Thursday, April 21, 2011

Gas and Such

With all the moves to restrict the oil supply domestically, and while fanatically printing dollars it's no surprise that the price of gas is getting ridiculous. This veritable tax on the economy is going to cause a further contraction and there's nothing to be done. The Federal government can try to paper over the contraction (some more) by issuing more debt, that's covered by money printing at the Federal Reserve, which causes gas and other prices to go up more, which causes a further contraction, and so on. Truly the 'coffin corner' that has been predicted as the other option is to dramatically decrease debt issuance and related government goodies which will cause gas prices to fall due to a lack of money printing and the inevitable economic contraction that would follow. This is going to break one way or the other, and every indication is that our elites are pretty clueless about this fact.

At least we can relish the fact that some governments, through their own idiocy, have made it even harder on themselves. It’s interesting in that the Arab governments are in a ‘coffin corner’ as well. They’re wholly dependent on food imports, and when the price of oil goes up, those additional profits go right back out the door in order to cover imports, especially food (and with lethargy in any system, the profits don’t quite cover the hikes). As well, every time the Saudi’s “cut back”, the rumor mill starts up again that their production is falling, that they’ve mined out the easy oil. That kleptocracy holds their cards close to the vest, but there’s certainly ancillary evidence to suggest that’s the case. What happens when all the oil money in the world isn't enough to keep their people fed? Probably something worse that what is already going on.

It may be an interesting year. Go long in gardening supplies...

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