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Guest Post: Tracking The Next Gasoline Induced Recession

Tyler Durden's picture




 

Submitted by Lance Roberts of Street Talk Advisors

Tracking The Next Gasoline Induced Recession

There has been a LOT of talk recently on the rising price of gasoline at the pump, so much so, that Obama has now jumped in with both feet admonishing the "evil speculators" for causing such a burden upon the American public.   Well, that and to promote a clean energy policy that is ill conceived, ineffective and grossly misunderstood...mostly by him.

However, as in the famous words of Bill Clinton, "What is...IS" and what "is" right now is that gasoline is rapidly approaching, and has achieved in some states already, $4 a gallon.   Therefore, that is what should be concerned with right now and when that additional drain on the discretionary income of the average American translates into the next economic recession.

The chart shows the inflation adjusted average of all grades of gasoline (regular, mid and premium) going back to 1990.   What we find is that by looking at gasoline prices - spikes have tended to lead to economic recessions.    However, during the 90's households did not substantially increase their debt to maintain their living standards but beginning in 2000, households tacked on an additional 50% in debt to offset the effects of rising oil, food and gasoline prices.   In fact, as food and energy consumed a larger and larger percentage of wages and salaries the ability to take on additional debt through credit cards, mortgage withdrawals, etc. to offset the rising cost pressures stalled in 2006 and begin to decline sharply in 2007.   This is why we wrote in December of 2007 that we were "either in or about to be in a recession" - a year later the NBER proved us right.  

This leads us to the question that we now must answer - how long can the consumer go this time WITHOUT access to easy credit, struggling with high unemployment, and lack of wage growth before the effects of higher food and energy costs put a stranglehold on discretionary spending.   This becomes an even more important question as we are already looking at reductions in GDP forecasts across the board and the potential, and most likely temporary, end to support from the Federal Reserve. 

So, what would it take in order for this spike not to lead to an economic recession.    First, the average American would need to go back to work with an increase in wages to knock the percentage be eaten up by higher food and energy prices back down to the 18% level.    Furthermore, the banks would need to open back up the tap to allow consumers to have access to credit.  This sounds easy enough until you realize that you just opened Pandora's box as we have now just instilled the three legs to hyperinflation - commodity inflation, wage inflation and velocity of money.   Now the Fed has to raising interest rates to battle rising inflationary pressures and the economy slows into recession as a result of tightening monetary policy.    This is why the Fed is trapped in a box and cannot, for very long, withdraw support from the economy and the financial markets - it is a game that will end badly at some point in the future.  

The trap is set and there is an increasing probability that by the end of this year, or early next, we may be writing the next chapter in American recessions.

 

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Tue, 04/26/2011 - 14:46 | 1208586 Hedgetard55
Hedgetard55's picture

I'm not worried. Timmay Jeethner says rising gas prices will not slow the "recovery", unless, of course, we do not raise the debt ceiling.

Tue, 04/26/2011 - 14:47 | 1208592 Hedgetard55
Hedgetard55's picture

Not to mention he reaffirmed Treasury and Barry's desire for a strong dollar.

Tue, 04/26/2011 - 15:14 | 1208677 Cleanclog
Cleanclog's picture

Timmy and Ben are liars.  I just paid more than $70 to fill my tank which was not empty.  Northern California. http://bit.ly/eH7InI

Tue, 04/26/2011 - 15:17 | 1208699 sun tzu
sun tzu's picture

Barry says to trade in your gas guzzler for a GM Volt

Tue, 04/26/2011 - 15:21 | 1208705 Cleanclog
Cleanclog's picture

It's a small station wagon that gets 28 mpg.  I say Varry Ovama should Bolt his Volt.

Tue, 04/26/2011 - 16:17 | 1208934 greyghost
greyghost's picture

bad math...bad math.....car already paid for!!!!! HOW MUCH GASOLINE CAN I BUY FOR THE $41,000 PRICE OF THE SHIT VOLT????????

Tue, 04/26/2011 - 18:14 | 1209409 dynomutt
dynomutt's picture

How about this for feeding the decision-making process:

 

Depreciating asset with a loan whose terms are fixed at signing where the currency risk is on the bank (US gov't) which will allow for reduced consumption of a fuel which is a recurring cost and extremely speculative.

 

If gasoline is $20/gal and your car payment is still $500/mo, is it still better to keep your beater?

Tue, 04/26/2011 - 19:47 | 1209643 patb
patb's picture

Sure, if you drive 20 miles a week or less.

 

if you drive 200 miles a week, like most americans then yeah, your gas bill is way more then a car payment

 

Tue, 04/26/2011 - 15:35 | 1208767 SheepDog-One
SheepDog-One's picture

'Gas has achieved, in some states, $4 already'
5 states have gas over $5 right now.

Tue, 04/26/2011 - 16:15 | 1208937 surfersd
surfersd's picture

Wait until OPEC starts using SDR's to buy oil, that will help the dollar!

 

http://www.xtranormal.com/watch/11855451/drill-and-quit-printing-money?listid=22762471

Tue, 04/26/2011 - 16:58 | 1209146 Pchelar
Pchelar's picture

If they tap the SPR there is nothing AT ALL stopping OPEC from simply deciding to cut production by whatever amount the US govt. releases from the SPR.

Tue, 04/26/2011 - 18:25 | 1209428 dynomutt
dynomutt's picture

SDR != SPR

 

SDR = Special Drawing Rights, an alternative to any individual country's currency for use in international trade, possibly denominated in gold.

http://www.imf.org/external/np/exr/facts/sdr.htm

SPR = Strategic Petroleum Reserve.

Tue, 04/26/2011 - 18:48 | 1209481 surfersd
surfersd's picture

thanks for pointing that out pchelar

Thu, 04/28/2011 - 07:05 | 1215136 Diogenes
Diogenes's picture

Except they need every dollar they can get to keep their own political system going.

Tue, 04/26/2011 - 22:16 | 1209969 Mark Noonan
Mark Noonan's picture

There is no reason to worry - the Associated Press reports today that only oil at $150 a barrel could possibly derail this stupendous economic recovery...

Tue, 04/26/2011 - 14:47 | 1208595 besodemuerte
besodemuerte's picture

The chart shows the inflation adjusted average of all grades of gasoline (regular, mid and premium) going back to 1990.   What we find is that by looking at gasoline prices - spikes have tended to lead to economic recessions.

 

I don't see the correlation.  There are plenty of spikes in gasoline prices during the given period, just because gas went up two years ago doesn't mean it's a reliable metric.  Granted high gasoline sucks and can't be good, but it's salt and pepper compared to the steaks of housing, unemployment, debt, etc.

Tue, 04/26/2011 - 15:19 | 1208650 That Peak Oil Guy
That Peak Oil Guy's picture

Lol, you can read a graph?

Energy is one of the fundamental basic inputs to an economy.  Its effects are magnified in the bottom line.  The graph shows that the last decade was fucked economically and I don't think anyone would dispute that.  It corresponds very well to high oil costs.

Also look at the energy crisis of the 70s for more correlation.

TPOG

Tue, 04/26/2011 - 15:22 | 1208718 besodemuerte
besodemuerte's picture

Of course high energy input costs hurt.  This graph does not show that we'll be having a 'gasoline induced recession'.  Yes the last decade has been rough, however, the '01 recession was when gas was $1.25 which is what it has been for the last 20 years.  Then 6 years of growth as gas double from $1.50 to $3 until finally hitting another recession which certainly was not another 'gasoline induced recession'. 

Don't be a jerk, everyone knows how oil prices affect growth.  This article is pretty weak though as I put more attention on $14 trillion in debt, 90% debt/gdp, 20% unemployment, an ever increasing money supply, abyssmal housing, corruption, idiotic fiscal policy.

Oil is of utmost importance I acknowledge that, but the chronically ill system causes recessions.  Oil isn't on fire because the world is bursting at the seems with unicorns and rainbows of economic growth, it's because the Treasury and the Fed are spinning their wheels trading hundreds of billions of dollars every month causing our dollar to drop like Lindsey Lohan and inflation is permeating everywhere on the globe like radiation in Japan.

I don't even know why I have to type this out, I assume you're either trolling or just trying to be an internet superstar.

Tue, 04/26/2011 - 15:35 | 1208769 That Peak Oil Guy
That Peak Oil Guy's picture

It was a good rant, thanks for typing.  :-)

TPOG

Tue, 04/26/2011 - 20:32 | 1209737 Flakmeister
Flakmeister's picture

It is a catch-22 of sorts.... Without Bennie and his Inkjets, the economy would be DOA... the fact that the economy has any life means that we are hitting our heads on the ceiling of oil production... Pick your poison, "cheap oil" and deflationary collapse or expensive oil and the semblance of an economy...

Don't worry, high oil prices are ultimately deflationary....

Tue, 04/26/2011 - 16:19 | 1208942 Inspector Bird
Inspector Bird's picture

Utilizing 2 points on a short graph "proves" nothing.  I see a relationship, but no correlation, between price spikes and 2 recessions.  However, not every recession has been caused by a price spike and not every price spike in the past has caused a recession.

 

Don't mean we won't have one, but there are a million reasons why that will happen....such as....too much debt, too much fake cash floating around and a loss in confidence in the dollar, banks that are "healthy" but really aren't....ahhhh I can pretty much see lots of reasons for a recession.  Doesn't have to be increased price at the pump.  In fact, as painful as it is, the one thing I can say after being out of work for 8 months and finally finding a job (that pays much less than my last one) is that this price increase has had less impact on me than the one right after Katrina (which, oddly, DIDN'T lead to a recession).

 

Yes, eventually these price increases are going to work their way through the price matrix of the economy.  Yes, it's taking more of the average discretionary dollar.  No, it's not taking as much of mine because I've started walking and riding my bike whenever I can.  It's called the Substitution Effect.  I use it whenever I can.

Tue, 04/26/2011 - 22:47 | 1210049 johnnynaps
johnnynaps's picture

We didn't have a recession after Katrina because people were still making $50,000 by painting their house. They were also able to tap that house as an ATM. Now ask yourself, if you take home $28,000 a year, and your gas expenditure eats $1,000 more this year, is that good for your personal Economy? Same principal applies when dealing with the "real" Economy!

Tue, 04/26/2011 - 14:51 | 1208603 Strategery
Strategery's picture

No worries . Remember, the Fed has told us that this is 'transitory.'

Tue, 04/26/2011 - 15:21 | 1208714 Loose-Tools
Loose-Tools's picture

On a long enough timeline ... everything is "transitory"!

Tue, 04/26/2011 - 15:36 | 1208780 SheepDog-One
SheepDog-One's picture

True, and on a long enough timeline, ALL demand is destructed!

Tue, 04/26/2011 - 15:38 | 1208784 bothsidesnow
bothsidesnow's picture

It is transitory when the Fed starts to withdraw liquidity the specs have less free money to play with.

All the messages coming out in the last few weeks Obama, China, Saudi's is to tell the specs this round of the game is over.

The shills and trolls continue to make it sound like the game is still on because they wan't to milk the last dollars out of the bag holders.

 

Tue, 04/26/2011 - 14:52 | 1208607 redpill
redpill's picture

I'm long UCO.  Does that make me a domestic terrorist?

Tue, 04/26/2011 - 14:55 | 1208619 Cash_is_Trash
Cash_is_Trash's picture

Do you hold silver and gold? If yes, you are very dangerous.

Tue, 04/26/2011 - 14:57 | 1208635 redpill
redpill's picture

Not only that, but I even have a coin from Norfed*

 

* for collecting purposes only of course

Tue, 04/26/2011 - 15:31 | 1208753 Long-John-Silver
Long-John-Silver's picture

People who hold copper clad lead are even more dangerous.

 

Tue, 04/26/2011 - 14:51 | 1208609 SheepDog-One
SheepDog-One's picture

So we're right about there. Good, Im sick of this day to day bullshit for 2 years.

Tue, 04/26/2011 - 16:05 | 1208873 Dr. Richard Head
Dr. Richard Head's picture

Exactly.  I used to fear the collapse when I was wearing those government issued rose-colored glasses.  Ever since I ripped those damned things off the collapse of the LOLlar is something welcomed, by me, with open arms and an open personal bullion vault.

Sure many will be hurt during the transition, but none of the people in my circle will be able to say that I didn't warn them.  So far, those people in my world have been able to point to the accuracy and truth to what has been told to them by me.  I ain't Chicken Little, just a Dick Head.

Tue, 04/26/2011 - 14:58 | 1208636 6 String
6 String's picture

OT: You always KNOW silver will flash crash every single time ZH starts posting too much about the price of Silver when it goes skyward along with a bullish thesis laid out by Sprott Asset Management. Those two happening at once always signals a flash crash is about to take place on the COMEX.

I think at this point long dollar, short crude, long t-bills is the safe bet -- because everything that seems like the dumbest trade ever seems to work out to a tee in this casino.

Tue, 04/26/2011 - 15:23 | 1208721 hambone
hambone's picture

George Costanza school of investing - research and educate yourself, determine the best short, medium, long term course of action - then do exactly the opposite.  Today's winning strategy.

Tue, 04/26/2011 - 15:39 | 1208787 SheepDog-One
SheepDog-One's picture

Inverse investing in the rigged casino seems to usually always work, hindsight tested of course and throwing out all the crashed stock examples along the way. It is guaranteed to work until it suddenly doesnt.

Tue, 04/26/2011 - 17:10 | 1209178 hambone
hambone's picture

SD1- I think I'm done with this shit.  Take what I have left and go long Amazon and IYR.  The good lord seems to shine his contenance upon these.  Those who bet against them (or even question their value) are destined for a horrible, smotten, burning / gnashing of teeth life here on earth and in the afterlife.

Tue, 04/26/2011 - 15:07 | 1208637 css1971
css1971's picture

Well, Yuhuh.

This has been discussed on The Oil Drum for the last couple of years, and I have been timing my switch to cash by the oil price. What exactly do you think "productivity" is? It is the conversion of human labour to machine labour. Human labour is based on food, machine is fuel. So when machine labour increases in price, productivity falls. When productivity falls, the debts can't be paid. They are predicated on always running faster and faster.

Having said that I'm not sure there will be an actual crash this time. The money pump is already primed.

 

Considering Peak Oil. This process is going to continue until we are not hitting the limits of oil production. One way or another.

Tue, 04/26/2011 - 16:35 | 1208905 Dr. Richard Head
Dr. Richard Head's picture

Crash will depend on how long the Congress debates on the debt ceiling.  As the Audit the Fed in the Senate showed (Thanks Bernie Sanders), when the life of the cental planners is threatened a quake in the markets will be utilized to scare an action response. 

What was it?  $4 Billion a day being shoved into the equity markets during QE2?  Notice how the debt ceiling debate and "end" of QE2 coincide rather nicely?  Primary dealers will sit on their greased hands in order to shake the foundation of the boomer generation 401K's.  Liquidity tap turned off to commence action. 

Expect a crash should our congress even attempt to posture in finding their testicles.  Politcal theater and economic suicide bombings.   

Tue, 04/26/2011 - 15:00 | 1208638 That Peak Oil Guy
That Peak Oil Guy's picture

The US government is already doing something about it.  That is why they have troops all over the ME.  But the one-two puch of peak oil and money printing are irresistable in their force.

Think about it; what should be happening is.  We have a supply problem and now prices must rise.  Get used to this.  Flow rates will never be able to keep up with the way we have gotten used to using oil, so prices must go up to cause demand destruction.

Instead of blaming the governement for our problems we need to concentrate on getting ourselves ready for the energy crisis, and for using a lot less oil personally.

TPOG

Tue, 04/26/2011 - 15:07 | 1208656 CrashisOptimistic
CrashisOptimistic's picture

Sorry, there is no discretionary oil usage anymore.  It's all at a bare minimum.

Less oil means less life.  People are going to die.  5 billion of them. Soon.

Tue, 04/26/2011 - 15:15 | 1208691 That Peak Oil Guy
That Peak Oil Guy's picture

Perhaps.  But sometimes I like to slip back into denial mode and be more optimistic than that.  ;-)

TPOG

Tue, 04/26/2011 - 16:26 | 1208989 Inspector Bird
Inspector Bird's picture

Doomsayers exist for a reason, I suppose.  Julian Simon has, generally, been correct when you back track his philosophy throughout time.  Man is ingenius, inventive, and entrepreneurial. 

In addition, price movements open new markets.

 

I don't see us running out of energy anytime soon and eventually the price movement up will hit a point where lots of weird alternatives make good common sense....and prices will plateau and perhaps fall.

 

I really don't see us running out of oil, either.  There is still quite a bit untapped.  And eventually political pressure and price action will make all of it open for business.

 

Meantime, some weird dude tinkering in his backyard is going to find a solution to the issue.  Actually, I know someone who did.  He has a stable hydrogen based fuel that current cars can run on.  Oddly, he can't manufacture it anymore because Homeland Security confiscated all his equipment because it runs afoul of current laws....it seems this stuff is easy to get off the internet, but when you buy it all in a group you trigger some kind of "potential terrorist" alert.  If I were a tin-foil hat type, I'd think it was deliberate conspiracy by the oil companies.  But the same rules were used to shut down a meth lab locally, so it does ring true.

Tue, 04/26/2011 - 20:47 | 1209741 Flakmeister
Flakmeister's picture

  Do you have a subscription to "Cornucopian Illustrated"?

Thermodynamics is a real bitch, I suggest you learn some...

Tue, 04/26/2011 - 16:08 | 1208895 Piranhanoia
Piranhanoia's picture

I do want to be sure it was sarcasm regarding "no discretionary oil usage anymore" before I blew lunch on the screen.

Tue, 04/26/2011 - 15:22 | 1208711 sun tzu
sun tzu's picture

They're also shutting down domestic oil production all across America.

Tue, 04/26/2011 - 15:43 | 1208792 That Peak Oil Guy
That Peak Oil Guy's picture

Right, it's a conspiracy. /sarc

Read this from ROCKMAN at The Oil Drum. ROCKMAN is a Texas oilman:

"There’s an even more important aspect re: potential increase in URR (ultimately recoverable reserves) from the application of EOR (enhanced oil recovery): ITS ALREADY BEEN DONE IN ALL APPLICABLE US FIELDS! This is the most frustrating aspect of such discussions. What the heck do folks think we do for a living: leave profitable oil in the ground because we’re all billionaires and don’t need the money?. LOL. Many seem to think the oil patch has been sitting on its butt and hasn’t applied EOR in all applicable fields. EOR has been a major activity in the domestic oil patch FOR OVER 50 YEARS! IOW those big gains in URR have already been achieved."

http://www.theoildrum.com/node/7846

TPOG

Tue, 04/26/2011 - 20:40 | 1209745 Flakmeister
Flakmeister's picture

Good leg work....

Tue, 04/26/2011 - 15:37 | 1208775 Nels
Nels's picture

The US government is already doing something about it.  That is why they have troops all over the ME.  But the one-two puch of peak oil and money printing are irresistable in their force.

I don't understand what purpose you think the troops in the ME are fulfilling.  It cannot be to get us more oil or cheaper oil.  Either would be a lot easier to do by opening ANWR or by not shutting down the Permian Basin to save a reptile.   The most those troops will do is to direct the flow of oil money away from Gaddhafi to some other preferred potentate or oligarchy.

 

Tue, 04/26/2011 - 15:51 | 1208809 That Peak Oil Guy
That Peak Oil Guy's picture

How much oil does ANWR have?  How much can you get out at once?  What are the maximum flow rates projected out of the Dakotas?  I think you will find that all these numbers are much too small to help much with your gas bill.  Though they may help keep the food distribution system going for a while longer.

Let's say you are right, though, and we have a butt load more oil in our own country.  Why would we want to use it before tapping the rest of the world?  Seems like that would be a strategic asset good for continued world domination in the post-peak world.

TPOG

Tue, 04/26/2011 - 15:58 | 1208855 SheepDog-One
SheepDog-One's picture

Besaides, how long would it take to ramp up that oil production, a couple years at least Id guess.

Tue, 04/26/2011 - 16:53 | 1209130 Meatier Shower
Meatier Shower's picture

"Why would we want to use it before tapping the rest of the world?  Seems like that would be a strategic asset good for continued world domination in the post-peak world."

I don't think that Washington is thinking that way at all. Just today in the Permian Basin of west Texas, companies might have to shut down production and/or cancel plans for new drilling because of a 3 inch lizard that lives in the area and might soon be added to the endangered species list.

It's about the environment, not economics. Agenda 21 is in effect TPOG. TPTB want humans to be an endangered species - not animals - to protect Gaia. So, if a few billion people have to starve to death to accomplish that goal well........

Tue, 04/26/2011 - 23:15 | 1210109 johnnynaps
johnnynaps's picture

You really think TPTB want humans to be endangered? Have you seen the entitlement programs and the rewards for the poor to have babies?

Tue, 04/26/2011 - 17:39 | 1209269 granolageek
granolageek's picture

The most ANWR will do is refill the Alaska pipeline to a million barrels a day, about 250k more than now. Even if it was another North Slope (most unlikely) that wouldn't justify another pipeline.

 

And the Permian Basin has been in decline for decades. That's a salvage operation at this point.

Everything else except the west coast of Florida is similar chump change. Drill Baby Drill might get 2 million barrels a day with a crash program.

Except good ol' Tea Pary Florida. Based on the rest of the Gulf there's probably a million barrels a day there. I am so ready to park a rig in the middle of Tampa Bay.

No, I'm not a greenie wacko. I'm just damn sure that no plausible drilling program will add more than 2 million barrels a day to US production. Pretending that it could, instead of making rational decisions based on real potential production does no good for anyone not soliciting political contributions.

Tue, 04/26/2011 - 20:45 | 1209753 Flakmeister
Flakmeister's picture

The potential of ANWR is very debatable....

The Permian was one of the greatest oil fields, there is still lots of oil but it is like getting blood from a turnip, a typical well gets about 10-20 bblpd, slow but steady, 97% of what comes out is brine that is separated and reinjected. The Permian will produce oil for another 50-100 yrs.... 

Tue, 04/26/2011 - 14:58 | 1208639 Long-John-Silver
Long-John-Silver's picture

But-But-But they keep telling us the economy can manage just fine with high gasoline prices. Not only that I hear them talking about magic batteries for electric cars and engines that run on Pixie Dust Algae.

Tue, 04/26/2011 - 16:02 | 1208859 SheepDog-One
SheepDog-One's picture

Theres magical solutions for it all JUST dead ahead, cars that run on unicorn farts and all.

Tue, 04/26/2011 - 15:02 | 1208640 kito
kito's picture

the dow is up over 100 points. so it either knows there will be an announcement of qe continuation, or it doesnt expect qe to continue and is actually standing on its own two feet. if its the latter, that puts a damper in the expectations of pm holders

Tue, 04/26/2011 - 15:21 | 1208715 suldog
suldog's picture

OR, the market (5 firms) knows the hawks get a say tomorrow and are building a beautiful bull trap, double-top. 

Greek yields 25% and raised margins on periphery countries only don't matter until TPTB want them to ...

Coordinated banksters, Euro down, Dollar up, flush out some longs for the Goldman coffers ... tune in tomorrow.

Tue, 04/26/2011 - 15:41 | 1208795 bothsidesnow
Tue, 04/26/2011 - 15:46 | 1208797 SheepDog-One
SheepDog-One's picture

By 'IT' youre reffering to Skynet?
Watch out for all these 100% assumptions, like already pricing in a great Bernanke speech tomorrow he may just be setting everyone up for a ringer...the FED just may have gone short on all of it you never know.
This idea that the Bernanke may walk on water and say 'OK we're fine now' walking on our own'...sure lets see it, lets see them walk without billions of POMO daily and complete manipulation monetization of everything at ZIRP printing. Go for it Ben lets see it.

Tue, 04/26/2011 - 16:04 | 1208870 bothsidesnow
bothsidesnow's picture

No I'm responding to the post which supposes two possible outcomes. I have hedged by physical position based on the latter outcome proposed.

If you read through the article and the references and look at the data there is no room left on the monetary base without inflation.

It's either inflation or withdrawal of liquidity at this point and I'm hedged based on withdrawal liquidity with no risk. I have essentially locked in my physical gain albeit a small one compared to most here on ZH buy selling 500 oz short in a Forex account with a top at break even.

Some times you need to be willing to be on bothsides of the arguement.

 

 

Tue, 04/26/2011 - 15:03 | 1208649 CrashisOptimistic
CrashisOptimistic's picture

In the end, geology is going to win.  There is nothing that can be done about it.

Tue, 04/26/2011 - 15:07 | 1208654 ivars
ivars's picture

Yes, recession in q1 2012 and throughout 2013 stems also from these 2 predictions- USA stock market(DJIA):

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&start=180#p31988

And Brent oil prices:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a#p30486

Which does not bode well for USA deficit and thus need for debt:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...

 

 

Tue, 04/26/2011 - 15:45 | 1208803 SheepDog-One
SheepDog-One's picture

Recession in 2012? Never came out of the depression which really began in 2008, and before. Still in the depression, and no way can Ben go forward without equal to or greater than present printing and monetization of everything in sight daily.

Tue, 04/26/2011 - 15:58 | 1208854 css1971
css1971's picture

You reckon it's still a year out? I'm thinking 3-6 months.

 

Tue, 04/26/2011 - 15:07 | 1208655 TruthInSunshine
TruthInSunshine's picture

$65 dollar fillups for the average car and WalMart isn't feeling the love.

Just wait for $85ish for the average car, $125ish for the average pickup truck, and $2,200 for the average Diesel Tractor-Trailer, bitchez!

Tue, 04/26/2011 - 15:48 | 1208806 SheepDog-One
SheepDog-One's picture

$135 fill up yesterday on my F250, that was from a quarter tank.

Tue, 04/26/2011 - 15:59 | 1208860 css1971
css1971's picture

F250. Is that some sort of a jet plane?

 

Tue, 04/26/2011 - 16:10 | 1208910 Sudden Debt
Sudden Debt's picture

184$ to fill up my range on monday.

I don't look at the counter anymore. I mostly don't even look at the total anymore, it makes me sick.

 

Tue, 04/26/2011 - 15:06 | 1208661 docmac324
docmac324's picture

Yawn, same sh*t, different day, supply and demand it all away.

Tue, 04/26/2011 - 15:14 | 1208676 AldoHux_IV
AldoHux_IV's picture

The fed has placed itself in its undoing-- the elitards have no where to hide and retribution is on the horizon.

Tue, 04/26/2011 - 15:47 | 1208812 SheepDog-One
SheepDog-One's picture

They can do nothing but further QE, monetisation at ZIRP....Ben can rename it and roll that turd in powdered sugar all he wants but the Chinese have already called bullshit. Position yourselves accordingly, this clownshow is over.

Tue, 04/26/2011 - 15:14 | 1208678 Zon
Zon's picture

yeah they hit 4.10-4.25 a gallon were i live. yet people are still packing the mall parking lots, the overpriced burrito restaraunts are full,etc. it is like no recession ever happened. however it will hit them sooner or later and there will be much pain/

Tue, 04/26/2011 - 15:28 | 1208733 sun tzu
sun tzu's picture

Even during the Great Depression the football stadiums were full because 75% of the population was employed. 

Tue, 04/26/2011 - 15:41 | 1208789 SoNH80
SoNH80's picture

Bars were packed, too, especially since people could legally drink again.  I think the way to survive the Depression was by maintaining a low-key beer buzz whenever possible.  Hmmmm....

On the oil thing, people here fall into, (1) the monetary inflation camp; (2) the peak oil camp; (3) the 'hot' money/'speculation' camp; (4) the geopolitical instability camp; (5) the domestic production suppression camp; or (6) the all of the above camp.  I'm in the all of the above camp.  Oil prices are high because high-grade, easily-drilled-for petroleum is getting to be scarcer on a global level (peak oil); our government has severely restricted domestic production [enviro regs]; we are constantly meddling in the NA-ME zone, and many of these countries are in revolution; the dollar is being debauched through QE; and price discoverers (the speculators), viewing this scene, are rationally concluding that there may be more scarcity in oil on the horizon. Until these price discoverers see that there is demand destruction happening in the GLOBAL economy (including China, etc.), there will not be a (temporary) reversal in the price trend.  I am convinced that every time oil goes through one of these post-2001 spikes, the post-reversal price floor keeps going up.  And peak oil WILL intensify, whether things on that front get out of hand in 2 years or 40 is a matter for debate.

Tue, 04/26/2011 - 15:57 | 1208845 SheepDog-One
SheepDog-One's picture

Credit card applications are filling mailboxes, and the american sheeple love nothing more than debt. CONSUME, bitchez!

Tue, 04/26/2011 - 16:07 | 1208884 11b40
11b40's picture

It is beginning to hit retail already.  Just this morning, after the Easter retail sales numbers came available, I started getting orders pushed out from 2 customers.  More of this is expected.

As noted in an earlier post, Wal-Mart already knows it and (and making adjustments), and they are not the only ones.  The Bloomingdale's & Crate & Barrel customers may not be feeling it so much (yet), but middle America certainly is, and it will get much worse if these prices stay high.  It also depends to some degree where you live.  I'm in the South.  Largely rural and suburban, we have a ton of trucks, vans, & SUVs on the road.  The average family simply does not have an extra $20/week per vehicle without their discretionary income taking a big hit.

Just think back a couple of years ago.  Restaurants, dry cleaners, beauty shops, gyms, dog groomers, and everyone else whose business involved discretionary spending suffered.  I saw my order flow almost stop for several months as retail inventories backed up.

We are headed there again.

Tue, 04/26/2011 - 15:34 | 1208707 Sudden Debt
Sudden Debt's picture

The FED has created money into the trillions, but most of that money is still locked into reserves by the banks.

And like every buck you give to a bank, they turn that into 10 bucks and give it to other peopel, so will those trillions multiply X10. And this will happen whenever the economy indeed does get "better" and banks start to lend again and the velocity of money will increase bigtime.

This will cause inflation to appair that will be terrible and the FED will by than raise rates to try to counter it.

And that will crash the markets and the FED will be obliged to start it all over again but this time will only be able to monetize it all.

The money supply is already so big right now that if they did it all over again, gas prices would not be at 5 or 7$ but at 12 to 15$.

And while everybody thinks this is still years from now... it isn't.

We're talking 2 to 6 months before we enter the next chapter.

 

 

SURE BEN CAN RAISE RATES!

But to 30% if needed?

The US had 17,5% in the 80's.

It destroyed real estate prices bigtime.

Sure, if you bought a house back than you made a killing in 2005.

But you could only buy it if you had enough CASH.

Silver will do also.

In the beginning of the 90's, 300 ounces of silver bought you a average house.

Or prices will drop through the bottom for real estate of silver will go to 600$

and with 10000 gold that doesn't sound that crazy.

 

 

Wed, 04/27/2011 - 00:34 | 1210227 Bunga Bunga
Bunga Bunga's picture

The FED does not create money, it creates liquity. Only the commercial banks can create more money. They create more money when they create more new debt than old debt is paid back. Look at the chart: debt inflation is still negative, means that is a debt deflation = money deflation (money=debt). FED is just creating an illusion of inflation and it is amazing, that even so many here in the forum believe it is inflation.

Tue, 04/26/2011 - 15:20 | 1208712 kevinearick
kevinearick's picture

Alternative Energy

The cost of oil delivered for use exceeds the value of energy in the oil when externalities, which are bred into population behavior (the American Way), are factored in, AT ANY PRICE, because oil is a primary input cost that becomes a positive feedback signal, once the fulcrum is tipped. If your heating, transportation, and production fuel costs go up and your income does not, you are screwed, and so is the economy if the activity is broad-based. Most people are screwed.

Normally, in a recession, the banks swap underwater real estate as a small percentage of their portfolios, with offsets, and wait for re-inflation to complete the book accounting, maintaining control of all the real estate. This economic round is different because all sectors in their portfolio are crashing (absent continuous Fed intervention) … and for who is real estate now a small percentage of the portfolio? You, if you followed instruction. Trade some of your silver for income property. You and your friends become The Bank.

Now print money/credit, and you become The Government. Issue bonds/stocks, and you become the Corporation. Grant Corporation the rights of individuals and you become Caesar. It all starts with being The Bank. All these ponzi schemes require ignorant participants, so you must also bring education under Government control, which is why K-12 is the last cut they want to make when the ponzi scheme is collapsing.

Most people willingly participate in the master-slave relationship because it eliminates thinking and associated risk, with many of the slaves hoping to win the lottery to become token masters. When the real work needs to be done, however, all these people need to get the hell out of the way, and pay the f***ing bill, as presented.

If you get into a bind, add hydrogen to your gas. Run water across a polarized medium (pos & neg leads across stainless for example) and send the hydrogen to the air intake. The existing computer feedback system will take care of the mix.

Tue, 04/26/2011 - 20:48 | 1209755 Flakmeister
Flakmeister's picture

Umm... would you like a hot stock tip on perpetual motion machines? Maybe I could sell you one....

Tue, 04/26/2011 - 15:26 | 1208716 plocequ1
plocequ1's picture

Problem solved. Just fill up your tank with Apple I-Gas. Rally on

Tue, 04/26/2011 - 15:24 | 1208723 buzzsaw99
buzzsaw99's picture

$4/gal is cheap.

Tue, 04/26/2011 - 15:26 | 1208727 gwar5
gwar5's picture

Obama will never take any responsibility for anything. Scapegoats are mandatory. He even admitted, under his plan, energy prices would have to necessarily skyrocket. The only promise he has kept.

Tue, 04/26/2011 - 15:30 | 1208745 TruthInSunshine
TruthInSunshine's picture

Obama will blame sugar farmers in Brazil or the Amish for high gasoline prices that "hurt working American families" while he encourages the average household to buy a $41,000 Chevrolet Volt or "hybrid van."

Tue, 04/26/2011 - 15:53 | 1208822 SheepDog-One
SheepDog-One's picture

Yea Obama himself said about 6 months ago that gas would soon go well over $5. Now he wants to blame 'speculators' and get to the bottom of it all? Laughable...well he can saw whatever he wants because the people who still listen to him are morons.

Tue, 04/26/2011 - 15:34 | 1208760 ThirdCoastSurfer
ThirdCoastSurfer's picture

What $4 gas really does is take any talk of a tax increase on the middle class off the table (if it was ever there to begin with). 

It's going to be hard enough to reinstate the 2% social security reduction.

Tue, 04/26/2011 - 15:42 | 1208791 Abiotic Oil
Abiotic Oil's picture

Eventually it will become too expensive to drive to work for many in commuter areas like SoKal.

 

Long horses and hay.

Tue, 04/26/2011 - 15:49 | 1208807 buzzsaw99
buzzsaw99's picture

except for one man with an ak-47 and a honda full of silver. hi ho colloidal silver bitchez.

Tue, 04/26/2011 - 15:53 | 1208829 SheepDog-One
SheepDog-One's picture

Long pork.

Tue, 04/26/2011 - 16:14 | 1208915 Piranhanoia
Piranhanoia's picture

Long pig

Tue, 04/26/2011 - 16:21 | 1208955 Abiotic Oil
Abiotic Oil's picture

Profit sharing of residuals from Healthcare Reform?

Tue, 04/26/2011 - 23:33 | 1210146 johnnynaps
johnnynaps's picture

Yep, exactly why it doesn't pay to work.....especially when unemployment pays you to sit in and keep travel expenses at bay.

Tue, 04/26/2011 - 15:54 | 1208835 SheepDog-One
SheepDog-One's picture

I dont like Williams much, just too hard to listen to but his calls have been right. $200 oil next.

Tue, 04/26/2011 - 16:02 | 1208839 bob_dabolina
bob_dabolina's picture

With 15.5% of African Americans unemployed I hope this is the hope and change they voted for. If they want to get costco they are going to need some hope and change (with gas prices so high), that's for sure.

He'll still get a 99% approval from that demographic.

Wed, 04/27/2011 - 00:07 | 1209926 TruthInSunshine
TruthInSunshine's picture

I guarandamntee that a minimum of 50% of black males between 18 and 60 are unemployed in every major city in the U.S. I wouldn't be surprised to see 60% in some urban areas.

Hell, the unemployment rate for white males in that same age bracket is over 20%.

Everytime I go to a bank, store, anything retail, it's almost all women...

I think the unemployment rate for construction workers in the U.S. was 36% at last count.

The Republic is literally doling out Bread in the form of Social Security, SNAP Cards, Medicare (and Medicaid at the state level of gov't), Unemployment Insurance, Disability Insurance, and unsustainable government departments and programs designed to reduce unemployment, in an effort to continue. 48 million on SNAP Cards - think about that for just a second. That's one in 6 Americans on SNAP Cards alone.

The U.S. would have to cut 25% of all current non-discretionary spending (and non-discretionary spending comprises 83% of its annual budget), including the sacred cows of Social Security, Medicare & Defense spending, if it were to really get constructive on paring its debt down and returning to either a balanced budget or surplus within the next decade.

Tue, 04/26/2011 - 16:02 | 1208850 virgilcaine
virgilcaine's picture

 the Stores and Malls are Empty except for the mall walkers.  The Food court vendor was begging people to buy something.   So much for "Stocks as a leading indicator"  they aren't.. they lag the Economy now.  It's going to end badly one day.

 

ex.  DKS Dicks Sport goods.. overpriced leisure goods and the Stores are empty with the Stock near Yrly Highs

Wed, 04/27/2011 - 00:39 | 1210235 Bunga Bunga
Bunga Bunga's picture

Like stocks were a "leading" indicator during the last recession. Actually stocks were nine month behind. When Lehman collapsed, it was nine month after the recession began.

Tue, 04/26/2011 - 16:09 | 1208890 velobabe
velobabe's picture

listen up people. i am as old as a grandma, and only ride my fixie to shop for food. i think my tires are going low cause i never drive. i might have to sell my audios, for rent money. that will be my first major decision in my new life, i have. i am really sorry that any of you have to buy gas at these high prices. but you asked for it,

with your lifestyle choices, bitches†

Tue, 04/26/2011 - 16:14 | 1208928 Dr. Porkchop
Dr. Porkchop's picture

The first to die will be consumer air travel.. that industry has no future. Drive thru will become a quaint notion from past.

People will continue to drive long after $4 per gallon or $10 per gallon, they'll just be more choosy about how much they drive.

However, when a door closes, another opens. There is always economic opportunity to take advantage of changing times.

Happy Motoring

 

Tue, 04/26/2011 - 17:10 | 1209183 CrashisOptimistic
CrashisOptimistic's picture

You're absolutely right. 

When trucks don't have fuel to bring food to grocery store shelves, the cities will generate millions of corpses, which will be a great opportunity for the morgue business, provided you can find undertakers who don't need food.

Tue, 04/26/2011 - 23:39 | 1210153 johnnynaps
johnnynaps's picture

But thanks to State regulations, there won't be enough morticians to handle the excess. My state graduated 15 morticians last year TOTAL! And, my state is the most populated per mile. 

Tue, 04/26/2011 - 16:29 | 1209011 gkm
gkm's picture

Okay you had me for awhile thinking you knew what you were talking about but then...

Rising interest rates are INFLATIONARY ceteris paribus.  Why?  Because interest rates can`t go up unless there is capacity to absorb the interest cost i.e. to pay the interest the money supply has to be expanded.  Otherwise, they would be deflationary on the margin. 

Since Bernanke refuses to let anything be deflationary (although he is causing the deflation on the margin with higher gas prices etc) he is providing more money supply.  Unless he contracts the money supply, which is unlikely, I wouldn`t worry too much about deflation unless you are in non-liquid assets like housing.

Incidentally, you don`t get credit expansion in a hyper-inflationary environment because credit providers (beyond the central bank) are eventually wiped out so credit actually contracts and money printing takes its place.

Tue, 04/26/2011 - 17:04 | 1209168 gkm
gkm's picture

The other thing I`d like to point out is that the Bernanke has created demographic deflation.  What does this mean?  The first of the boomers hit retirement age this year which means that there are several years yet to come.  After this little stint of incredible deflation in the boomers largest asset along with inflation in everything they will be exposed to in retirement (food and heating fuel), how anxious do you think these folks are about retiring?  I`d say they are soiling their slacks pretty good right now.  And so what are the odds they are going to retire before they have to?  Virtually none even if they are secure because of the volatility the Chairman has wrought on their lives.  So while jobs are terribly needed for the younger generations they won`t be available thanks to the Chairman and his brethern`s efforts.  He`s not called the Chairsatan for no reason.

In fact the Kondratieff Winter that Greenspan fought to forestall was in fact caused by him.  How ironic in a poetic kind of way.

Tue, 04/26/2011 - 18:40 | 1209462 Milestones
Milestones's picture

But the young are stronger, faster and can carry bigger guns and more ammo and am sure will have a really bad attitude. Now the question is will they go after the right targets??  Milestones

Tue, 04/26/2011 - 19:48 | 1209638 CU1981
CU1981's picture

Paid $95 + today in SCarolina... and the tank wasn't empty.

 

Oh those evil V8 drivers, aka gasoline speculators. he he 

Wed, 04/27/2011 - 00:24 | 1210215 fellatio is not...
fellatio is not fattening's picture

Things are going to shit, how do I know, $100 doesn't even fill my Hummer H2 tank, what's a man to do

Tue, 04/26/2011 - 19:51 | 1209646 baconator3000
baconator3000's picture

ramen noodle recovery

Tue, 04/26/2011 - 19:53 | 1209655 baconator3000
baconator3000's picture

which btw is 1.99 for a pack of 12 at my walmart. Up a 1.25 from a year ago

Tue, 04/26/2011 - 22:42 | 1210034 Common_Cents22
Common_Cents22's picture

Here's obummers plan:

If his campaign strategists are smart, (Obama is now in full campaign mode) and will save his idealogical pursuits for full scale assault after winning 2nd election, he is setting up gas prices for a fall going into next election to look like a hero.    Not sure if he can pull it off but I could see them trying.   Restriction supply, stockpiling(ND?), then getting into motion the targeting of speculators.   When the time is right he'll open up drilling permits that he has been withholding in the gulf area, bringing any supply online from domestic and hitting any speculators to bring prices down to look like a hero.    If that scenario comes true, be prepared to be whipsawed big time his entire next 4 years as a lame duck Pres. pursuing his real goals of transforming America into a weak Europe.
Tue, 04/26/2011 - 23:55 | 1210179 MarcusAurelius
MarcusAurelius's picture

You've heard me say it hear many times and I sure know the zero hedge gang are no ones fool. They say it is different this time...even Jeremy Grantham. Well I am not him nor of his legenday status but I will go on record to say he is wrong. That all our commodity resources have been depleted to the point of prices rising like this is sheer poppy cock none sense. The supply and demand chain is that out of whack? Really? Well these were all the catalyst sayings in the 70's and now again which for all intesive purposes are nothing more than stating the obvious "that yes our commodities are not finite resources" but that all of a sudden prices should reflect this wild and crazy spike as being the norm? Ahhh....well go long. Maybe Grantham is right this time but....well I will take the odds of 100% that he isn't.

Wed, 04/27/2011 - 00:39 | 1210234 Flakmeister
Flakmeister's picture

There are lots of resources left...but, the rate at which they are extracted is topping out. The economy relies on perma-growth and we are hitting the limits.

Ben is exacerbating things with his printing. It is like the ICU, pull the plug and the patient dies, i.e. deflationary collapse. With the liquidity in the system, people can bid up resources as there is real demand for that marginal unit of resource...Ben and Co. are hoping that someone turns this liquidity into the next great thing and soon....

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