Heinz on oil, GDP, and the economy
Date: Tue May 04 2004 15:22
trotsky (crude oil) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
as i have previously mentioned, once the $40 barrier falls convincingly, an over 20 year old resistance level will be broken. whenever that happens in a commodity market, it's a highly significant event. one only has to look at the resistance levels that were broken in the early 70's, many of which similarly had held for 20 to 30 years. prices subsequently rose by multiples.
i'm not saying it WILL definitely happen right here and now - after all, 40 remains formidable resistance, so it is more likely that it will continue to act as resistance for the time being. this is just a heads-up regarding the 'what if' scenario. IF and when the level breaks, all hell is likely to break loose in crude oil prices.
Date: Tue May 04 2004 15:15
trotsky (frustrated, 12:38) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"@capacity utilization ...is this factor becoming less important as we turn
toward a service economy and away from a manufacturing
economy? and I see that the average between 1972-2002 is 81.3...what is the critical number..."
you are actually in error if you believe that manufacturing has become 'less important'. it has merely become more EFFICIENT, as less and less workers are needed to produce more and more goods. but other than that, manufacturing remains the by far most important sector of the US economy. don't let 'GDP' mislead you into thinking otherwise - a huge amount of actual PRODUCTIVE outlays in the economy are simply NOT COUNTED to arrive at GDP. if you consult the input/output tables, underneath the 'official' $10 trillion 'consumption economy', that includes the waste of resources by the 21+ MILLION apparatchiks employed by the state ( and counts it as 'growth' ) there have been transfers among businesses of over $18 trillion last year - much of it indeed related to manufacturing. manufacturing is in REALITY far more important to the economy than is generally believed. thus when capacities lie idle as they now do, we must assume that the malinvestments of the 1990's bubble have not yet been liquidated. BEDFORE that happens, new capital investment will remain extremely restrained, and the economy will remain unable to genuinely recover.
the entire production structure must be allowed to realign to reflect the absence of the false boom of the 90's. that this has not yet happened is a sign that after decades of monetary abuse by the Fed, the pool of real funding in the US has finally begun to shrink, which in turn means they can't even maintain the illusion that their tinkering produces 'growth' anymore.
admittedly capacity utilization per se does not tell you a whole lot - no aggregate economic data set does. but in the historical context, the current percentage is NOT consistent with a recovery, but rather a recession. note that in past post WW2 recession/recovery cycles ( when the pool of real funding was still expanding by the looks of things ) , utilization tended to fall to somewhat lower lows ( 71-73% approx. ) but quickly recovered to above 80 percentages in the up cycle phases. this has not happened this time around, an i contend that the unused capacity largely consists of lingering malinvested capital. why does it linger? because the monetary bureaucrats have averted the cleansing 'bust', i.e. they have thrown these malinvestments a line of artificial life support, just as has happened in post bubble Japan. Japan is btw. the best example that the causation chain between monetary 'policy' and economic 'growth' is an illusion, that survives only as long as the pool of real funding manages to grow in spite of the interventionist depredations.
Date: Tue May 04 2004 14:51
trotsky (Cowpoke, 12:36) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
true economic wealth creation has nothing to do with a growing supply of money. in a free market, money is a fungible commodity with a pre-existing demand, exhibiting various features that make it useful as money ( the market has decided on gold to fulfill this function about 2000 years or longer ago already ) , and it serves as a medium of exchange. now, since fiat money is created out of thin air, it follows that the creation of ADDITIONAL tokens of fiat money can not, per se, produce economic 'growth', or to be more precise, wealth. if it could, the third world would be a utopia by now. in fact, every country with a printing press ( or a computer these days ) would be a utopia.
however, wealth creation is NOT equal to the creation of medium-of-exchange-tokens. it is the production of goods and services, the increasing division of labor ( and lengthening of the production structure ) , achieved by capital accumulation ( a.k.a. 'savings' ) that create wealth. it is immaterial how big the supply of money is - even a completely constant supply of money would serve us quite well. it's what the money can buy that counts. |
