High cost of oil and global economy

[redrichie]

First let me state I am in no way an economist. I just have a little theory that I feel may be realized all too soon. I will leave my conspiracy portion of this to myself. lol
I would be willing to bet if you superimposed 2 graphs on top of one another, one of the cost of a barrel of oil, and one of the global downturn of the economy, they would reflect each other.
From what I have read and watched the US economy is based on cheap oil. No more than $30 a barrel, much less the high side of $150.00 a barrel. During the high gas prices debacle a couple years ago, the price of most goods or services had to go up to compensate for the price of gas. Food in the stores, airfare, public trans, pretty much everything. And it happened rapidly. When asked about the high gas prices President Obama stated "I would have rather seen them go up more gradually."
HAs the prices for any of these goods returned to a normal price after oil had gone back down? Not really. But commodities have INCREASED as of late. Corn is up substantially. No big deal you may say I wont buy any corn from the market. Thats fine, but the chicken, beef, or pork you eat, eat the corn that just went up. That price (as with many of the commodities that went up) has not been passed to the consumer. YET. Electricity is getting higher in the US. As much as 45% for the year in some areas. So the meat that will get more expensive due to corn, just got more expensive due to higher energy as well. The grocer has to use freezers and lights for your meat. NOw add to that the fact that oil is now back around $90 a barrell again (and risiing) and your meat just got even more expensive. I can think of many more examples just for meat. This will happen with almost all other foods that you eat.
So the economy is already in a weakened state. Prices have really not dropped since they went up to compensate for oil. Countries are going bankrupt. And the price of oil is nearing the red zone again. When the market prices for all of these increases actually hits the consumer what do you think will happen? Just with the higher price of gas last time everyday people had to start choosing between gas to go to work or other bills. What kind of a choice is that?
So lets just say milk gets to be 10 dollars a gallon. Not impossible seeing that cows (make milk) eat corn, dairy farms use lots of electricity to pump and store milk. Takes diesel, (not to mention all the new taxes for truckers, which will be passed on to you soon) to get the milk from the dairy to the processors. The elec for the processors..........all the way down to you the consumer at the grocery store at the register wondering what the hell just happened to them. What do you do then? Buy milk or buy gas?
Watch the price of oil. Compare to the world stage. As oil goes so does the world. Can we, in our already weakened economy, survive another oil price surge in the $150 range? I think not. What happens if it goes past that? Will you be able to afford to go to work? Will a trucking company think it is worth it to haul goods with the even higher price of diesel? We are headed for an iceberg guys. Pay attention

[jibbguy]

The problems of the economy are manifold.. But when over 30% of a nation's Manufacturing was lost in only 12 years time (... as has happened in the US).... NO country can possibly prosper under such conditions.

The middle class is the engine that powers this country's economy, and the ONLY thing that made it great... not wall street criminals and banksters. When the middle class is attacked and shrunken (shrank the WRONG way by increasing poverty, not increasing the numbers of new wealthly)... Everything in the economy eventually suffers; except hedge funds and other fraudulent speculation games that are designed to profit from peoples' misery.

This society was built on the consumerism of the middle class. Right or wrong, this is fact. When "engineered" depressions hit the middle class (and we now have as much Unemployment as in 1936 during the Great Depression)... "Retail", "Big Ticket Items" (cars), "Real Estate", and sales of everything else tied to them go into the toilet.

None of that is really "rocket science". It is "Economics 101". Yet we see this information totally ignored by those who are supposed to be controlling our economy

Land, real estate, is the only real "property", and all that endures. Funny how the "economic crisis" that supposedly hit all the banks, ended up giving these same banks a much higher percentage of ownership of our land.

[rickoff]

Land, real estate, is the only real "property", and all that endures. Funny how the "economic crisis" that supposedly hit all the banks, ended up giving these same banks a much higher percentage of ownership of our land.

Yes, what you say is spot on. We were told that we had to bail out the big banks and Wall Street firms because they were "too big to fail." People were, and still are, defaulting on their mortgages in huge numbers, and we were told that this mortgage crisis left the bankers holding the bag and dooming their financial outlooks. Such nonsense! Nothing could be farther from the truth. When the banks issued the mortgages to home buyers, they actually "loaned" nothing of any real value to the buyers. On the other hand, though, the buyers put up their properties (which did have real value) as collateral for the "loans." In a transaction like that, the bankers are overjoyed when people default on their mortgage, as any payments that have already been made are pure profit and they now own a valuable piece of real estate free and clear, which they can now mortgage off to another consumer for even greater profits. What a scam!

[rickoff]

Watch the price of oil. Compare to the world stage. As oil goes so does the world. Can we, in our already weakened economy, survive another oil price surge in the $150 range? I think not. What happens if it goes past that? Will you be able to afford to go to work? Will a trucking company think it is worth it to haul goods with the even higher price of diesel? We are headed for an iceberg guys.

Right you are. Fuel prices rose 4.6 percent last month, and are still rising. And rising fuel costs fuels the rise in prices of everything else, just as you say. Basically, there are two major reasons why fuel costs escalate:
1. Price controls.
2. Monetary devaluation.

Price controls can be those established at the whim of OPEC, by refining companies who raise prices when there is higher consumer demand for product, and by artficially creating higher demand for available product by allowing petroleum stockpiles to become significantly reduced. In this latter category, for example, the latest Department of Energy numbers show that US crude oil inventories fell by more than 7 million barrels in the past 30 days.

Monetary devaluation, though, also plays a very major role in fuel increases. During the 4 month period between June and October, The US dollar lost 20 percent of its value, on average, in comparison to other world currencies. Yes, you read that correctly, 20% in just 4 months! And that, of course, was just a 20% reduction in the remaining value, which was already quite low compared with the dollar value before the Federal Reserve took over in 1913. At that time, gold was valued at less than $19 per ounce. On November 8th of this year, gold reached $1400 per ounce. Now the true value of gold remains rock steady over the ages, and always has relatively the same purchasing power. In other words, while a fine men's suit could be purchased for $19 (or one ounce of gold) in 1913, it would cost $1400 (still one ounce of gold) for that same suit today. What this tells us is that the gold is not worth any more now than it was in 1913, but rather that our dollar is worth far less. How much less? Well, simple math (1400-19/1400) shows that by November 8th the dollar had lost 98.64% of its 1913 purchasing power. As the Fed races to devalue what little remains of the dollar's purchasing power, prices on every item imaginable will skyrocket. The $10 a gallon milk price you spoke of is really not that far away, and neither is $10 a gallon gasoline and heating oil.

There definitely is an iceberg dead ahead, and it is the Federal Reserve's "Quantitative Easing" (QE2) plan to run the money printing presses non-stop in the months ahead. This inflationary measure will further significantly dilute and devalue the dollar, and that means higher prices for everything are to be expected.

The question most people should have now is what to do. We can trade our available dollars for gold, but gold only acts as a hedge against inflation. Sure, we will have a lot more dollars in our hand if we sell the gold in 6 months or a year, but those dollars will buy no more than they will now when you take them to the supermarket. The only realistic means by which we can avoid the iceberg that awaits us is to declare the Federal Reserve and the IRS to be unconstitutional, which they are, and to end their existence while repudiating any and all debts owed to the Fed. Since the Fed currently owns more than 50% of our National Debt, and since the interest alone on the debt is nearly equal to total US Gross Domestic Product (GDP), that debt forgiveness would immediately halt our otherwise fatal course and allow for explosive economic growth. We must all wonder now why Congress never seemed to realize this and failed to take corrective action on it during the past 97 years. They do seem to realize now, after the mid term election, that the failing economy is our number one problem, but appear oblivious to the obvious solution. Cutting wasteful government spending at this point in the game will only marginally slow our approach towards the iceberg, and that, of course, leaves us in a precarious situation. Let's hope that enough of our representatives gather up the intestinal fortitude necessary to strip the Fed of their power. This past year's failure to pass the Audit The Fed bill would seem to suggest that Congress may still not be ready to take on the Fed, and perhaps this is out of fear of reprisal. After all, the last two Presidents who attempted to wrest monetary control from the banking cartel and return it to the Congress, as constitutionally intended and mandated, were both shot in the head shortly thereafter.

[redrichie]

So the average family that only has about 3 days supplies of food in their house is gonna be in a hurt locker. In these times so many live pay check to pay check, how do they get a food storage. They dont. The gov knows this. I feel it is designed to do this. When collapse begins, and food is astronomically high, and fuel is unavailable, most will have no choice but to run to the new governmental gods. "Come over here, I have clean water, food, electricity. You can continue to lead your normal lives if you just jump on the social program, be good boys/girls, go to work, and let us tell you what to do. look what happened when "they" were in charge." Its a Jedi mind trick!!! PEOPLE WAKE UP!!! Also, a little down the road (if we make it through this mess) we need to be aware of what is happening cosmically. Our life giver is acting really funny. We have more space observatories looking at the sun, than anywhere else in space, and all in the last few years. If a flare like Conradphd is talking happens, it will make our financial crisis look like a walk in the park. Unless they are related. Hmmmmmm.