When is a Market, not a Market?

Consumers are seriously shaken, and the Outlook might meet Consumer Expectations. The worst of the Situation must be considered Speculator-driven. Oil in the Pipeline would seem to dictate a burst of the Oil Bubble, and the Economy would respond nicely to a $20/barrel drop in Oil. The Federal Reserve must raise Interbank rates sharply, but declines to do so, because it will place Bank managements at Risk; exactly where they would have been without Fed support. Exterior Government Expenditure will not aid the debacle, unless it is very labor-intensive. A normalized Economic policy would seek a standardized Tariff policy, designed to limit Trade; a factor which would both induce domestic production, and improve American economic position in the World economy. Residual fears coming from the Great Depression will forestall this Resolution, and will be the controlling element generating any new Recession.

Readership of the article should not place too much emphasis on the relationship of the Numbers to 1980. I will not go in depth on the lack of relationship of 1980 and Today, but say Students should concentrate more upon the post-WWI Recession, where there was an excess of funding without adequate levels of financed Demand. The Product is there, the flow of Cash is there, but Consumers cannot afford the lifestyle as Wages have not kept pace with Product pricing. The flush Profits of the previous Period impede the Price reductions necessary to clear the Market. This lack of Clearing is leading to a back-up of Product on the Shelves; with all their Warehousing Costs at the Retail level (Economists will say this is untrue, but do not check the drag time delay of Product on the Shelves). Continued failure to clear the Markets will bring a Trade Downturn greater than any efficient Tariff system.

One needs to study this Piece by Paul Krugman, and follow it with examination of the Piece of Steve Waldman cited by Krugman. I would first like to say that both Waldman and Krugman are right, but ignore the primary factor behind the Oil Price increase, which is the Contractual Tie-Down of Oil Reserves by Governments and Sovereign Wealth funds. Loose Oil Production on the Market have been massively reduced, with a Speculator-expanded Demand for what loose Oil is left. It is an artificial Constraint enjoined by Government policy action, and unduly hampers establishment of a stable Oil price. This is the Situation which We face, and the distorted Market We must adjust in order to return to sound Market pricing for Oil. lgl