When Will It Sink In That We’re Sunk?

Oil Jumps to New Record on Dollar’s Fall
Oil Jumps to a New Record Above $103 As the Dollar Declines to a New Low Against the Euro

NEW YORK (AP) — The surging price of oil reached another milestone Monday, jumping to an inflation adjusted record high of $103.95.

The weaker dollar that has propelled oil and other commodities prices higher sent light, sweet crude for April delivery past $103.76 a barrel on the New York Mercantile Exchange. That’s the level many analysts consider to be the true record high for oil, after its $38 barrel price from 1980 is translated into 2008 dollars.

The price later traded up $1.81 at $103.65, fluctuating with the normal ebb and flow of trading.

Oil’s most recent run into record territory has been driven by the greenback’s slump against other world currencies. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.

Gold, copper and wheat are among the other commodities that have rallied in recent weeks as the dollar has fallen.

Notice this bit:

As for where oil goes from here, analyst estimates vary widely, with some predicting an eventual decline to the $65 or $70 range as supplies continue to grow and demand falls, and others seeing oil rising as high as $120 as investment capital continues to flow into oil markets from overseas.

For its part, the Energy Department’s Energy Information Administration’s latest prediction is that oil will average $86 a barrel in 2008, up 19 percent from 2007, when oil averaged $72 a barrel.

Emphasis added by me.

Nineteen percent rise! Yet the government is telling us overall inflation is a mere fraction of that! Do these people ever buy pizza?

It gets worse. Not that you’d ever read about any of it in our newspapers or see it explained on our TV!

The Federal Reserve’s rescue has failed

The verdict is in. The Fed’s emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed.

Yields on two-year US Treasuries plummeted to 1.63pc on Friday in a flight to safety, foretelling financial winter.

The debt markets are freezing ever deeper, a full eight months into the crunch. Contagion is spreading into the safest pockets of the US credit universe.

It is hard to imagine a more plain-vanilla outfit than the Port Authority of New York and New Jersey, which manages bridges, bus terminals, and airports.

The authority is a public body, backed by the two states. Yet it had to pay 20pc rates in February after the near closure of the $330bn (£166m) “term-auction” market. It had originally expected to pay 4.3pc, but that was aeons ago in financial time.

“I never thought I would see anything like this in my life,” said James Steele, an HSBC economist in New York.

Emphasis added by me.

Get used to hearing that phrase — I never thought I would see anything like this in my life — because you’ll be hearing it over and over again. Some of you will be saying it!

Judie Lipsett of Gear Diary will confirm that about a month ago I was talking to her about interest rates plummeting to zero in Japan. Now that might happen here too:

The greater risk is slump, says Princetown Professor Paul Krugman. “The Fed is studying the Japanese experience with zero rates very closely. The problem is that if they want to cut rates as aggressively as they did in the early 1990s and 2001, they have to go below zero.”

This means “quantitative easing” as it was called in Japan. As Ben Bernanke spelled out in November 2002, the Fed can inject money by purchasing great chunks of the bond market.

Section 13 of the Federal Reserve Act allows the bank – in “exigent circumstances” – to lend money to anybody, and take upon itself the credit risk. It has not done so since the 1930s.

Emphasis added by me.

And yet the three mainstream candidates for the Presidency of the United States go on as if we are not inexorably sliding towards an unprecedented abyss.

And, oh yes, it will be unprecedented.

Look around you. We are not the people who withstood the Great Depression. We have an abundance of criminals. We didn’t have that back then. We are also saturated with illegal guns. Another thing we didn’t have then.

This is going to be very, very ugly.

Explore posts in the same categories: C.O.A.T. - Money, C.O.A.T. - Politics, Politics

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