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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: mishedlo who wrote (12831)10/5/2004 12:38:34 AM
From: Elroy Jetson  Read Replies (1) of 116555
 
That's the magical aspect of oil. When the price of oil rises too far, it brings about it's own economic recession which promptly results in lower prices.

The Fed "successfully" stopped the the Asia led recession world-wide recession in 1996 by dramatically expanding the money supply through new debt creation. But they've left their foot on the accelerator for so long that the excess demand is showing up in rapidly rising commodity prices, oil in particular. Eventually the little Fed Boy runs out of fingers to stick in the dike and you get the worse economic downturn to pay for the smaller downturn you avoided earlier.

If our supplies of oil are running low, like some believe, this sets in motion a longer term price driven substitution. But I think the short-term spikes is just an expensive speeding ticket for breaking the law of economic cycles.
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