Friday, December 14, 2007

All I Want for Christmas--Bah, Humbug!

The International Energy Agency adjusted their estimate of Oil consumption upward next year to 87.8 million barrels per day. The Countries providing protection subsidies to their citizens are expected to continue their increasing rate of use of energy. This, in conjunction with the obvious manipulation of the Price of Oil in the Markets, will bring on a Oil balloon within the coming year; Oil Demand remaining constant in the developed nations. It may be time for the Federal Government to develop a real structural Reserve (unlike the current one) dedicated to a build-up of a 6-Week supply of Oil, and utilize the Buying agency organized to regulate Oil prices by direct intervention in the Markets. The Reserve should be strategically sited throughout the Country, so as to provide Security against Pipeline disruptions. Oil Specialists will declaim the program, citing the difficulty of acquiring the Oil without major disruption of the Oil market, but it will eventually have to be done, and Sooner will be easier than Later.

The Consumer Price Index jumped 0.8% in November, with the core CPI advancing at 0.3%. Consistent December performance will put Us on the road to a year over year 4.2% inflation rate. Further Fed fund rate cuts would throw Gasoline on a raging fire. The whole Situation , combined with the Producer Price Index, has brought on a challenge; the December CPI is likely to be higher than November’s rise.

Europe is suffering under the impact of Inflation as badly as the Americas. Unlike Edward Hugh, I can express a Hope that We are entering a Recessionary period, this because it would be a lot less painful than the Scenario which I suggest is developing–Stagflation. The evil Beast was not vanquished in the 1980s, only left to sleep until the Money managers would again awaken it. Excess Development was pushed ever since the Tech Bust, and We are left with a Mortgage debacle (Business as well as Homes) over-financed, with little chance of effective payment without rising Prices for Product; Production obviously being in decline to cut excessive Costs. I estimate the Stag will be running free within the year. lgl

No comments: