment because the remedies required -- higher interest rates and cuts in government spending -- are painful
to implement.

Hyperinflation Coming 68
Hyperinflation will occur instead of predicted deflation because of the dropping of the gold standard.
Williams, 4/8/08
career as a consulting economist, John has worked with individuals as well as Fortune 500 companie, For more than 25 years, I have been a private consulting economist and, out of
necessity, had to become a specialist in government economic reporting. “That began a lengthy process of exploring the history and nature of economic reporting and in interviewing
key people involved in the process from the early days of government reporting through the present. For a number of years I conducted surveys among business economists as to the
quality of government statistics (the vast majority thought it was pretty bad), and my results led to front page stories in the New York Times and Investors Business Daily,
considerable coverage in the broadcast media and a joint meeting with representatives of all the government's statistical agencies. Despite minor changes to the system, government
reporting has deteriorated sharply in the last decade or so. -- John Williams”
As to the fate of the developing U.S. great depression, it will encompass the fire of a hyperinflation, instead of the ice
of deflation seen in the major U.S. depressions prior to World War II. What promises hyperinflation this time is the
lack monetary discipline formerly imposed on the system by the gold standard, and a Federal Reserve dedicated to
preventing a collapse in the money supply and the implosion of the still, extremely over-leveraged domestic financial
system.
The accompanying two graphs measure the level of consumer prices since 1665 in the American Colonies and later the United States. The first
graph shows what appears to be a fairly stable level of prices up to the founding of the Federal Reserve in 1913 (began activity in 1914) and
Franklin Roosevelt’s abandoning of the gold standard in 1933. Then, inflation takes off in a manner not seen in the prior 250 years, and at an
exponential rate when viewed using the SGS-Alternate Measure of Consumer Prices in the last several decades. The price levels shown prior to
1913 were constructed by Robert Sahr of Oregon State University. Price levels since 1913 either are Bureau of Labor Statistics (BLS) or SGS
based, as indicated.
The magnitude of the increase in price levels in the last 50 years or so, however, visually masks in the first graph the
inflation volatility of the earlier years. That volatility becomes evident in the second graph, with inflation history
shown only through 1960.
What is shown in the second graph is that up through the Great Depression, regular periods of inflation — usually
seen around wars — have been offset by periods of deflation. Particular inflation spikes can be seen at the time of the American
Revolution, the War of 1812, the Civil War, World War I and World War II. The inflation peaks and the ensuing post-war depressions and
deflationary periods tied to the War of 1812, the Civil War and World War I show close to 60-year cycles, which is part of the reason some
economists and analysts have been expecting a deflationary depression in the current period. There is some reason behind 30- and 60-year
financial and business cycles, as the average difference in generations in the U.S. is 30 years, going back to the 1600s. Accordingly, it seems to
take two generations to forget and repeat the mistakes of one’s grandparents. Similar reasoning accounts for other cycles that tend to run in
multiples of 30 years.
Aside from minor average annual price level declines in 1944 and 1955, the United States has not seen a deflationary period in
consumer prices since before World War II. The reason for this is the same as to why there has not been a formal
depression since before World War II: the abandonment of the gold standard and recognition by the Federal Reserve
of the impact of monetary policy — free of gold-standard system restraints — on the economy.
The gold standard was a system that automatically imposed and maintained monetary discipline. Excesses in one
period would be followed by a flight of gold from the system and a resulting contraction in the money supply,
economic activity and prices.
Faced with the Great Depression, and unable to stimulate the economy, partially due to the monetary discipline
imposed by the gold standard, Franklin Roosevelt used those issues as an excuse to abandon gold and to adopt close
to a fully fiat currency under the auspices of what I call the debt standard, where the government effectively could print and
spend whatever money it wanted to.

Hyperinflation  Dollar Decline 69
Hyperinflation pushes a dollar decline.

Paul Craig Roberts, 3/26/08
Watching the Dollar Die, http://www.creators.com/opinion/paul-craig-roberts/watching-the-dollar-die.html ,Paul Craig Roberts, Assistant Secretary of the Treasury during President
Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic
and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President
Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider's Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside
the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the
Name of Justice.
People who haven't accumulated much age have little idea of the corrosive power of "acceptable" inflation. Unlike gold and silver,
fiat
money has no intrinsic value. When money is created faster than goods and services, it drives up prices, thus driving
down the value of the money. If freely traded currencies are excessively printed or if inflation, budget deficits and
trade deficits drive currencies off their fixed exchange rates, prices of imports rise as the foreign exchange value of
the currency falls. Today, the United States, heavily dependent on imports, is subject to double-barrel inflation from
both domestic money creation and decline in the dollar's foreign exchange value.

Solvency: Stagflation 70
A global effort to shift to alternate energy is critical to keep the economy going and to avoid stagflation.
Ban Ki-Moon, The Washington Post, EDITORIAL COPY; Pg. A17, Global Action to Save Global Growth
Global growth is the leitmotif of our era. The great economic expansion, now in its fifth decade, has raised living standards worldwide and
lifted billions out of poverty. Yet today, many wonder how long it can last. The reason: Plenty comes at an increasingly high price.
We see it daily in the rising cost of fuel, food and commodities. Consumers in developed countries fear the return of
"stagflation" -- inflation coupled with slowing growth or outright recession -- while the world's poorest no longer can
afford to eat. Meanwhile, climate change and environmental degradation threaten the future of our planet. Population growth and rising
wealth place unprecedented stress on the Earth's resources. Malthus is back in vogue. Everything seems suddenly in short supply:
energy, clean air and fresh water, all that nourishes us and supports our modern ways of life. As the leaders of the Group of
Eight gather here, we know that these issues affect us all: north and south, large nations and small, rich and poor. And we know we must find
ways to extend the benefits of the global boom to those who have been left behind, the so-called "bottom billion." In dealing with problems of
such dimension and complexity, there is only one possible approach: to see them for what they are -- as parts of a whole requiring a
comprehensive solution. A big part of that solution should be a "global supply-side response," as some economists put it, grounded in
sustainable development -- nations, international financial organizations, the United Nations and its various agencies working as one. Begin
with the global food crisis. It has many causes, among them a failure to give agricultural development the importance it deserves. What's
needed, in effect, is a "green revolution" of the sort that once transformed Southeast Asia, this time with a focus on small farmers in Africa.
With the right mix of programs, there is no reason productivity cannot be doubled within a relatively short span, easing scarcity worldwide.
We've seen it happen in Malawi, which, with international assistance, has shifted within a few years from being a country plagued by famine to
one that exports food. In Hokkaido, I will call on G-8 nations to triple official assistance for agricultural research and development over the
next three to five years. We must act immediately to get seeds, fertilizers and other agricultural "inputs" to farmers in vulnerable countries in
time for the coming harvests. We must encourage nations to eliminate the export restrictions that many placed on foodstuffs this spring, as well
as the more long-standing subsidies that many developed nations provide their farmers. Such artificial barriers distort trade patterns and drive
up prices, deepening the immediate crisis and jeopardizing global growth. With climate change, as well, sustainable development figures large
in the solution. Most experts agree that we are nearing the end of cheap energy. Alternative technologies are among our
best hopes for cleaner, affordable power. Here, too, a new "green revolution" is underway. The United Nations
Environment Program has found that $148 billion in new funding went into sustainable energy last year, up 60 percent
from 2006 and accounting for 23 percent of new power-generating capacity. Our job, as national and international leaders, is to
assist in guiding and hastening this nascent economic transformation. We need to change social behavior and
consumption patterns throughout the developed world. And we must help developing countries "green" their
economies by spreading climate-friendly technologies as broadly as possible. We can take a big step forward in Hokkaido.
Mindful of our responsibilities to the poorest nations most vulnerable to climate change, we must fully fund the global Adaptation Fund and
make it operational. Looking forward to the December climate change summit in Poznan -- and to Copenhagen in 2009 -- we must push ahead
with negotiations for a comprehensive agreement limiting greenhouse gases. Above all, we need to inject a sense of urgency and real leadership
into this quest. It is not enough to set goals for 2050, far down the road. We need a middle-term timeline to 2020 if we are serious about
promoting change now. Lastly, Hokkaido will test our commitment to the Millennium Development Goals. For Africa alone, donors have
pledged $62 billion a year by 2010. Those in need have faces: mothers who die needlessly in childbirth, infants stunted through life because
they do not receive adequate nutrition during their first two years. We promised this assistance. Now is the time to provide it. Never in
recent memory has the global economy been under such stress. More than ever, this is the moment to prove that we
can cooperate globally to deliver results: in meeting the needs of the hungry and the poor, in promoting sustainable
energy technologies for all, in saving the world from climate change -- and in keeping the global economy growing

Current loose monetary policy will trigger recession – only new energy investments can solve
Jagadeesh Gokhale and Thomas A. Firey, The Fed Walks a Tightrope, http://www.cato.org/pub_display.php?pub_id=9355
In the Fed's defense, the current economic situation involves more than just an oil supply shock; the housing sector
has weakened and the financial markets are suffering liquidity shortages. Declining home prices reflect over-
investment in houses, which compounds the negative oil price shock with a negative shock to Americans' wealth and
spending. Depreciating home values also cause lopsided bank balance sheets with too many non-performing loans eroding bank capital.
Those capital losses are triggering cutbacks in lending to viable borrowers who, in turn, reduce spending on
consumption and investment. This leaves the Fed with lousy choices. If it tightens the money supply in order to
combat inflation, the supply shock-induced decline in the nation's output may accelerate. But if it increases liquidity
for financial institutions, it may trigger higher inflation in the future. Indeed, inflation rates have been ticking up since
November. So far, the Fed has appeared willing to run the risk of inflation in order keep the economy buoyed. But should
it pursue that policy much further? Two arguments suggest that the FOMC should refrain from additional rate cuts, at least for now: First, the
credit market problems cannot be solved by traditional interest rate cuts. They ultimately require an infusion of
capital in affected institutions, and that is a fiscal and not a monetary issue. Second, output losses from structural
adjustments are unavoidable. Sooner or later, we must shift our investment from housing to energy, and that shift will
not be painless. Loose monetary policy might induce households and business to postpone making those changes --
but that will prolong and perhaps increase the total amount of economic pain. The FOMC's policy disagreements over interest
rates reflect its members' different perceptions and preferences about how quickly such adjustments should be promoted via monetary policy.
We worry that further delays induced by excessively accommodative policy will result in a vicious cycle of higher
inflation, increased inflation expectations, reduced Fed anti-inflationary credibility, slower capital reallocations and,
eventually, a weaker economy.

In order to save us from inflation and a declining dollar, the US must adopt a sound energy policy.
Seeking Alpha, 6/4/08
Originally from upstate New York, I grew up in Louisiana and have since lived in San Diego, Phoenix, and Austin, TX. I received a BSEE and worked for 22 years in the electronics
industry. was a San Diego tax consultant and financial planner, I provide income tax. Seeking alpha, http://www.fitz-cpa.com/index.htm
Despite what Bernanke and Paulson have been pontificating about the last few days, Fed policy will continue to promote negative
real interest rates and thus, a lower US dollar. I am sure this was the rationale behind Axel Merk's Merk Hard Currency Fund
[MERKX] which is up over 6% YTD. On the other hand, there are people like Steve Forbes who contend all we need to do is shore up the
dollar and oil prices will come down. As usual, Forbe's has things back-asswards. It is the rising cost of oil (due to worldwide
supply/demand fundamentals) that is causing, in a vicious circle, the US dollar to decline. Does Forbes really believe
the rest of the world is not aware of the $650 billion US dollars that leave the US every year to pay for our oil
addiction? Please. Did anyone look at the faces of the sheiks in the crowd yesterday while Paulson was speaking? The only question I have is
when are the Middle Eastern countries going to get off their US dollar currency pegs? Seriously, they are having to cut their interest rates every
time the US does even though inflation is running, in some cases, between 10-20%. They must be very irritated... We know that jawboning a
strong dollar policy (wink-wink) doesn't work. We know the US government will continue fudge inflation data. Barry
Ritholtz says the US government's reports inflation data as "inflation excluding inflation". So, is there no hope for the
US dollar? Actually, there is one prudent thing to do. It is also the key to future economic prosperity and addressing
global warming: a comprehensive, well-crafted, long term US energy policy.
Better energy policy is one of the few hopes we have for decreasing inflation.
New York Times, 6/27/08
http://www.nytimes.com/2008/06/29/opinion/29sun3.html, editorial,
History may not be a reliable guide. It is easy — but not necessarily helpful — to draw analogies to eras like the stagflationary 1970s. Then,
high prices led to higher wages and the dreaded wage-price spiral. Raising interest rates increased unemployment and slowed wage growth,
choking inflation. But today, wages are barely budging, even as prices go up. Rate hikes to fight today’s inflation —
which stem from commodity prices, not wages — may not be the fix they once were. We don’t know how the Fed is going
to get out of this bind. In the long run, however, the bigger challenge is not the Fed’s. Policy makers must come up with strategies to
prevent the recession-and-inflation problem from happening time and again. Foremost would be a systematic plan for
reducing the nation’s dependence on oil. From this perspective, high oil prices are actually a good thing — cutting
use and spurring the development of alternative energy — but there must be help for the most hard-hit Americans, like lower-
income workers. The country first saw how high oil prices can wreak economic havoc with the oil shocks of the 1970s.
Congress and presidents have failed to reduce America’s vulnerability by reducing its dependency. The Fed will have to
feel its way through the current crisis. But the next president and Congress will have to tackle the oil problem once and for
all.

Impact: Stagflation Kills Economy 73
Stagflation would couple with the wage spiral, destroying the economy.
The Washington Post, 2/27/08
Robert J. Samuelson, The Washington post A-17, February 27, 2008 Wednesday
Regional Edition,
"Stagflation" is back in the headlines -- but the term is being misused. Eminent commentators describe stagflation as the messy mixture
of high inflation and high unemployment. It isn't. Stagflation, at least as the concept was initially understood in the 1970s, meant something
different. Yes, it signified the simultaneous occurrence of high inflation, high unemployment and slow economic growth, but its defining
feature was the persistence of this poisonous combination over long periods of time. Let's see why this is a distinction with a difference. The
coexistence of high (or rising) inflation and high (or rising) unemployment is not an abnormal event. But it's usually
temporary, because the higher unemployment -- stemming from an economic slowdown or recession -- helps control inflation. Companies
can't pass along price increases; they're stingier with wage increases. It's only when this restraining process is not allowed to work
that inflationary psychology and practices take root, creating a self-fulfilling wage-price spiral. Higher wages push
up prices, which then push up wages. Then we get stagflation: a semipermanent fusion of high joblessness and inflation.
Naturally, no politician acknowledges the self-evident implication: that recessions, though unwanted and hurtful to many, are not just
inevitable; sometimes they're also necessary to prevent the larger and longer-lasting harm that would result from resurgent inflation.
Interestingly, many academic and business economists who have more freedom to speak their minds suffer the same deficiency. They treat
every potential recession as a policy failure when it is often simply part of the business cycle. They thus contribute to a political
climate that, focused on avoiding or minimizing any recession, may perversely aggravate inflation and lead to much
harsher recessions later. The stagflation that began in the late 1960s and resulted from this attitude was indeed
dreadful: From 1969 to 1982, inflation averaged 7.5 percent annually and unemployment 6.4 percent. (Present unemployment is 4.9 percent.)
What has renewed interest in stagflation is the latest consumer price index (CPI), the government's main inflation indicator. For the year ending
in January, all prices were up 4.3 percent. Excluding the temporary surges after Katrina, inflation hasn't been higher since July 1991. Even
eliminating food and energy prices (about a quarter of the index), January's year-to-year increase was 2.5 percent.
All these figures exceed the Federal Reserve's informal inflation target of 1 to 2 percent a year, a range deemed so low that it constitutes
effective price stability. And these aren't the truly disturbing numbers. The more upsetting figures are those for the past three months, when the
full CPI rose at a 6.8 percent annual rate. Without food and energy, the increase was still 3.1 percent. Medical services were up 5.1 percent,
women's and girls' apparel 7.3 percent (again, at annual rates). Inflation is accelerating; yesterday's producer price report (finished-goods prices
up 7.4 percent over the past year) confirmed that. Price increases of individual items can have many immediate causes: poor harvests for food;
OPEC for energy; uncompetitive markets for health care; corporate market power for drugs. But persistent inflation -- the general rise of most
prices -- has only one cause: too much money chasing too few goods. It's not a random accident. The Federal Reserve regulates the nation's
supply of money and credit. The Fed creates inflation and can control it. Since August, the Fed has been under great pressure to ease money
and credit. It has. The overnight Fed funds rate has fallen from 5.25 percent in early September to 3 percent now. Politicians are clamoring for
the Fed to prevent a recession. Banks and other financial institutions want cheaper credit to enable them to offset losses on subprime
mortgages. There is fear of a wider economic crisis if large losses erode confidence and, by depleting the capital of banks and other financial
institutions, undermine their ability and willingness to lend and invest. Unfortunately, the Fed shows signs of overreacting to these pressures
and repeating the great blunder of the 1970s. Underestimating inflation then, the Fed repeatedly shoved out too much money and credit in a
vain effort to keep the economy near "full employment." Now, the Fed has again underestimated inflation. It expected the economic slowdown
to suppress inflation spontaneously. But so far, the lower inflation hasn't materialized, in part because, outside of housing, there hasn't been
much of an economic slowdown. It's true that the Fed is treading the proverbial tightrope. No one wants a financial crisis,
but no one should want the return of stagflation, either. The American economy -- a marvelous but flawed engine of
wealth -- periodically goes to speculative or inflationary excesses. If most of those excesses aren't given the time to
self-correct, we may be trading modest pain today for much greater pain tomorrow. Trying to prevent a recession at
all costs is a fool's errand that could ultimately backfire on us all.

US stagflation could harm other major economies due to collateral damage.

The Globe and Mail, 7/8/08
EDITORIAL; THE G8 SUMMIT; Pg. A16, Copyright 2008 The Globe and Mail, a division of CTVglobemedia Publishing Inc. All Rights Reserved The Globe and Mail (Canada),
With today's economic crises, the summits have come full circle. And while there are no instant answers, now or then, to these
dilemmas, G8 leaders should concentrate on how to co-ordinate their resistance to a recession in a time of escalating
inflation. Those G8 discussions should not sideswipe their consideration of climate change, trade and energy; consideration of
macroeconomic conditions is already on the agenda. But the economy has become a more urgent matter in recent weeks. U.S. economic
woes are steadily deepening, as oil prices bob above $145 (U.S.) a barrel and the housing sector keeps plummeting.
Other nations cannot insulate themselves from the collateral damage. As Sherry Cooper, chief economist at BMO
Nesbitt Burns, points out, U.S. growth was a piddling 1 per cent in the second quarter, while inflation hit an annual
4.2 per cent in May. Consumers are hoarding their cash for essentials such as gasoline and buying far fewer imports
from other nations. That means that other G8 countries "are now more vulnerable than ever to a punishing
slowdown." The solution, however, is far from obvious. If central banks cut their rates to stimulate demand, they risk inflation. If they raise
rates, they could choke growth. In this quandary, the U.S. Federal Reserve and the Bank of Canada are in a holding pattern, while the European
Central Bank raised key rates by a mere quarter of a percentage point last week. Governments and their central banks may be cautiously feeling
their way, but it is not clear they are working in tandem.
The settling stagflation will result in a global economic collapse.

Hendon, 7/10/08
Ray Hendon has business degrees from the University of Alabama (B.S. in Commerce and Business Administration) and Louisiana Tech University [MBA] as well as advanced
graduate studies at New York University School of Business in economics, statistics and finance. He is a member of the honorary scholastic society, Beta Gamma Sigma. He taught
economics and finance in several universities in the United States, and is now retired and lives in northern California. He continues advising a small clientèle on portfolio
construction, and writes on financial matters. Seeking alpha. http://seekingalpha.com/article/84368-stagflation-and-the-limits-of-growth
Regardless of where you look, there are clouds either overhead, as in the U.S., or on the horizon and blowing towards shore, as in Europe, Asia,
Africa, and Latin America. The old giants are staggering, and the new ones will be soon! The table below (click to enlarge), taken from
Bloomberg, is a little outdated in what to expect in terms of real growth, but it is the latest available. In my view, and increasingly that
of many others, real GDP growth in the U.S. and probably Europe will decline for 2008, and not be much better in
2009. Stagflation will not be a purely local affair for us. Of course, there is no agreement about the severity or
longevity of the downturn. There never is. But slower times are upon us, and the greater fear is that it could turn into
a 1930s scenario of economic activity spiraling downward. This scenario unfolds like this: to protect themselves, the
developed nations (the U.S. and Euroland, e.g.) will blame everyone else and begin pulling back from their bilateral
and multilateral trade agreements. This they will do, trying to protect their domestic workforce from falling real
wages and businesses from the effects of higher commodity prices. This, in turn, would be met by retaliation of our
former partners in the developing world, in the form of trade embargoes, higher tariffs and inflated currencies. World
trade plummets, and the heady times of ever expanding world economies comes to an end. It’s a horror of a scenario,
and it did happen in the early stages of the 1930s depression.

Stagflation will be bad for several sectors of the economy, and can prove fatal.
Gross, 3/6/08
http://www.slate.com/id/2185919/ , Daniel Gross is a journalist, author, and editor who specializes in business history, political economy, and the money culture. He writes the
“Moneybox” column for Slate and contributes to the “Economic View” column of the New York Times. He has worked as a reporter at The New Republic and has contributed to
more than 60 publications. Since 1999, he has edited STERNbusiness, the semi-annual management journal published by New York University’s Stern School of Business. Gross has
appeared on CNBC, CNN, Fox News Channel, The News Hour with Jim Lehrer, C-SPAN, and on more than 35 radio programs, including NPR’s Fresh Air with Terry Gross (no
relation). In 2001, he was a fellow at the New America Foundation. He is the author of three books: Forbes Greatest Business Stories of All Time (Wiley, 1996); Bull Run: Wall
Street, the Democrats, and the New Politics of Personal Finance (PublicAffairs, 2000), and Generations of Corning: 150 Years in the Life of a Global Corporation, 1851-2001
(Oxford University Press, 2001), co-authored with Davis Dyer. A graduate of Cornell University, Gross holds an A.M. in American history from Harvard University.
We also import much more oil today than we did in the 1970s. According to the Department of Energy, U.S. net daily imports have risen from
6.4 million barrels in 1980 to 12.4 million barrels in 2006. Meanwhile, annual U.S. production has fallen from 3.2 billion barrels in 1980 to 1.9
billion barrels in 2006. When the United States largely fed its own addiction, the high prices Americans paid at the pump
were generally recycled into the domestic economy. Today, the payments are more likely to wind up in government coffers in
Venezuela, the Persian Gulf, and Russia. There's a final reason why even a mild case of stagflation can prove fatal: leverage.
Stagflation implies a rise in fixed costs and inputs (food, energy, the price of money itself) coupled with slowing
growth in sales and revenues. This dynamic of a rising bottom line and a stagnant top line shrinks profit margins. If
you have a lot of debt, and if much of that debt is floating-rate or short-term debt, a horrible combination results. If
your entire business model consists of borrowing huge sums of floating-rate or short-term debt and using it to buy
other assets or debt instruments that tend to decline in value when inflation rises and growth stalls, then it's a killer.
Unfortunately, that's exactly what the financial-services sector and the American homeowner have been doing for the
last several years.

Impact: Fed Rate Hikes [1/2] 76
If inflation becomes a threat The Fed’s only choice to avoid stagflation will be to raise interest rates.
Telegraph, 6/2/08
US staring at double-dip recession as calls for higher interest rates grow, By Liam Halligan, http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/01/ccliam101.xml
The Fed has long been able to lower interest rates despite inflationary pressures. The
dollar's reserve currency status has
traditionally given the US central bank room for manoeuvre. The world has now changed. So weak is the US
currency, so large are the country's debts, and so powerful is this "structural" oil price shock that even an overtly
political central bank like the Fed can no longer do what it wants. So this inflation spike will harm the US not only
via escalating costs and lower spending power but, as the markets have now reluctantly concluded, by forcing the
Fed to raise rates just when the broader economy so badly needs them to fall. In a recent private seminar, I heard
Greenspan say: "If we allow inflation to re-emerge, growth rates will slow, living standards will suffer and we could
well see US stagflation. And the only way you can truly contain inflation is by raising rates." It doesn't help Bernanke that
his predecessor has the brass neck to offer advice he refused to follow himself. But with producer price inflation above 6 per cent and one-year
inflationary expectations hitting a record 7.7 per cent last month, US rates must rise.
The Banking Economy would be devastated by rate hikes.

CNN Money.com, 6/26/08
David Ellis, staff writer, for cnnmoney.com , http://money.cnn.com/2008/06/26/news/companies/banks_margins/#TOP, Banks should fear a rate hike
Typically, these big banks are also more affected by rate hikes because they tend to rely more on so-called wholesale funding sources, such as
the debt market, for capital. The debt market is highly sensitive to changes in interest rates. But if the Fed were to shift to an inflation-
fighting stance and start raising rates, smaller banks could be the ones who get stung the most. Gerald Hanweck, a
finance professor at George Mason University's School of Management, warns that smaller banks already grappling
with exposure to bad mortgages could be in the deepest trouble. "Some of these banks right now are barely profitable," said
Hanweck. "They are right on the edge and [higher rates] could tip them into losses." Rate hikes could also make an
already tough lending environment even tougher. In previous years, banks could compensate for rising rates by
relaxing their underwriting standards to increase loan volume or attract new borrowers. Nowadays, however,
heightened regulatory scrutiny and rising loan losses have prompted banks, both large and small, to tighten their
underwriting standards. And consumers aren't doing a lot of borrowing nowadays even with rates as low as they are.
But banks' interest rate pain wouldn't end there. Rising interest rates would also lead to even more intense competition for deposits, notes
Michael Nix, a principal at Greenwood Capital Associates in Greenwood, S.C., which oversees about $750 million in assets. Many online
banks and brokerages have been offering their own interest bearing money market accounts, often at a higher rate than traditional banks, in
recent years. To be sure, a rate increase would not affect every bank in an identical way, notes Khanh Vuong, a vice president at A.M. Best who
oversees the bank rating group. In fact, he said the impact of rising rates could "vary from region to region and bank to bank." Banks with well-
positioned balance sheets would be able to weather a rising rate environment, he noted. And financial institutions that aren't as threatened by
fierce competition for deposits would also be able to withstand rate pressure. But for an industry that's already dealing with a host of
problems, the possibility of rate hikes down the road is not an encouraging sign.

Impact: Fed Rate Hikes [2/2] 77
A Banking collapse would destroy the economy.

The Market Oracle 7/14/08
US Banking Crisis Goes from Bad to Worse, Nadeem Walayat, http://www.marketoracle.co.uk/Article5461.html, Nadeem Walayat has over 20 years experience of trading, analysing
and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial
Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial
markets.
The Federal regulators stepped in to seize the assets and guarantee 100% of the first $100k of depositors money. Meanwhile at the same time
another far bigger crisis was unfolding as Freddie Mac and Fannie Mae that insure or manage more than half of US mortgages were also on the
brink of collapse. US Treasury Secretary Hank Paulson stepped in to try and reassure the market that the banks were able to meet to day to day
financing operations. This 'ms-information' was followed on Sunday by a U-turn by the Federal Reserve and Treasury Department by making
unlimited funds available to both critical institutions so as to prevent their collapse, even going so far as the government seeking to buy the
banks stock so as to put a floor under the share prices. The problem the US banking system now faces is that the failure of
Indymac, and bailout of Fannie Mae and Freddie Mac to prevent a far worse collapse are not an isolated instance but
systemic of the whole banking system. The New York Times estimates that as many as 150 banks could go bust and
thus requiring the Fed to step in to seize assets during the next 12 month with many of the remaining banks cutting
back on their branch networks. However this estimate may still be just the tip of the banking crisis iceberg as the
Savings and Loans crisis of the early 1990's witnessed the number of bank failures explode that eventually saw more
than 1000 financial institutions go bust, which given that today the US is experiencing the worst housing market
crisis since the Great Depression may be in for an even worse fate. The FDIC currently has some $53 billion of funds available
to pay depositors of defaulting banks of which upto $8 billion has now been eaten up by Indymac, which means should anywhere near the
number of anticipated banks fail then the US Tax payer will be forced to step in to the tune of several hundreds of billions of dollars if not for
over a trillion dollars. There also exists this risks of an across the board loss of confidence in the banking system
culminating a series panic runs on US banks accompanied by a collapsing US Dollar as the US national debt levels
explode as the liabilities of these failing banks are taken over by the government and depositors / investors seek
shelter in more secure currencies and assets such as the precious metals.The question now being raised is who will be
next on the list to go bust. ? The crisis in the US banking sector echoes around the world as many banks have seen capital bases eroded by
well over 50% due to exposure to toxic US mortgage backed securities that continue to default in ever increasing numbers which has resulted
in the credit freeze as increasingly cash starved banks fear lending money to one another due to the increased risk of default.

A2: Food Price is alt cause 78
Oil prices cause an increase in food prices.

Mieszkowski 06, Katharine: American journalist and graduate of Yale University, honored as one of the top 25 Women on the Web, Senior
Writer for Salon.com, where she covers technology, business, and the environment
[The oil is going, the oil is going! http://www.salon.com/news/feature/2006/03/22/peakoil/index.html]
Over red wine and a potluck dinner of hummus and salads, the peak oilers, who tonight include a computer programmer, a
consultant, a teacher, a retired engineer and a recent college grad, listen intently to the first speaker: Alice Friedemann, a systems
analyst for a large transportation company. She's been studying the history of agriculture in California and learning
sustainable farming techniques. "As energy gets more expensive, food will get more expensive," Friedemann says,
citing a stat that's often mentioned in peak-oil circles: In our era of industrial agriculture, it takes 10 calories of fossil-fuel
inputs for fertilizers, pesticides, farm equipment and transportation from natural gas, oil and coal to produce
one calorie of food. The fear is that the rising price of oil will drive us to rely on other fossil fuels, draining those as
well, and destroying the atmosphere in the process. Friedemann remarks that there are home-court advantages to being so close to
California's fertile Central Valley. "The good news is we're near the food," she says. "But the bad news is people are likely to come here not just
because of the food but because it will be too hot or cold where they live." Grapes of wrath, anyone?

A2: Alt Causes (general) 79
Inflation is specifically driven by oil because it’s used in almost every aspect of our economy.
Investopedia 08, a Forbes Digital Company, one of the Internet's largest sites devoted entirely to investing education, one of the most respected
sources for financial information
[“What is the relationship between oil prices and inflation?” http://www.investopedia.com/ask/answers/06/oilpricesinflation.asp]
The price of oil and inflation are often seen as being connected in a cause and effect relationship. As oil prices move
up or down, inflation follows in the same direction. The reason why this happens is that oil is a major input in the
economy - it is used in critical activities such as fueling transportation and heating homes - and if input costs rise, so
should the cost of end products. For example, if the price of oil rises, then it will cost more to make plastic, and a
plastics company will then pass on some or all of this cost to the consumer, which raises prices and thus inflation.
The direct relationship between oil and inflation was evident in the 1970s, when the cost of oil rose from a nominal
price of $3 before the 1973 oil crisis to around $40 during the 1979 oil crisis. This helped cause the consumer price index
(CPI), a key measure of inflation, to more than double from 41.20 in early 1972 to 86.30 by the end of 1980. Let's put this into
perspective: while it had previously taken 24 years (1947-1971) for the CPI to double, during the 1970s it took about
eight years.

A2: Fed Will Balance 80
The fed will be unable to stop the hyperinflation.

Williams, 4/8/08
The effect of this structural change has been that most consumers
have been unable to sustain adequate income growth beyond
the rate of inflation, unable to maintain their standard of living. The only way that personal consumption — the dominant
component of GDP — can grow in such a circumstance is for the consumer to take on new debt or to liquidate savings. Both those factors are
short-lived and have reached untenable extremes. Debt expansion and savings liquidation both were encouraged by the
investment bubbles created by Alan Greenspan; he knew that economic growth could not be had otherwise. Part of
what is happening today is payback for those policies.
This circumstance places both the federal government and the Federal Reserve in untenable positions, where they
cannot easily or rapidly address the underlying problems, even if standard economic stimuli were available. From the
standpoint of the federal government, traditional fiscal stimulus in the form of tax cuts or increased federal spending
have reached their practical limits, with the actual annual budget deficit running out of control at $4.0-plus trillion
per year.

A2: Econ Self-Balancing 81
If hyperinflation occurs, there is not adequate currency in the US to adjust and stop the problem.
Williams, 4/8/08
Therein lies an early problem for a system headed into hyperinflation: adequate currency. Where the Fed may hold
roughly $210 billion in currency (sharply increased in the last year) outside of $50 billion in commercial bank vault
cash, the bulk of roughly $780 billion in currency outside the banks is not in the United States. Back in 2000, the Fed
estimated that 50% to 70% of U.S. dollar cash was outside the system. That number probably is higher today, with perhaps as
little as $200 billion in physical cash in circulation in the United States, or roughly 1.5% of M3. The rest of the dollars are used
elsewhere in the world as a store of wealth, or as an alternate currency free of the woes of unstable domestic financial
conditions. In Zimbabwe, for example, where something akin to hyperinflation is underway, U.S. dollars are used to
maintain some semblance of economic activity, where wages and salaries seriously lag inflation, and goods often are
available only on the black market. Given the extremely rapid debasement of the larger denomination notes, with
limited physical cash in the system, existing currency would disappear quickly as a hyperinflation broke. For the
system to continuing functioning in anything close to a normal manner, the government would have to produce
rapidly an extraordinary amount of new cash, and electronic commerce would have to be able to adjust to rapidly
changing prices. In terms of cash, new bills of much higher denominations would be needed, but production lead
time is a problem. Conspiracy theories of recent years have suggested the U.S. Government already has printed a new currency of red-
colored bills, intended for some dual internal and external U.S. dollar system. If such indeed were the case, then there might be a store of "new
dollars" that could be released at a 1-to-1,000,000 ratio, or whatever ratio was needed to make the new currency meaningful, but such would
not resolve any long-term problems, unless it were part of an overall restructuring of the domestic and global financial and currency systems.
From a practical standpoint, however, currency would disappear, at least for a period of time in the early period of a
hyperinflation. Where the vast bulk of today’s money is not physical, but electronic, however, chances of the system
adapting here are virtually nil. Think of the time, work and effort that went into preparing computer systems for Y2K, or even problems
with the recent early shift to daylight savings time. Systems would have to be adjusted for variable, rather than fixed pricing, credit card lines
would need to be expanded daily, the number of digits used in tallying dollar-denominated transactions would need to be expanded sharply.
While I have been advised that a number of businesses have accounting software that can handle any number of digits, I also noted on a recent
cross-country trip that a large number of gas stations have older pumps that cannot register more than two digits’ worth of dollars in their totals
or more than $9.99 per gallon of gas. From a practical standpoint, the electronic quasi-cashless society of today also would
shut down early in a hyperinflation. Unfortunately, this circumstance rapidly would exacerbate an ongoing economic
collapse.

A2: high consumer spending disproves 82
US consumers don’t feel the weak dollar and inflation since the government manipulates data and china hasn’t
dumped the dollar - YET
Paul Craig Roberts, 3/26/08
Watching the Dollar Die, http://www.creators.com/opinion/paul-craig-roberts/watching-the-dollar-die.html ,Paul Craig Roberts, Assistant Secretary of the Treasury during President
Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic
and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President
Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider's Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside
the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the
Name of Justice.
The U.S. inflation rate is about twice as high as the government's inflation measures report. In order to hold down
Social Security payments, the government changed the way it measures inflation. In the old measure, inflation
tracked the nominal cost of a defined standard of living. If the price of steak rose, up went the inflation rate. Today, if
the price of steak rises, the government assumes that people switch to hamburger. Inflation doesn't go up. Instead, the
standard of living it measures goes down. This is just one of the many ways that the government pulls the wool over
our eyes. With the dollar value of the euro rising through the roof, today a vacation in Europe is far more costly than in the past. Thanks to
China, so far Americans have been sheltered from the greatest effects of the dollar's declining value. Our largest trade
deficit is with China. The prices of the goods from China have not risen because China keeps its currency pegged to
the dollar. As the dollar goes down, China's currency goes with it, thus holding down price rises.

A2: Consumer Spending Turn 83
The Current oil driven inflation will not spur consumer spending, but will in fact stop it.
Chicago Sun-Times, 7/16/08
Copyright 2008 Chicago Sun-Times, Inc. All Rights Reserved, Chicago Sun Times, July 16, 2008 Wednesday , Final Edition, SECTION: FINANCIAL; Your Wallet; Pg. 45, Gas
ignites inflation; Price increases hit 27-year high while consumer spending gets little lift from stimulus
Soaring costs for gasoline and food pushed inflation at the wholesale level up 1.8 percent in June, leaving inflation
rising over the past year at the fastest pace in more than a quarter-century, the Labor Department said Tuesday. Over the past
12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period
when soaring energy costs were giving the country inflation pains. Core inflation, which excludes energy and food, was better
behaved in June, rising by just 0.2 percent, slightly lower than expectations. For June, energy prices at the wholesale level shot up by
6 percent; the price of unleaded regular gasoline surged by 9 percent following an even bigger 9.6 percent increase in
May. Retail spending edged up just 0.1 percent in June, the weakest showing since February, even though the
government was mailing out billions of dollars in economic stimulus payments. The reports contributed to a volatile day on
Wall Street. The Dow Jones industrials fell 92.65, or 0.84 percent, to 10,962.54 -- the first close below 11,000 since July 2006. 65
PERCENT OF CONSUMERS CUTTING BACK ON SPENDING. Americans are putting less into retirement
savings, cutting back on spending and relying on credit cards to help them deal with tougher economic times, a
survey to be released today by Country Financial found. Sixty-five percent of those responding to the poll said they
cut back their spending, and 62 percent said they have put less money into savings or retirement to cope with the
current economy. Meanwhile 43 percent said they have tapped into their savings to get by, and 26 said they have had to rely on credit cards.
Less than half of respondents use a household budget, the survey found.
Despite the government’s stimulus package, consumers are locked into saving the money, empirically proven.
The Atlanta Journal-Constitution, 5/15/08
The Atlanta Journal-Constitution, May 15, 2008 Thursday, Main Edition, Stimulus hopes misplaced; Ailing economy has spending spree unlikely, BYLINE: GOVIND
HARIHARAN; For the Journal-Constitution
Millions of households started receiving their gift checks from the federal government two weeks ago as part of the
economic stimulus package signed into law earlier this year. The checks are making their way into bank accounts as
the U.S. economy struggles with a possible recession.
Ever since the Great Depression, recession fears have brought about a populist response from the federal government in the form of rebates and
other "gifts." Most recently, in 2001, as the economy entered a recession, tax rebate checks of between $300 and $600 were mailed out to about
two-thirds of U.S. households. The underlying belief is that such payouts, especially to lower-income households, will
stimulate consumer spending --- which accounts for the biggest chunk of gross domestic product --- and thereby
boost employment and incomes as businesses rush to meet increased demand. But despite hopes --- and enticements from
retailers offering free rebate-check cashing, coupons and added value to gift cards --- that cash-strapped consumers will go out and spend their
windfall, in reality the tax rebates won't do much to help the ailing economy get back on its feet. The economy is
crippled by a housing crisis and credit crunch of alarming proportions; debt-burdened households that are shopping
more at Wal-Mart than at Target; soaring oil and commodity prices that are stoking fears of inflation; a softening job
picture; a weak dollar that makes imports more expensive; and a volatile stock market. Consumers are seriously
worried about their jobs and the economy. Any extra dollars that end up in their pockets will certainly not be used for
discretionary spending. The 2001 tax rebates failed to coax consumers into spending. University of Michigan economists
Matthew D. Shapiro and Joel B. Slemrod found in their research in 2001 that only about 22 percent of households planned to spend their
rebates, with their follow-up survey showing similarly low levels of spending. This time around, the macroeconomic picture is bleaker.
Compared with 2001, prices of bare necessities such as food and oil are much higher, and the debt levels of households have risen just as home.

A2: Consumer Spending Turn 84
Stopping consumer saving in order to spend more is bad since saving is better for the economy’s long term welfare.
Skousen 03**
http://www2.gsb.columbia.edu/ipd/j_gdp.html, WHICH DRIVES THE ECONOMY: CONSUMER SPENDING OR SAVING/INVESTMENT?, Mark Skousen, Mark Skousen is a
college professor, prolific author and world-renowned speaker. He's made his unique sense of market and investment trends known and respected in the financial world. With a Ph.D.
in economics and a focus on the principles of free-market capitalism and "Austrian" economics, Mark Skousen has often gone contrary to the crowd in his investment choices and
economic predictions -- and has often been proved right, Mark Skousen has built a reputation for not only accurately identifying the right economic and political trends, but also the
right investments for the times.
Thus, saving is just as much a form of spending as consumption, only a different form of spending, and in some
cases, a better form of spending when it fulfills a need for more capital and investment. It is vital to have a proper
balance in the economy between consumption and saving/investment. Both are necessary to the foundation of wealth
and prosperity. But consumer spending should not be promoted at the expense of saving and investment. Be wary of
statements such as: --“Consumer spending drives the economy.” --“Consumer spending represents two-thirds of the
economy.” --“Increasing saving won’t help the economy.” Remember that saving is an important ingredient to
economic performance over the long run. Tax cuts that encourage saving and investment more than consumption are
not necessarily bad. Avoid statements such as: -- “Tax cuts won’t stimulate the economy if they are saved.” Or --“Tax
cuts for the wealthy are ineffective because the wealthy spend less than the middle class.”
** this card may be later than 03, there was no date given, but 03 was the latest date cited in the article

Turn: Consumer Spending Bad 85
Consumerism actually hurts the economy in times of recession, saving is key to long-term improvement.
Business and Media 07
[“A Ho-Hum Christmas Already?” http://www.businessandmedia.org/articles/2007/20071107142509.aspx]
You can often hear the media say that consumer spending “is critical to economic growth.” As Maria Bartiromo explained
on NBC’s “Today” October 31, this is a “ … very , very important part of the year, which, of course, is the holiday season where two-thirds of
consumer spending is allocated to economic growth.” But some economists disagree about how important excessive spending
really is to the economy. Economist and author Arnold Kling wrote in January 2006, “The idea that the economy needs
consumer profligacy is not nearly as entrenched among scholars as it is among journalists, politicians, and other
citizens. In fact, there is a strong case to be made that we would be better off if we had less consumer spending and
more saving.” “But none of those scholarly arguments matters. In President Nixon's phrase, ‘we are all Keynesians now.’ That means that
folk Keynesianism, which exalts consumer spending, permeates discussions of the economic outlook,” Kling continued. Kling was referring to
economist John Maynard Keynes, who heavily influenced economic theory in the 20th century and beyond. Keynesian theory advocated
government intervention and promoted spending rather than saving. Economist, Hillsdale College professor and BMI adviser Gary Wolfram
explained the problem with Keynesian economics this way: “It is true that at any point in time, consumption makes up a large
portion of the total GDP [70-75 percent], but that doesn’t mean that if we stop consuming it will reduce GDP.” What
actually happens when people stop spending? They deposit money in banks, which in turn loan money to businesses
that use it to produce capital goods [buildings, inventory, etc] and become more productive, improving our economy
in the long run, said Wolfram.

XT: Turn: Consumer Spending Bad 86
Frugality results in stability.

WiseBread 5-10-08
[“Does living frugally hurt the economy?” http://www.wisebread.com/does-living-frugally-hurt-the-economy]
When I advocate for frugal living, people sometimes ask, "What if everybody lived like that? Wouldn't it hurt the
economy?" My natural inclination toward frugal living may color my opinion, but I don't think so. I think mass frugality would be
good for the economy. It's a valid concern, rooted in the way recessions and depressions start. Some recessions are business-led, with
businesses cutting back first and consumers following because their paychecks are smaller and they can see that their jobs are at risk. Others
are consumer-led, with consumers cutting back first and businesses responding to falling sales with layoffs. Either one, of course, leads
directly to the other, and there's no automatic mechanism to stop the downward cycle. So, the question is: If everyone suddenly decided to be
more frugal, would that look like a consumer-led recession, with falling sales leading to layoffs, and layoffs leading to cash-strapped
consumers choosing to be even more frugal? It's a question that's hard to answer. If everyone were a bit more frugal, yes there probably would
be a bit less total economic activity. (Xin Lu lays out this case in her post from a few months ago, What if everyone suddenly became frugal.)
I think, though, that the exact result depends a great deal on the economic situation at the moment the change takes place. It's kind of like
hesitating before giving someone an aspirin: Won't it cause his temperature to fall? Well, if he's got a fever, yes it probably will. Otherwise,
probably not. In much the same way, if the economy is overheated, then a shift to frugality will probably slow it down. If the economy is
underperforming, I don't think a shift toward frugality will make a big difference--if everyone is already reduced to focusing on just the
necessities, becoming more frugal isn't much of a change. So, the downsides may be real, but I think they're small. On the other
hand, if everyone is more frugal, the upsides are potentially huge. A lot of the harm in a recession comes from fear.
The people who are unemployed have less money to spend, but even people with jobs start to cut back, simply
because they're nervous. Frugal people are less vulnerable to this. They have less debt, more savings, and more
room in the budget to handle a drop in income. They don't panic when their neighbor loses his job--because they
don't need to. The result is that the frugal household is more stable. And a community of stable households is a more
stable community. Any change in consumer's tastes--deciding that they want less of anything, whether it's VHS tapes, camera film, or
incandescent light bulbs--is hard on the businesses that produce those things. But it doesn't kick off a downward spiral, because there's a
natural point of stability: the point where the consumers are buying whatever it is they now want. The shift to more frugal
consumption patterns would be like a change in tastes, not like the beginning of a recession. So, I feel comfortable
advocating frugality. We may lose a bit of economic activity--but what we lose is worth losing. What we gain is more
secure households and a more sustainable economy. It seems like a win to me.

A2 Dollar Decline Good: = recession 87
A declining dollar causes a severe recession.

Financial times, 04
Financial Times (London, England), December 20, 2004 Monday , USA Edition 2, Why the dollar's fall is not to be welcomed: BARRY EICHENGREEN:, BYLINE: By BARRY
EICHENGREEN, SECTION: COMMENT; Pg. 15
The question is whether or not it is already too late for a smooth adjustment. The current account is the difference between savings and
investment. Narrowing the US deficit will therefore require some combination of increased savings and lower investment. The falling dollar
will bring this about by tending to drive interest rates up. As Asian central banks curtail their purchases of US Treasury securities and sell some
of their existing holdings, there will be upward pressure on US Treasury yields. Moreover, as the dollar falls, there will be upward
pressure on US import prices and more inflationary pressure generally. In response, the Federal Reserve will have to
raise interest rates faster than currently expected. Higher interest rates will make borrowing more expensive and slow
investment growth. They will have a negative impact on asset valuations, including house prices. US households, no
longer living off capital gains, will have to start saving again. With investment down and saving up, the current
account deficit will narrow. Unfortunately, this happy observation is not the end of the story. A significant decline in both
consumption and investment will mean a recession in the US. This conclusion is so obvious that the only question is
why the markets are not forecasting it already. The answer, presumably, is that investors do not believe that the
dollar's decline will produce a significant increase in inflation. The historical data say that a 10 per cent fall in the
dollar produces 3 additional percentage points of inflation, which in turn implies a 450 basis-point increase in the
discount rate. Clearly, we have not seen anything like this yet. Treasury inflation-protected securities spreads - the difference
between yields on conventional Treasury securities and Tips - suggest only a modest increase in inflationary expectations. Maybe the "new
economy" has rendered the US economy more flexible and resilient so that the traditional relationship between dollar depreciation and inflation
no longer holds. Perhaps, then, fears of significantly higher interest rates are exaggerated. But even if this observation is
correct, it just means that the dollar will have to fall further to generate enough inflationary pressure to force the
Federal Reserve to raise interest rates. At the root of the dollar's decline is the view that the US current account
deficit is unsustainable. Foreigners will therefore keep selling dollars until it narrows. This in turn means that the
dollar will keep falling until US inflation heats up to the point where the Fed does indeed have to raise interest rates.
The implication, that the US economy will slow or more likely succumb to recession, is unavoidable.
The question is whether there is anyone to take up the slack. For the world economy to avoid a serious downturn, less consumption and
investment in the US will have to be offset by more consumption and investment elsewhere. But where? Europe is stagnant, and the European
Central Bank has shown no awareness of the need for monetary stimulus. China is cooling off, and it will cool off more as it allows its currency
to strengthen. Japan's modest recovery will disappoint now that it has to raise taxes to control its own spiralling debt. Countries outside the
Group of Four nations (the US, the UK, Japan and Germany) are simply too small to make a difference. The implication is that the
correction of the US current account deficit that is now getting under way will mean a recession not just for the US
but for the rest of the world. The optimists who are welcoming the dollar's fall should think again.

A2 Dollar Decline Good: A2 trade def 88
A weak dollar risks damaging the economy, and will not be able to sove for a trade deficit.
National Post (f/k/a The Financial Post) (Canada), January 24, 2008 Thursday , National Edition, U.S. dollar risks; Trust is the most powerful currency, so the Fed should
concentrate on dollar strength, instead of core inflation, BYLINE: Bill Wilby, The Wall Street Journal, SECTION: FP COMMENT; Pg. FP17,
But don't we need a lower dollar to "correct" our large trade and current account deficits? In the first place, our
accounting deficits are
largely with our own overseas subsidiaries (more than 50% of world trade is intra-company trade) and reflect an
increasingly globalized world economy. Second, America is the shopping mall for the world. Because our distribution system
is the world's most efficient, retail prices for the world's goods are lower here, and we have been the shopping
destination for the world's consumers even before the dollar began its recent fall. These foreign purchases prop up
retail sales (helping to explain the resilience of the U.S. consumer), depress our measured savings rate, and result in an
underreporting of U.S. exports and an exaggerated measure of our imports (some significant share of our imports are actually
bought by foreigners). The ability of currency moves to correct trade deficits or surpluses depends on the elasticity of demand and supply.
Because of increasingly specialized world trade, the elasticity associated with our exports and imports are very low. Thus a falling dollar is
likely to increase the dollar amount of our imports (the infamous J-curve), and force the bulk of the adjustment to currency moves into the
"income effect" that results from our higher bills (witness the impact of higher oil prices on the U.S. consumer). Moreover, our current account
deficit for a year is equal to only a fraction of the dollar's foreign-exchange trades for a day. To say that one is either the cause or consequence
of the other is almost laughable. Our external deficits are largely measures of Federal Reserve and banking-system liquidity
creation, just as the dollar's exchange rate is a function of foreign trust in holding dollar cash or near-cash balances as
a monetary store of value (these balances are the lion's share of our so-called foreign debt). Thus, our deficits will only be
ameliorated by a slowdown in liquidity creation itself. Just such a slowdown is likely now underway as a result of the mortgage crisis as we
enter 2008, but any attempt by the Fed to ease at the expense of further dollar declines will likely snatch defeat from the
jaws of victory, and risk a global inflation of significant proportions over the next several years. Doesn't a failure to
respond aggressively to the credit crisis by cutting rates too slowly risk a recession, or a Japan-like breakdown of the world's financial system?
Unfortunately, the recession risk is high, but not because of high interest rates (which are currently negative in real,
after-tax terms). The recession risk is high because of a breakdown in the absurd system that developed for the
packaging and underwriting of debt, and the excess liquidity that developed from the combination of that system and
a highly stimulative monetary policy.
The Fed took a gamble on inflation to ward off what was perceived as a deflationary threat in 2001-02. The
inflationary consequences of that gamble are now here, with the petrodollar monetary merry-go-round fuelled by the
weaker dollar. Those consequences will be much easier to deal with now, rather than later. Unlike Japan, where the capital-
markets risk was concentrated in a handful of thinly capitalized large banks, the very growth of the credit-derivatives market that is the source
of the current crisis in the United States has also resulted in a wide dispersion of risk in the financial system, and any recession will likely be
mild and short. While we might see a number of hedge funds and some isolated banks fail, the pool of distressed asset buyers waiting in the
wings would result in a needed consolidation of the financial-services industry, without systemic failure. In the meantime, the systemic risk
posed by the failure of one or more of these institutions is minimal compared with the moral hazard and longer-term inflation risks we incur
from their bailout. Sadly, the dimensions of the Fed's great dilemma would be much less acute had the Fed and Treasury officials not taken such
a cavalier approach to the U.S. dollar over the past eight years. Our "strong dollar" (wink, wink) policy has never been articulated by either
institution with any real conviction, and markets have rightly sensed that maintaining employment, growth and stock-market happiness has
begun to take precedence over maintaining the value of money. In a world of fiat currencies, where trust is your most powerful policy tool,
dollar strength is a far better indicator as to the appropriate stance of monetary policy than "core" inflation. Any further loss of
confidence in the U.S. currency will cost us dearly in terms of both price stability and jobs in the long run, as it will
imply a higher level of interest rates to maintain a given monetary stance. A convincing elevation of the dollar in the
policy priority list for both the Fed and the Treasury would be the single greatest step that either institution could take
in restoring health to the financial system.

A2 Dollar Decline Good: A2 trade def 89
The uncompetitiveness of the U.S. economy forces a declining dollar to actually hurt exports.
South Asian Citizens Web 05 US DOLLAR HEGEMONY: THE SOFT UNDERBELLY OF EMPIRE (AND WHAT CAN BE DONE TO
USE IT!) http://www.sacw.net/free/rohini_marinella30012005.html
All this has weakened the US dollar, but this does not necessarily mean that it will decline to the point where it ceases to function as
world currency. There are contradictory pressures, both from the US and from its major creditors. Within the US, there
could be hopes that a weaker dollar would spur exports, but this now seems unlikely, given how uncompetitive US
industry has become.(18) More importantly, the US deficits shrink as the dollar declines. Federal Reserve Chairman Alan Greenspan
summed up the US dilemma in November 2004, in a speech where he seemed to accept the inevitability of the dollar
decline in order to help ease US deficits. This would be a boon to the US so long as the dollar retained its role as world
currency, but it would inflict enormous losses on countries that have amassed large quantities of dollar reserves.
China and Japan alone hold about a trillion dollars, and while countries like India (and smaller economies) may hold much smaller
quantities, the devaluation of those reserves is already hitting them, and would hit them even more if the dollar crashes.(19)

A2: Dollar Decline Good: A2 trade def 90
A weak dollar is NOT good – prefer our evidence because it assumes their warrants.
[“Will a US dollar collapse end American hegemony?” http://shareno.net/dollarcollapse.htm]
For many years the US has been the economic engine for the world, standing in as purchaser of last resort for the world’s supply
of goods in times of global economic distress. Now the US itself is in trouble. If the US attempts to fight the rapidly gaining
forces of deflation by encouraging a depreciating dollar, it will export deflation to the rest of the world because
foreign currencies will rise relative to the dollar. This will damage foreign economies and inhibit their ability to buy
goods and services, including those from the US. Since the short-term benefit of a weak dollar to US corporations’
earnings will show up quickly, while the long-term damage to the global economy will become apparent only
with the passage of time, it is a fair assumption that the US will take the easy route and worry about the global fallout later. The problem
with this approach for the Bush administration is that there are great risks to a weak dollar policy. The world economy is awash in
dollars, and when there is too much of something the price or value usually drops, sometimes precipitously. If confidence in the dollar or
dollar assets, such as Treasury bonds, declines, the world may, at some point, reconsider its involvement with US assets. The
results of such a reappraisal could be anything from mildly damaging to catastrophic. Seventy-five per cent of the world’s central-bank assets
are held in US dollars (as Treasury bonds). These bankers do not want their primary asset to suffer a significant decline.

A2: Dollar Decline Good: A2 trade 91
Their scenario assumes a gradual decline of a dollar. Our scenario would be a sharp drop resulting in recession.
Weller 04, Christian E.: Senior Fellow at American Progress and an Associate Professor of Public Policy at the University of Massachusetts
Boston, former research staff at the Economic Policy Institute
[“The Dollar's Decline in Perspective,” http://www.americanprogress.org/issues/2004/11/b256346.html]
Under the right set of circumstances, a lower value of the dollar may be welcome. When the dollar falls, U.S. exports
become more competitive, whereas U.S. imports become more expensive. Ideally, this should help to shrink the record U.S.
trade deficits. Whatever happens to the trade deficit has direct ramifications for manufacturing. After all, manufactured goods represent
between 70 and 80 percent of U.S. trade. To maximize the benefit of a dollar decline for the economy, the decline has to be
gradual and consistent. If the dollar declines too fast, it can lead to rapid inflation and thus to higher interest rates
followed by a recession – the hallmarks of a currency crisis.

A2: China no dump b/c dependence 92
Not true – it’s actually the other way around.

Roberts 8-13-07, Paul Craig: Assistant Secretary of the Treasury in the Reagan Administration, Forbes Media Guide ranked him as one of the top
seven journalists in the United States in 1993, former editor for the Wall Street Journal, Business Week, and Scripps Howard News Service
[“China's "nuclear option" to Dump the Dollar is Real,” http://onlinejournal.com/artman/publish/article_2293.shtml]
The notion that China cannot exercise its power without losing its US markets is wrong. American consumers are as
dependent on imports of manufactured goods from China as they are on imported oil. In addition, the profits of US brand
name companies are dependent on the sale to Americans of the products that they make in China. The US cannot, in retaliation, block the
import of goods and services from China without delivering a knock-out punch to US companies and US consumers.
China has many markets and can afford to lose the US market easier than the US can afford to lose the American
brand names on Wal-Mart’s shelves that are made in China. Indeed, the US is even dependent on China for advanced
technology products. If truth be known, so much US production has been moved to China that many items on which
consumers depend are no longer produced in America.

A2: China no dump (generic) 93
China wouldn’t hesitate to dump: no foreign currency and no trade deficits.

Roberts 8-13-07, Paul Craig: Assistant Secretary of the Treasury in the Reagan Administration, Forbes Media Guide ranked him as one of the top
seven journalists in the United States in 1993, former editor for the Wall Street Journal, Business Week, and Scripps Howard News Service
[“China's "nuclear option" to Dump the Dollar is Real,” http://onlinejournal.com/artman/publish/article_2293.shtml]
Now let’s examine the University of Wisconsin economist’s opinion that China cannot exercise its power because it would
result in losses on its dollar holdings. It is true that if China were to bring any significant percentage of its holdings to
market, or even cease to purchase new Treasury issues, the prices of bonds would decline, and China’s remaining
holdings would be worth less. The question, however, is whether this is of any consequence to China, and, if it is,
whether this cost is greater or lesser than avoiding the cost that Washington is seeking to impose on China. American
economists make a mistake in their reasoning when they assume that China needs large reserves of foreign exchange.
China does not need foreign exchange reserves for the usual reasons of supporting its currency’s value and paying its trade bills.
China does not allow its currency to be traded in currency markets. Indeed, there is not enough yuan available to trade.
Speculators, betting on the eventual rise of the yuan’s value, are trying to capture future gains by trading "virtual yuan." The other reason is
that China does not have foreign trade deficits, and does not need reserves in other currencies with which to pay its
bills. Indeed, if China had creditors, the creditors would be pleased to be paid in yuan as the currency is thought to be
undervalued.

Weak Dollar  China Dump 94
China will dump the dollar—high concentration of Chinese exchange in weak dollars and possible geopolitical
risks have them looking for alternatives such as the Japanese currency
Ruiping 04, Jiang: director of the Department of International Economic under China Foreign Affairs University
[“Crisis looms due to weak dollar,” 9/28/04, http://www.chinadaily.com.cn/english/doc/2004-09/28/content_378317.htm]
Many international institutions and renowned scholars have recently warned that the possibility of a US dollar slump is
increasing and may even lead to a new round of "US dollar crisis." Since China holds huge amounts of US-dollar-
denominated foreign exchange reserves, the authorities should consider taking prompt measures to ward off possible
risks. It is still too early to conclude if the US dollar is heading towards a crisis. But it is an indisputable fact that it has gone down continually. Its rate against the euro, for example,
has dropped by 40 per cent since its peak period and it lost 20 per cent of its value against the euro last year alone. It is becoming more and more evident that
the possibility of a further slump of the US dollar is increasing. From a domestic perspective, the worsening fiscal deficit will put great pressure on
the stability of the US dollar. In 2001 when the Bush administration was sworn in, the United States enjoyed a US$127.3 billion surplus. The large-scale tax cuts, economic cool-down,
invasion of Iraq and anti-terrorism endeavours have abruptly turned the surplus into a US$459 billion deficit, which accounts for 3.8 per cent of the US gross domestic product (GDP).
By the 2004 fiscal year, the US Government's outstanding debt stood at US$7.586 trillion, accounting for 67.3 per cent of its GDP, which exceeds the internationally accepted warning
limit. The deteriorating current account deficit of the United States is another factor menacing the future fate of the dollar. In recent years, the US policy that restricts exports of high-
tech products, coupled with overly active domestic consumption and the oil trade deficit caused by rising oil prices, has deteriorated the US current account balance. This poses a great
threat to a stable US dollar. During the 1992-2001 period, the average US current account deficit was US$189.9 billion. In 2002 and 2003, however, the figure soared to US$473.9
billion and US$530.7 billion respectively. Experts predict that following its increasing imports in the wake of its economic recovery and continuing high oil prices, the United States
will hardly see its current account balance improve. Given the huge US current account deficit, the US dollar, if it is to remain relatively stable, must be backed up by an influx of
foreign direct investment (FDI). In 1998, 1999 and 2000, FDI that flowed into the United States was US$174.4 billion, US$283.4 billion and US$314 billion respectively. Starting from
2001, however, global direct investment began to shrink and US-oriented direct investment also decreased. In 2003, FDI into the United States was 44.9 per cent less than that in the
previous year. The decrease in FDI will put more pressure on the US dollar, which has been endangered by the huge US current account deficit. Internationally, the Japanese
Government's intervention in the foreign exchange market may become less frequent following the gradual recovery of the Japanese economy. To deter the Japanese yen's appreciation
and promote exports, the Japanese Government used to intervene in the foreign exchange market to keep the yen at a relatively low level. In 2003 alone, it put in 32.9 trillion yen
(US$298.76 billion) to purchase the US dollar. The intervention constituted a major deterrent to US dollar devaluation. As the Japanese economy fares better, the Japanese Government
tends to back away from the market. Since April, it has not taken any steps to swing its foreign exchange market. Another factor behind the risks of a US dollar slump is the weakened
role of the so-called "oil dollar." Given the deteriorating relations between the United States and the Arab world, quite a few Middle Eastern oil-exporting countries have begun to
increase the proportion of the euro used in international settlement. Reportedly Russia is also going to follow suit. If an "oil euro" is to play an ever increasing role in international trade,
In China's case, its rapidly increasing foreign exchange reserve will incur substantial losses if the US
the US dollar will suffer.
dollar continues to weaken. At the end of 2000, China's foreign exchange reserve was US$165.6 billion. By the end
of 2002, it rocketed to US$286.4 billion before it soared to US$403.3 billion by the end of 2003. By the end of June
this year, the reserve was registered at a staggering US$470.6 billion. About two thirds of the reserve is dominated by
the US dollar. As the dollar goes down, China will suffer great financial losses. Experts estimate that the recent US dollar devaluation has
caused more than US$10 billion to be wiped from the foreign exchange reserve. If the so-called US dollar crisis happens, China will suffer further loss. The high concentration of
China's foreign exchange reserve in US dollars may also incur losses and bring risks. The low earning rate of US treasury bonds, which is only 2 per
cent, much lower than investment in domestic projects, could cost China's capital dearly. Due to high expectations of
US treasury bonds, international investors used to eagerly purchase the bonds, which leads to bubbles in US treasury
bond transactions. If the bubble bursts, China will suffer serious losses. Moreover, since the Chinese trading regime
requires its foreign trade enterprises to convert their foreign currencies into yuan, the more foreign exchange reserves
China accumulates, the more yuan the Chinese authorities will need to put in the market. This will exert more
pressure on the already serious inflation situation, making it harder for the central authorities to conduct macro-
economic regulation. Besides, investing most of its foreign exchange reserves in US treasury bonds also holds great
political risks. To ward off foreign exchange risks, China needs to readjust the current structure, increasing the
proportion of the euro in its foreign exchange reserves. Considering the improving Sino-Japanese trade relations,
more Japanese yen may also become an option. During the January-June period this year, the proportion of China's trade volume with the United States,
Japan and Europe to its total trade volume was 36.5 per cent, 28.6 per cent and 37.4 per cent respectively. Obviously, seen from the perspective of foreign
trade relations, the US dollar makes up too large a proportion of China's foreign exchange reserves. China could also
encourage its enterprises to "go global" to weaken its dependence on US treasury bonds. And using US assets to increase the strategic
resource reserves, such as oil reserves, could be another alternative.

Weak Dollar  China Dump 95
China will dump US dollar in favor of strong currencies

Agora Financial 07
[“Dollar Plummets, Gold and Oil Skyrocket, China Threatens to Dump the Dollar, Michael Jackson’s Foreclosure, and More!,” 11/7/07, http://www.agorafinancial.com/5min/dollar-
plummets-gold-and-oil-skyrocket-china-threatens-to-dump-the-dollar-michael-jacksons-foreclosure-and-more/]
“The world’s currency structure has changed; the dollar is losing its status as the world currency,” said Xu Jian, a Chinese central bank
vice director, yesterday. “We will favor stronger currencies over weaker ones, and will readjust accordingly,” confirmed Cheng
Siwei, vice chairman of China’s National People’s Congress, at the same conference. And that was all she wrote for
the U.S. dollar. While China has yet to formally announce a change in its foreign exchange reserves, the allusion was enough to spook
traders. Here’s the breakdown: Euro: $1.47 — an all-time high versus the dollar Pound: $2.10 — 26-year high versus the dollar Canadian
dollar: $1.10 — rose almost 2 cents in one day, a new all-time high Australian dollar — 93.9 cents — gained over a cent overnight, to a new
23-year high Yen: 113 — gained a full point versus the dollar to 2-month highs The dollar fell against every other actively traded
currency… 16 in all. Profit-taking has since chased down several of these currencies from their peaks, but as we write, all remain above
previous highs. For its part, the dollar index fell an entire point overnight, to 75.20 — a new all-time low. Since the Fed
cut the discount interest rate on Aug. 17, the dollar index has lost over 6 points. At some point, you’d expect to see a
healthy contrarian rally… but there’s nothing stopping bearish sentiment today.
China is clear that if the dollar continues to decline, they will dump it.
Roberts, 8/9/07
[China's Threat to the Dollar is Real, http://www.counterpunch.org/roberts08102007.html, By PAUL CRAIG ROBERTS, is an economist and a nationally syndicated columnist for
Creators Syndicate. He served as an Assistant Secretary of the Treasury in the Reagan Administration earning fame as the "Father of Reaganomics". He is a former editor and
columnist for the Wall Street Journal, Business Week, and Scripps Howard News Service. He is a graduate of the Georgia Institute of Technology and he holds a Ph.D. from the
University of Virginia. He was a post-graduate at the University of California, Berkeley, and Oxford University where he was a member of Merton College. In 1992 he received the
Warren Brookes Award for Excellence in Journalism. In 1993 the Forbes Media Guide ranked him as one of the top seven journalists in the United States]
What the two officials said is completely true. It is something that some of us have known for a long time. What
is different is that China
publicly called attention to Washington's dependence on China's good will. By doing so, China signaled that it was
not going to be bullied or pushed around. The Chinese made no threats. To the contrary, one of the officials said, "China doesn't
want any undesirable phenomenon in the global financial order." The Chinese message is different. The message is that
Washington does not have hegemony over Chinese policy, and if matters go from push to shove, Washington can
expect financial turmoil. Paulson can talk tough, but the Treasury has no foreign currencies with which to redeem its debt. The way the
Treasury pays off the bonds that come due is by selling new bonds, a hard sell in a falling market deserted by the largest buyer.

Weak Dollar  Hyperinflation 96
Due to a devaluating dollar, hyperinflation will hit hard.

Williams, 4/8/08
career as a consulting economist, John has worked with individuals as well as Fortune 500 companie, “That began a lengthy process of exploring the history and nature of economic
reporting and in interviewing key people involved in the process from the early days of government reporting through the present. For a number of years I conducted surveys among
business economists as to the quality of government statistics (the vast majority thought it was pretty bad), and my results led to front page stories in the New York Times and
Investors Business Daily, considerable coverage in the broadcast media and a joint meeting with representatives of all the government's statistical agencies. Despite minor changes to
the system, government reporting has deteriorated sharply in the last decade or so. -- John Williams”
In response to the rapidly deteriorating fundamentals underlying the value of the U.S. dollar, selling of the greenback
has been intense, but contained, with brief periods of stability as seen at the moment. In the near future, dollar selling
should build towards an extreme, with heavy foreign investment in the dollar fleeing the U.S. currency for safety
elsewhere. With the domestic financial markets and U.S. Treasuries so heavily dependent on foreign capital for
liquidity, the Federal Reserve — now touted as the formal financial market stabilizer — will be forced increasingly
to monetize federal debt. That process will build over time, given the federal government’s effective bankruptcy, as
discussed in the section U.S. Government Cannot Cover Existing Obligations. Therein lies the ultimate basis for the pending
hyperinflation.
Again, the current circumstance will evolve into a hyperinflationary depression, then great depression. Although such is
not likely much before 2010, or after 2018, that financial end game for the current markets will tend to come sooner rather
than later and will break with surprising speed when it hits. As discussed later, this likely will not be a deflationary
environment as seen during the Great Depression.
What lies ahead for the current year will be severe enough and financially painful enough to affect the outcome of the
2008 presidential election. Historically, the concerns of the electorate have been dominated by pocketbook issues. Prior to gimmicked
methodologies making the reporting of disposable personal income largely meaningless, that measure was an excellent predictor of presidential
elections.
The weak dollar would trigger hyperinflation that would cause the economy to collapse inward.
Williams, 4/8/08
It is this environment that leaves
the U.S. dollar open to potentially such a rapid and massive decline, and dumping of
U.S. Treasuries, that the Federal Reserve would be forced to monetize significant sums of Treasury debt, triggering
the early phases of a monetary inflation. In this environment annual multi-trillion dollar deficits rapidly would feed
into a vicious, self-feeding cycle of currency debasement and hyperinflation. Lack of Physical Cash. The United States in
a hyperinflation would experience the quick disappearance of cash as we know it. Shy of the rapid introduction of a
new currency and/or the highly problematic adaptation of the current electronic commerce system to new pricing
realities, a barter system is the most likely circumstance to evolve for regular commerce. Such would make much of
the current electronic commerce system useless and add to what would become an ongoing economic implosion.
Some years back, I happened to be in San Francisco, having dinner with a former regional Federal Reserve Bank president and the chief
economist for a large Midwestern bank. Market rumors that day had been that there was a run on a major bank in the City by the Bay. So I
queried the regional Fed president as to what would be happening if the rumors were true. He had had some personal
experience with a run on banks in his region and explained how the Fed had a special team designed to handle such a crisis. The biggest
problem he had had was getting adequate cash to the troubled banks to cover depositors, having to fly cash in by
helicopters to meet the local cash flow needs.

Paul Craig Roberts Is Awesome 97
Paul Craig Roberts is one of the most qualified authors on the subject.
VDare 08
[“PAUL CRAIG ROBERTS,” http://www.vdare.com/roberts/bio.htm]
Hon. Paul
Craig Roberts is the John M. Olin Fellow at the Institute for Political Economy, Senior Research Fellow at
the Hoover Institution, Stanford University, and Research Fellow at the Independent Institute. A former editor and columnist for
The Wall Street Journal and columnist for Business Week and the Scripps Howard News Service, he is a nationally syndicated columnist for
Creators Syndicate in Los Angeles and a columnist for Investor’s Business Daily. In 1992 he received the Warren Brookes Award for
Excellence in Journalism. In 1993 the Forbes Media Guide ranked him as one of the top seven journalists. He was Distinguished
Fellow at the Cato Institute from 1993 to 1996. From 1982 through 1993, he held the William E. Simon Chair in Political
Economy at the Center for Strategic and International Studies. During 1981-82 he served as Assistant Secretary of the Treasury
for Economic Policy. President Reagan and Treasury Secretary Regan credited him with a major role in the Economic
Recovery Tax Act of 1981, and he was awarded the Treasury Department’s Meritorious Service Award for "his outstanding
contributions to the formulation of United States economic policy." From 1975 to 1978, Dr. Roberts served on the congressional staff where he
drafted the Kemp-Roth bill and played a leading role in developing bipartisan support for a supply-side economic policy. In 1987 the French
government recognized him as "the artisan of a renewal in economic science and policy after half a century of state
interventionism" and inducted him into the Legion of Honor.

Brink: China Dump 98
China may dump within the next few months to cancel hidden foreign debts.
Chang 7-21-08, Gordon G.: lawyer and author, best known for his book, The Coming Collapse of China
[“How Big Is China's Debt?” http://online.barrons.com/article/SB121642068083866453.html?mod=googlenews_barrons]
HOW MUCH DEBT IS THE CHINESE GOVERNMENT CARRYING? Official statistics show that Beijing is solvent, but they
substantially understate the country's obligations. The rest of the world should be concerned because a financial
shakeout in China undoubtedly would have global consequences. A Chinese Finance Ministry's report in March
noted that the central government had 5.21 trillion yuan ($714.23 billion at the then-prevailing exchange rate) in debt at the end
of 2007. That amount is modest, given China's size, and it is well structured in that most of it is denominated in Chinese currency and is long
term. The nation's foreign-exchange reserves of $1.80 trillion are about 51 times larger than its sovereign foreign-currency debt. And less than
5% of Chinese government indebtedness is external. Yet, in its official figures, China hasn't included central government debt
incurred for municipal and other local projects; Ministry of Finance guarantees related to partial bank recapitalizations; debt
extended by the World Bank and other institutions or governments; borrowings by China Development Bank and two other "policy banks;" and
miscellaneous obligations, such as grain-subsidy payments. China probably also has incurred undisclosed obligations for military expansion.
We just don't know the full extent of Beijing's indebtedness, but we do know that there is a worrisome trend in its
borrowing habits: The central government has been increasingly relying on off-balance-sheet financing. Beijing's
numbers are becoming less transparent as time goes on. Based on official numbers, the debt of the world's most
populous nation equaled 21.1% of GDP at the end of 2007, well below the internationally recognized alarm level of
60%. Yet we should perhaps add to the ratio three percentage points for Beijing's obligations to multilateral institutions and foreign
governments and maybe 10 percentage points for central government debt incurred for lower-tier governments. Local provinces, cities and
municipalities also have incurred substantial indebtedness, and such debts, at least theoretically, are also obligations of the central government.
Chinese municipalities have no legal right to borrow, yet they do so, often issuing bonds through conduit companies or taking loans from local
banks. A half-decade ago, one report put the amount of debt issued by lower-tier governments at $600 billion, but current estimates are
considerably lower -- and sometimes appear to be understated. Beijing analysts who labeled local debt a potential mine field recently stated
that such obligations could amount to a trillion yuan ($146 billion). Cities' off-budget liabilities are, according to a January 2006 World Bank
report, "sizable" but not precisely known. In February 2006, the Organization for Economic Co-operation and Development issued a study
stating that local debt probably ranged from 3.5% to 9.3% of 2002 GDP. The passage of time isn't the only reason these figures probably
understate local obligations. These governments are supposed to make good on pension shortfalls, especially where there has been fraud -- a
common occurrence these days. Rural governments are also in a pinch because Beijing has ended the agricultural tax and other levies in order
to relieve peasants of onerous financial burdens. Premier Wen Jiabao, however, has offered these governments little financial compensation for
the loss of crucial revenue. Unfunded mandates from Beijing are also a continuing problem. In the Chinese economy, moreover, a large portion
of gross domestic product -- perhaps as much as a quarter -- is attributable to the state's fiscal stimulus. Much of this takes the form of seed
money for local government projects, many explicitly or implicitly guaranteed by local authorities, although they're not economically viable. In
view of all this, local governments seem to be illicitly taking on obligations at about the pace of GDP growth. Best estimates indicate that
provinces and lower-tier governments have incurred unrecorded debt equal to roughly 10% of GDP. That brings the debt-to-GDP ratio to
around 45%, still some distance from the international alarm level. China's ratio doesn't include still other obligations. There is, for instance,
about a trillion dollars of nonperforming and questionable loans on the books of the Ministry of Finance, its instrumentalities and state banks.
The national social security system is grossly underfunded, especially as Beijing continues to extend subsistence payments. These two items
inflate China's ratio to more than twice the 60% level. Of course, there's no magic to this much-watched figure. Argentina defaulted about a
half-decade ago when its debt equaled about 55% of GDP. Italy and Japan have debt loads exceeding 100% of GDP, but their modern
economies apparently can withstand that much stress. But in the next Chinese downturn, which many expect after the
Olympics, Beijing's hidden obligations could trigger crisis at home and perhaps panic abroad. No developing nation
has escaped a financial crash. So we may find out soon what happens when Beijing dumps a trillion dollars of
foreign assets all at once to pay off its hidden obligations at home.

Dollar Decline Crushes Econ: 6 Reasons 99
The dollar decline is bad for 6 reasons, also the benefits of its decline are short term and exaggerated.
Delfeld, 10/19/07
http://seekingalpha.com/article/50529-seven-reasons-why-a-weak-dollar-hurts-america, seeking alpha, 10/19/07
Mr. Delfeld has held positions as ETF Specialist with Union Bank of Switzerland, U.S. Representative to the Asian Development Bank, a Forbes Asia Columnist, stockbroker in
Tokyo, Hong Kong & Sydney, and U.S. Treasury consultant. He is a graduate of Fletcher School of Law & Diplomacy and a Fellow at Keio and Sophia University, Tokyo. 20 years
of experience in the global investment business. In London with BancBoston, in Tokyo, Hong Kong, New York and Sydney with an investment subsidiary of Northwestern Mutual, as
an international economist with the U.S. Joint Economic Committee, as a member of the Executive Board of Directors of the Asian Development Bank in Manila, as a consultant to
the U.S. Treasury, and as a private client advisor with a subsidiary of the Union Bank Of Switzerland (UBS). Financial. I have taught international business at the University of
Colorado, been a member of the U.S. National Committee on Pacific Economic Cooperation, authored a book on global investing, and was a Japanese Government Scholar at Keio
University in Tokyo. More importantly, I have the experience of being through the many cycles of investing: the crash of the U.S. market in 1987, the 2001-2002 bear market when
the S&P 500 index fell 44%, the Asian crisis in 1997. I recognize the need to stay objective, to look for value throughout the world and at all costs avoid fads and trends.”
First, aweaker dollar translates into a cut in the real spending power of American consumers - in effect - a reduction
in real income. Second, a weaker dollar weakens the role of the U.S. dollar as the world’s reserve currency. Why should
investors and central banks around the world invest in US assets when their value is steadily declining? Third, the chances of a weaker
dollar leading to a sharp reduction in America’s trade deficit is highly unlikely since 40% of the current deficit is due
to oil imports that are denominated in US dollars. An additional 20% is due to trade with China which is of course
controlling the value of its currency. Fourth, a weaker dollar is inflationary since it increases the cost of imports. Fifth,
business leaders know that discounting prices may bump near term revenue and profits but at a real cost to long term
profitability not to mention inflicting damage to the brand name. This is what we are doing to the brand of America
by trying to increase exports by lowering their price in the global marketplace. Better to stand firm on price and sell
into global markets on the basis of what is great about American products – superior quality, innovation and service.
Sixth, investors seem to like a weaker dollar since the profits of American multinationals get a boost from foreign
earnings being translated into U.S. dollars. Again, this is short-term thinking and vastly overstated since most
multinationals have sophisticated treasury departments that hedge currency exposures. What a weaker dollar really
does is to encourage American and international investors to invest in non-American markets. The more the dollar
drops, the more global equities rise. Many Asian currencies are hitting record highs against the U.S. dollar. The Australian dollar has
climbed to a 25 -year highs, while the Singapore dollar has touched 10-year highs. The Brazilian real, which has jumped 18% in value against
the U.S. dollar this year, and the Indian rupee's sharp appreciation against the U.S. dollar during the past year, have supercharged U.S. dollar
investors' returns in those markets. According to EPFR Global, investors are pouring money into global funds - with net inflows of $96.94
billion into world equity funds so far in 2007, while taking out $9.6 billion out of U.S. equity funds. Brazil's local stock exchange, the Bovespa,
reported that investors have injected $1.2 billion into the market in September alone. Foreign investors slashed their holdings of U.S. securities
by a record amount as the credit squeeze intensified, according to the latest Treasury figures. The Treasury said net sales of US market assets –
including bonds, notes and equities – were $69.3bn in August after a revised inflow of $19.5bn during July. The August outflow exceeded the
previous record decline of $21.2bn in March 1990.

Impact: Hegemony 100
Dollar strength is the key determinant of US hegemony

Mephi 06, financial analyst focusing on international economics for Sociology, B.A. from Wesleyan University
[“The Power of International Money: The Dollar & Empire,” http://le-enfant-terrible.blogspot.com/2006/11/power-of-international-money-dollar.html]
Control of global liquidity by the American state is therefore a crucial aspect in which American hegemony has
surpassed its British predecessor.(Arrighi 1994, 71, 278-9; Parboni 1981, 19) The status of top capital market was transferred from London to
New York, but control was transferred to Washington by means of the power of the Federal Reserve and US political dominance of major
global monetary institutions such as the IMF. The US consolidated its position as the central actor in global economic regulation through
political clout, in some cases institutionalizing its power. The IMF voting structure, for example, was weighted based upon contribution size
with the US making the largest contributions. The IMF, as an international lender, which could potentially create international money(5) or at
least international liquidity, would inevitably weaken American political control were it to be a truly multilateral institution. The US, therefore,
used its power to limit access to IMF credit and to make loans conditional.(6) (Birnbaum 1968, 18; Block 1977, 111-2) Borrowers of IMF
funds were forced into deflationary programs to rectify their payments imbalances and to generate revenue for repayment. Recipients of
Marshall Plan aid were highly discouraged from using IMF loans, furthering the Europeans reliance on the US during post-war reconstruction.
The general goal of US actions during this period was to assert US control over the sources of international liquidity and ensure that it was
sufficient but limited.(Block 1977, 111-4) In this way fiscal discipline was imposed on much of the world and the US increased its leverage
through control of global money creation. The US used this leverage to force through economic changes and political arrangements that
secured a liberal economic order after several decades of state driven development.(O'Brien and Clesse 2002, 38) While Strange argues that a
Top Currency is determined on almost purely economic grounds, one can see in this history the importance of political action in securing that
status. The US took strong action in the post-war period to establish a liberal economic order backed by a strong
American presence—politically, economically and monetarily. (Hopkins and Wallerstein 1996, 64) In the post-war era global security and
monetary institutions served American hegemony “like the blades in a pair of scissors.” (Arrighi, Silver and Ahmad 1999, 87) These two
systems enabled the United States at the height of its hegemony to govern the globalized system of sovereign states to an extent that was
entirely beyond the horizons, not just of the Dutch in the seventeenth century, but of Imperial Britain in the nineteenth century as well. (Arrighi,
Silver and Ahmad 1999, 94) Had the US failed to establish its control over global liquidity in the post-war period it would have
had more significance than simply signaling weakness in American hegemony. It would have denied the US the extraordinary
ability to greatly influence the global economic environment. Had the dollar been displaced by an internationally created asset the
US would suddenly be subject to the same harsh economic discipline other states were. Had the US then acted as it did during the late 1960s
and 1970s, pursuing inflation and devaluation, the dollar’s value would have gone into free fall, unsupported by other central banks. The US
would not have had the same unilateral ability to spread global deflation as it did in the early 1980s when it wanted to enforce strict fiscal
discipline on the third world and increase reliance upon direct US aid. American political control would have been reduced as states
had new sources of lending and New York’s prominence as a financial market was reduced. US action to limit and control the international
financial institutions created after World War II did more than simply symbolize the extent of American hegemony. The US
ensured for itself the continued privileges and power that accrue to it as a result of its currency status. With threats
currently mounting to that status the actions it takes now are of immense importance. The US failing to maintain its
monetary power would not only signal hegemonic weakness, it would create it.


Impact: XT: Hegemony 101
A declining dollar would result in a dollar dump, ending American hegemony.

[“Will a US dollar collapse end American hegemony?” http://shareno.net/dollarcollapse.htm]
Today, many forces are coming together that could lead to a collapse of the US dollar. Among these are its oversupply, low
interest rates, the need to fight deflation, continuing stock-market declines, and a potential derivatives meltdown [see Share International May
1990] It is highly likely that in the not-too-distant future all of these factors will come into play simultaneously. In addition, many of the
world’s financiers, central bankers, and government officials cannot be pleased with the economic and foreign
policies of the Bush administration. They well know that the continued recycling of capital into US assets serves, at least in part, to
allow the US to dominate the world. If the people who control the world’s capital were to decide, for whatever reason, to cease
buying Treasury securities and to liquidate those they own, the dollar would collapse and the US would experience an
unprecedented economic shock. Were this to happen, the world would witness the end of American hegemony.

Impact: Dollar Dump (Economy) 102
A Chinese dollar dump would result in economic collapse.

Evans-Pritchard 07, Ambrose: international business editor of the Daily Telegraph
[“China threatens 'nuclear option' of dollar sales,” http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml]
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that
Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies. Described as China's "nuclear
option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking
down through historic support levels. It would also cause a spike in US bond yields, hammering the US housing
market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US
bonds.


US-Sino coop good (5 mpx) 103
Sino-American coop results in Asian stability, economic growth and solves for terror, prolif, and disease.
Wenzhong 04, Zhou: Chinese ambassador to the United States
[“Vigorously Pushing Forward the Constructive and Cooperative Relationship Between China and the United States -- In commemoration of the 25th anniversary of China-US
diplomatic relations,” http://china-japan21.org/eng/zxxx/t64286.htm]
China's development needs a peaceful international environment, particularly in its periphery. We will continue to play a
constructive role in global and regional affairs and sincerely look forward to amicable coexistence and friendly cooperation with all other
countries, theUnited Statesincluded. We will continue to push for good-neighborliness, friendship and partnership and dedicate ourselves to
peace, stability and prosperity in the region. Thus China's development will also mean stronger prospect of peace in the Asia-
Pacific region and the world at large. China and the USshould, and can, work together for peace, stability and prosperity in
the region. Given the highly complementary nature of the two economies,China's reform, opening up and rising economic size
have opened broad horizon for sustained China-US trade and economic cooperation. By deepening our commercial
partnership, which has already delivered tangible benefits to the two peoples, we can do still more and also make greater
contribution to global economic stability and prosperity. Terrorism, cross-boundary crime, proliferation of advanced
weapons, and spread of deadly diseases pose a common threat to mankind. China and the US have extensive shared
stake and common responsibility for meeting these challenges, maintaining world peace and security and addressing
other major issues bearing on human survival and development.Chinais ready to keep up its coordination and cooperation in
these areas with theUSand the rest of the international community. During his visit to theUSnearly 25 years ago, Deng Xiaoping said, "The
interests of our two peoples and those of world peace require that we view our relations from the overall international situation and a long-term
strategic perspective." Thirteen years ago when China-US relations were at their lowest ebb, Mr. Deng said, "In the final analysis, China-US
relations have got to get better." We are optimistic about the tomorrow of China-US relations. We have every reason to believe that so long as
the two countries view and handle the relationship with a strategic perspective, adhere to the guiding principles of the three joint communiqués
and firmly grasp the common interests of the two countries, we will see even greater accomplishments in China-US relations.

[NEG] Prices Falling 104
Oil prices are set to fall – multiple warrants.

Reynolds 6-6-08, Alan: Senior Fellow at the Cato Institute, former Director of Economic Research at the Hudson Institute, served as Research
Director with National Commission on Tax Reform and Economic Growth, advisor to the National Commission on the Cost of Higher Education
[“Get Ready for the Oil-Price Drop,” CATO Institute, http://www.cato.org/pub_display.php?pub_id=9450]
The price of crude oil has jumped as high as $135 lately, up from $87 in early February. The news encouraged some Wall
Street analysts to suggest oil might approach $200 before long. In fact, that's quite impossible: The world economy
can't handle current energy prices, much less a big increase. Which in turn means that oil prices will fall. Market
analysts often claim oil prices are almost entirely determined by supply. Demand is said to be insensitive ("inelastic") to price.
The standard example is that many Americans have to drive to work and most gas-guzzling SUVs will still be on the road even if the affluent
few can trade theirs for a Prius. Whatever the price, we'll pay it. This idea rests on two fallacies. The first is to exaggerate the
United States' importance when it comes to ups and downs in worldwide oil demand. In fact, America is using no more
oil than we did in 2004. The second fallacy is to greatly exaggerate the importance of passenger cars in the United
States. It's true that Americans are driving less and buying four-cylinder cars - but that's not where we should be looking for serious "demand
destruction." Two-thirds of petroleum in the United States is used for transportation - but half of the transportation sector's fuel flows into commercial trucks, trains, buses,
airplanes and ships. As a result, only 44 percent of each barrel of oil is used to produce gasoline in this country, and some of that gasoline fuels business - delivery vans, landscapers'
trucks, fishing boats, industrial and farm machinery, etc. Most crude oil is used to produce diesel fuel for trucks, ships and trains, heavy fuel oil for industry, aviation fuel, asphalt, home
In short, a huge share of crude
heating oil, propane, wax, and innumerable petrochemical products ranging from detergents and drugs to synthetic fabrics and plastic.
oil is used to produce and distribute industrial products. That explains why the price of oil is extremely cyclical - that
is, it tends to rise during economic booms and fall during contractions. It dropped 44 percent in the last recession (from November 2000 to November 2001), 48
percent from October 1990 to January 1992 - and 71 percent from July 1980 to July 1986. Oil prices have a huge impact on producers' cost of production - profits and losses - not just
on consumers' cost of living. Firms that can't raise prices will find profit margins squeezed - and will have to cut back on production and jobs. Even if some producers of energy-
intensive products can raise prices enough to cover higher energy costs, they'll nonetheless sell fewer of their products because of those higher prices. So they too will have to cut back
Nine out of 10 previous postwar recessions began shortly after a big spike in the price of oil. Yet
on production and jobs.
those recessions always slashed oil prices dramatically. People who have been predicting both a nasty US recession
and $200 oil prices are contradicting themselves. Recent news reports have expressed surprise that the US economy appears much
stronger than the famously gloomy predictions at the start of the year. Indeed, the surprising endurance of US manufacturing and exports is one
reason oil prices rose as long as they did. But note that a US recession isn't required to bring down the price of oil. All that's
needed is industrial stagnation or decline in many other countries. In the United States and Britain, industrial production is
nearly flat - only 0.2 percent higher than it was a year ago. In many other countries, however, industrial production has dropped over the
past 12 months. It's down by 0.7 percent in Japan, 1.1 percent in Austria, 2.5 percent in Italy and Denmark, 2.9 percent in Canada, 5.4
percent in Greece, 5.7 percent in Singapore and 13.3 percent in Spain. In April, industrial production also fell in India and China.
Shrinking industry around the world shrinks demand for energy in general - and for oil in particular. When the price of
anything gets unbearably high, it discourages demand. The resulting drop in sales, in turn, causes inventories to pile up
and the price to come down. That has proven true of overpriced houses - and it will likewise prove true of overpriced
oil.
Oil prices are at a 6 week low right now.

BBC News 7-22-08
[“Oil prices fall to six-week low,” http://news.bbc.co.uk/2/hi/business/7520670.stm]
Oil prices have fallen to a six-week low as US energy demand fell and a hurricane in the Gulf of Mexico appeared to be missing oil facilities.
US light sweet crude fell as low as $125.63 a barrel, well off its 11 July peak above $147 a barrel. Petrol consumption in the US is 2.2% below
last year's levels, according to a MasterCard survey, suggesting that higher prices are hitting demand.

[NEG] Prices Falling 105
Oil prices are falling now.

United Press International 7-18-08
[“Crude oil prices fall again Friday,” http://www.upi.com/Business_News/2008/07/18/Crude_oil_prices_fall_again_Friday/UPI-81531216383655/]
NEW YORK, July 18 (UPI) -- Crude oil prices fell Friday in New York, marking a fourth straight day in declining prices
for the bellwether commodity. Oil prices settled at $128.82 per barrel on the New York Mercantile Exchange, down more
than $2 on the day and nearly $20 below its record price set a week ago. The price of heating oil rose 0.0085 cents in late trading to
$3.70 per gallon. Reformulated blendstock gasoline prices fell 0.0014 cents to $3.1695 per gallon. Natural gas prices rose 0.11 cents to $10.68
per million British thermal units. At the pump, the national average price for a gallon of unleaded gasoline fell 0.009 cents to $4.105 per
gallon, AAA said.
Continued price increases force oil price to inevitably decrease.

The Telegraph 7-14-08
[“Oil price will fall back to $93, Lehman predicts,” http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/07/15/cnoil115.xml]
Crude oil will unwind much of its meteoric rise next year, investment bank Lehman Bros has predicted, as the Opec oil
producers raise their supply and the slowing global economy squeezes demand. The bank expects the price of crude
to fall back to about $93 a barrel. Oil, which hit a record high of $147 on Friday before falling back at the close. Yesterday, crude prices
in London were trading up 34 cents at $144.83. Soaring oil prices are increasing pressure on consumers and businesses in the US and the UK -
with US oil import volumes now falling rapidly - down 19pc in the three months to end-May. Ed Morse, chief energy economist at Lehmans,
expects mounting signs of slowing demand, and an expected increase in supply to move oil prices lower to $130 in the third quarter of 2008,
before dropping down to $93 a barrel. However, Mr Morse insists he is not forecasting a “demand destruction” in line with the 1980s cycle.
Chinese import volumes have yet to show any signs of slowing, he said. Mr Morse expects demand growth to ease to 1.2pc in 2009, with a
drop in prices owing to an expected “supply response” from Opec and others. He sold a third of his stake for £16.75 a share in April for £25m
and reinvested £19m to subscribe to a heavily discounted £6 share rights issue. Wide difference among analysts about the risks and rewards tied
to Imperial’s operation in Siberia have resulted in valuations ranging from £9 to £17 a share. Mr Morse said: “Our forecast of lower
crude prices in the second half of 2008 and 2009 relies more on increased supply rather than a demand drop. “The recent
evidence of demand slowing sharply in the US surely strengthens the case for lower prices.”
Oil prices are falling, making the US economy more stable

Read 08 (Madlen, journalist for the Associated Press, Stocks turn mixed as Oil prices retreat, July 15)
Wall Street recouped its steep early losses and traded mixed Tuesday as oil dropped by more than $7 a barrel, giving
investors hope that lower energy prices could help revive the flagging economy. Fears of escalating instability in the financial
sector have kept the market trading erratically, however. The market opened sharply lower on investors' increasing uneasiness about the
ongoing mortgage criss. Sobering comments from Federal Reserve Chairman Ben Bernanke, who told Congress the U.S. economy is faced
with "numerous difficulties," took stocks down further. Bernanke's comments come only days after the Fed and the Treasury said they would
lend financial support to mortgage financiers Fannie Mae and Freddie Mac if necessary. Shares of Fannie and Freddie — which together hold
or back nearly half of all the nation's mortgages — tumbled again Tuesday. But as oil retreated from its near-record levels, bargain
hunters entered the market and the Dow Jones industrial average, down more than 200 points in early trading,
rebounded. If oil prices stabilize or retreat, consumers might feel more comfortable spending on discretionary items,
and in turn help the economy. A barrel of light, sweet crude dropped $7.30 at $137.88 on the New York Mercantile
Exchange as traders bet that the weak economy in the United States and elsewhere will take its toll on global
demand.

[NEG] Oil Shocks Gradual 106
Current oil shocks are more gradual and only one-third as large as that of the 70s.
Nordhaus 07, William: Sterling Professor (the highest academic rank at Yale University, awarded to a tenured faculty member considered one of
the best in his or her field), of Economics at Yale University, member of the National Academy of Sciences, on the Brookings Panel on Economic
Activity, member of the Council of Economic Advisers during the Carter administration
[“Who’s Afraid of a Big Bad Oil Shock?” September 2007, http://www.econ.yale.edu/~nordhaus/homepage/Big_Bad_Oil_Shock_Meeting.pdf]
So what should we conclude? To begin with, the

oil shock of 2002-2006 was different from those of earlier period. If we
measure the shock as the income effect per year of the price increases, the shock was substantially smaller than the
shocks of the 1970s. It occurred more gradually, and the change was much less of a surprise in the context of past
experience. Roughly speaking, the shock was about one-third as large as the shocks of the 1970s. In terms of effects, the impact of
the shock on inflation was qualitatively similar although quantitatively different from the earlier shocks. The rise in PCE inflation in the recent
shock was consistent with less than full pass-through of the energy-price increase. Unlike the shocks of the 1970s, there appears to have been
no substantial pass-through of the energy-price increases into wages or other prices. The impact of the shock on output was
completely different from earlier episodes – indeed the sign was opposite. Output continued to grow relative to
potential output after the shock, and unemployment continued to fall. The reason for the anomalous output impact is unclear.
One possible reason is that the shock was too small to affect the overall pace of economic growth. Additionally, there is modest evidence
that the transmission mechanism from energy prices to output has changed from negative to neutral over the last three decades. The reasons for
the declining sensitivity are not completely understood, but two underlying causes seem plausible. First, there is evidence that the Federal
Reserve reacted more sensibly to energy prices in the 2000s.. ...A second and more speculative reason for the muted
macroeconomic reaction is that consumers, businesses, and workers may see oil-price increases as volatile and temporary
movements rather than the earth-shaking changes of the 1970s. ...All of these factors would tend to reduce the impact of
energy-price shocks on the macroeconomy. In the end, this suggests that much of what we should fear from oil-price shocks is the
fearful overreactions of the monetary authority, consumers, businesses, and workers. A cautious reading today suggests that policymakers
should not be afraid of a Big Bad Oil Shock. The most recent evidence suggests that the economy is robust in the face of
major energy shocks. The economy weathered an increase in real oil prices of 125 percent from 2002 to 2006 without any major strain.
This suggests that policymakers should focus on fundamentals such as employment, real output, and containment of inflation as well as the
instabilities caused by financial innovations and risk-taking. Oil-price shocks are neither so big nor as bad as in the 1970s.
Current oil shocks are more gradual and the economy is more resilient.
The Economist 5-29-08
[“The oil shock: Pistol pointed at the heart,” http://www.economist.com/world/britain/displaystory.cfm?story_id=11455807]
Despite these disturbing precedents, until now the risk of a recurrence seemed almost as remote as that fated decade. More recent experience
lulled fears. Between early 2004 and the spring of 2006, the real oil price in sterling doubled. That was a substantial shock by any
reckoning, yet the economy absorbed it without undue damage. Output growth slowed in 2005, but GDP still expanded by nearly
2%, and then grew at an above-trend rate of around 3% a year in 2006 and 2007. There were several reasons why the economy
coped better with the oil shock of 2004-06. For one thing, the rise in oil prices in that period was smaller and more gradual
than the spectacular jumps of the 1970s. Furthermore, it was prompted mainly by rising demand in China and other emerging
economies rather than by disruptions to supply. The economy has in any case become less vulnerable to oil shocks of any
description because it is less oil-intensive than it was, using half the oil per unit of GDP that it did in the 1970s, according to the National
Institute of Economic and Social Research.

[NEG] High Prices Don’t Affect Econ 107
High oil prices don’t affect the economy

CCTV International 08
(“Oil prices not to have big impact on world economy in long term,” 1/3/2008, http://www.cctv.com/program/bizchina/20080103/102837.shtml)
Analysts say the high oil prices will continue, but are not likely to have a big impact on the world economy in the long run.
Although the price of crude oil has been rising consistently in recent years, the world economy has maintained a
growth rate of around 5 percent, and international trade has grown at a rate of between 7 to 9 percent. Analysts say, the impact of
oil prices on the world economy is weakening. The main reason is energy-saving measures and new technology, which are
improving the efficiency of energy consumption. The economic growth is less reliant on high consumption of oil. Secondly, the
integration of global economies and technology innovation have raised production efficiency and reduced costs
around the world, which has led to an increase in disposable incomes. Consumption has therefore remained strong. Another
reason is that the world economy is in a phase of expansion, and macro-economic policies in many countries have been in place to
withstand the impact of high oil prices. However, the International Energy Agency has estimated that until 2030, the demand for crude oil will
increase by 35 percent to 116 million barrels per day and crude oil prices will remain high for the longer term. It will force the economies to
change their growth model, innovate energy-saving technologies, and explore new energy resources to achieve sustainable development.

[NEG] SPR Solves Shocks 108
Strategic Petroleum Reserves solve shocks.

United Press International 7-19-08
[“Murray: U.S. oil reserve should be used,” http://www.upi.com/Top_News/2008/07/19/Murray_US_oil_reserve_should_be_used/UPI-65421216484535/]
WASHINGTON, July 19 (UPI) -- Congressional Democrats want the United States to tap into the Strategic Petroleum
Reserve to help bring down oil prices, U.S. Sen. Patty Murray said Saturday. Murray said during the Democrats' weekly radio address
that with gasoline prices reaching new highs, it is time to use the emergency reserves and urge oil companies to drill on
leased federal lands. "We believe it's time for the oil companies to use that land and to make sure that it stays in
America instead of shipping it to the highest bidder overseas," Murray said. "Democrats also think it is time to tap into the
Strategic Petroleum Reserve. Right now we have more than 700 million barrels of oil sitting underground in Texas and
Louisiana that can be used in times of emergency." Murray also called for increased regulation of energy trading, which she contends
is being affected by speculators seeking to profit from rising oil prices. Democrats, she said, "believe we must rein in Wall Street and traders
who are unfairly driving up oil prices." "With regard for nothing but their own profits, some traders are bidding up oil prices by buying huge
quantities of oil just to resell at an even higher price," she said.

[NEG] ANWR Solves Shocks 109
ANWR would satisfy the oil demand, providing 800 million barrels within two years and eventually 2 trillion
barrels. Liberal complaints are wrong.
Weyrich 7-19-08, Paul M.: founder of the Heritage Foundation, more qualifications below
[“It's time to drill in ANWR,” http://www.rep-am.com/articles/2008/07/19/opinion/syndicated_columnists/354468.txt]
In a remarkably short time, the public has changed from supporters of environmentalism to advocates of drilling for oil and natural gas in the
Alaskan National Wildlife Refuge and offshore. For the first time since the 1970s, liberals in both parties have found themselves responding to
significant demands for drilling. Their responses are meant to confuse the electorate to turn public opinion back to their position on the
environment. Toward that end, liberals have come up with two mantras which we hear on every talk show, in every news conference
and in every speech addressing the high cost of gasoline. The first is: It will take at least 10, maybe 30 years before we see
a drop of oil coming from the aforementioned sites. The second: Greedy oil companies have 86 million acres of leases
provided by the federal government and they want more leases only to satisfy their greed. On the first point, Larry Kudlow recently
featured on his CNBC show James T. Hackett, president and CEO of Anadarko Petroleum Co. Hackett said it would
take only two or three years, depending upon where the drilling took place, for wells to begin producing oil. One oil-
exploration expert said if the right equipment were available, it might take only a year because the oil companies know
exactly where the oil is in the Outer Continental Shelf. Speaking with House members who support more drilling, one oil-shale
expert said the first 800 million barrels of oil from shale could be available in two or three years. The remaining
estimated 2 trillion barrels from shale would take longer because they would be more difficult to extricate. But the first 800
million barrels would help the U.S. economy. On the second point, I received two different answers. Sen. Jim Inhofe, R-
Okla., who used to be in the oil business, said the reason oil companies are not drilling on the 86 million acres is there
is no substantial oil available on those lands to make drilling economically viable. He said the government only permits
exploration on those leased lands, so companies have explored them and found they would produce little. The second answer came from
Hackett, who said the federal government in effect is guilty of fraud. It accepts the lease money and the annual rents
but has refused to grant permission to drill. He implied some oil had been found that would be worthwhile to extract, but companies
cannot drill, so the consumer sees no benefits. Either way, to accuse oil companies of greed is an unfounded assertion.
Prefer our evidence – Weyrich is awesome.

Newsmax 08
[“Paul Weyrich Biography,” http://www.newsmax.com/weyrich/bio/]
Paul M. Weyrich is Chairman and CEO of the Free Congress Research and Education Foundation. He served as President
of the foundation from 1977 to 2002. From 1989 to 1996, Mr. Weyrich served as President of the Kreible Institute of the Free
Congress Foundation, responsible for training democracy movements in the states comprising the Former Soviet Empire. He is a founder
and past director of the American Legislative Exchange Council, the founding president of the Heritage
Foundation, and the current National Chairman of Coalitions for America. A former reporter and radio news director, Mr.
Weyrich is a regular guest on daily radio and television talk shows. A sought-after writer, Mr. Weyrich has published policy reports and journals
on a variety of conservative issues and has contributed editorials to The New York Times, The Washington Post, and The Wall Street Journal.
He has been described by The Economist as "one of the conservative movement's more vigorous thinkers." Voted
three years in a row from 1981 - 1983 by readers of Conservative Digest as one of the top three "most popular
conservatives in America not in Congress," Mr. Weyrich has been named by Regardie's Magazine as "one of the 100
most powerful Washingtonians." He has been married since 1963 to the former Joyce Smigun, is the father of five children, and serves
as a deacon in his church.

[NEG] A2: ANWR Not Cheaper 110
Even if ANWR doesn’t reduce prices, it STABILIZES PRICES, which is the internal link to your advantage.
Seacoast Online 7-7-08
[“Drilling in ANWR may be the answer,” http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080707/NEWS/80707037/-1/OPINION]
Let’s be honest -- would it really be that bad to start drilling for oil in one small section of the Arctic National Wildlife
Refuge? I mean, seriously? Yeah, I know we’re not supposed to rape the environment for our own selfish indulgences. The problem is, the
same folks who claim indignation at any whisper of new drilling are not offering any practical solutions of their own. They rail against Big Oil
mega-profits and price gouging, appropriately, but they HAVE NO ANSWERS. There are, unfortunately, more than enough questions. And
with everyone pointing the finger at everyone else, it’s hard for us in the general population to figure who’s telling the truth. If we have no
alternative sites, then yes, we should at least consider drilling in the Alaskan refuge. My understanding is that the
proposed area is about 2,000 acres of a 19-MILLION-acre area. A postage stamp lying on a football field, so they
say. But environmentalists and Democrats insist oil companies already own permits for drilling in up to 60 million acres they haven’t even
tapped into yet. They say these regions could produce nearly 5 million oil barrels and 44.7 trillion cubic feet of natural gas a day, according to
the Associated Press. So then why did Republicans in the U.S. House of Representatives kill a bill that would have required oil companies to
drill in those areas before considering others. It makes no sense. I still haven’t heard a legitimate reason why Big Oil hasn’t explored these
leased options, and the cynic within me wonders if this is all some gambit by the industry to fuel consumer outrage until voters INSIST
companies are allowed to drill in regions they’ve long coveted. Not to say they’ve created the crisis, but maybe they see an opportunity to
capitalize on it — kind of like when the local school district threatens to cut its math program if it doesn’t get a significant budget increase.
That’s just where the riddles begin. After decades of promised exploration of alternative energy sources, why isn’t their development further
along? Why do we seem to be caught flatfooted by this crisis? If we do expand drilling operations here in the good old USA, how soon will we
see results at the gas pump? And is it just a coincidence that this debate to lift drilling bans has reopened just as Bush and Cheney — both Oil
Guys — are getting ready to leave office? In the meantime, while the Left and the Right argue over their cause, the rest of us are being
squeezed in the middle. At my house we’re going to have to pay $459 a month this year for heating oil if we want to keep the price down, and
the wife spent 78 bucks just the other day to fill the tank of her Jeep. Our friend Denise up in Rochester had to pay a price protection fee of
only $45 for her oil service last year, to cover the company’s loss in case the price dipped below the fixed rate; this year the amount has
increased to $399. That’s a markup of almost 900 percent. She also had to put up a $300 deposit this year, which wasn’t necessary last year. I’ll
tell you something — I’m feeling pretty pissed off and powerless these days. I don’t like feeling powerless. It’s getting to the point where I’m
tempted to express my extreme frustration in a very public fashion. I’m talking Boston Tea Party-type action (although we obviously don’t
want to dump oil in our own harbor.) But rather than resort to any sort of violent protest, I’ll settle for holding ANWR hostage. If the GOP and
their Big Oil benefactors want to tap into the Alaskan refuge also known as ANWR (that’s pronounced AN-war, but isn’t to be confused with
the stunning actress Gabrielle Anwar who so memorably tangoed with Al Pacino in "Scent of A Woman") then that’s fine; but first they have to
provide a convincing argument for not drilling in these areas that have already been leased to them. Likewise, if the Democrats and granolas
want to protect ANWR, then they have to come up with a viable, practical alternative. Something that will produce fuel. Either way, these
measures will only serve as a stopgap while we bring along other energy options that should’ve already been on line by now -- or at least a little
further along. Nuclear energy, electric hybrid cars, shale oil, biofuels, solar power, geothermal technology, wind —
these are just some of the options we’ve heard discussed over recent decades, but they don’t seem that much closer to
realization. Obviously, there’s plenty of blame to be spread on both sides of the aisle. The reason Democrats are having to fight off rising
popular support for opening up ANWR to drilling — and the reason Republicans once again find themselves the scourge of people who want to
protect the planet — is because neither side had the foresight to aggressively pursue these other power sources long ago. But now is the time
for action, and the sooner the better. Now is the time for leadership. "I don’t think it’s overly dramatic to say that this
nation’s future and the quality of life for every American are dependant on the decisions you make or don’t make in
the next few months," Alaska Gov. Sarah Palin recently wrote to Senate Majority Leader Harry Reid. Palin’s letter
urged Reid and other leading Democrats to pursue drilling in ANWR. Even if such drilling were to occur, there’s no
guarantee oil prices would immediately drop, she noted, but it "should help reduce price volatility in the U.S."

[NEG] Shocks  Alternative Energy 111
Shocks spur alternative energy development.

IHT 6-30-08, International Herald Tribune
[“Inflation, oil dependence and the Fed's next step,” http://www.iht.com/articles/2008/06/30/opinion/edoil.php]
We don't know how the Fed is going to get out of this bind. In the long run, however, the bigger challenge is not the Fed's. Policymakers
must come up with strategies to prevent the recession-and-inflation problem from happening time and again.
Foremost would be a systematic plan for reducing America's dependence on oil. From this perspective, high oil
prices are actually a good thing - cutting use and spurring the development of alternative energy - but there must be help
for the most hard-hit Americans, like lower-income workers.

[NEG] Empirically Denied 112
Empirically denied – a recession was predicted when oil prices hit $100.
Bloomberg 07
[“$100 Oil May Mean Recession as U.S. Economy Hits `Danger Zone',” November 12, http://www.bloomberg.com/apps/news?pid=20601109&sid=a1aGJ64Na3g8&refer=home]
Nov. 12 (Bloomberg) -- Rising fuel prices that businesses and consumers took in stride earlier this year may now be
near the point of pushing the weakened U.S. economy into recession. ``We are in a danger zone,'' says Nariman
Behravesh, chief economist at Global Insight Inc. and a former Federal Reserve economist. ``It would take two
shocks to bring the economy to its knees. We got one shock in the form of the credit crunch. Oil could be that second
shock.'' Crude-oil prices are poised to cross the $100-a-barrel mark while the U.S. economy is still reeling from a
surge in corporate borrowing costs. Europe and Japan are vulnerable as well, after the U.S. subprime-mortgage
collapse contaminated their credit markets. Even before the latest jump in energy costs, economists expected U.S.
growth to slow to less than 2 percent in the fourth quarter -- half the third quarter's pace. Andrew Cates, an economist
at UBS AG in London, said his models suggest a 45 percent chance of a U.S. recession next year, up from 33 percent
last month, as oil prices prove a ``growing concern.''
Oil prices can’t collapse the U.S. economy, multiple scenarios prove
Clifford Singer, January 08 Professor of Political Science at the University of Illinois
[“Oil and Security,” published by the Stanley Foundation, http://www.policypointers.org/page_7028.html]
Nevertheless, there is little doubt that concerns about who had control of Iraq’s large oil revenue potential brought particular attention to that
price increases in 1998 and 2007, no dire effects on the US or global economy have yet been observed or are clearly
in the offing, for reasons discussed below. […] While outside intervention in Mideast conflicts has not been effective in stabilizing oil prices,
the question of what to do about oil price instability remains. One viable answer is: nothing. After all, prices for
many raw materials fluctuate substantially, and life goes on. If oil is viewed not as a strategic commodity but rather just another
commodity, then there is nothing special about it.15 From a global perspective, such price fluctuations do nothing except move
money around. The foreign exchange that flows to oil producers has at some point to be reinvested or used for
purchases that stimulate the economies in countries from which the purchases are made—i.e., windfall profits from oil-
producing and exporting countries inevitably find their way into investments in oil-receiving or importing countries.16 Oil price
fluctuations themselves thus do not cause global economic recession.17 Only when they trigger or coincide with other financial
instabilities do such fluctuations cause or appear to cause global economic problems. Barsky and Kilian attribute the US stagflations
of 1973-1975 and 1979-1982 primarily to a response to money supply overexpansion, with oil price shocks only
accounting for part of the accompanying recessions.18 The subsequent economic malaise of the early 1980s was further
compounded by problems resulting from inadequate regulation of US savings and loan institutions.19 In 2007 an oil price spike
coincided with exposure of overreach in the subprime mortgage market. However, in the 1970s the US economy was twice as
oil-intensive as it had been when the occupation of Iraq started in 2003;20 and in 2007 the Federal Reserve responded to the downturn in the
housing market with a measured reduction of interest rates in a much less difficult monetary policy environment than it had faced during the
stagflations in the previous effective oil cartel period.21 There was no guarantee that monetary policy would continue to be exercised in a way
that would avoid recession, but with the target for federal funds rates still at 4.5 percent in the final quarter of 2007 there remained ample room
for doing so.
Empirically denied – we’re already in the midst of a shock.

U.S. Senate Committee on Environment and Public Works 7-15-08
[“McConnell: It’s Time for a Serious, Balanced Approach to the Price of Gas,” http://epw.senate.gov/public/index.cfm?FuseAction=Minority.Blogs&ContentRecord_id=2745262b-
802a-23ad-4bad-447fc2b77636]
Washington, D.C. – U.S.

Senate Republican Leader Mitch McConnell delivered the following remarks on the Senate floor
Tuesday regarding the need for a serious and balanced approach to lowering the price at the pump: “As we stand
here, Americans are suffering from the most dramatic oil shock in memory. A single barrel of crude oil costs almost
three times today what it did a year and a half ago. This is a crisis that demands our full attention.

[NEG] Economy Resilient 113
We can survive any oil shocks: multiple reasons.

Heath 12-8-07, Allister: associate editor of The Spectator and deputy editor of the Business
[“Braced for a new oil shock? Relax, this isn't the 1970s,” http://findarticles.com/p/articles/mi_qa3724/is_20071208/ai_n21153240]
Demand will continue to grow faster than supply next year. The International Energy Agency expects global demand to rise
from an estimated 85.9 million barrels per day this year to 87.7 million in 2008; but supply is forecast to come in at 85.2 million
barrels per day in 2007 -- a shortfall of 700,000 barrels. The gap widens to 2.4 million barrels per day in 2008, effectively
guaranteeing that $100 a barrel will be the new norm. All of which confirms that the rising price of oil is a result of economic
success, especially in Asia, rather than the cause of economic failure, as it was 30 years ago in the West. For all its credit-
crunch problems, the world economy enters 2008 in not too sickly a state; by contrast, it was so weak in the 1970s
that it did not take much of a shock to cripple it. Another crucial difference is that Western economies are far more
reliant on services than they ever were in the past; this means they are less affected by the prices of commodities,
including oil. The slump in the value of the dollar, in which oil is priced, also partly helps to explain the rise in its price. Producers have
seen the value of their exports drop in real terms as the greenback has plummeted; there has been huge pressure to jack up prices in
compensation. The surge in the euro against the dollar has helped protect the eurozone, cancelling out much of the rise
in the price of oil. Sterling's performance against the greenback has also helped. In the aggregate, the British economy, which still pumps
out roughly as much oil as it consumes, gains as much as it loses from higher oil prices. Yet another big change since the 1970s is
that central banks have grown up. They know they must act speedily to nip inflation in the bud; interest rates are guaranteed
to go up if higher commodity prices begin to feed into consumer prices, which is one reason why overall inflation has been almost
entirely unaffected by the surge in the price of fuel over the past few years. Finally, in many countries including Britain,
sky-high petrol taxes act as a cushion: the price at the pumps has gone up proportionately much less than it has in America, where lower taxes
mean that market prices are reflected much more closely at the filling stations. So what next? Jim Rogers, the investor who predicted the start
of the commodities rally in 1999, is now forecasting $150 a barrel. When he first came up with his prediction a year ago, he was dismissed out
of hand. Nobody's laughing today. But one thing is clear: unlike in the 1970s, the world economy will be able to cope with
almost anything the oil market throws at it.
Despite oil prices, the economy is resilient – prefer our evidence, it’s predictive and assumes their warrants.
O’Grady 7-4-08, Sean: Economics Editor of The Independent, a prominent British newspaper
[“Paulson predicts US economy will pick up by end of the year,” The Independent, http://www.independent.co.uk/news/business/news/paulson-predicts-us-economy-will-pick-up-by-
end-of-the-year-860062.html]
The US Treasury Secretary, Henry Paulson, signalled yesterday that the worst may soon be over for the American
economy. As the price of a barrel of oil tested fresh highs once again, and acknowledging the "headwinds" to growth
coming from rapidly rising global energy and food inflation, Mr Paulson nonetheless said: "We have a resilient
economy, we have good productivity, we have good efficiency. I think there's a very strong possibility that we will be
growing at the end of the year, we will have stronger growth at the end of the year than we have right now." That, however, could still
be relatively weak, and Mr Paulson continues to be more worried about growth than inflation.

[NEG] Alt Causes 114
U.S. economic decline is fueled by many alternate causalities.

Cook 7-16-08, Richard C.: federal government analyst for the U.S. Civil Service Commission and the U.S. Treasury Department, frequent
contributer to the Washington Post, recipient of the Cavallo Foundation Award for Moral Courage in Business and Government, frequent contributor
to Center for Research on Globalization
[“Status Report on the Collapse of the U.S. Economy,” http://www.globalresearch.ca/index.php?context=va&aid=9596]
With the economic news of the week of July 14—the continuing crisis among mortgage lenders, the onset of bank failures, the
announced downsizing of General Motors, the slide of the Dow-Jones below 11,000—we are seeing the ongoing collapse of the U.S.
economy. Even the super-rich are becoming nervous as cries for an emergency suspension of short selling ring out. What is really taking
place, however, is that the producing economy of working men and women is being crushed by the overall debt burden
on households, businesses, and governments that could reach $70 trillion by 2010. The financial system, including
mortgage giants Fannie Mae and Freddie Mac, is bankrupt, as the debts it is based on cannot be repaid. This is because the
producing economy of people who work for a living simply can no longer generate enough purchasing power for
people either to pay their debts or allow them to purchase what is being sold in the marketplace. In turn it is the debt
burden and the loss of societal purchasing power that are crashing the stock market. Thus the collapse of the financial
economy has started to destroy the producing economy as well. It’s a “perfect storm,” the result of a 200-year-old
financial system where money is largely created by bank lending and where since 1980 our industry and jobs have been
increasingly outsourced abroad to cheap labor markets. Thus domestic incomes have stagnated while the nation’s GDP has not been
able to keep up with the exponential growth of debt. While the mainstream media are blind, deaf, and dumb as to the causes, the victims within
the middle and working classes are seeing their livelihoods ruined, jobs taken away, pensions eroded, homes foreclosed on, and are being
saddled with ever-increasing debt and forced to work under more and more stress due to rising burdens of taxation, gas and food price inflation,
and bureaucratic rules and regulations. The only places a more-or-less normal life may still be possible will be the wealthiest imperial centers
like Washington, New York, Houston, Chicago, or San Francisco. All that the current bailouts being engineered by the Federal Reserve are
doing is to create more debt to shore up failing financial institutions. No new wealth is being created. It’s band-aids on band-aids.
There are numerous alt causes to a U.S. economic decline.

Trumbell 7-16-08, Mark: Staff writer of The Christian Science Monitor
[“Woes deepen for U.S. economy,” Christian Science Monitor, http://www.csmonitor.com/2008/0716/p01s05-usec.html]
Expectations that the current US economic downturn will be shallow are diminishing. A severe recession in the United States still isn't the
mainstream forecast, but economists say it's a real possibility, especially as problems at American banks deepen amid a
continuing shakeout of the housing crisis. What makes forecasts challenging these days is that the economy's problems involve the
linkage of many moving parts. Crucially, a healthy banking system is vital to the economy, and now an economic slowdown
and a plunge in bank stocks have raised the prospect of more bank failures and the need for federal intervention. The
rising uncertainty and risk were visible Tuesday, from auto manufacturing to the value of the dollar. General Motors
canceled dividends for shareholders, something it hasn't done since 1922. The dollar fell to a new low against the
euro. Stocks fell worldwide. Everyone from CEOs to policymakers to ordinary investors and depositors are grappling with the question:
How bad is this crisis? How bad could it get? It's a sign of the times that Federal Reserve Chairman Ben Bernanke, the closest thing to a
spokesman for the economy, talked a lot about unknowns even as he sought to reassure lawmakers Tuesday at a congressional hearing. One
major question, he said, is how long housing-market declines will persist. "It's that uncertainty, I think, that is generating a lot of
the stress … that we're seeing," he said in response to questioning.

Many non-oil related alt causes.

AFP 7-16-08, Agence France Presse: the oldest news agency in the world, and one of the three largest with Associated Press and Reuters
[“Global stocks shake with stress from US financial crisis,” http://afp.google.com/article/ALeqM5gKWr3a7zyRm3jOea_vtAUbgTMoJw]
"The economy continues to face numerous difficulties, including ongoing strains in financial markets, declining
house prices, a softening labor market, and rising prices of oil, food, and some other commodities," Bernanke had
warned on Tuesday. The Fed report lifted its 2008 outlook for the US economy in a forecast that appears to show no recession. But
investors across the globe remain on edge over the possibility of a recession -- two or more quarters of negative economic
growth -- in the United States, analysts said. "The balance is again tipping towards fears of recession given that the (Bernanke) speech ...
confirmed the particularly marked uncertainty weighing on the economy and persistent uncertainty about inflation," said Valerie Plagnol, the
joint head of strategy at Credit Mutuel CIC in Paris.

[NEG] Circuit Breakers Solve 116
Market circuit breakers are designed to curb inflation and economic decline.
U.S. Securities and Exchange Commission 08
[“Circuit Breakers and Other Market Volatility Procedures,” http://www.sec.gov/answers/circuit.htm]
The securities and futures markets have circuit breakers that provide for brief, coordinated, cross-market trading halts
during a severe market decline as measured by a single day decrease in the Dow Jones Industrial Average (DJIA). There are three
circuit breaker thresholds—10%, 20%, and 30%—set by the markets at point levels that are calculated at the
beginning of each quarter. The formulas for these thresholds are set forth in the New York Stock Exchange (NYSE)
Rule 80B. For example, on April 1, 2007, the average value for the DJIA for the preceding month (March 2007) was used to calculate point
levels (rounded to the nearest 50 points). This resulted in the Level One (10%) circuit breaker set at 1,250 points, Level Two (20%) circuit
breaker set at 2,450 points, and the Level Three (30%) circuit breaker set at 3,700 points.

[NEG] Inflation Uniqueness 117
Bernanke is shifting focuss to combat inflation. It will not get out of hand.
Boston Globe, 6/5/08
Copyright 2008 Globe Newspaper Company, All Rights Reserved, The Boston Globe, BUSINESS; Pg. F1, Bernanke: Fed is intent on preventing stagflation', Robert Gavin Globe
Staff
Federal Reserve chairman Ben S. Bernankesignaled yesterday that the central bank is turning its attention to fighting
inflation after several months of cutting interest rates to bolster a weakened economy and struggling financial system.
Speaking to graduating seniors at Harvard College's Class Day, Bernanke focused on the impact of soaring energy, agricultural, and commodity
prices, comparing today's situation to that of the 1970s, when runaway inflation and stagnant economic growth gave rise to the term
"stagflation." While Bernanke said a repeat of the '70s is unlikely, the Harvard speech followed other recent speeches in
which the Fed chairman addressed concerns about rising inflation. On Tuesday, for example, Bernanke said the Fed
is worried about the dollar, which has declined in value, compared to other currencies, and is contributing to
inflation. A weaker dollar means imported goods - including oil - cost more in the United States. This renewed focus
on inflation suggests the Fed won't cut interest rates when policy makers meet this month, said Mark Zandi, chief
economist of Moody's Economy.com. Interest rate increases are coming down the road, he said. Higher interest rates reduce borrowing and
spending, which slows demand and makes it harder for producers to raise prices. For the time being, however, the struggling economy
appears too weak for the Fed to starting raising rates, Zandi said. "Right now, there's not much Bernanke can do
except talk, and talk tough about inflation," Zandi said. "But he's changed his focus from the financial system and
housing, and that's laying the groundwork for [rate] increases."
Stagflation is no threat to the economy, since the fed is keeping a check, by the end of 2008 the economy will be
picking up.
St. Petersburg Times (florida), 2/22/08
FLASHBACK TO THE '70S, KRIS HUNDLEY, Times Staff Writer, St. Petersburg Times, BUSINESS; Pg. 1D
Are signs of stagflation emerging? Over the past 12 months, consumer prices have risen an average of 4.3 percent, fueled by increases
in oil and food prices. Meanwhile, economic growth this year is projected to slow to 1.3 to 2 percent, below earlier forecasts. What makes some
economists think it's not? Though unemployment is creeping up, it's still only 4.9 percent. And economists say the inflationary
expectations of long-term investors are under control, as seen by low long-term rates in the bond markets. They also
note that wages are not rising and a wage-price spiral is considered a prerequisite for stagflation. What can the Federal
Reserve do to counter stagflation? It can't boost the economy and dampen inflation at the same time. The Fed is now focused on
spurring the economy, with another cut in the short-term interest rate expected next month. Economists say the Fed
can temper inflation by reversing course and raising rates in the second half of the year, once it's got the economy
going again. What does it mean to me? Consumers are getting squeezed at the gas pump and the grocery as wages stay flat while expenses
rise. Floridians have the added pressure of rising homeowners insurance and declining real estate values. But rebates and interest rate
cuts will be working their way into the economy by midyear, hopefully boosting consumer and business spending.
What the experts say: "It's not anywhere close to when we had 10 percent unemployment along with 10 percent inflation. I'd call it micro-
stagflation. But there's still a lot of uncertainty in the outlook." Scott Brown, chief economist, Raymond James & Associates "It's the '-flation'
part I'm a little more worried about than the 'stag.' Because in order to extricate inflation once it does take root, the pain is significant." Sean
Snaith, director of the Institute for Economic Competitiveness, University of Central Florida "If it's stagflation, it's low-altitude
stagflation. I think the economy is going to pick up and we're going to see an improvement in inflation by the end of
the year. Most of the run-up in inflation is due to higher commodity prices, and I don't see that spilling over to other
parts of the economy."

[NEG] Inflation Uniqueness 118
US economy isn’t falling into stagflation

Robb 08 (Greg, jouralist for the MarketWatch, U.S. isn't falling into stagflation, Fed chief says Vigilance on easing rates as needed wins applause on Capitol Hill,
http://www.marketwatch.com/news/story/us-not-falling-stagflation-bernanke/story.aspx?guid=%7B8DC2219A-F7A7-497C-B58C-C481455AA68D%7D, February 28)
"I don't anticipate stagflation. I don't think we are anywhere near the situation that prevailed in the 1970s," Bernanke
said in his second day on Capitol Hill delivering the Fed's latest report on monetary policy. Ugly inflation reports in January have raised
concern that the Fed's recent interest-rate cuts will spark higher inflation in coming months just as the economy slows to a crawl. But
Bernanke stressed that he believes inflation will move lower as the year progresses and growth remains tepid. "Our
current view is that inflation will moderate this year as oil and food prices don't rise as much this year as they did last
year," Bernanke said. At the same time, it's true that rising prices are complicating Fed policymakers' task of helping return the economy to
a moderate growth path, he said. "We are facing a situation where we have simultaneously a slowdown in the economy, stress in financial
markets, and inflation pressures coming from these commodity prices abroad," Bernanke said. "We have to make our policy trying to balance
these different risks in a way that can get the best possible outcome for the American economy," Bernanke said. The top U.S. central banker
also said more plainly than he had that the sputtering economy presents more of a risk than the risk of higher inflation. "At the moment, I think
the greater risks are to the downside, that is to growth and to financial markets," Bernanke said. He also said that inflation
expectations have remained "pretty stable" despite the steady increase in oil and food prices. Bernanke's clear
message is that he intends to cut benchmark interest rates further to support the flagging economy -- was well-received by
members of the Senate Banking Committee, just as it was on Wednesday by the House Financial Services panel. See full story.

[NEG] Fed Balance 119
The Fed balances inflation.

Parry 08, Chris: Associate of the Chartered Institute of Bankers, senior lecturer at University of Wales Institute, Cardiff
[“Economic Trends: Is Inflation Really Good for the Economy?”http://www.investorguide.com/igu-article-926-economic-trends-is-inflation-really-good-for-the-economy.html]
The Fed keeps a tight rein on both inflation and deflation, trying to create a happy medium that encourages moderate economic growth
for the United States. As a result, there are several policies in place to deal with inflation (or deflation as the case may be). The
Fed watches a number of things carefully to help determine the inflation policies for the country. One of their primary tools is the
consumer price index. By examining the price of goods on a general level, the Fed can make decisions about whether or not
to raise interest rates in an attempt to keep the market on a relatively stable level. By changing the level of the interest rate in
the United States, the Fed can keep a tight rein on the level of inflation. Every six weeks, the Federal Reserve Board of the
Open Market Operations Committee meets to set both the Fed funds rate and the discount rate, changing the inflation levels
each time the rates go up or down. Policy makers as a whole tend to either tend to be more concerned with the growth of the GDP or more
concerned with keeping the levels of inflation quite low within the country. It tends to be best to have a mixture of these two things at any given
time in the Fed in order to set the best inflation policies for the United States.
Fed will balance

Northeast Pennsylvania Business Journal 7-7-08
[“Running on empty,” http://www.npbj.com/site/news.cfm?newsid=19834879&BRD=2231&PAG=461&dept_id=449419&rfi=6]
Conventional economic wisdom states that low interest rates handed down by the Federal Reserve Board (Fed) are highly
inflationary. In view of the current low rates, some economists hold the Fed to be a key player in commodity inflation.
Robert Dye, senior economist with PNC Financial Services Group, explains that today's Fed is walking an economic
tightrope with a dual mandate of promoting economic growth, as well as controlling inflation. After two straight quarters with
inflation plus weak growth in gross domestic product (GDP), the Fed is banking on a future with cooler prices and
healthier growth. "Yes, these low interest rates are a gamble," says Dye. "The Fed is watching the economy carefully, and has
signaled there will be no more rate cuts. We're now starting to plan for how a Fed rate-tightening cycle will unfold. They can't keep the
interest rates at 2 percent forever. We are below the inflation rate and therefore it's considered a zero rate." Dye explains that the European
Central Bank is only charged with the responsibility of fighting inflation. It has therefore kept interest rates high relative to the U.S. This pulls
interest-seeking investors to Europe, and the dollar falls in relation to the Euro and many other currencies. The end result is higher prices for
imports into America, including precious crude oil.
The Fed will make sure that inflation is controlled.

The Gazette, 6/4/08
The Gazette (Montreal), June 4, 2008 Wednesday , Final Edition, , Bernanke shores up the U.S. dollar; Signals end of rate cuts. Issues warning on inflation, BYLINE: SCOTT
LANMAN, Bloomberg News, SECTION: BUSINESS; Pg. B6
The Fed is working with the Treasury to "carefully monitor developments in foreign exchange markets" and is aware
of the effect of the dollar's decline on inflation and price expectations, Bernanke said in his first speech on the
economic outlook in two months. In addition, interest rates are "well positioned" to promote growth and stable
prices, he said. Bernanke 's comments are a shift from past remarks by Fed officials that have highlighted both the
spur to exports from a cheaper dollar and the pressure it puts on import prices. The dollar climbed after the speech
indicated exchange rates will be a consideration in setting rates. "I can't recall such a strong defence of the dollar
from a Fed chairman," said Sophia Drossos, a currency strategist at Morgan Stanley in New York who used to work
at the New York Fed, where she helped manage the central bank's foreign-exchange holdings. "The Fed is putting its
marker down in letting the market know that a weaker dollar would be detrimental." Investors anticipate the central bank
will keep its benchmark rate at two per cent this month after 3.25 percentage points of cuts since September, futures prices show. Bernanke
spoke via satellite to the International Monetary Conference in Barcelona, Spain. "For now, policy seems well positioned to promote
moderate growth and price stability over time," Bernanke said. "We will, of course, be watching the evolving
situation closely and are prepared to act as needed to meet our dual mandate. "We are attentive to the implications of
changes in the value of the dollar for inflation and inflation expectations," Bernanke said. The Fed's commitment to
price stability and maximum employment "will be key factors ensuring that the dollar remains a strong and stable
currency."

[NEG] Fed Won’t Raise Rates 120
The Fed will not raise interest rates at all.

Kotok, 7/21/08
The Huffington Post, http://www.huffingtonpost.com/david-kotok/why-the-fed-will-not-rais_b_107598.html, David R. Kotok co-founded Cumberland Advisors in 1973 and has been
its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from
The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from the University of Pennsylvania. His articles and financial market comments
have appeared in The New York Times, The Wall Street Journal, Barron's, and other publications. He has appeared on CNN, CNBC, and Bloomberg TV. Mr. Kotok currently serves
as a Director and Program Chairman of the Global Interdependence Center (GIC). He is a member of the National Business Economics Issues Council (NBEIC), the National
Association for Business Economics (NABE), the Philadelphia Council for Business Economics (PCBE) and the Philadelphia Financial Economists Group (PFEG). Mr. Kotok has
served as a Commissioner of the Delaware River Port Authority (DRPA) and on the Treasury.
1. The energy price shock is not something that the Fed can control. The oil price depends on many factors, and
monetary policy is not one of them. Those who allege the oil price is determined by the weakness of the dollar are
ignoring history. There have been just as many periods when oil prices rose and the dollar was strong as there have
been in the reverse. The direction of causality between oil and currency is not proven. Skeptics can look at the oil price in
other currencies and see that it has also traced a parabolic curve. Energy price inflation is a shock. It causes substitution wherein consumers
spend on gasoline or other energy at the expense of spending on something else. It functions as a tax. The amount of energy price inflation tax
has already exceeded the total federal rebates. Energy price taxes, just like other taxes, reduce economic activity and slow the economy. They
are deflationary, not inflationary. In this case the tax collectors (recipients) are foreign governments, and so the US is transferring wealth to
them. The Fed cannot control any of this economic transfer. It only exacerbates it by raising interest rates. 2. Food price inflation is
another form of shock. We know the story on corn and flooding. Soybeans are also impacted. We have seen drought-
induced rice shortages and higher rice prices. And we have already written about the new airborne fungus impacting
wheat. The Fed can do nothing about the weather, nor can it alter the natural progression of a wheat disease.
Monetary policy is not designed to handle these natural forms of shocks. Like energy, the higher food prices are altering the
consumer's ability to spend elsewhere. Food prices force substitution just like energy prices. The Fed can also do nothing about the stupid
Congressional structure that has subsidized ethanol and caused higher food prices that now have a "pile-on" effect on the weather-induced food
price problem. The United States national legislature has dealt a terrible blow to Americans and the world with its policy. Notice how silent the
Senators and Representatives are about ethanol. Remember all the crowing about "energy independence." Now you hear nothing. How many
journalists have probed the votes of those who gave us this policy? How many now editorialize against it? How many admitted that this
massive subsidy at the federal level has been an enormous raid on the taxpayer and has diverted national resources to economically nonviable
businesses? The Fed is powerless to do anything about this situation. 3. The housing situation is worsening. No bottom is in sight,
as prices of housing continue to fall throughout the country. There are still millions of housing units in excess
inventory that have to be absorbed. The Fed will only exacerbate this situation by raising rates. It took the Fed 6
months longer than needed to get the rate low enough so that resetting mortgages reached levels that did not raise the
foreclosure, default, and delinquency rates. Now the Fed knows it must hold the short-term rate steady so that this situation can start to
plateau. The lead time between monetary policy and impact on housing is nearly a year. The foreclosures we see now are a result of policy a
year ago. The Fed knows this. Raising rates now only makes the housing situation worsen. 4. Wealth effects are harder to measure but
are a real force in the economy. We have two at work, and housing is only one of them. The other is the negative
psychological effect that impacts individuals when they see the declining values in their retirement plans (401k). This is
the "flip side" of a rising stock market. The result is that individual investors retrench. We see that in mutual fund flows and in the choices
investors make in asset allocation. We see that the stock market "labors" even as the Fed has lowered the policy interest rate to 2% and has
extended massive liquidity to the banking and capital markets through the use of the many new tools and the redeployment of the Federal
Reserve's balance sheet. The Fed has done about all that it can to offset any negative wealth effects. Rising interest rates would only worsen the
present situation. The housing negative wealth effect is becoming a record drop. Homeowners' equity dropped about $400 billion in the first
quarter of this year. The year-over-year drop was nearly $900 billion. The total decline in US households net worth was $1.7 trillion in the first
quarter of 2008. This is the largest quarterly decline in the post-WWII history. Falling housing prices are now raising the default and loss rates
on the $600 billion home equity second mortgage sector. These have been securitized and are likely to trigger the next round of write-offs and
loss reserves in the financial sector. The Fed has already dropped the reference rates to the level that will blunt the damage. Going lower will
not do much more to improve things. Raising rates will certainly exacerbate this situation.
5. The Fed knows that it is under political attack. We have written several times about Senator Christopher Dodd's
behavior with respect to Fed appointments. The Economist recently editorialized a view exactly consistent with ours.
Dodd isn't even embarrassed by the revelation that he took a personal mortgage at a below-market rate from
Countrywide under their "VIP" program. At least his colleague, Senator Conrad, admitted the error and contributed
the difference to a charity and refinanced his mortgage. Dodd has done nothing but deny he took a subsidy, and
claims he didn't know about it. The Fed is in its weakest political position since 1932, and the Board of Governors'

[NEG] Fed Won’t Raise Rates 121
appointments are the most impacted since the Depression era. The Fed normally does not raise interest rates
preceding a national election. This time they are a beleaguered body and threatened by politics unlike in any recent period of history.
Politics has injected a wild card into the Fed decision making. We expect that the Fed will stay on hold until after the election and keep its
profile low in September and October. But the other forces at work are such that anything can happen. We will stop here because of
time. Our position is that the Federal funds rate will be unchanged for the rest of this year. We also expect the Fed to
continue the use of its balance sheet in these newer forms as it tries to narrow credit spreads and restore dysfunctional financial markets to more
normalcy. No one knows what the new normal will be. The situation is not healed and the Fed knows it. Before the Fed can resume a
more normal policymaking stance it must have restored financial markets to a healthier condition. The Fed cannot
apply policy to an injured financial system. The Fed knows it. That is why the Fed is unlikely to raise rates in 2008.

[NEG] Inflation Good 122
Inflation is good and allows a rebalancing of the economy – Fed says.

Boston Globe 6-12-08
[“Trying to balance inflation, concerns over downturn,” http://www.boston.com/business/articles/2008/06/12/trying_to_balance_inflation_concerns_over_downturn/]
HARWICH - Allowing inflation and unemployment to rise in the short-term would be an "appropriate" response by policy
makers to soaring oil prices, Donald L. Kohn, vice chairman of the Federal Reserve System, said yesterday. Kohn, speaking
here at a conference sponsored by the Boston Federal Reserve Bank, said that moving quickly to bring down inflation in the face of
oil and commodity price shocks could produce a sharp increase in unemployment. Kohn noted that recent history
shows big jumps in oil prices have had only "modest effects" on long-term inflation. "It may be efficient to allow some
adjustment period in which both overall inflation exceeds its desired low level and the unemployment rate is higher than its long-run
sustainable level," Kohn said. "Setting policy in a manner that balances the undesirable effects of a shock to the system on
both inflation and employment will tend to be more efficient than setting policy so as to deliver more extreme outcomes in
either inflation or employment." Kohn's remarks, made during a panel discussion with central bankers from other countries, reflect the
tricky situation faced by the Fed. The economy is weak, perhaps in recession, while inflation is rising. If the Fed cuts interest rates
further to give the economy a boost, it risks sparking rapid inflation. If it raises rates to stamp out inflation, it risks a deeper
economic downturn.

[NEG] Inflation NOT a concern 123
Inflation is NOT a threat we should be concerned about.

New York Post, 7/18/08
http://www.cato.org/pub_display.php?pub_id=9545, Alan Reynolds, found on Cato
Bottom line: "Headline CPI" gives us a fair picture of what has happened to the cost of living over the past month or
year. But it's near-useless for telling us where inflation is headed in the future. That's why analysts regularly look at "core
CPI" — the headline number, with volatile food and energy prices factored out. But excluding food prices makes little difference except to
distract attention from the main issue, so many of us prefer to exclude only energy prices — and look at the "ex-energy" CPI. The graph above
compares year-to-year percentage changes in two measures of inflation since 1966. The ex-energy CPI excludes only direct energy costs, such
as gasoline and utility bills. The headline CPI includes everything. And either measure makes it quite clear that comparing
today's inflation with a '70s-style stagflation is preposterous. Nor were the terrible inflations of 1973-75 and 1978-82
"caused" by oil prices, as many believe. Inflation then was skyrocketing even as measured by the ex-energy CPI: It
was up by 8.2 percent in the 12 months ending in December 1973, and by 11.7 percent a year later. It was up 9.1 percent in the 12 months
ending in December 1978 and 11.1 percent a year later. Today, "headline inflation" is much higher than the ex-energy rate
because the price of crude oil doubled over the past year. The only way the headline rate could remain as high as 5
percent over the next 12 months would be for the price of crude oil to double again. But if crude doubles again,
inflation won't be our problem — because that would trigger a nasty global recession, and oil prices always collapse
in recessions.

The current inflation is actually being caused by foreign demand.

The Huffington Post, 7/22/08
http://www.huffingtonpost.com/hale-stewart/#blogger_bio, Hale Stewart, Hale "Bonddad" Stewart is a former bond broker with several regional firms. He has been involved with the
financial markets since 1995. He currently practices law in Houston, Texas and is a graduate student in taxation at Thomas Jefferson Law School, working towards an LLM in
international and domestic (US) taxation.
As the information below indicates, inflation is a problem. And it is growing. I've written this title a bunch over the last few months,
largely in response to a story of a few commodities hitting new highs. However, I haven't looked at a ton of charts and compiled them into a
master list. So here is that list. First I went to Futures Trading Charts. Then I looked at their futures charts for agricultural and energy
commodities. I found 18 charts that show major price moves. All of them are listed below.
If this were one commodity I would dismiss it as a commodity specific price disruption. However, we're looking at
major league price spikes across the spectrum of goods. That's a huge deal and it indicates a fundamental
development in the markets. I stand by my standard explanation 101: with India's and China's standard of living
going up, it's only natural the demand curve gets moved to the right. That means increasing prices.

[NEG] Consumer Turn 125
Inflation is causing consumers to spend more.

US News 5-1-08
[“Inflated Consumer Spending,” http://www.usnews.com/articles/business/economy/2008/05/01/inflated-consumer-spending.html]
Consumers spent more in March, but they did not have much of a choice. The Commerce Department reported today
that inflation was the main driver of consumer spending that month. Spending was up 0.4 percent, but if you exclude
inflation, that number falls to 0.1 percent. While higher prices are forcing consumers to spend more, real disposable income
was slightly negative in March, decreasing by less than 0.1 percent after increasing 0.3 percent in February.
Americans also have to worry about slow growth and unemployment. The unemployment rate for April will be
announced tomorrow, but one data point doesn't look good: New jobless benefit claims increased last week by
35,000.
Consumer spending is the only thing that keeps our economy going.
Business and Media 11-28-07
[“Talking Ourselves into Recession,” http://www.businessandmedia.org/printer/2007/20071128154245.aspx]
Journalists worried before Thanksgiving about holiday shopping. And they kept worrying as sales figures came in.
“Consumer spending accounts for more than two-thirds of the U.S. economy's growth. And if consumers really start
to pull back, that is what will turn us from the r-word of resilience to the r-word of recession,” Erin Burnett of CNBC told
Brian Williams on the “NBC Nightly News” November 26.

[NEG] Energy Dependence Untrue 126
Energy dependence is a joke.

Auerswald 07, Phillip E.: assistant professor and director of the Center for Science and Technology Policy at the School of Public Policy, George
Mason University; research associate at the Belfer Center for Science and International Affairs at Harvard University’s Kennedy School of
Government.
[“The Irrelevance of the Middle East,” The American Interest, Volume 2, Number 5, May - June 2007, http://www.the-american-interest.com/ai2/article.cfm?Id=269&MId=1]
Nearly everyone agrees, moreover, that thanks to policy, organizational and technological innovations, the oil-consuming
economies of developed countries are far more resilient in the face of short-term oil supply disruptions today than they
were thirty years ago. The strategic oil reserves of the OECD countries have grown to more than a billion barrels,
representing a significant short-term response capability. We also use energy inputs far more efficiently than we did thirty years
ago. And for all their negative lessons, Hurricanes Katrina and Rita demonstrated that the U.S. economy can adapt
quickly to infrastructure disruption. How many terrorist cells would it have taken to damage Gulf Coast production and refining
facilities as thoroughly as did those two storms? And even then, with the aggravating impact of the war in Iraq and speculative activity in the
oil markets, the observed macroeconomic impact has been negligible. In short, the persistent belief, distributed throughout American
politics, that U.S. energy dependence is a serious strategic and economic liability is simply not true. Straining to solve
a problem that really is not much of a problem at all is a waste of effort and a distraction from the policy goals on
which we ought to be focusing.

Defense vs China Dollar Dump 127
China wouldn’t dump the dollar: multiple reasons.

Channel 10 News 08
[“Olympic Diplomacy: Don't Fear China,” http://www.10news.com/money/16423346/detail.html]
That China is choosing to invest its reserves in this country ought to be viewed as a huge compliment, a vote of confidence in the U.S.
economy. Instead, China-bashers believe that allowing China to own U.S. government debt is tantamount to putting a
nuclear bomb in its hands: All that Beijing needs to do is dump U.S. bonds. This will crash the U.S. dollar, especially now,
when it is already in a weakened state, making it useless as the world's reserve currency, the main source of America's status as the world's
economic superpower. But should China attempt to detonate this bomb, its own economy would be buried under debris
long before America even heard the explosion. For starters, given Uncle Sam's overall $9 trillion debt, China's $400
billion constitutes barely a day's trading in U.S. treasuries. A Chinese dollar sale would produce some economic
ripples in the U.S. economy, observes Dan Griswold, director of trade policy at the Cato Institute, but no lasting impact.
"Contrary to popular belief, the Chinese simply are not very big players," Griswold says. Giving Away Free Money But
even if it could, China wouldn't make any precipitous move to weaken the dollar because doing so would instantly
lower the value of its own foreign reserves. As the late Nobel prize-winning economist Milton Friedman explained,
foreign governments that make distress sales of their dollar holdings to destabilize the U.S. economy usually have to
sell at below-market value. There would be plenty of buyers for these assets, so their overall value would not suffer. But the sellers would
lose big time because they would effectively be giving away free money. [China has lately started diversifying its reserves into euros and other
currencies as they strengthen against the dollar, but that's to maximize the returns on its investments, not out of political spite against the U.S.]
Furthermore, to the extent that Chinese authorities do slow the American economy, they would make the U.S. less
capable of absorbing China's exports. This would have major political reverberations, given that America is China's
biggest export market. Indeed, Chinese workers making, say, toys for Wal-Mart (WMT) will not simply sit by quietly while their jobs
vanish. The truth is that opening the U.S. to Chinese investments and exports has given China an enormous stake in
America's economic health. In fact, last year, when statements by a Chinese academic triggered rumors that a China
dollar dump was imminent, Chinese officials quickly issued a statement that "China doesn't want any undesirable
phenomenon in the global financial order."

China Won’t Dump 128
China won’t dump – the U.S. in set for a soft landing.

Free Market News Network 06
[“CHINA DOLLAR DUMP? – TODAY'S HIGH ALERT,” http://www.freemarketnews.com/Analysis/134/6593/high.asp?wid=134&nid=6593
But, amidst the exhortations to ruin that began this piece, we are impelled to offer the perspective that it may not happen overnight
(though, yes, perhaps it could). The reason may be as simple as this: The dollar is still the world's dominant currency and all the
major players, OPEC, the EU and, of course, Asia and China have a stake in making sure it does not decline too fast.
Additionally, the United States is a major consumer nation, and crippling such a large market without a replacement is not likely a positive
move for producing nations such as China, or even Japan. China does not exist in a vacuum. The leadership has its own problems -
nearly half a billion impoverished, rural Chinese who seemingly do not believe they are getting their "fair share" of the current prosperity and
continue to present the threat of civil destabilization. China needs to continue its industrial expansion until it can move more of these
rural dissidents into cities where they can find work other than hand-to-mouth farming (an ongoing program). In the meantime, terminally
undermining the economy of one of China's major trading partners is not likely going to help bring about the
continued prosperity China's leaders believe is necessary to "modernize" while maintaining the current, fairly unstable system, Perhaps
that is why the senior Chinese official above emphasizes the gradualism with which China intends to decrease its position
in American dollars.
China will not dump dollar—despite claims, it still intends to keep the dollar as the main currency
Asia News 07
[“Beijing worried about weak dollar eroding value of its reserves,” 11/20/07,. http://www.asianews.it/index.php?l=en&art=10848]
Premier Wen Jiabao is open to diversifying China’s foreign currency reserves, but US dollar remains the basis, also to
prevent a loss of competitiveness of Chinese exports. Singapore (AsiaNews) – As the value of the US dollars drops more
and more, the government in Beijing is starting to worry about the impact on the value of its reserves. Speaking before
the National University of Singapore, Chinese Premier Wen Jiabao (in photo with Lee Kuan Yew, former prime minister of the city-state)
admitted that the matter is of concern to the government, adding that financial markets are also wondering whether
Beijing will buy stronger currencies in lieu of the US dollar. “When our foreign reserves were small, we weren't
under so much pressure,” Mr Wen said. “But now we can't help but be worried about how to preserve the value of
our reserves, which have reached US$ 1.4 trillion.” According to official statistics, the mainland's foreign currency reserves stood at
US$ 1.43 trillion by the end of September, representing an increase of US$ 367.3 billion in the first nine months of the year. With the US dollar
at 1.47 euro, National People’s Congress Vice-Chairman Cheng Siwei suggested that China’s reserves should give more weight to stronger
currencies in its reserves to offset the losses due to a weak dollar. About 70 per cent of its foreign reserves are generally believed to be held in
US dollar-denominated paper, principally US government bonds. Amid rising concerns that Beijing might reduce its US dollar holdings, Yi
Gang, an assistant governor of the People's Bank of China, came to the defence of the US currency. He told a Washington-based public
policy think-tank last week that, whilst China needed to diversify the composition of its reserve currencies, it
was very firm about keeping the US dollar as the main constituent. “It is also a very firm policy [. . .] that the
US dollar is the main currency in our reserves,” he said, since it is “the largest currency that we use in terms
of trade and foreign direct investment as well as financial clearances and settlements.” The United States are
China’s main trading partner. A stronger yuan, at a fixed rate against the dollar, combined with a weaker dollar
would create problems for Chinese exports to the United States. For Beijing exports are lifeline to prevent mass unemployment
and social unrest.

China Won’t Dump 129
China won’t dump – it would hurt them.

Williams 07, Krissah: Named “Emerging Journalist of the Year” by the National Association of Black Journalists
[“China steps up currency fight by 'absurd' threat to sell $US,” Sydney Morning Herald, http://www.smh.com.au/news/business/china-steps-up-currency-fight-by-absurd-threat-to-
sell-us/2007/08/09/1186530532725.html]
If China was to dump its US currency, it would hurt its own pocketbook because it is such a large investor. "There
would be turmoil in the financial markets," said Menzie D Chinn, professor of economics at the University of Wisconsin.
"It's not really a credible threat." The US Treasury Secretary, Henry Paulson, who met Chinese leaders in Beijing last week and
told them to raise the currency's value without delay, called Mr He's comments "frankly absurd". "China's economic
relationship with the United States is very important to both countries. "And then another point I've made for some time is …
what the Chinese hold in treasuries is less than one day's trading volume in treasuries. We have a broad, liquid
market." Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington DC, said the Chinese
researchers are probably attempting to remind Congress that "this is a relationship of mutual interdependence, not a one-way
street".

Dollar Decline Not Bad 130
Dollar decline has benefited us more than it has hurt.

Cowen 12-2-07, Tyler: Holbert C. Harris Chair of economics as a professor at George Mason University, writes the "Economic Scene" column for
the New York Times and writes for such magazines as The New Republic
[“The Dollar Is Falling, and That’s Good News,” http://www.nytimes.com/2007/12/02/business/02view.html?_r=1&oref=slogin]
ANXIETY about the dollar continues to spread. The falling greenback is often seen as a sign of an impending recession or the fall of
the United States from global leadership. A low dollar simply looks bad. We are, after all, used to judging ourselves against others —
comparing our salaries with the earnings of our peers, and our homes with those of our neighbors. We’re used to thinking it is a big advantage
to stand at the top of a numerical list. But when it comes to currencies, a higher value neither brings national success nor
predicts future prosperity. The measure of a nation’s wealth is the goods and services it produces, not the relative
standing of its currency. Take a look at 1985-88, when the dollar lost more ground than in the last few years. Those
were good times, and the next decade was largely prosperous as well. Today’s lower value for the dollar reflects the success of
other regions. Europe has shown it can make the European Union and its unified currency work, and thus the euro has become stronger. The
Canadian union appears increasingly stable, and that means a higher value for the Canadian dollar. Over all, these geopolitical developments
are good for America even if the dollar becomes weaker in relative terms. Many observers have an exaggerated sensitivity to the
dollar’s fall because they spend more time in relatively expensive countries. A shopping trip to London will give an American
tourist the feeling that all prices have doubled or even worse. A weekend vacation or conference in nearby Toronto or Montreal may no longer
feel like a bargain. But from a broader perspective, the value of the dollar hasn’t fallen quite as much as it might seem.
Since President Bush started his second term in January 2001, to Nov. 20 of this year, the dollar has dropped 19.8 percent — if
we weight the dollar by how much America trades with individual countries. That is a noticeable decline, but it is hardly a radical
economic event. There are still many bargains, travel and otherwise, in Asia and Latin America for people paying in dollars. A
falling dollar does mean price inflation in the United States. Just as it costs more for an American to buy a fancy meal in Paris, so do French
wines and German cars have a higher markup when they are sold in New York. But imports are only 16 percent of the American
economy, and most foreign suppliers have been reluctant to risk their position in the American market by raising
prices a great deal. Furthermore many price increases from Europe come on luxury goods and thus they fall on wealthy American buyers,
who can afford it most easily. Wal-Mart serves a more working-class clientele and it is stocked with goods from Asia, where currency values
have remained weaker against the dollar. Of course the lower value of the dollar also makes American exports more
competitive. Much of Middle America is booming because of its ability to sell tractors, food stuffs and other products abroad at favorable
prices. Even after a serious real estate decline, the American economy is continuing to expand, and this is largely
because of the strength of our export sector, as encouraged by a low value for the dollar. Another worry is that a
falling dollar puts the United States at the mercy of China. Dr. Brad Setser, a currency analyst at RGE Monitor, estimates that the
Chinese hold about $1.2 trillion in dollar-denominated assets. China is likely to slowly diversify into other currencies, but
Chinese leaders have no interest in encouraging a run on the dollar or a fire sale of dollar-denominated assets. China
is in a more vulnerable position than the United States, if only because China is a poorer country and has
underdeveloped capital markets. Still, it would be naïve to argue that a weak or falling dollar can never hurt the United States. Extreme
volatility can increase general anxiety and discourage economic commitments. If the dollar went into a true free fall, it would damage the
reputation of the United States as a desirable place for foreigners to invest. That would hurt; but on the other hand a low dollar would
mean bargains for foreigners, thereby attracting investment and limiting the potential negative fallout from a dollar
collapse. SO far the Federal Reserve and the Bush administration have shown little concern over the falling dollar. This isn’t
because of neglect or lack of interest; trillions of dollars worth of currency are traded every day, so policy makers have only a limited ability to
push around long-term exchange rates, even if they wanted to do so. When it comes to market prices, people can always find
reason to be unhappy. In the eurozone, for example, it is a common complaint that the euro is too strong and
therefore it is too difficult for Europeans to export goods and services. In the case of the dollar, we need to stop
thinking of its value as a marker of economic success. The American economy has its problems, but so far the low
value of the dollar has proved more a benefit than a cost.

Dollar Decline Inevitable 131
Collapse of the strong dollar is inevitable

Paul 06
(House Representative, Texas, “The End of Dollar Hegemony,” Energy Bulletin, 2/14/06, http://www.energybulletin.net/node/12987)
In the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a
threat to the country issuing the world currency. In this case that’s the United States. As long as foreign countries take our
dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize, as they bash China for
maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets, as we become
more dependent on others and less self-sufficient. Foreign countries accumulate our dollars due to their high savings
rates, and graciously loan them back to us at low interest rates to finance our excessive consumption. It sounds like a great
deal for everyone, except the time will come when our dollars-- due to their depreciation-- will be received less
enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for
living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is
yet to come. The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the
preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each
year. Last year alone M3 increased over $700 billion. The artificial demand for our dollar, along with our military might,
places us in the unique position to “rule” the world without productive work or savings, and without limits on
consumer spending or deficits. The problem is, it can’t last.

Impact: Econ Comp K2 Heg 132
A decline in the dollar spurs economic growth and is critical to maintaining economic competition.
Bivens 03, Josh: economist at the Congressional Research Service, Economic Policy Institute
[“The benefits of the dollar's decline,” http://www.epi.org/content.cfm/briefingpapers_bp140]
The value of the U.S. dollar as of July 1, 2003 had fallen by 9.1% since its peak in February 2002.1 The benefits
of the falling dollar
vastly outweigh the costs for the U.S. economy. The primary costs of the falling dollar are higher prices for imported
goods and for American tourists traveling abroad. The primary benefit is increased price competitiveness of U.S.
products, both for exports abroad as well as in the domestic market. The United States currently has an enormous trade
deficit (importing more than it exports), which represents a significant drag on efforts to spur economic growth and create
jobs, and has led to an accumulation of foreign debt that will have to be repaid in the future. Given this trade deficit,
the benefits of greater international competitiveness prompted by the falling dollar greatly outweigh the costs.
Economic competition is UNIQUELY key to maintaining hegemony. Prefer this: assumes their ev and cites
empirical warrants.
Conetta 2-5-08, Carl: co-director of the Project on Defense Alternatives, former Research Fellow of the Institute for Defense and Disarmament
Studies, he has made presentations at the Pentagon, US State Department, US House Armed Services Committee, Army War College, National
Defense University, UNIDIR, and other governmental and nongovernmental institutions in the United States and abroad
[“Cul de sac: 9/11 and the paradox of American power,” Project on Defense Alternatives, http://www.comw.org/pda/0802rm13.html]
Since the Second World War the United States has enjoyed a hegemonic position within the "western" camp. By this
we mean that it has enjoyed a predominant position among this group of states, especially in the economic and military fields - and that this
position is partly institutionalized. Hegemony is a hierarchal, rule-governed system in which one polity enjoys predominant influence in
defining the rules, adjudicating them, and enforcing them.6 America's position is not unlike the position of Athens in the Delian League as
described by Isocrates (circa 300 BC); its hegemony is "the right of leadership conceded to one state by the others." 7 Hegemony depends
on the acquiescence of the junior partners and on their expectation that deference to the hegemon will yield greater absolute gains.
America's hegemonic position among the "western" states does not depend on coercion; nor is the subordination of the
junior partners complete. The terms and price of the relationship are always at issue - as are individual policies. But the
United States can apply substantial leverage to get its way by financial means, or by threatening to withdraw from
cooperative enterprises, or by threatening to "act on its own" as it sees fit (with system-wide effects). The hegemon disciplines
its partners by reminding them that it is always best to bandwagon with it, the "indispensable nation". Of course, the partners must be
convinced of real, positive benefits in terms of security, stability, legitimacy, and growth. In recent decades, US hegemony has been
increasingly troubled. The American predilection for employing "decisive" and other coercive means often has been a point of contention
with its partners - especially since the mid-1960s. More significantly: since the early 1970s, partners have increasingly viewed the
United States as unwilling to pay the economic price of hegemonic privilege. And this perception has grown as
globalization has accelerated and international economic competition has intensified. Still, for many years, the presence of two
million Warsaw Pact troops within easy striking distance of the western European heartland helped guarantee America's position and its
preferences within the alliance. To put it simply: the "Soviet threat" cemented American hegemony within the Western group.


XT: Impact: Econ Competition 133
A weak dollar is good—improves competition, economy, and global exports

N. Gregory Mankiw, 12/23/2007. Professor of economics at Harvard, and he wrote my econ textbook last semester.
[“How to Avoid Recession? Let the Fed Work,” New York Times, http://www.nytimes.com/2007/12/23/business/23view.html?ref=business]
By making United States bonds less attractive to world investors, lower interest rates from a monetary expansion also weaken the dollar in
currency markets. A depreciation of the currency is not in itself to be feared. Treasury secretaries often repeat the mantra of
favoring a strong dollar, but these pronouncements are based more on public relations than hard-headed analysis. A weak currency is a
problem if it results from investors losing confidence in an economy. The most damaging cases are the episodes of
sudden capital flight, as occurred in Mexico in 1994 and several Asian countries in 1997. This outcome is unlikely for the
fundamentally sound American economy, but fear of it is one reason that Treasury secretaries maintain public fealty to a strong
dollar. But if a weakened currency comes about because the central bank is trying to stimulate a lackluster economy, the story is very different.
In that case, depreciation is not a malady but just what the doctor ordered. A weaker currency makes domestic goods more
competitive in world markets, promoting exports and bolstering the economy. The dollar’s falling value is one
reason exports of goods and services have grown more than 10 percent in the past year.
The falling dollar is good, since it increases competitiveness, and avoids major economic downturns through the
housing market.
Financial Times, 10/15/07
BYLINE: By MARTIN FELDSTEIN, SECTION: COMMENT; Pg. 13, Financial Times (London, England), October 15, 2007 Monday
London Edition 1, A more competitive dollar is good for America.
The falling dollar should not be seen as a problem for the US economy. A more competitive dollar will raise net
exports, reducing the probability that the current weakness will turn into an outright recession. Looking further ahead, as
the US household saving rate rises from its current low of nearly zero to a more normal level, consumer spending will slow, driving down
aggregate demand. A declining dollar will then help to maintain growth and employment by raising exports and causing
American consumers to shift their spending from imports to domestically produced goods and services. Nor should
the falling dollar be a problem for our trading partners if they take the appropriate measures to offset the reduction in
demand that will be caused by their declining exports and rising imports. The best way for foreign governments to stimulate
demand would be by revenue neutral fiscal changes (such as tax-financed increases in investment incentives) or by regulatory changes to
facilitate increases in consumer spending and construction. If foreign central banks were instead to lower interest rates or
foreign governments to engage in exchange market intervention, the result would be to weaken their currencies and
prevent the dollar's decline. If that happens, US exports will not increase, causing the current US economic weakness
to get worse and potentially leading the future rise in household saving to precipitate a US economic downturn. Any
perception that foreign economic policy is responsible for US economic weakness would exacerbate the current protectionist mood in the US
Congress. Since a falling dollar raises the cost of imports and increases the export demand for US products, a dollar
decline by itself puts upwards pressure on the US inflation rate. But the overall inflation rate need not rise if the
Federal Reserve sticks to its goal of price stability. Instead, relative in-creases in the prices of tradable goods would
be offset by lower inflation in other goods and services. Markets must look beyond the slogan that a strong dollar is
good for America to recognise that a more competitive dollar will help sustain US growth and is necessary to correct
America's trade deficit. Governments of our trading partners must recognise that the dollar's decline will weaken
demand in their economies and should use fiscal and regulatory measures to maintain their growth and employment. With appropriate
policies, the dollar's decline will correct the imbalances that threaten the global economy without higher inflation in
the US or decreased growth in the rest of the world.

XT: Impact: Econ Competition 134
A lower dollar creates a larger export market.

CNBC 7-2-08
[“Which Is Better -- Strong or Weak US Dollar?” http://www.cnbc.com/id/25486214]
But there are those who disagree. Wilbur Ross,

chairman and CEO of WL Ross & Co told CNBC Wednesday, "I'm one of
the few people as an American, who likes the weak dollar. I believe that the only way that we can compete with our
high wages and high standard of living is by a weaker dollar, so I'm actually an advocate of the weaker dollar." Ross
added that the rate of growth in U.S. exports had exceeded the rate of imports ever since the dollar started its descent.
"I believe one of the few things that's helping to bolster the economy now is the growth in exports. Not that we have
unbalanced a favorable trade balance -- we have not -- but there has been pretty good growth in exports driven by the weak dollar," Ross told
CNBC.

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Shock/Inflation Adv Northwestern

Jeff Zhang/Gautam Uphadya/Raj Patel Antonnuci/Paul/Mulholand

Zarefsky Juniors 2008 1

Zarefsky Juniors 2008 2

Zarefsky Juniors 2008 3

Everything else should be pretty self-explanatory.

Zarefsky Juniors 2008 4

Everything else is self-explanatory.

Zarefsky Juniors 2008 5

Shock 1AC [1/6] 6

ADVANTAGE ____ IS SHOCK

Scenario 1: The Economy

An oil shock is coming.

Zarefsky Juniors 2008 6

Shock 1AC [2/6] 7

Economic collapse leads to extinction.

Zarefsky Juniors 2008 7

Shock 1AC [3/6] 8

Scenario 2: Dollar Decline

Higher oil prices directly result in a declining dollar

If the dollar's decline continues, China will dump.

Zarefsky Juniors 2008 8

Shock 1AC [4/6] 9

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Shock 1AC [5/6] 10

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Zarefsky Juniors 2008 10

Shock 1AC [6/6] 11

US-China war will go nuclear and destroy the planet

Zarefsky Juniors 2008 11

Uniqueness/Impact: Spikes Coming 12

Zarefsky Juniors 2008 12

Uniqueness: Shocks Coming 13

Oil shocks 70s-style are coming.

Demand for oil will cause oil shocks.

Zarefsky Juniors 2008 13

Shocks Coming: Middle East 14

Zarefsky Juniors 2008 14

Zarefsky Juniors 2008 15

Zarefsky Juniors 2008 17

Internal: Prices kill Economy 18

Raising oil prices threaten U.S. and global economic stability.

Zarefsky Juniors 2008 18

Internal: Prices kill Economy 19

Oil shocks have an impact on the US economy

3 internal links to economic collapse

Zarefsky Juniors 2008 19

Internal: US Econ K2 Glob Econ 20

That collapses the global economy

Zarefsky Juniors 2008 20

Impact: Stagflation kills Economy 21

Zarefsky Juniors 2008 21

Impact: Econ/War [1/2] 22

Oil shocks result in resource wars

Resource wars result in nuclear proliferation and extinction.

It's official: the

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Impact: Econ/Enviro/War [2/2] 23

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Zarefsky Juniors 2008 23

Stiglitz (mpx author) is awesome! 24

Zarefsky Juniors 2008 24