The Fed could burst the oil bubble... (real estate, debt, borrowing)

[bchris02]

The Fed could burst the oil bubble but it chooses not to because so many irresponsible idiots bought into the ARM scam. 95+% of the US population is paying thier mortgages. Most of those who aren't deserve what they are getting. A collapse of these oil prices would help the economy out tremendously - more than any housing bailout would. All it would take to burst the bubble is a sudden, significant rally in the dollar. I say somewhere around $1.40-$1.45 vs. the Euro for starters. That happens and watch the speculators panic and sell. Ben Bernanke is an incompetent idiot who has no business being chairman of the Federal Reserve.

[Wild Style]

bchris

that 95% is going to dwindle over the next 4 yrs, mark my words on that one.

[Shuffler]

I heard Iran has a master plan to flood the world market with cheap oil and call for all dealings using the Euro, thus collapsing the U.S. dollar and our economy. Lindsey Williams espouses on this in his Oct 2007 speech about the non-energy crisis. Check out the video...worth watching.

[evilnewbie]

You want to know who the true fault is at? Its the oil producers who sell their oil barrels for marked up prices and use speculators as the scape goat. The oil producers CAN sell their oil barrels for the correct price which would make speculators lose their money in the oil commodity trade but nope, they gain much more money by raising prices and blaming it on speculators. There is NO supply problem, there are NO gas stations that can't sell you gas, there are NO long lines at gas stations... there is NO reason to increase the price on a barrel of oil and the oil producers KNOW this, they want to increase it and blame speculators... speculators do NOT tell the producers how much to sell the oil for.. oil producers use the commodity index to sell it but at they aren't obligated to do so but they do it anyway... why? GREED... the oil producers could easily sell their oil at prices that are in line with supply and demand but they have NOT, they are fueling speculators to keep investing in oil... once they start to sell the price per barrel of oil correctly, you will see speculators leaving in masse... who are the oil producers?? OPEC and many other countries... FOREIGN GOVERNMENTS... that is who is getting rich... I have yet to see us declare war on them like we used to promise decades ago if oil prices rose... apparently Bush, Republicans, and Democrats are all in bed with foreign governments... they can stop it but have chosen not to... I would of threaten Saudi Arabia, Venezuela, and similar countries of war if they continue to abusing the market... too bad we have a lame duck president and a corrupt Congress...

[HappyTexan]

The oil producers do not run the commodity markets.

[evilnewbie]

The commodity markets doesn't force the oil producers to sell more than the oil is worth either... just because gold is worth $900 an ounce, the people who mine the gold can sell it for $500 an ounce if they want.. just like oil producers... the only thing in their way? Greed...

[jazzlover]

There are two reasons that oil prices are skyrocketing:

1. The quantity of oil being demanded worldwide is exceeding currently available supplies. Most of the cheap-to-produce oil has been found, and a large number of those fields are now declining in production. Meanwhile, population growth and a rise in the standard of living in developing countries like China and India has sent demand soaring. The only things that will stop the upward trend are a decline in living standards, a decline in population, massive gains in energy efficiency, a massive (and likely not quick) change to alternative energy, or some combination of all of these. Only the first one is likely to occur quickly, so the most probable short-term break in energy prices is likely to come from a severe economic contraction--and that scenario seems increasingly likely.

2. The other factor is trashing of the dollar orchestrated by both Americans' and their government's drunken binge of debt creation and mis-"investment" in consumption and other non-productive activities (like housing), along with the Fed's willingness to try to bail our sorry ***es out of that by debasing the currency.

If our spineless government was REALLY serious about lowering energy prices AND getting America back to some fiscal and financial sanity, the Fed should immediately raise interest rates by at least 2-4%. That would break the back of inflation, strengthen the dollar, and encourage saving rather than debt. The short-term negative effect (but likely beneficial over the long-term) would be a savage recession that would complete the de-leveraging of the real estate market (and actually lower home prices to realm of relative affordability again) and squeeze a lot of wasteful spending and inflationary speculation out of the economy. The strengthening of the dollar and the recessionary decline in energy demand would substantially lower energy prices. It is drastic and painful medicine that will undoubtedly make many Americans miserable, but it is going to happen--either now or much more painfully later. People just haven't gotten a grip yet on the fact that the way we have lived of late is over--probably for good. The world has changed . . .

[Philosophizer]

My fear is that the Fed wont jack up rates until it's far too late. I don't think we'll see rates increase until after the election. If that's the case, inflation may peak in mid to late 2009 (possibly 25% real inflation rate) before the spike in rates finally takes effect. If China sees the dollar tank that much, they just might start selling treasury notes and flood America with even more dollars since it's the only place where they could use dollars (albeit it'll take quite a few of them) to actually secure goods with them.

I don't know how it's going to go down. At best, we could repeat the late 70's early 80's. At worst, we could see something comparable to the drop in the standards of living during the great depression.

[AJGIANTS]

Originally Posted by TexianPatriot

My fear is that the Fed wont jack up rates until it's far too late. I don't think we'll see rates increase until after the election. If that's the case, inflation may peak in mid to late 2009 (possibly 25% real inflation rate) before the spike in rates finally takes effect. If China sees the dollar tank that much, they just might start selling treasury notes and flood America with even more dollars since it's the only place where they could use dollars (albeit it'll take quite a few of them) to actually secure goods with them.

I don't know how it's going to go down. At best, we could repeat the late 70's early 80's. At worst, we could see something comparable to the drop in the standards of living during the great depression.

I 100% agree. Berenke is an idiot. If now is not the time to raise rates then when is?
Unemployment is still at historically low levels. The Dollar is as soft as carvel on a hot humid day. And Inflation is spiking. That sounds like an environment that needs a rate increase NOW!

[HappyTexan]

The low rate is for the banks borrowing. Raise the rates and the banks will start hurting. Those low rates are hurting us but helping bank borrowing. I think their loses are much greater than what we were led to believe and the Fed would rather have inflation than bank collapse.