[Outcast_Searcher]

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The critical factor is NOT the price of the gallon of gas ,
I know Americans are obsessed by it but oil is used in pretty much everything from feedstock in the chemical industry to transport of products and services , an increase in its price percolate through the whole economy often in a multiplying effect

Well, that's all theoretically true in the LONG run, although substitution effects and adaptation would certainly mitigate that to some (or perhaps a great) extent. (Doomers often seem to ignore or deny that this occurs in the long run, and I'm NOT calling you a doomer when I mention this).

However, in the short run, there seems to be a very small correlation between the core CPI and the price of oil, at least in the U.S. where I pay close attention. Yes, the core CPI weeds out fuel price increases, but supposedly not all the other price factors oil hits, unless you want to blame this on government conspiracy, MSM conspiracy, etc.

The reason that matters in the context of my argument, is it is a short term argument -- that rising oil prices don't "crush" the consumer (and thus the economy) in the short run, unlike the dire warnings of that consequence which I see frequently on this site.

[sparky]

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@ outcast , it's OK to call me a Doomer , I am one ... a happy one !
but certainly not a catastrophist , things will happen , as they must . that is ultimately for the best
for me short term is a year , medium term ..ten years
the first 1973 oil shock devastated the advanced economies ,
a very severe bout of stagnation \inflation occurred , a fair bit of it was due to unrestrained spending by the U.S. federal government , they had heavy social programs ( Johnston Great society ) the shot to the moon and a very expensive if rather futile war in Vietnam ,
printing greenback was all the rage , there was a big bubble in personal spending and real estate
fed chairman Volker castrated the banks by crushingly high interest rate but Oh surprise the economy took some wind in it's sail only when the price of oil collapsed due to those nice doggies of the Saudis royal family overproducing .

Well , you can see where I'm driving at .
the U.S. government HAS to madly create money to pay its bills , as long as the whole world want dollars , life is sweet beside the unfortunate fact that a high dollar price U.S. exports out of competition and encourage imports ,
I.E. the remedy is the disease itself , massive current and budgetary deficits funded by more borrowing

Two points

first foreigners are going to loose their shirts , that is not really a worry
second , In 1973 the U.S. import of oil was rather modest ,
the price rise was painful but domestic , now the oil bill has to be paid to strangers who are kind enough to accept U.S. government IOU ,
should they edge their bets , I'm not sure what would follow but it would not be pretty
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[copious.abundance]

Filling out the rest of the chart, and assuming that the US follows the world trend we get:

Code: Select all

Year   GDP Decline %   Net Worth*   Net Worth Decline*
‘08      (4.2)         431.1        18.9
‘09      (4.6)         411.3        19.8
‘10      (5.0)         390.7        20.6
‘11      (7.1)         363.0        27.7
                          TOTAL    87.0
*trillions


The destruction in net worth by the end of 2011 will be $87 trillion. The Market Value of Fiat Credit for the entire US bond portfolio is only about $58 trillion. It will not be possible for the FED to create enough Fiat Monetary Base to compensate. Fiat Money Total is going to disappear, leaving only the Base.

This is how the prediction for a monetary system collapse of no later than the 3rd or 4th quarter 2011 was derived. Almost the entire value of the Market Value of Fiat Credit will be wiped out by that time.

I do believe it's time for another update. If one is to make a model with numerical predictions, I hope they don't mind being reminded about the accuracy of their predictions when the time frame of the predictions comes to pass.

Here we have shortonoil (who seems to be really scarce around here these days) predicting a 5% GDP decline for the US for 2010.

Well lookee what we have here

For the whole of 2010, the economy grew 2.9 percent, the biggest gain since 2005.

As the saying goes - garbage in, garbage out.

[sparky]

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True enough , at the Davos talk feast for financial leaders , even Dr Roubini is mildly optimistic
But no one is dancing in the streets yet .
there is some growth but it's been bought by over revving the Federal credit card

China stepped in to support the Euro , big time , they bought Portuguese and Spanish gov, bonds
putting a floor under it , the Germans were pathetically grateful

Now we should see a slow purging of the bad debts from the system and a bit of growth
it might not be enough to drag the dole numbers down ,
especially as the States and cities have some need of rescue and slashing public employees is on the cards