$80 oil? Fragile economy could be damaged by a loud fart...

fra-jeel-ay? Must be Italian.

lajimi: F E D E R A L T A K E O V E R

But if we did that, we'd have all this extra oil profit money laying around. And it's not like we have anything we could spend it on for the public good - we're all doing just fine the way we are, thanks very much.

I blame muslins.

the $80/bbl price of oil is a product of the FREE MARKET, in case you commutards don't know. it's better for the economy to collapse, than to revert to REGULATIONS and other nazi ideas.

Well the reason it's $80 because the gov't is printing money like it's going out of style.

Soon as all that Iraq oil starts flowing in, we'll be sitting pretty.

This is why hybrids are important. Improving these technologies helps move us away from oil.

Affordable pure electric cars aren't ready. It's disingenuous when an electric cars range is much less than the claimed triple digit MPG's.

The Brains: the $80/bbl price of oil is a product of the FREE MARKET, in case you commutards don't know. it's better for the economy to collapse, than to revert to REGULATIONS and other nazi ideas.


Well, if you look deeper it's actually the depreciating value of the dollar that has oil, other commodities, and event the stock market rising right now. Price the SPX in the Euros, Yen, or Swiss Franc you will see that the value of the S&P has gone virtually nowhere in the past three months.

It's easy to blame the speculators but they serve a valuable role in providing liquidity to the market. A free market tends to correct itself over time. Additional government intervention usually throw this out of whack. Look no further than Bernanke and his printing press.

event=even

Is this why I'm STILL paying $3/gal in the Valley?

If I could afford a new car, I'd be buying a hybrid.

F*ck oil anyway. I already ride a bike to work in the spring through fall because of the last jump in oil prices. As soon as my lease is up I'm going to just move close enough to work so that I can walk there all year. Suck it oil companies!

MugzyBrown: Well the reason it's $80 because the gov't is printing money like it's going out of style.

No. The Federal Reserve issued more debt to give the banks more liquidity, but the banks are hoarding cash to cover for their fark-ups like a drunken frat boy cramming for a final in two desperate days. So, there really isn't that much money in circulation. As the banks issue more debt, the Fed will take money back out of circulation to keep the supply stable. A rather good plan, really.

The falling dollar has more to do with the crippled economy plus the deficit. Deficit spending is a time-honored way to get out of a recession, but that assumes you had a surplus to begin with. The outgoing government spent money like drunken sailors before we went into recession, so faced between Really Big-ass deficit + recession or deficit + depression, the Obama Administration opted for the former. Unfortunately, the banking crisis also meant they had to keep interest rates down.

What a vicious cycle: We're in a recession so we need deficit spending, but dollars are in short supply so we need to keep interest rates down, but it's hard to issue more debt with an already-large deficit and low interest rates.

As a result, dollar-based investments just don't look as spiffy as they used to. Investors are hedging their bets that the currency might hyperinflate or the government might default on its debt. Neither are likely, but risk isn't about events; it's about probabilities. The perceived safety of treasury bonds as investments looks a lot shakier now than it did before the recession. Not enough to crash the dollar, but enough to make it drop about 10-20% or so. Things could be a lot worse.

farkMcFark: The Brains: the $80/bbl price of oil is a product of the FREE MARKET, in case you commutards don't know. it's better for the economy to collapse, than to revert to REGULATIONS and other nazi ideas.


Well, if you look deeper it's actually the depreciating value of the dollar that has oil, other commodities, and event the stock market rising right now. Price the SPX in the Euros, Yen, or Swiss Franc you will see that the value of the S&P has gone virtually nowhere in the past three months.

It's easy to blame the speculators but they serve a valuable role in providing liquidity to the market. A free market tends to correct itself over time. Additional government intervention usually throw this out of whack. Look no further than Bernanke and his printing press.

A free market is prone to over corrections, higher highs and lower lows. The problem is government hasn't let the lows go as low as they should in the past in order to avoid recession (and being voted out of office), and has let the highs get too high because no one wants to put the brakes on unsustainably making money hand over fist (bubble after bubble).

crab66: I blame muslins.

Muslins?

/is that like chitlins?

Okay, soo..... Oil is up, the dollar is down, unemployment is sky-high, new housing starts and car sales are in the toilet, but the Dow is over 10,000 so the recession is over, right?

So invest in things that take advantage of high oil prices.

Which makes me curious about Buffet's move to buy some Wal-Mart yesterday. The BNSF move seemed related to high oil costs, but if you were concerned about that you wouldn't buy into Wal-Mart because that company is built on cheap oil.

Is he beating on a consumer and non-consumer recover? I'm confused.

meat0918: farkMcFark: The Brains: the $80/bbl price of oil is a product of the FREE MARKET, in case you commutards don't know. it's better for the economy to collapse, than to revert to REGULATIONS and other nazi ideas.


Well, if you look deeper it's actually the depreciating value of the dollar that has oil, other commodities, and event the stock market rising right now. Price the SPX in the Euros, Yen, or Swiss Franc you will see that the value of the S&P has gone virtually nowhere in the past three months.

It's easy to blame the speculators but they serve a valuable role in providing liquidity to the market. A free market tends to correct itself over time. Additional government intervention usually throw this out of whack. Look no further than Bernanke and his printing press.

A free market is prone to over corrections, higher highs and lower lows. The problem is government hasn't let the lows go as low as they should in the past in order to avoid recession (and being voted out of office), and has let the highs get too high because no one wants to put the brakes on unsustainably making money hand over fist (bubble after bubble).


Agreed. Recessions are a necessary for healing, that's why I said over time.

Dragonchild, I'm not so sure the banks are hoarding money. All the money is going to outside assets instead of being loaned out to U.S. businesses. The low interest rates are funding a huge carry trade. Investments banks are borrowing a zero interest rates and making tones of money speculating on everything from commodities to emerging markets to international real estate.

mod3072: the Dow is over 10,000 so the recession is over, right?

Yes. The GDP is growing, so the recession is officially over.

What we're learning is that any news celebrating the stock market or economic growth has everything to do with investors and nothing to do with working-class Americans. Why? Because American OEMs headquartered in America are profiting off Chinese-made products exported elsewhere (including to America). In fact, even the stimulus funds the Republicans were so violently against are being redirected through GOP-card-carrying American businesses to China. Meanwhile, unemployment is high and still rising.

The Dow and GDP can keep on rising while the standard of living keeps dropping. What I really want to see are hard numbers on domestic capital investment. I'm not interested in how much money Goldman Sachs is making. I want to see how much money the companies they invest in are spending to set up infrastructure here. For all I know, that could still be dropping.

The argument about "trickle-down" is that jobs are created by businesses set up by investors looking to invest their money. The problem with giving investors money with no strings attached (including taxpayer stimulus funds) is that they're not obligated to invest that money in America. They blame unions and labor laws for making American labor uncompetitive, but when you realize they're fighting bills in Congress to disallow imports obtained through child slave labor, you realize there really isn't anything American workers can do to be competitive against slaves. . . except willingly become slaves themselves.

The Brains: the $80/bbl price of oil is a product of the FREE MARKET, in case you commutards don't know. it's better for the economy to collapse, than to revert to REGULATIONS and other nazi ideas.

Communists or Nazis. Make up your mind.

dragonchild: mod3072: the Dow is over 10,000 so the recession is over, right?

Yes. The GDP is growing, so the recession is officially over.

What we're learning is that any news celebrating the stock market or economic growth has everything to do with investors and nothing to do with working-class Americans. Why? Because American OEMs headquartered in America are profiting off Chinese-made products exported elsewhere (including to America). In fact, even the stimulus funds the Republicans were so violently against are being redirected through GOP-card-carrying American businesses to China. Meanwhile, unemployment is high and still rising.

The Dow and GDP can keep on rising while the standard of living keeps dropping. What I really want to see are hard numbers on domestic capital investment. I'm not interested in how much money Goldman Sachs is making. I want to see how much money the companies they invest in are spending to set up infrastructure here. For all I know, that could still be dropping.

The argument about "trickle-down" is that jobs are created by businesses set up by investors looking to invest their money. The problem with giving investors money with no strings attached (including taxpayer stimulus funds) is that they're not obligated to invest that money in America. They blame unions and labor laws for making American labor uncompetitive, but when you realize they're fighting bills in Congress to disallow imports obtained through child slave labor, you realize there really isn't anything American workers can do to be competitive against slaves. . . except willingly become slaves themselves.

This is sooooooooooooo depressing.

farkMcFark:
Dragonchild, I'm not so sure the banks are hoarding money. All the money is going to outside assets instead of being loaned out to U.S. businesses. The low interest rates are funding a huge carry trade. Investments banks are borrowing a zero interest rates and making tones of money speculating on everything from commodities to emerging markets to international real estate.

They're hoarding to the point they need to meet capital requirements. Beyond that, they indeed are investing capital they've borrowed at zero percent in things other than consumer borrowing. At the same time, they're paying depository customers nearly nothing for their savings, while also charging consumer borrowers interest rates not seen since the '90s. (18.99% on a credit card, and my FICO score is 790? Puh-leeze, Citibank).

Really, in this environment, a bank has no incentive to collect depository customers. It's cheaper to get capital from the Fed. There is nothing in this recovery for normal people except more fees. We're no longer a customer the bank needs. They don't need our deposits in order to have capital to make loans when they can just borrow money from the Fed at zero and then invest it in various speculative ventures and turn a hefty profit. Depository customers are just a trump card they can use to leverage the government to bail them out when they screw up.

Turbo6inKY: farkMcFark:
Dragonchild, I'm not so sure the banks are hoarding money. All the money is going to outside assets instead of being loaned out to U.S. businesses. The low interest rates are funding a huge carry trade. Investments banks are borrowing a zero interest rates and making tones of money speculating on everything from commodities to emerging markets to international real estate.

They're hoarding to the point they need to meet capital requirements. Beyond that, they indeed are investing capital they've borrowed at zero percent in things other than consumer borrowing. At the same time, they're paying depository customers nearly nothing for their savings, while also charging consumer borrowers interest rates not seen since the '90s. (18.99% on a credit card, and my FICO score is 790? Puh-leeze, Citibank).

Really, in this environment, a bank has no incentive to collect depository customers. It's cheaper to get capital from the Fed. There is nothing in this recovery for normal people except more fees. We're no longer a customer the bank needs. They don't need our deposits in order to have capital to make loans when they can just borrow money from the Fed at zero and then invest it in various speculative ventures and turn a hefty profit. Depository customers are just a trump card they can use to leverage the government to bail them out when they screw up.

This is even more depressing. Wells Fargo is having a cow because I am one payment behind. ONE. Not five, not 20, ONE. I HATE banks anymore.

RussianPooper: The Brains: the $80/bbl price of oil is a product of the FREE MARKET, in case you commutards don't know. it's better for the economy to collapse, than to revert to REGULATIONS and other nazi ideas.

Communists or Nazis. Make up your mind.

How bout Nazi Zombies?

farkMcFark: Dragonchild, I'm not so sure the banks are hoarding money. All the money is going to outside assets instead of being loaned out to U.S. businesses.

Nope. Well, you might be right that they're taking no-interest loans and buying up stuff like treasury bonds and foreign stocks, which is why they're profiting, but they are hoarding lots of cash as well. It's hard to read, but once the real estate bubble popped, the banks went from trying to shove money out the door as fast as possible to getting as jittery as squirrels during a November cold snap:



Any run on the bank (which doesn't need to be from consumer depositors, a "run" can also be a blown-up investment) can sink an overextended bank, so to survive they need to keep enough cash on hand to avoid getting wiped out by a nasty surprise. Banks aren't doing this to be mean. I don't say that because I trust them (I don't), I say that because they don't make money when they're literally sitting on a trillion dollars in cash; they make money by lending it out. It's just that after realizing they'd absurdly overleveraged themselves, they're scared shiatless -- and with good reason. They only need to look at the pile of 100+ corpses over the last year.

Now, everyone's familiar with this graph, because the wingnuts have been using it to scream how the sky is falling:


It looks like the U.S. decided to create $1 trillion out of thin air. Well, they did. Because the banks hoarded $1 trillion. They sucked money out of circulation so fast that the credit market was in critical danger of freezing. The last time that happened, that spikey thing above didn't happen, and we fell into what is known as the Great Depression.

This time, when the banks took a trillion out of circulation, the Federal Reserve responded by increasing the money supply by a trillion. It was brilliant in its simplicity, and anyone who opposed it should never even think of working for a bank.

To address the partisans for a moment, to clarify, it wasn't Obama's mistake because it wasn't done by Obama and it wasn't a mistake. It was the obvious solution -- give a liter of blood to a patient that's suddenly short a liter -- and done by the Federal Reserve, whose only real kudos was that they decided to NOT sink the credit market just to satisfy some ideological retards. Any Federal Reserve Chairman of either party would've done the same thing.

Turbo6inKY: Really, in this environment, a bank has no incentive to collect depository customers. It's cheaper to get capital from the Fed.

Thank you, Phil Gramm, for repealing Glass-Steagall.

Oil is high because the dollar is low, not to mention the continuing reality that global reserves are falling. Any economic boom right now would be self-destroying, because oil would go through the roof again, and that would chop the boom off at the knees (again). So, printing money to "stimulate" the economy is self-defeating. Printing money inflates the dollar, and oil goes up, which depresses the economy. Cap & Trade and the Copenhagen Treaty are dead letters for now. Probably indefinitely.

Drill, Baby, Drill, and pray that blorfmaster is right.

Bookmarking this thread so that when the next idiot who comes to me claiming that the Fed and Obama are destroying the American economy, I can point them at dragonchild's comments instead of risking a coronary trying to explain it myself.

pdieten: Bookmarking this thread so that when the next idiot who comes to me claiming that the Fed and Obama are destroying the American economy, I can point them at dragonchild's comments instead of risking a coronary trying to explain it myself.

It won't work. They don't know the difference between "money supply" and "monetary base."

dragonchild:
It looks like the U.S. decided to create $1 trillion out of thin air. Well, they did. Because the banks hoarded $1 trillion. They sucked money out of circulation so fast that the credit market was in critical danger of freezing. The last time that happened, that spikey thing above didn't happen, and we fell into what is known as the Great Depression.

This time, when the banks took a trillion out of circulation, the Federal Reserve responded by increasing the money supply by a trillion. It was brilliant in its simplicity, and anyone who opposed it should never even think of working for a bank.

Thank you for your patient explanation. It's perhaps one of the most honest and intellectually engaging posts I've ever read on the Fark politics tab (a dubious distinction.) My question is ... what happens when banks start lending that trillion again? Like, by buying treasury bonds, etc.? Maybe the essential step was to fill out the money supply and get things going again, but what happens when things loosen up and that thin-air-generated money goes into circulation? I'm not asking to be argumentative, it just seems like an important missing component of your explanation.

It's not fragile, it's just FRA-GEE-LAY.

http://img44.imageshack.us/img44/9619/leglamp10.jpg

$30 oil collapsed my economy last year, so fark you submitter.

I've been saying the same thing for more than a year - especially how the price of gas was a much bigger factor in the collapse than some think it was - but no one was listening. Guess that's what I get for not being an economist.

You won't have a recovery on $3 gas, and it's not much easier at $2.50 gas. Stop the dollar from falling already!

MugzyBrown 2009-11-18 02:10:38 PM Well the reason it's $80 because the gov't is printing money like it's going out of style.
=====================================================

If it wasn't for the fact that our economy is in the toilet and we aren't using much oil... It could EASILY be over $100 based on how shiatty the dollar is.

Maybe more.

/In other words, pretty much you're right.

I think having oil prices that high could be beneficial to the United States in the long run. Americans would be forced to have a lower standard of living. The United States is the most productive country in world why not the world take advantage of that production for a lower price. We need to play a serious currency game with China to see which country can produce the most at the best price. Obama is about ready to do that. Think of all the Japanese and European automakers trying figure out where to move manufacturing now that the Yen and Euro are so high. The worst will eventually lead to the best in economics. Happens every time.

This reminds me of the halcyon days of Fark when there was a magic 8 ball oil thread at 6, noon and again at 11.

Reasoned, calm, informed discussion of the economy? In *my* Fark?


Dragonchild, this must be why I favorited you.

dragonchild

Thanks for using small words, that was a very informative post.

/favorited

Eh, it won't deviate much from the $70-80/bbl realm. The Saudis know what side their bread is buttered on.

"Leave me out of this!"

I welcome high oil prices, some of us will benefit from high oil prices.

Saiga410: I welcome high oil prices, some of us will benefit from high oil prices.

Oh, bloody well fark off.

This is OBVIOUSLY the fault of ev0l Bush and Cheney, who are teh manipulating allofda oil markets.

Vast and Trunkless: My question is ... what happens when banks start lending that trillion again? Like, by buying treasury bonds, etc.?

That's indeed the tricky part, yes. They're buying bonds already, which has some people justifiably outraged because that's not what the Fed lent them the money for. That said, we do indeed have a lot of dollars out there, so as banks stabilize and gain confidence, it'll be up to the Federal Reserve to absorb those dollars back out of circulation to avoid hyperinflation.

Thing is, in creating the Federal Reserve, America did something both ideologically unpopular and economically brilliant at the same time: Hand complete control of the money supply to rich bankers. Why does this work? Because rich people have craploads of money, a lot of it invested, so it's in their own best interest for that money to be worth something. If they deflate the currency to make their cash more valuable, the economy impodes and the value of their assets crash. If they inflate the currency, their bonds become worthless. So while I generally engage in some class warfare (having grown up close to poverty), greedy rich people really are the best caretakes of a money supply in the world. These people will never, NEVER let America become a second Zimbabwe.

So on one hand, I'm nervous about how they'll take money out of circulation. It'll be a delicate operation. Raising rates is the time-honored tradition and raising the fractional reserve limit -- ironically, the minimum amount of cash banks are required to hold -- is an effective trump card. The problem is, these can't be changed too quickly; banks need predictability to get anything done, and volatility is what everyone is trying to avoid. So the question is, how do they maintain stability using long-term tools in a dynamic situation? I honestly don't know. But while I don't trust these guys to, say, craft trade legislation in ways that won't screw over us peons in at least a half a dozen orifices, the money supply's in as good hands as it'll ever get.

dorkymidgetqueen: Dragonchild, this must be why I favorited you.

Actually, I think it was in a D&D thread where we Ohio Farkers tried to get a gaming group started. Which, by the way, went nowhere.

Dragonchild:

Yes, I remember. I'd have LOVED to have gotten in on that -- but it's pretty damn impossible to contribute while I live in Indianapolis.

However, I'm down for a hellacious shindig next time GenCon rolls around. Y'all are welcome in my city any time.