I thought that you might find this interesting, just in case someone asks what our governement, the BLS, feels is the current BEST case for May '08.Saturday, June 21, 2008
Wednesday, June 18, 2008
False Premise
"Our nation has come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk...But the central bank has neither the clear statutory authority nor the mandate to anticipate and deal with risks across our entire financial system.
We should quickly consider how to appropriately give the Fed the authority to access necessary information from highly complex financial institutions and the responsibility to intervene in order to protect the system so they can carry out the role our nation has come to expect."
Short but sweet, folks...this is an argument, not a debate. The argument is based upon this entirely false premise put forth today by our idiot savant Treasury Secretary, Henry Paulson.
Just who said that we have "...come to expect..." the FED to step in and do anything? I didn't. You didn't. Nobody asked them to save us from anything. Did you ask them to bail out a private investment bank with the ultimate result that risk taking actually increased because there is a new sheriff in town with bail cash for all?
And, petty though this may sound, who in Hell asked them to save us from them?
Though many voices will say this is wrong...well...who really cares what "many voices" will say. The fact is that inflation is a monetary occurrence. Inflation is not possible without too much liquidity. And the FED has accommodated this liquidity rush with the best financial drugs known to man...massive credit and low interest rates and ridiculously low reserve requirements. Oh, and by the way, virtually no enforcement of existing regulations. Remember Greenspan's "What could I have done?" bit?
A house of financial mirrors...every direction looks right and yet every direction is wrong. Raise rates and kill any hope of a real estate recovery and huge losses become unimaginable losses. Lower rates and systematic inflation is assured and the dollar drops like George Michael's pants in Central Park.
In reality, the FED wants inflation and a lower dollar. Inflation, in the vision of the FED, will lead to rising incomes. At least that is their hope. Wage pricing power is completely non-existent right now. But IF the FED can move wages up, then perceived purchasing power increases and real estate has a chance. Values begin to grow again, the existing debt may be paid off in cheaper (devalued) dollars and everyone feels better and richer.
But, like a stripper bathed in red stage lights, all is not what it seems. The FED is actually focusing NOT on commodity prices as their "canary in the mine" but rather the very thing that they need to make this whole plan work...wages! That's right, the FED is actually using wage increases as a signal to "act decisively" to ward off that nasty inflation because it should be obvious to all that rising wages are bad and rising prices are good.
What kind of world does the FED live in? You are going to tie your decision to fight inflation to an increase in wages...Really?...Seriously?
Didn't the FED just assure us of the next worst thing next to deflation - stagflation? That is the very definition of stagflation - rising prices and flat wages.
The name of the game right now is real wealth preservation, adjusted for inflation. A rate of return of even 12% is a sucker's bet with inflation running 7-10% and taxes of 35%. Add a risk free rate and a risk premium and you need high teens returns to beat inflation and earn a small net return to assure growing purchasing power.
I can still hear Will Rogers saying "Last year we said, 'Things can't go on like this', and they didn't, they got worse."
"Our nation has come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk...But the central bank has neither the clear statutory authority nor the mandate to anticipate and deal with risks across our entire financial system.
We should quickly consider how to appropriately give the Fed the authority to access necessary information from highly complex financial institutions and the responsibility to intervene in order to protect the system so they can carry out the role our nation has come to expect."
Short but sweet, folks...this is an argument, not a debate. The argument is based upon this entirely false premise put forth today by our idiot savant Treasury Secretary, Henry Paulson.
Just who said that we have "...come to expect..." the FED to step in and do anything? I didn't. You didn't. Nobody asked them to save us from anything. Did you ask them to bail out a private investment bank with the ultimate result that risk taking actually increased because there is a new sheriff in town with bail cash for all?
And, petty though this may sound, who in Hell asked them to save us from them?
Though many voices will say this is wrong...well...who really cares what "many voices" will say. The fact is that inflation is a monetary occurrence. Inflation is not possible without too much liquidity. And the FED has accommodated this liquidity rush with the best financial drugs known to man...massive credit and low interest rates and ridiculously low reserve requirements. Oh, and by the way, virtually no enforcement of existing regulations. Remember Greenspan's "What could I have done?" bit?
A house of financial mirrors...every direction looks right and yet every direction is wrong. Raise rates and kill any hope of a real estate recovery and huge losses become unimaginable losses. Lower rates and systematic inflation is assured and the dollar drops like George Michael's pants in Central Park.
In reality, the FED wants inflation and a lower dollar. Inflation, in the vision of the FED, will lead to rising incomes. At least that is their hope. Wage pricing power is completely non-existent right now. But IF the FED can move wages up, then perceived purchasing power increases and real estate has a chance. Values begin to grow again, the existing debt may be paid off in cheaper (devalued) dollars and everyone feels better and richer.
But, like a stripper bathed in red stage lights, all is not what it seems. The FED is actually focusing NOT on commodity prices as their "canary in the mine" but rather the very thing that they need to make this whole plan work...wages! That's right, the FED is actually using wage increases as a signal to "act decisively" to ward off that nasty inflation because it should be obvious to all that rising wages are bad and rising prices are good.
What kind of world does the FED live in? You are going to tie your decision to fight inflation to an increase in wages...Really?...Seriously?
Didn't the FED just assure us of the next worst thing next to deflation - stagflation? That is the very definition of stagflation - rising prices and flat wages.
The name of the game right now is real wealth preservation, adjusted for inflation. A rate of return of even 12% is a sucker's bet with inflation running 7-10% and taxes of 35%. Add a risk free rate and a risk premium and you need high teens returns to beat inflation and earn a small net return to assure growing purchasing power.
I can still hear Will Rogers saying "Last year we said, 'Things can't go on like this', and they didn't, they got worse."
Tuesday, June 10, 2008
"The three stages of magic:
First, there is the setup, or the "Pledge," where the magician shows the audience something that appears ordinary but is probably not, making use of misdirection.
Next is the performance, or the "Turn," where the magician makes the ordinary act extraordinary.
Lastly, there is the "Prestige," where the effect of the illusion is produced. There are "twists and turns, where lives hang in the balance and you see something shocking you've never seen before."[
From the movie “The Prestige”.
Bernanke is the illusionist.
We are the audience.
We must be willing to suspend disbelief. We paid for the ticket. We know that a railroad car or the Statue of Liberty cannot disappear. But we want to believe they can. We want to be entertained.
The setup, or the “Pledge”, is a fair market and real, inflation adjusted growth. It seems normal and fair but all is not what it seems.
The “Turn” is the illusion of exceptional economic growth and prosperity beyond all rational expectations. Interest rates are low, zero down, cash back financing, asset values increasing far in excess of any wage and earnings growth. People making $50,000 per year are buying houses for $500,000. Houses are “flipped” for huge profits. Assets sell for more than the asking price. Wages increasing faster than prices. Security of social contracts (social security, etc.). $700T worth of derivatives that are perfectly hedged. Banks with sufficient reserves. Solvent muni bond insurers. Sufficient equity and cash flow for the debt load.
The “Prestige” is the appearance of real growth of your wealth and the financial stability of the US, all the while the “lives hanging in the balance” are real estate crashes, massive bank write-offs, increasing unemployment, historic rise in prices of oil, unimaginable federal budget deficits, a war in Iraq, prescription drugs, Medicare, Medicaid, Social Security, trade deficits, Sovereign Wealth Funds moral authority via their investments, complete lack of wage pricing power, record foreclosures, negative savings rates, increasing bank failures.
All of these are mis-directions. All real and, yet, you WANT to believe that these problems are solvable at the wave of a wand by the Illusionist.
You walk away from the event knowing what you saw can’t be real yet you still believe.
The only problem is that when you leave the theatre, the Pledge, the Turn and the Prestige, the entire illusion, stay in the theatre. You don’t have to go back and your memory of the illusion grows richer over time.
In the real world, you pay for that Illusionist each and every day with your tax dollars, your depreciating disposable income and your diminishing asset values. You feel richer but you are not.
Inflation erodes your purchasing power, deflation diminishes the value of your home. Your net worth increases BUT your real value, in terms of purchasing power, decreases.
The FED CANNOT raise interest rates and have economic growth. The FED CANNOT lower rates and stop inflation. They have finally reached their “Hobson’s Choice”…a choice that is really no choice at all.
We have no wage pricing power in a globalized world. We have no pent-up demand to drive a recovery via new jobs in manufacturing or service. Our real savings are decreasing.
To raise interest rates, oil must come down, thereby freeing up disposable income to pay the higher interest rates. But if rates increase, housing dies, more mortgage and credit losses, more FED lending to banks and investment banks, the FED runs out of balance sheet (about $1T total to work with but having used about $500B already), the FED goes to the Treasury for re-funding, that means more federal debt, higher federal interest costs, bigger budget deficits.
This is the quintessential “Hobson’s Choice” and the greatest illusion ever attempted.
The FED will not raise rates in this election year, no matter what the “Pledge” is.
And our audience will not suspend disbelief. Therefore, the illusion is no illusion at all.
Fade to black…
First, there is the setup, or the "Pledge," where the magician shows the audience something that appears ordinary but is probably not, making use of misdirection.
Next is the performance, or the "Turn," where the magician makes the ordinary act extraordinary.
Lastly, there is the "Prestige," where the effect of the illusion is produced. There are "twists and turns, where lives hang in the balance and you see something shocking you've never seen before."[
From the movie “The Prestige”.
Bernanke is the illusionist.
We are the audience.
We must be willing to suspend disbelief. We paid for the ticket. We know that a railroad car or the Statue of Liberty cannot disappear. But we want to believe they can. We want to be entertained.
The setup, or the “Pledge”, is a fair market and real, inflation adjusted growth. It seems normal and fair but all is not what it seems.
The “Turn” is the illusion of exceptional economic growth and prosperity beyond all rational expectations. Interest rates are low, zero down, cash back financing, asset values increasing far in excess of any wage and earnings growth. People making $50,000 per year are buying houses for $500,000. Houses are “flipped” for huge profits. Assets sell for more than the asking price. Wages increasing faster than prices. Security of social contracts (social security, etc.). $700T worth of derivatives that are perfectly hedged. Banks with sufficient reserves. Solvent muni bond insurers. Sufficient equity and cash flow for the debt load.
The “Prestige” is the appearance of real growth of your wealth and the financial stability of the US, all the while the “lives hanging in the balance” are real estate crashes, massive bank write-offs, increasing unemployment, historic rise in prices of oil, unimaginable federal budget deficits, a war in Iraq, prescription drugs, Medicare, Medicaid, Social Security, trade deficits, Sovereign Wealth Funds moral authority via their investments, complete lack of wage pricing power, record foreclosures, negative savings rates, increasing bank failures.
All of these are mis-directions. All real and, yet, you WANT to believe that these problems are solvable at the wave of a wand by the Illusionist.
You walk away from the event knowing what you saw can’t be real yet you still believe.
The only problem is that when you leave the theatre, the Pledge, the Turn and the Prestige, the entire illusion, stay in the theatre. You don’t have to go back and your memory of the illusion grows richer over time.
In the real world, you pay for that Illusionist each and every day with your tax dollars, your depreciating disposable income and your diminishing asset values. You feel richer but you are not.
Inflation erodes your purchasing power, deflation diminishes the value of your home. Your net worth increases BUT your real value, in terms of purchasing power, decreases.
The FED CANNOT raise interest rates and have economic growth. The FED CANNOT lower rates and stop inflation. They have finally reached their “Hobson’s Choice”…a choice that is really no choice at all.
We have no wage pricing power in a globalized world. We have no pent-up demand to drive a recovery via new jobs in manufacturing or service. Our real savings are decreasing.
To raise interest rates, oil must come down, thereby freeing up disposable income to pay the higher interest rates. But if rates increase, housing dies, more mortgage and credit losses, more FED lending to banks and investment banks, the FED runs out of balance sheet (about $1T total to work with but having used about $500B already), the FED goes to the Treasury for re-funding, that means more federal debt, higher federal interest costs, bigger budget deficits.
This is the quintessential “Hobson’s Choice” and the greatest illusion ever attempted.
The FED will not raise rates in this election year, no matter what the “Pledge” is.
And our audience will not suspend disbelief. Therefore, the illusion is no illusion at all.
Fade to black…
Friday, May 30, 2008
Why bad debt matters
This is the financial equivalent to the crazy uncle in the basement...something no one talks about or understands. It is bad debt.
Bad debt is a very different animal. Ask someone that is not in the business to define it and they'll get it wrong. Bad debt, also called charged-off debt, is the direct result of a customer not paying their bill. It is not past due debt or delinquent debt. It is debt that the customer has never paid and your company has fully reserved for the debt and your company now carries debt that is a net $0 value.
Let's take an easy example. Say your company revenues are $100. The average company makes about 10% or $10 in after tax profit. Built into this number is an expense to cover the cost of the part of the $100 in sales that are never collected. To be very simple, say that 1% or $1 has been expensed and charged to the bad debt reserve and the 10% net income is after this expense.
Next, assume that your company is public and trades for 20 times earnings. Your stock is worth 20 times $10 or $200.
Now, let's say that your bad debts go from 1% up to 2%. This is commonly referred to in the media as "only up 1%". It seems insignificant and nothing to talk about. Dismiss it. It's lost in the details. What are you worrying about?
He's why you should be very concerned. If the bad debt goes up from 1% to 2%, that means that your earnings have gone down from $10 to $9, or 10%. Your stock price has just gone from $200 down to $180.
Does that seem important to you? Now imaging that this bad debt goes up another 1 or 2 percentage points. This is real erosion of your stock price or market capital. All due to just a few more consumers and companies not paying their debt.
Most people think of this debt as mortgage debt because that is all the rage in the financial media. There is also auto loan debt, consumer debt, RV debt, boat debt, lines of credit, HELOCs, payday loan debt, signature loan debt, utility debt, property tax debt, bad check debt, overdraft fee debt, parking ticket debt, speeding ticket debt, library debt, medical debt and credit card debt.
And that is just the consumer side.
Don't forget commercial debt. Oooops, forgot LBO debt and derivative debt.
The point is that every dollar of unpaid debt destroys a much larger amount of capital. When that capital goes down in value, transactions based upon that asset value decrease in value. It's the equivalent to the "Dead man's spin" to a pilot.
The FED knew this when they bailed out the banks and the investment banks. These folks cannot earn money quickly enough to rebuild their capital base without significant FED intervention. Without the $400-$500B provided by the FED, many, many more banks and investment banks would have been in the trash heap by now.
Since the FED is taking care of the banks and the IB's, just who will take care of the consumer credit issuers, hhhhmmmmm?
So, next time someone says that debt charge-offs are up "just 1%", you now know that this is a rather nasty increase. Knowing this, financials are a very difficult long position right now as every bank, by its nature, makes loans and is exposed to the declining ability of both consumers and companies to service their debt.
Last point, now add into this equation just a slight drop in disposable income, due to, say, oil, food, taxes or some other such insignificant expense. Since disposable income as a percentage of gross earnings is at exceptionally low levels, just a small increase in expenses drives disposable income into the ground. And it is this very disposable income that allows you to service your debt.
Such simple circular logic, really. And now you know. Sleep well.
This is the financial equivalent to the crazy uncle in the basement...something no one talks about or understands. It is bad debt.
Bad debt is a very different animal. Ask someone that is not in the business to define it and they'll get it wrong. Bad debt, also called charged-off debt, is the direct result of a customer not paying their bill. It is not past due debt or delinquent debt. It is debt that the customer has never paid and your company has fully reserved for the debt and your company now carries debt that is a net $0 value.
Let's take an easy example. Say your company revenues are $100. The average company makes about 10% or $10 in after tax profit. Built into this number is an expense to cover the cost of the part of the $100 in sales that are never collected. To be very simple, say that 1% or $1 has been expensed and charged to the bad debt reserve and the 10% net income is after this expense.
Next, assume that your company is public and trades for 20 times earnings. Your stock is worth 20 times $10 or $200.
Now, let's say that your bad debts go from 1% up to 2%. This is commonly referred to in the media as "only up 1%". It seems insignificant and nothing to talk about. Dismiss it. It's lost in the details. What are you worrying about?
He's why you should be very concerned. If the bad debt goes up from 1% to 2%, that means that your earnings have gone down from $10 to $9, or 10%. Your stock price has just gone from $200 down to $180.
Does that seem important to you? Now imaging that this bad debt goes up another 1 or 2 percentage points. This is real erosion of your stock price or market capital. All due to just a few more consumers and companies not paying their debt.
Most people think of this debt as mortgage debt because that is all the rage in the financial media. There is also auto loan debt, consumer debt, RV debt, boat debt, lines of credit, HELOCs, payday loan debt, signature loan debt, utility debt, property tax debt, bad check debt, overdraft fee debt, parking ticket debt, speeding ticket debt, library debt, medical debt and credit card debt.
And that is just the consumer side.
Don't forget commercial debt. Oooops, forgot LBO debt and derivative debt.
The point is that every dollar of unpaid debt destroys a much larger amount of capital. When that capital goes down in value, transactions based upon that asset value decrease in value. It's the equivalent to the "Dead man's spin" to a pilot.
The FED knew this when they bailed out the banks and the investment banks. These folks cannot earn money quickly enough to rebuild their capital base without significant FED intervention. Without the $400-$500B provided by the FED, many, many more banks and investment banks would have been in the trash heap by now.
Since the FED is taking care of the banks and the IB's, just who will take care of the consumer credit issuers, hhhhmmmmm?
So, next time someone says that debt charge-offs are up "just 1%", you now know that this is a rather nasty increase. Knowing this, financials are a very difficult long position right now as every bank, by its nature, makes loans and is exposed to the declining ability of both consumers and companies to service their debt.
Last point, now add into this equation just a slight drop in disposable income, due to, say, oil, food, taxes or some other such insignificant expense. Since disposable income as a percentage of gross earnings is at exceptionally low levels, just a small increase in expenses drives disposable income into the ground. And it is this very disposable income that allows you to service your debt.
Such simple circular logic, really. And now you know. Sleep well.
Saturday, May 24, 2008
Did I mention Part Two of the "Black Gold Rope-A-Dope"?
Remember that owners, more than likely, are also speculators.
Accepting this premise, and acknowledging that there is enormous wealth (growing exponentially) controlled by oil owners and related sovereign wealth funds, this might lead one to conclude that even free markets may be moved (up and down) with relative ease by a very few.
Should this ring untrue, remember the huge silver bull market nearly 30 years ago when silver spiked to more than $50/oz. Members of the Hunt family had essentially full control of the delivery of silver. This was not acceptable to people with even more money than the Hunts and the rules were changed in the middle of the game, forcing several members of the Hunt family into virtual financial ruin.
Think this process can't happen again? It's happening right now as new rules have been discussed and proposed regarding futures trading of food related commodities. It should be noted here that the oil owners have accumulated far more wealth than the food commodity owners and these rules changes have not yet been proposed for oil.
Besides, it couldn't work anyway. Money goes where it is wanted. Over-regulate trading in the US and the trading will move elsewhere.
The current oil price hearings in the House right now are a side show - a game of "Three Card Monte" - for the entertainment of the American voters.
"Something must be done!"
"Something will be done!"
Our trusted, elected officials will ask even more insightful questions such as "Did you make more than $4m last year in salary?" to the heads of Big Oil. That will show Big Oil and the voters we are serious. Quick, ask them another question so that we can adjourn and get back to campaigning.
Which rules do you think will change first?
Remember that owners, more than likely, are also speculators.
Accepting this premise, and acknowledging that there is enormous wealth (growing exponentially) controlled by oil owners and related sovereign wealth funds, this might lead one to conclude that even free markets may be moved (up and down) with relative ease by a very few.
Should this ring untrue, remember the huge silver bull market nearly 30 years ago when silver spiked to more than $50/oz. Members of the Hunt family had essentially full control of the delivery of silver. This was not acceptable to people with even more money than the Hunts and the rules were changed in the middle of the game, forcing several members of the Hunt family into virtual financial ruin.
Think this process can't happen again? It's happening right now as new rules have been discussed and proposed regarding futures trading of food related commodities. It should be noted here that the oil owners have accumulated far more wealth than the food commodity owners and these rules changes have not yet been proposed for oil.
Besides, it couldn't work anyway. Money goes where it is wanted. Over-regulate trading in the US and the trading will move elsewhere.
The current oil price hearings in the House right now are a side show - a game of "Three Card Monte" - for the entertainment of the American voters.
"Something must be done!"
"Something will be done!"
Our trusted, elected officials will ask even more insightful questions such as "Did you make more than $4m last year in salary?" to the heads of Big Oil. That will show Big Oil and the voters we are serious. Quick, ask them another question so that we can adjourn and get back to campaigning.
Which rules do you think will change first?
Friday, May 23, 2008
Just another thought about oil.
How are oil prices determined? Is it "Big Oil", oil executives, speculators, the "Government"?
There is no ambiguity. You'll never need to ask this question again. Here is the only complete and correct answer.
The only people that know where the price of oil is going are the folks that OWN the oil.
This is so simple, it defies logic that anyone even asks the question. Owners can raise prices until they squeeze out the last drop of profit. They can take the world to the brink of ruin. The world reacts and begins to kind of maybe think about thinking about maybe doing something about improving a completely dysfunctional energy policy. Just after investments are made in other energy sources, the owners WILL LOWER THE PRICES to make these alternative investments no longer financially feasible. New energy goes belly-up, and the owners RAISE THE PRICES again, only MUCH higher this time.
Black gold rope-a dope.
Holy sweet crude, Oil Man, this isn't news! The owners have done this EXACT SAME THING several times before to us. Are our brains so filled with useless crap and crippled with media induced ADD ("Speed Racer" comes to mind) that we can't remember what the owners have done to us over the last 35 years? Have we no long term memory?
Consider yourself completely armed for the next idiot that asks you this question. Be swift, be merciful, put him out of his moronic misery...and don't let him breed!
How are oil prices determined? Is it "Big Oil", oil executives, speculators, the "Government"?
There is no ambiguity. You'll never need to ask this question again. Here is the only complete and correct answer.
The only people that know where the price of oil is going are the folks that OWN the oil.
This is so simple, it defies logic that anyone even asks the question. Owners can raise prices until they squeeze out the last drop of profit. They can take the world to the brink of ruin. The world reacts and begins to kind of maybe think about thinking about maybe doing something about improving a completely dysfunctional energy policy. Just after investments are made in other energy sources, the owners WILL LOWER THE PRICES to make these alternative investments no longer financially feasible. New energy goes belly-up, and the owners RAISE THE PRICES again, only MUCH higher this time.
Black gold rope-a dope.
Holy sweet crude, Oil Man, this isn't news! The owners have done this EXACT SAME THING several times before to us. Are our brains so filled with useless crap and crippled with media induced ADD ("Speed Racer" comes to mind) that we can't remember what the owners have done to us over the last 35 years? Have we no long term memory?
Consider yourself completely armed for the next idiot that asks you this question. Be swift, be merciful, put him out of his moronic misery...and don't let him breed!
Wednesday, May 21, 2008
With all due credit to George Carlin, circa last century, these are the seven deadly words today...Inflation, stagflation, recession, depression, peak oil, sub-prime and gold. I believe that Carlin also hyphenated two of his words.
No one is to speak of these words. And never in threes (think "Beetlejuice" and you get the idea). God forbid that a politician, ANY politician, should utter any of these words. We might actually begin to understand the enormity of our dilemma.
More liquidity? More inflation, higher gold, higher oil, lower dollar.
Lower rates? More inflation, higher gold, higher oil, lower dollar.
More bailouts? More inflation, higher gold, higher oil, lower dollar.
No bailouts? Recession, Govt. and FED try to stop it, more liquidity, more inflation, higher gold, higher oil, lower dollar.
I sense a pattern...let's see...gutless and down right stupid politicians (both parties please step forward) making horrid decisions to further their careers and appeal to the unwashed and uneducated voters. Nearly 50% of voters pay little or no federal income taxes soooooooo...that means that this 50%+ can vote for the remaining 49% to support them virtually without consequences. Since these voters don't have to work for it, environmentalism, global warming and tree hugging sound like good things to be "for". Therefore, we are "for" these causes with no plan to deal with the effects. Pols know this so they either intentionally or unintentionally pander to this block.
Oil companies-bad, profits-bad, polar bears-good, environment-bad...or good...depending upon perspective. Suspend gas tax for summer-good, build refineries-bad, beg the Saudis to produce just a few drops more oil-good (but not for our national stature). Nuclear-bad.
I really think every putz in Washington needs a basic class in cause and effect.
Today would be the effect. The cause has been happening for many years. No new nuclear plants for 30 years. No new refineries for about half that time. Can't drill off the coasts even though China and other countries drill just outside our national waters. Now we wonder why this happened all of a sudden. Oil goes up, jobs go away, the economy is "sluggish" (Did you ever think about the derivation of the word "sluggish"? To be like a slug. In this context, it sounds just a bit more repulsive rather than politically correct.)
This is all about supply. We have not even touched the surface of demand. 85m barrels of oil produced each day, 85m barrels of oil consumed. If you remember your basic college economics, the moment that there is 1 more barrel of oil demanded than there is supply, the incremental price of that barrel is indeterminate. It is what anyone can or will pay. And the price does not have to go up gradually. Just look up or remember the 1973 and 1979 oil crisis.
Everything old is new again and here we are with all kinds of causes and all kinds of effects. Only this time, the world is playing the game at the same time.
By the way, the peak oil for the US occurred in the mid-70's, more than 30 years ago. No one said we were quick studies...
No one is to speak of these words. And never in threes (think "Beetlejuice" and you get the idea). God forbid that a politician, ANY politician, should utter any of these words. We might actually begin to understand the enormity of our dilemma.
More liquidity? More inflation, higher gold, higher oil, lower dollar.
Lower rates? More inflation, higher gold, higher oil, lower dollar.
More bailouts? More inflation, higher gold, higher oil, lower dollar.
No bailouts? Recession, Govt. and FED try to stop it, more liquidity, more inflation, higher gold, higher oil, lower dollar.
I sense a pattern...let's see...gutless and down right stupid politicians (both parties please step forward) making horrid decisions to further their careers and appeal to the unwashed and uneducated voters. Nearly 50% of voters pay little or no federal income taxes soooooooo...that means that this 50%+ can vote for the remaining 49% to support them virtually without consequences. Since these voters don't have to work for it, environmentalism, global warming and tree hugging sound like good things to be "for". Therefore, we are "for" these causes with no plan to deal with the effects. Pols know this so they either intentionally or unintentionally pander to this block.
Oil companies-bad, profits-bad, polar bears-good, environment-bad...or good...depending upon perspective. Suspend gas tax for summer-good, build refineries-bad, beg the Saudis to produce just a few drops more oil-good (but not for our national stature). Nuclear-bad.
I really think every putz in Washington needs a basic class in cause and effect.
Today would be the effect. The cause has been happening for many years. No new nuclear plants for 30 years. No new refineries for about half that time. Can't drill off the coasts even though China and other countries drill just outside our national waters. Now we wonder why this happened all of a sudden. Oil goes up, jobs go away, the economy is "sluggish" (Did you ever think about the derivation of the word "sluggish"? To be like a slug. In this context, it sounds just a bit more repulsive rather than politically correct.)
This is all about supply. We have not even touched the surface of demand. 85m barrels of oil produced each day, 85m barrels of oil consumed. If you remember your basic college economics, the moment that there is 1 more barrel of oil demanded than there is supply, the incremental price of that barrel is indeterminate. It is what anyone can or will pay. And the price does not have to go up gradually. Just look up or remember the 1973 and 1979 oil crisis.
Everything old is new again and here we are with all kinds of causes and all kinds of effects. Only this time, the world is playing the game at the same time.
By the way, the peak oil for the US occurred in the mid-70's, more than 30 years ago. No one said we were quick studies...
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