Speaking At Jackson Hole

…Petro Keynesian growth stimulus to the global economy is different. Sometimes it works too well. Its outright and unambiguous success through 2004-2007 was quickly followed by failure. As we know, and Bernanke reminded us on August 21, global growth turned south, when oil prices went far north in 2008. The basic reason for this is unpalatable to those, like Trichet and Bernanke who hope growth will soon return, to trim the soaring peaks of national debt. Due to another kind of peak, peak oil rather than OPEC or exuberant Wall Street oil traders, it was simply not possible to produce enough oil to prevent last year

High oil prices were also joined by supply side limits on world grains and food output, including water shortage and climate change impacts. More bad news for inflation and consumer spending potentials outside food and energy basics, was delivered by shortage inducing factors affecting supply/demand outlooks for most metals and minerals. Through 2004-2007, peaking in 2008, even such basics as cement aggregates, iron ore, alumina and world bulk shipping charges climbed smartly in price.

Financial Sense