Fall Color
As I sit here typing this blog entry, I gaze up occasionally and fix my glance on the yellow, orange and red colors rolling over the hills in the distance. Fall - what a gorgeous site. That scene exists, of course, on the map on my wall, given to me by the petrol station across the street. My real view rolls over high rises, parking lots and shopping centers in metropolitan Houston. In a way, this is a fitting metaphor for the current economic crisis - the map with the rosy economic future on it was given to us by the folks in government who are busy bailing out the world’s banking system.
The economic view outside my window does not coincide with the economic map, as I really had hoped it would. There are a number of reasons for my pessimism, the most basic of which are that we are simply switching debt from a limited number of the population to the entire population. The debt has not gone away nor has most of the debtors’ inability to repay it. As the government assumes the debt, it borrows from the public to finance the assumption betting that the pay back of the debt can be financed with new debt, a bet made by many individuals that, collectively, got us into this mess in the first place. Add to that the fact that we have not yet gotten around to the problem of the enormous pile of unsecured credit card debt and I see no reason to be overly optimistic about the economy for the next few years. Demand will fall, and with it the price of oil and gas. Many suggest OPEC may step in and limit supply. Indeed, they may but recall that the move has back fired when tried before, costing OPEC dearly in market share, and that raising energy prices in the midst of a global recession will hardly buy OPEC any friends. My bet (and I am often wrong) is that OPEC production cuts will be limited, the price of oil will not rebound dramatically and we are in for some tougher times than many anticipate. How tough? The near collapse of the industry in the early to mid 80s might be a good point from which to begin speculation.
If you see it differently, let me know.
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October 15th, 2008 at 3:02 pm
I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.
Tim Ramsey
October 15th, 2008 at 3:49 pm
The recent decline in demand for crude oil has already brought about a correspondingly quick decline in prices at the pump. Could this example serve to prove the point to the pointy heads in congress that committing to more domestic drilling and production in the U.S. would keep those prices down? Then, as you say, if OPEC by chance did choose to limit supply, the market share would shift in our favor.
October 19th, 2008 at 10:43 am
The price of oil went up too fast this past year, it has come down just as fast. It caught us with our pants down, so to speak. Wind and Solar energy and corn,sugar or switch grass based fuels are not viable until the price of crude and natural gas increases. The price of fossil fuels will increase as the demand does and the money supply for drilling returns. Changes must be made in consumption with higher gas milage for transport modes and less used for heating and cooling methods. Congress must repeal or not pass laws that increase the cost of operations. One propsed new law is a carbon tax. The question is always-what is best for our health and what is the economic result. Laws must do no harm either way. It is sometimes like a cold- Take Dr’s prescription get well in a week. Do nothing get well in 7 days.