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The King Canute Economy: Governments' Futile Attempt to Stem the Tide

The primary error I see in many of the overly pessimistic forecasts is that they project current trends to infinity instead of realizing that the world is cyclical. Trends eventually reverse. Jimmy Carter killed growth and drove inflation through the roof in the 70's, but then came Volker and Reagan and inflation was conqured and taxes were lowered and growth returned. Just like Carter, Obama's excess goverenment spending and controlling of our lives will be reversed and the pendulum will swing back to freedom,lower taxes, smaller government and growth.

Don't Believe Long-Term Oil Forecasts

Oil has been a cyclical commodity for 150 years and remains so today. Those who say the price will go very high or very low and stay there don't understand supply and demand and technology. Yes, the shallowest and easyist to find oil is found first and gets used up, but the improvements in technology have cancelled out the increasing scarcity for the last 150 years and will probably continue to do so for the distant future. In real, non inflated dollars oil is no higher now than it was 30 years ago and probably won't be any higher 30 years from now. I remember back in the 1970's when everyone said the world was running out of oil. They were as wrong then as the people saying the same thing today are. If oil gets to $200-$300 per barrel it will be because the dollar has devalued to 10 times less than when oil was $20-$30 per barrel.

Dollar Nearing a Critical Level

It appears that we are repeating the 1970's. It has been so long since we experienced double digit inflation that people now think it is better to inflate our way out of high debt levels both for homeowners who can't pay their mortgages and the government who can't balance its budget. The FED will keep interest rates low for as long as it can by buying treasurys (printing money). But eventually we will end up like under Jimmy Carter with 13% inflation and a 20% prime interest rate.

Inflation vs. Deflation: A Matter of Money Supply and Demand

Your comment that oil prices are manipulated is clearly wrong. If the oil companies or OPEC could control prices they would never have let them fall from $150 per barrell to $35 in six months. Except for the last 6 months of recession world oil demand (fueled by China) had grown much faster than supply which is why oil prices got to $150 in the first place. The short term reduction in demand caused by the recession is what caused prices to fall, and they are now raising due to the anticipated increase in demand as we (and China) come out of the recession.


On Aug 16 09:42 AM verdae wrote:

> I think that your article assumes that our economy is a closed system,
> operating only within our borders. Most consumer goods are imported
> from Asian countries that peg their currencies to ours. As long as
> that is the case, we will not see much inflation in the price of
> their products. If they de-peg from the dollar, then it is a new
> ball game. The deflation we see now is mostly from retailers taking
> smaller margins.
>
> Most inflation in the US in the past e.g. the 80's was fueled by
> spiraling labor costs. Our labor costs over the last decade or more
> have risen very little. And in the 80's we manufactured much more
> of what we consumed. Manufacturing less means inflation is less sensitive
> to US labor costs. Even if our labor costs rose dramatically, it
> would be felt in more in the services sector where most of our economy
> resides. But even in services, labor costs have been kept low by
> illegal immigrant labor.
>
> The costs of food, oil, drugs, and medical services are anomalies.
> We grow most of our own food and food competes on a world market.
> And food production cost is sensitive to the price of oil and natural
> gas (fertilizer).
>
> The price of oil is clearly manipulated by something other than supply.
> How else can we explain decreasing demand, increasing supply, and
> higher price?
>
> Medical care in the US is the biggest anomaly of all. Its rise in
> costs exceed anything else in our economy. Its costs are clearly
> manipulated else why does health care in the US cost 16% of GDP while
> European Union nations average 9% and still manage to insure all
> their citizens?

Washington's Dilemma: This Isn't a Recession, It's a Collapse

The only solution is to throw out all the career politicians and install term limits so that they will not have an incentive to buy votes for the next election.

Stocks Are Due for Consolidation, But the Worst Is Behind Us

It is good to see so many pessimists out there commenting. The bull market we are now in needs a "wall of worry" to climb. When all the pessimists throw in the towel and admit that they missed the bottom and start to invest (probably not for another 6 months or 2000 points up on the Dow) it will then be time to sell and take profits.

Thoughts on a 'Recovery' Following Surprisingly Good Earnings Reports

Bull markets always "climb a wall of worry" and unemployment is indeed a lagging indicator. By the time unemployment starts to decline you will have missed the bull market and lost a 40 to 60 % rebound from the market lows.

Bear Market Rally or Bull Market Beginning?

Bull markets always "climb a wall of worry". All the negatives the article lists are just the wall of worry. If everything was posative the market would already be at its all time highs and it would be time to sell. If you wait until all the potential problems clear up you will miss the entire market recovery.

Ashford Hospitality Trust, Inc. Q4 2008 Earnings Call Transcript

They had earnings of $1.35 per share and over $2.5 of cash per share and are trading at $1.06 per share. How is that possible?

Short-Term Mean-Reversion Becoming Stronger: Wood’s Light Bulb

What this article implies is that momentum strategies such as "the trend is your friend" will not work any more. Many strategies like Valueline's are based on momentum.

Oil: The Inconvenient Truth

We do not need a government energy policy. Normal market economics will solve any oil shortage with rising prices. If the oil price gets high enough the alternatives will become economic and the market will supply them without any government coersion. If the government forces us to use wind or solar before they naturaly become economic then we are forced to waste money and our standard of living will be reduced accordingly. The only government energy policy we need is for the government to get out of the way and stop preventing the oil companies from drilling where the most oil is located.