Currently, oil prices are stabilizing around $45 per barrel, and gasoline prices are finally beginning to decrease. Over the weekend, we filled our tank here in sunny California with the less expensive option for just $3.19 per gallon—what a bargain!
This combination of overproduction, slowing global growth, and the lifting of sanctions on Iran could potentially keep oil prices suppressed for several years. For commuters in Southern California and other consumers, lower oil prices feel like an income boost. The extra savings at the gas station can be redirected toward additional purchases.
Generally, reduced oil prices and the possibility of increased consumption would enhance the Federal Reserve’s favored measure of economic health, namely aggregate demand. Lower energy costs could indeed stimulate GDP growth and help consumers reduce their debts.
However, this situation is not just a typical cyclical drop in oil prices. Regrettably, we are witnessing the aftermath of a significant bust following a tremendous boom in U.S. oil and gas exploration and production. Continue reading
Economic cycles fueled by cheap credit can be highly disruptive. Furthermore, these cycles become even more pronounced due to central banks’ attempts to stabilize them. Instead of smoothing out the peaks and valleys, current monetary policies tend to amplify these fluctuations, and there are many recent examples to illustrate this.
A particularly striking example is China’s massive concrete construction frenzy. By injecting credit to stimulate building projects, the nation has engaged in an astonishing spree—mixing enormous quantities of concrete and spreading it widely across its landscape.
From 2011 to 2014, China’s economy consumed a staggering 6.6 gigatons of cement. What exactly a gigaton entails might be unclear, but it’s undoubtedly an unfathomably heavy figure. To put it into context, the U.S. utilized only 4.5 gigatons over the past century.
So, what led an entire nation to engage in such reckless behavior? As expected, misguided stimulus strategies propelled them towards the utterly absurd. Continue reading
Last Thursday, Goldman Sachs, Larry Summers, and their global financial allies achieved their aims. Fed Chair Janet Yellen acquiesced, offering an extension of zero-interest-rate policies to appease her benefactors. Unfortunately, this greatly disadvantages savers, seniors, and advocates of freedom everywhere.
At Economic Prism, we strive to transform lemons into lemonade. Moreover, when the glass feels half empty, we reach for a smaller cup—because it doesn’t take much to overflow a party cup.
This means Yellen inadvertently did us a favor. By persisting with policies of mass credit creation, she is hastening the inevitable downfall of the Federal Reserve. From our perspective, an earlier resolution would be ideal.
Exercise some restraint now and it might only prolong the broken system for decades. Perhaps we’d then witness another 20 or 30 years of this charade if the Fed were to pretend it was tightening monetary policy. Why not resolve it sooner? Continue reading
Money—How to Get It and Keep It
By Doug Casey, The Casey Report
Even if you’re already financially secure, it’s beneficial to ponder this subject. What would you do if a disaster occurred—a natural event or government action, a costly lawsuit, or a significant mistake that left you at square one? In a genuine depression, everyone suffers. As Richard Russell famously stated, the real winners are those who lose the least. Personally, I believe we are on the brink of a Greater Depression, not merely another cyclical decline. You might find that, despite surpassing your neighbors in preparedness (you own precious metals, have diversified internationally, and remain skeptical of official narratives), you’re still not as ready as you’d like to be.
This calls for a strategic approach—consider a four-step plan: Liquidate, Consolidate, Create, and Speculate. Continue reading
In summary, the current economic climate, characterized by fluctuating oil prices, problematic monetary policies, and unsettling systemic imbalances, calls for careful consideration and strategic planning. By understanding these dynamics, individuals can better position themselves for the uncertainties that lie ahead.
