Overproduction is a classical economic description of the over-accumulation of capital. In the case of an over-consolidated capital, it specifically refers to sub-optimal compensation of wages and salaries and overcharge on the economic rent (the cost required to participate in the economy--the cost of living--which includes the over-compensation of top executives to administer the capital).
The leading indicators for impending overproduction are executive over-compensation, high prices (inflation) due to high speculative demand (administered by the executives), and a devaluation of the currency.
The result of inadequate compensation (the lack of consumption) is unsold inventories of goods and services, or overproduction. The effect of that is a weak dollar.
Notice that today's steep drop in oil prices occured with a weakening dollar value again. The weak dollar is an effect, not a cause, of the inflated, sepeculative demand price because the inflation reduces adequate compensation for the productive value of goods and services.
The cause of the overproduction is the high speculative demand that results from an overaccumulation of capital from prices exceeding income, which is what we have now. The technical explanation offered by the overpayed administration and its subordinates is scarcity. The contradiction then appears: scarcity and overproduction at the same time, to be explained with all manner of confusing political and economic interpretation.
Even though, for example, demand for gasoline has been substantially reduced, the speculative demand for crude oil is still strong due to the sub-optimal compensation to consumers (the over-accumulation and over-consolidation of capital and markets). Compensation, not the commodity, is where the scarcity is, and fully explains the contradiction.
Disbelievers will be quick to argue that there is a fundamental scarcity of an essential commodity input--oil. That is incorrect. The free-market will provide ample supply in all its possible forms if it is not allowed to consolidate due to inadequate compensation. The scarcity is the free market, not the commodity. The problem is the way the economy is politically organized, not the available supply.
The way the economy is politically organized (whether it is modeled pluralist, elitist or bureaucratic) determines (effects) the available supply. Conversely, the available supply will effect the political organization. The result may very well be just another version of consolidated power, and in the case of perceived scarcity most certainly will.
The reorganized process of consolidated power with a national-socialist legitimacy will only increase supply by direct state rationing of limited resources, much like what we have now in the form of state capitalism in which the speculative demand receives a subsidy in the form of regressive taxation. This is a bad way to figure out that ensuring a free and unconsolidated marketplace maximizes both economic efficiencies and direct political accountablility.
It takes pragmatic leadership with a high moral intelligence to accoucher a peaceful and prospersous pluralism. The way will be paved not by affective flip-flopping, but the practical utility of effective pragmatism.
Obama 2008!
Very best wishes.
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