I don’t predict this will stop anytime soon. The $700 Bil is like a band aid for an internal wound, that is, to stop the bleeding we need to examine what caused it so as to successfully heal it. If the $700 Bil doesn’t solve the problem (which I believe) then we’ve added more trouble, work, and a lot more money to nip this thing in the bud. If you’ve seen the Zeitgeist movie or have spoken with foreigners, it is obvious that the central banking system is not a sound system anywhere. Many countries, in fact, have rejected the central bankers from entering their country for the very reasons such as the problems we’re facing now. When will we ever learn? We’re like a bad, alcoholic country, in that, we have to hit bottom (Great Depression) before we learn our lessons. And the sad thing about that is we didn’t learn very well from our past mistakes. Get rid of the Central Banks! Our hard earned savings may not be worth anything in the future… and that’s sad since that is what we teach our kids! Save, save, save. Why should I save into a 401k if:
A.) I have to gamble with my hard earned money to be able to retire!?
and/or
B.) It may not be worth anything even if I get there and have $$ in my retirement!?
I think it is pretty obvious that Europe has a Central Bank. It’s obvious because they are doing worse than we are right now that they subscribed to the same for fiscal and monetary policies. Perhaps what is most stunning is that depending on where you get your information that some of their institutions were more leveraged than ours. Perhaps it would be a good idea and do some research and realize there was a housing bubble in the UK and other Euro locales as well, maybe not on the same scale.
I fail to see how Europe is a model for anything, especially when it comes regulation. The world is in this together, no one gets off, they were all greedy and they are all in debt.
1.) As many others have said, oil has become decoupled from any kind of fundamentals of supply and demand or long-term outlook. Oil is the most vital substance on the planet and has always been phenomenally undervalued. And right now in 2008 there are no reasons for oil to be low other than psychological ones. But since psychological reasons most often determine what occurs in markets at least it makes sense.
2.) Conventional wisdom says (blah, blah, blah) that if the market is down and the economy is slowing (ha!) then demand destruction will follow and supply/demand theory kicks in. At least that’s what they say. And that could be true.
However, at some point in the next few years (maybe as soon as within a year) the razor thin supply margins of oil will explode in everyone’s face and oil will never be remotely cheap again no matter how much the global economy tanks.
Hey guys. I have questions regarding my credit cards. I have a decent credit rating, and still have lots of room on my credit cards. I’ve been paying them down, paying much more than the minimum. My question is, now that it appears that the sh!t is about to hit fan…should I continue to do so? Do I wait for hyperinflation then max out my cards and buy things that might help in dire circumstances? What good is my credit rating if the dollar collapses? Thanx in advance.
I think oil is low because of deflation and the contraction of the useable money supply, due to frozen credit, banks sitting on money, citizens making withdrawls, I am pretty sure if one dollar becomes 10 dollars with a reserve rate of 10% then the reverse must be true, that a non-productive dollar, sitting under a mattress or in a bank that is not lending is ONLY 1 dollar.
The billions of dollars put in the system do not count yet because they are chillin and not being lended to anyone. When those dollars start getting spent and loaned then you will see oil skyrocket, probably gold as well.
As far as the shortages in the south east, if you do the research the real issue is not supply shortage it is government interference with price controls, i will post the link to that article if anyone is interested.
[quote]Hey guys. I have questions regarding my credit cards. I have a decent
credit rating, and still have lots of room on my credit cards.[/quote]
Here’s all the advice you’ll ever need for credit cards: Destroy them.
There is no reason anyone should ever have a credit card. Keep a positive balance of $5,000 and it’ll do you just as good, and pay interest (instead of taking it).
If you’ve got debt on cards. Get rid of it. Most cards are shrinking the maximum limits of their possessors. Hedging against inflation with them is no good (the card companies will just raise the interest rates through the roof). In fact, credit cards exist for one, and only one reason – to con from you your money.
Over the past two months there were a lot of reasons to ask that question. Then last week, and this week something huge happened.
Both gasoline and oil inventories made a wicked hook that, if continued for the next several weeks can be only described as demand falling off a cliff. At this point, there is a very real possibility (if this is indeed world demand being utterly crushed) oil prices, instead of rising, will outright crash in the next few months. I’m sure if there is even one more week of this OPEC will go into panic. So will Russia, whose petrodollars are the only thing making its obliterated economy look halfway alive. (So much for that loan, Iceland!)
This massive shift, in a way scares the hell out of me. In recent years there have been a huge amount of oil projects built on expensive oil (Tar Sands, etc…), and like most projects these are deep in debt. If oil stages a full out crash we could see many production gains wiped out in short order, meaning that extremely intense cost spikes could be in the further future (1+ years from now). Even scarier, it’ll threaten future development of these expensive oil resources and, of course, development of alternative energies – and this’ll be true even in the face of an oil peak!!! – due to massive fears in the energy and investment industries that oil will crash yet again. (The 80s oil crash killed the 70s alternative initiatives)
In any case, that’s one more set of economies that’ll be destroyed. On the bright side, it’ll bring down costs and provide some breathing room. Unfortunately, that won’t matter much because the damage has already been done.
Thanx for your response. You know, I came here to learn more about the American economy and it’s pitfalls and started reading more about the economy, but mostly now I feel more confused than ever. I’ve been trading FOREX pretty successfully, but I’m a techincal trader and I don’t really know anything about fundamentals.
So what are we looking at next year? Deflation? Hyper-inflation? How does this economic collapse thingy work?
I am not rich, I owe no debt, I have never had a real credit card, and I work hard for my money. Get out of debt, get rid of your credit cards. I saved for everything I owned and did not have to go into debt for it. I might not have everything that many people do, but I do not owe anything on the things I have.
If oil demand really does fall off a cliff, do you really think the demand will increase in the near future?
While I can see what you’re saying happening, I think the opposite may be true. A severe, global depression should lower oil and gasoline demand for a very long time, no?
I’m completely current on the crash course…waiting on the last installment. The crash course indicates hyper inflation is coming, everyone else is saying that deflation is coming. I don’t know who to believe.
It is very difficult to say how percisely a global depression will effect oil demand. The problem being, that large amounts of oil demand are not flexible. How much, really can a person drive less? How much less food can be grown? Etc… etc… Recall, depressions are often caused because the financial world catches up with the real world. So, by extension, we can say that we’ve probably been in a depression for a year now.
"Just as ominously, for those who’ve been watching, the USD has
strengthened hugely against the Yen over the past few days, indicating
that one more shoe plunking to the ground is the rapid unwinding of a
massive Yen carry trade. Note that the Yen is close to breaking the
100:1 barrier."
Based on this statement by Chris, I had to Google "Yen carry-trade" to learn what it is. Low and behold… another staple of high-finance, which profoundly affects our stock market and "the fallout from which is potentially endless”, about which I knew nothing
A fascinating new subject. Here’s a chart that demonstrates this trade’s impact:
In the past, when the economy was technically thriving and supply stayed ahead of demand, cheap oil was a good thing. Well, in fact, if you look at the history of oil prices we’ve pretty much had cheap oil all the time – except for the '70’s crises.
But today things are different. Oil went so high this past year (bursting a negative bubble some argued) that now drops in oil prices aren’t considered corrections of an overzealous market but an indicator of a tanking economy. Until we replace petroleum based systems with others run on different fuels one could say that oil consumption is the leading indicator of economic growth.
But since we don’t have any replacement for petroleum products a significant drop in oil prices/demand can only be read as an ominous sign. If oil is ten dollars a barrel again it means that you’re unemployed and stuck in your house.
So when someone exclaims to me how great it is that oil is falling like a rock I tell them that the exact opposite is most likely true.
srbarbour also raises a critical point regarding the inflexibility of much of the world’s demand.
It’s good to see Chris question his calls, thinking there might be a short term low… to question how can things go differently than what he thinks it will do… to constantly take new data points for what they are. This chart does not show a conspiracy to me… it coincides exactly when the markets started to slide precipitously. Come on guys (not you or Chris, just meant it in general), this site started off as an educational, self awareness building exercise and now just look at the forums. Is there truly enough evidence that we have TODAY that can justify talk of going back to the Amish way of living? How about some posts on how there’s a chance that the world financial markets can be saved … well at least for the short term? Or are posters now too scared to post something positive? If that’s the case, that’s the signal as to when you should leave the site for good… when it starts to detract from people putting opposing views and having a vibrant debate.
I see us heading for a depression unless drastic measures are inacted. Too many trend analysts and other knowledgable people are making a case for this and my own intuition is screaming this at me and I have lived by my intuition for so long. The one thing I worry about is the violence that would likely ensue in the large cities.
I am studying all i can and gratefull for this site and even have my kids doing the course. I figure they too also need to understand why everything they have had up till now is probably coming to a screeching halt plus great motivater to getting them to participate in the soon to be running family "farm". Even christmas gonna be differnt as planning on gifts that will get us thru winter like down blankets and such. forget the wii games.
