New Deal democrat's blog

Countdown to $100 Oil ?!? (part 5) - Final Post

This is it. Forward month WTI has closed below $100, at $95.71. The Series is officially over.

When I began this series on May 29, Oil was over $130, having gone up 30% in only 4 months! It seemed everybody was convinced that we would have $150 Oil by July 4 and $200 Oil by the end of 2008. Here's what the Oil chart looked like on the very day that I said "The Countdown to $100 Oil is on":

05/08 oil

click graph to enlarge

Courtesy bonddad

BREAKING: Wall Street Mega-Merger!!!

BREAKING NEWS! Mega Merger on Wall Street just announced!!!

In a surprise move, a slew of Wall Street firms brought together by the Fed and the US Treasury Department originally to discuss bailing out Lehman Brothers, decided to merge with each other instead.

The new entity, which Wall Street sources said was to be called CitiLehmanUnitedBearStearnsJPMorganGoldmanSachsAIGMerrillWaMu - FannieFreddieUnionCountrywideKravitz, will trade on the Exchanges under the shortened acronym, CLUSTERF*CK.

The Fannie/Freddie "Conservatorship": Sometimes abject despair is appropriate

I've been asked what my thoughts are about the Fannie and Freddie bailout leaked by the Treasury to the NYTimes and the Washington Post late Friday afternoon.
Since the actual details haven't been released, and you can click over to Tanta and Barry Ritholtz as easily as I can, I suggest you go there for the best exposition so far of the proposed details. In fact, Ritholtz' "The Big Picture" has a pretty good multi-point presentation, which forms the basis for my comments below.
This story is MAJOR, in multiple ways, and almost none of it good, particularly for the long-term. Some points below.

Solving the Mortgage Crisis - Part I

I don't know about you all, but I was reading Ben Jones' Housing Bubble Blog 3 years ago when house prices were still climbing 20% a year and housing bulls were laughing at the bubbleheads. To them, the naysayers obviously missed the boat and were just sore losers who rented.

Way back in 2005 there were plenty of people (Federal reserve economists excepted of course) who saw the bubble and predicted that when the adjustable rate mortgage resets came due (beginning en masse in 2007) there was going to be one heckuva housing bust, and a cacophony of calls for a bailout of the greedy and the stupid.

Now that those predictions have come to pass, the question is, should we just let the mortgage/housing debacle play out, or are there ways to intervene that would be socially beneficial?

We ought to at least be able to narrow down the options, filtering out those that mainly bail out the greedy, or else entail too much cost or moral hazard. Of those options that remain, we ought to at least be able to narrow down areas of disagreement. Below are my suggestions.

Hints of a year-end economic respite?

The recession is here (and has been since last December). It's going to hang around for a while longer at least. And layoffs and unemployment are almost certainly going to continue to increase right through election day, which is bad news for the people who will lose their jobs, but at least has the silver lining that it will increase the chances of Democrats doing very well indeed this November.

That being said, like seeing the green shoot of a crocus popping up above the ground at the end of January, I am seeing the first nascent signs that the economy may enter a period of respite by the end of this year, either growing very slowly or at least the pace of contraction slowing down to a crawl.

Countdown to $100 Oil?!? (3): Oil under $120

"Countdown to $100 Oil?!?" is my contrarian series on the direction of Oil prices. The premise of this series is that, even if we have arrived at the plateau of "Peak Oil", there will still be wild swings in its price (in fact, there already have been) and that demand destruction is taking place sufficiently such that oil will recross the $100 boundary before it ever reaches $200.
In the first installment, I argued that unsustainable heavy subsidies to the consumption of Oil in Asian economies, together with some evidence of hoarding of supply, and already apparent demand destruction in the US, meant that Oil was ready to decline below $100 sometime soon. Just a few days later, a number of Asian countries cut their subsidies, giving rise to my second installment.
Then Oil went on a sudden tear to $147+, before breaking down and by yesterday trading at $119.50, and at $118 this morning.

The Blogosphere Banking Panic (III. The Failure of the FSLIC)

The Savings and Loans Crisis of the 1980's was one of the biggest financial crises in US history. The insurer for savings and loans, the FSLIC became insolvent and was abolished in 1989. A new institution, the Resolution Trust Corporation (RTC) was established to liquidate failed financial institutions. Federal insurance of S&L deposits was transferred to the FDIC in 1989.

One contemporary account described the scope of the financial meltdown as follows:

Global economic tipping point: at the intersection of China and Oil

The US is no longer the engine, or at least the sole engine, of global economic growth. That mantle is shared, at least, with Europe, and even moreso with emerging Asia, and nowhere so much as China, now the world's 4th largest economy and 47wallst.com/2008/07/china-a-10-gdp.html">growing at a rate of 10% a year.
That growth has run smack up against at least short term limits on the availability of resources -- metals, livestock, rice, and more than anything else, Oil.
While growth in the US peaked about two years ago and has been generally declining since, most recently measured at about 1.9% (but perhaps in a year or three retroactively to be revised into negative territory, as Q4 2007 just was), China in particular has continued to boom, as I described in China's Out of Control Inflationary Boom.

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