[Scrub Puller]

Yair . . . onlooker

$this->bbcode_second_pass_quote('', 'I') wonder Repent how many Americans are now like you slaves to debt and bills just eking out a living. I myself am stuck with piles of debt I cannot get out of and what is more have no intention of. I figure what for at this point?

[onlooker]

Yeah Scub it seems that as long as you still are making your minimums they will continuing offering you credit.

[onlooker]

they want you to be their debt slave for as long as you live.

[ennui2]

$this->bbcode_second_pass_quote('pstarr', 'E')gypt thrived on $100 oil. Italy, Greece are the next Silicone Valley.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('onlooker', 'u')mmm, I thought food prices were going up , was not that the trajectory even recently?

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Pops', 'I')t may just be me but some things just don't seem usual, mostly the strong trend to deflation since 2008 - PRIOR to the oil price collapse - that sucked up all the QE that was "supposed" to lead to hyperinflation - and the fact that so many countries see the "success" of the US progrm as a reason to do their own.

Which makes the US$ very attractive as an inflation hedge.

[Revi]

We are all saving money for a rainy day. Now think about what that money represents. It is a store of value for the future. Now let's just assume that there is a big warehouse full of stuff. We are all working, but piling up chits that represent a share of what's in the warehouse for use some time in the future. What if there is nothing in the warehouse when that day comes?

[Pops]

Along the lines of "The media caused the drop..."

$this->bbcode_second_pass_quote('', 'O')n a separate shocking note I also learned that Cushing, back in 2012, went to 88% capacity vs. where it is now in the low 70’s. Can anyone guess where oil was back then? Not $50 but $100! That thump was someone falling off their chair after reading this. The same can be said for natural gas inventories which are below their 5 year average, 10% below the mild 2012/2013 levels, and yet have fallen to record lows because the spin artists wish to focus comparisons only on last year’s levels. Selective perception is running rampant in the media and has gotten completely out of control, so much so that I think media outlets and sell side brokers discredit themselves, as their “facts” don’t match their reports. Just today, BOA was on CNBC again calling for oil to fall to $40.

[evilgenius]

I think what you are looking at with oil prices right now(just over $50 WTI) is simply Murphy's Law. What I mean is that it can happen, so it will. Like any stock in a market, even if that stock has sound fundamentals, pricing won't remain static, and neither will it follow a linear trajectory forever. As far as the oil price goes, even in a depleting model, there must remain room for what currencies, business sectors, central banks, rich people, poor people, brave people, scared people and whoever else will do.

In markets solid stocks will return to their expected path after an anomaly. Some are quicker at it than others. The way it works out is too complex, even with the examination of a single company, to know ahead of time how the rebound, or retracing, will occur. When you look at oil the situation is very complex. You do have a lot of people thinking of oil as a holdable asset right now, just look at the price of tanker stocks, where those companies can charge investors to hold oil offshore per period for an indefinite time. Those investors paying the tanker companies are treating oil like gold. Oil and gold are similar in the sense that the same kind of financial expectation is present for both, that they will run up extensively at some point in the future, perhaps at a volatile pace. Neither of them produce any dividends or other benefits to their holders either. At least you can use oil to do something, produce energy. Gold doesn't go away, but oil does. Few in either of these markets are really looking all that far into the future, certainly not 20 years or more. Much of this is predicated upon an inflationary outlook for the near or mid-term. Said inflation has had a hard time materializing post crisis, so backing this position is as much belief as it is theory.

On the other hand, look at Europe. If you think inflation is having a hard time gaining a foothold in the US it is worse over there. Their currencies are suffering under the weight of what must be tried in order to get the inflation rate back up to an understood 2% healthy level, the same level the Fed would like to see in the US. All of this does not necessarily mean that outright deflation is taking place, or disinflation either. It probably means, moreso, that both inflationary and deflationary forces are at work in both sets of economies at the same time. In some cases these forces are at work within the machinations of the same market, and in others that they are at work, but in separate markets within the same economy. This is evidenced by what the article said about how the Fed's actions have largely benefited the financial sector, and failed to reach the middle class.

There is currently a lot of talk about the Fed raising rates, while in Europe there is only chatter concerning continued or even more aggressive measures designed to induce inflation, like quantitative easing. Much of the drop in the euro and the pound recently is due to this kind of thinking, most bulls this way projecting far more extensive action on the part of the requisite central banks. There are also a lot of people who bring morality into the picture. In their view there is some kind of price to be paid for all of our excesses, or whatever. They seem to think that absolutely everyone who sticks their neck out will get it chopped off, no exceptions. The only problem with that is, where is the 'risk' in the risk/reward paradigm, if you totally embrace their point of view? I think most of these people are really central planners masquerading as free market proponents. They aren't alone. Most people are really central planners at heart. It fits with human selfishness, and the desire to always be right. It goes hand in hand with the disaster that comes with embracing gambling above the analysis of probability, like in the housing run up. It's what people do.

This current conundrum, where we can't seem to get traction at the middle class level, is why I brought up the idea of using some of the bailout money, not all of it, for another endeavor. I advocated, in the direct and immediately extending period after the crisis, for a mortgage subsidy toward all mortgage holders, regardless of the morality of their positions. What I said back then was that some of that money ought to go toward temporarily reducing the amount of money mortgage holders would have to pay monthly, not the amount of money they owe. I said this could be done by reducing the effective interest rate that mortgage holders had to pay, while still paying the institutions they owed the money to the full amount of their monthly payments under their original agreements. The difference would be paid by the bailout. It wouldn't be permanent, but would last long enough to figure out who had actually been defrauded, so that their loan terms could be adjusted to something sustainably payable, or, failing that test, rolled into a special defaulting category where compensation to the institutions harmed by the failures could be assessed such that too big to fail would not fail, but not before this was tried. The money that people didn't have to pay they would either save or spend, some and some, at least partially stimulating the economy at the middle class, not the super rich, level. Instead, the Fed's efforts have targeted investment almost exclusively, and we are still seeing a disconnect between their efforts and the middle class. And it is the success of this effort by the Fed within the investment sector that has interest rate talks brimming in regard to the US. Whatever was possible that way they did it and it has worked out so far. Most people feel that it will eventually reach the rest of us, and it has to some extent. The trouble with this thinking is that there are a lot of people who believe in a moral component who back it.

So what happens when the Fed raises rates? Will oil crash? It might, seeing as how so many oil companies are carrying so much debt, but it might not either, seeing as how so many people are determined to make it happen and have positioned themselves for the contingency. You might, instead, see a lot more J. Paul Getty types, making their fortunes from realizing that oil was a better bargain in the markets than wildcatting. If it happens it will probably happen wrapped in a cloud of morality. People love that stuff, just as most poor Republicans like to vote against their own interests they would probably eat this up too, until, and if, it fails. The oil markets are not exactly transparent. There is a long running argument over just how much speculation is in them, and how much that has driven the movement of prices, both up and down. Looking towards monetary policy alone, in this context, is too simple an approach, I think.