kevin
http://www.bullinachinamarket.com

Know why we can pursue insane monetary policy and issue debt (at virtually 0% interest) to bailout every irresponsible dickhead under the sun? Because otherwise intelligent people are actually buying into “demand destruction” and commodities deflation propaganda. The punchline to this joke is worldwide poverty and famine.

I hate to be the one to criticize the only area that Hank and Ben have had any degree of success in this train wreck, but what is happening now is supply destruction of things human beings don’t fare too well without. Thanks to the opacity of the CFTC, any dunce with enough credit can short contracts of stuff they don’t have until the price drops. The problem is, no one will produce those goods at the prices set in never-neverland.

As Secretary of the Treasury, Paulson is charged with the task of producing gold and silver coins at market price in quantities sufficient to meet public demand, but doing so would mean the government would be subsidizing production at the artificially low price it created (which defeats the purpose). Instead, they sell this story that we’ve lost the recipe to make coin blanks, and no one even blinks.

People like me get dismissed as “tin-foil-hat-wearing-gold-bugs” who don’t understand how markets work, but when the shelves (and gas pumps) are empty, it ain’t a market anymore, so “prices” mean nothing. We are hurtling to this condition at warp speed and no one seems to mind.

Go figure

China Retail Sales Rise 22%, Help to Counter Slowdown (Update3)
http://www.bloomberg.com/apps/news?pid=20601089&sid=abM29KiepBow&refer=china

I have seen a bear dropping in Yosemite and it was the size of a well fed poodle.

A bear actually did his duty in our yard and it was less than a well-fed poodle would leave, but I haven’t studied the subject.

As Terry says, they are omnivores. One killed a calf at a farm in the next town.

I think the invisible hand will solve the problems provided no well meaning people get in the way. Oil will stay low in price, mysteriously, if credible alternatives become available or if serious research is about to get underway.

This is not to say alternatives shouldn’t be explored. They just need to pay their own way and not receive excessive subsidies, such as corn and ethanol. I know the oil producers are evil and avaricious, but two wrongs don’t make a right. The idea of Harry Reid pouring buckets of borrowed money into an industry that should be able to pay it’s own way makes me want to puke. It should be obvious to a halfwit that this kind of support will yield the wrong allocation decisions. Obama is smart. Democrats are dumb to the point of making normal people want to scream. But, at least, they’re not as bad as Republicans at this time.

Another old but interesting read I have posted before – to me this reinforces the hypothesis of Minksy that stability breeds instability, especially when compared to perceptions of risk then and pre-2008:

http://www.prospect.org/cs/articles?article=the_alarming_parallels_between_1929_and_2007

I use different wording for Minsky: stability breeds arrogance.

Dead Hobo,

I fear an overshoot to the downside, especially in oil, will lead to apathy about needed energy reform and policies when in actually it yields a window of opportunity to develope new energy products in a relatively price-stable environment.

Without wasteful credit spiking the punch bowl, oil prices will remain affordable for several more years. This is more than long enough to make more substantial adjustments to daily living patterns.

The CUB spike price in commodities was little understood by most, simply a rotation out of paper assets (including currencies) in search of yield, but pundits galore praised the world economy for its vast demand needs.
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Absolutely true. What had surprised me to no end was that otherwise smart people believed the Armageddon scenario proffered by the Theory of Boone and others, some of whom won Nobel prizes in economics.

Now the other side is overshooting with the Theory Of Demand Destruction. Demand has fallen due to price elasticity relative to the time people can realistically change energy consumption habits. People are learning to conserve because they know the downside of wasteful consumption.

On the other hand, a temporary worldwide slowdown is not the same as putting Saudi Arabia out of business. Existing wells still hold finite amounts of oil and each individual well has it’s own peak oil graph. Consumption will rise as demand recovers and as new consumers enter the economy. Thus, Exxon might be a bad place to put spare change for a while, but the service companies are still in demand and their stocks are a bargain of the century now.

Thus, oil prices are going down, but not forever. They will rise, but not back to $147 unless credit goes out of control again. The oil market is back to normal, probably for the first time in many years. The floor price is probably close to the marginal cost of production of new and recent wells. OPEC threats to drop down production are nothing more than basic production control decisions. Oil is extremely expensive to inventory. Thus, it is best left in the ground if it is not needed.

RBOB futures are forecasting a price of about $49 for oil right now. BP and Venezuela might not like this, but the Energy Services people will dig regardless of the price.

About gold, I’m wondering if that is on the way to $450. Any insight about that from anyone?

Agreed. We have reached a Minsky moment…of unknown dimension.

http://www.moneyweek.com/news-and-charts/economics/have-we-reached-a-minsky-moment.aspx

Have we reached a Minsky moment?