<what happens if oil drops to 40, 37, 35, 33?>
Resources are in extremely short supply, therefore I see only minor effect from a 1-2% drop in global GDP. Much of the problem is in subsistence items, which I actually expect to go even higher in price, regardless of economic weakness.And if they leave rates low, it will just feed even more speculation in to them. I can see a scenario where oil spikes to $60, if the Fed stays at current emergency levels or cut rates (new emergency), irrespective of the economy. I would also expect a USD collapse.
<But what happens to the CPI if housing falls>
I see little if any correlation between CPI and housing prices, see above.
<Consumers tapped out?>
They are in serious, serious trouble, but will go down grudgingly and with terrific fight.
<where you see the CPI headed with housing falling and consumer spending falling >
Much higher in essential items, maybe flat in luxury and highly discretionary items (the junk people buy, that probably shouldn't even be in the CPI). Rent (which is counted in the CPI), might actually go up relative to housing prices, as people give up on speculating, and scramble for places to rent. Perverse thought I know. |
