Thursday, April 3, 2008

Recession? Follow the oil supply...

In late December 2007 I wrote in a post that a recession in NOMINAL terms was unlikely, unless the aggregate supply of oil to the U.S. economy declines in 2008 from 2007.

As I said in the post just prior to this one, it certainly appears that the supply of oil to the U.S. has declined and, perhaps more importanly, the effects of the rise in oil prices due to the decline in availabilty has sent the U.S. Trade Defict higher IN SPITE OF A DECLINING U.S.$

While the data might be insufficient now to call this the absolute begining of the U.S. import crisis, if you wait for the "sure thing" it will be too late (as it applies to your investments), disasterously too late.

Mentatt (at) yahoo (d0t) com


Anonymous said...

Bravo! Now we are talking. Did you see the George Sorros on Bloomberg piece where he says that he is expecting lower stock prices after this "bottom" which is not a real bottom. I am still thinking recession and deflation. Even all this supposed liquidity that the FED is putting into the banking system. That is only trying to shore up their negative non-borrowed capital. All that is money down the drain if the banks are still so impaired that they can't loan money to either individuals or corporations. Also if the real rates of return from investments are negative (such as in business or real estate) and they would be in a situation where the energy imports are decreasing, then rational people will not borrow to invest no matter how low interest rates are. That means recession/depression. Again we go back to the old formula of how the credit based global financial system works:

1. Inflation = destruction of savings
2. Deflation = destruction of equity
3. Bankruptcy, bank failure, revolution and conflict = transfer of assets to the few from the many for pennies on the dollar
4. Start again

Best regards,
Chuck H.

Greg T. Jeffers said...


Nice feed back loop. You have such a way with words...

Yes, I saw Sorros. He was stealing my thunder.

And, yes, rational people will NOT borrow to invest no matter the rate.

It's a funny old world, isn't it?


Anonymous said...

Dear Greg:
It is not my formula. I can't take credit for a work of a visionary genius. Please check out Hypertiger Wisdoms on the web. I think you will find it interesting to say the least. Almost theological but there is a grain of truth there that I find compelling. He cuts through the crap in a similar way to you but he is more out there than you are. Definitely worth a read.

Chuck H.