Oil rally may be economy's undoing

[UpInArms]

Source: Associated Press

NEW YORK - Preoccupied the last few months with shrinking credit and a slumping economy, Wall Street has all but ignored the relentless rise in oil prices that has taken a barrel of crude to a once-unthinkable $106.

But the market may not be able to look the other way much longer — especially when consumers, already hurting from the soaring cost of gasoline, find themselves paying even more to fill their tanks come spring.

<snip>

Should the central bank cut rates at its March 18 meeting, which is widely expected, that move could also further weaken the dollar — and possibly keep the cycle of rising oil prices going.

Then there is the problem of an even greater impact on the consumer — whose growing hesitation about spending has been reflected in weak retail sales, even during the holiday season. What happens as gasoline prices in particular increase? The fear is that Americans, forced to pay more money for gasoline and overwhelmed by other economic issues, will continue to hunker down.

"The U.S. consumer, who has carried the economy for the past half-dozen years, is in full defensive mode, battered by falling housing values, spiking food and energy prices, tightening lending standards, the teetering stock market and hints of weakening in the labor market," said T.J. Marta, economic and fixed income strategist for RBC Capital Markets.

Read more: http://news.yahoo.com/s/ap/wall___main

[Crowman1979]

1. Noooooooo, really?

I'm so baffled by the choice of words for these articles related to the economy. Come on! MAY BE the economy's undoing?!?! More like IS the economy's undoing! Either these so-called financial experts are too optimistic for their own good, or they are just plain in denial--I'll go with the later. This reinforces my decision to drop out of business school back in December and work on getting my Associate's in Electrical Technology instead. Because if I had taken another Economics class, my head would have exploded.

[UpInArms]

3. we call those folks - eCONomists

welcome to DU, Crowman1979!

:hi:

(edited for typo)

[Kolesar]

2. If food was scarce and prices doubled, would Wall Street call that a "rally" also?

How about a "rally" in the price of medications?

[UpInArms]

4. if the traders can make a buck off selling it, you bet!

they would call it a "rally" in pharmaceutical stocks

and charge you for selling and for buying - the middleman cut is most important to them

:hi:

[tanyev]

6. They're already calling famine and hunger "food insecurity".

[Lance31]

5. How to solve the crisis on a personal basis

My original degrees are in accounting and economics. I read the writing on the wall 2 years ago. I bit the bullet and went back to school in the medical field. I am swamped with Job offers and now am planning my relocation to New Zealand. When the bottom falls out, it will destroy Medicare and Social Security too. There will be nothing.

Get out of the country while you can. Invest in sliver or gold too.

[DemFromMem]

7. Relax

The Democrats will be back in charge soon :-)

[GliderGuider]

9. And just in time, too

Just in time for the whole country to turn and ask, "So now what, smart guys?"

By the middle of 2009 we'll have a global depression nicely under way, the world's capital pools drained dry, oil prices rocketing through $200 a barrel, coal prices double what they are today, GW-induced rainfall changes doing a Genghis Khan routine on the world's grain production, food prices 75% higher than today, and famines under way in Africa and South Asia.

In the face of this global convergence of crisis I find it hard to imagine what a change of political parties in the USA will accomplish. You can change captains, but she's still the same old Titanic, and that's still an iceberg.

[Lance31]

12. Doesnt matter at this point whos in charge

12 trillion in debt (and rising) will grind the govt to a halt, when servicing the debt outstrips what they bring in in taxes. Remember the tax cuts? The economy simply is no longer there to offset the debt this administration has incurred.

[tachyon]

18. Maybe, but can they unscramble an egg?

:shrug:

[maseman]

8. I am sure many can just

pick up and move out of the country. Sounds like a great plan if you have no family, friends, future. By the way have you heard of teh global economy? IF the US crashes the world crashes with it. No one is safe from this.

[GliderGuider]

10. I don't think most people have realized that this is a multifactorial global crisis.

Safe havens are going to be few and far between, probably starting as early as next year.

[Lance31]

13. you are right to a point

If you look about there are a few countries that are fairly decoupled from the US economy. Austraila and New Zealand are good examples.

I take offenese at the "no future" remark. I am doing just the opposite, creating a future.

[cliss]

15. I agree Lance, and Welcome

to the DU!
I also have a degree in Economics + Accounting. It's really tough to find jobs in that field. If you look at the help wanted ads, the only section which is booming is.....health care. It's amazing and you are right.

I think at this point, we need to start figuring out ways to survive, rather than just sit on the deck of the Titanic. Because that's what's happening right now. The ship is sinking.
We need to start looking at ways to survive. Save money, become self-reliant that kind of thing.

[Ghost Dog]

17. I think you'll find that much of the world is far less reliant on the US economy

(aka the US consumer) than many imagine. Beyond the incestuous relationships among financial institutions, that is. And much of the world is rapidly organising itself to have less and less to do with the US.

There will, nevertheless, be a worldwide hit (in the negative economic sense). Wheat supplies are one big real-world problem, Chinese, Eurasian and Australian production notwithstanding.

[fasttense]

11. It ain't the price of oil, it's the stagnant wages.

Though the price of oil isn't helping, what is really hurting this economy is the lack of demand.

All the corporations all over the world want to sell to the US. Their productivity is up and the supply is up. The problem is US workers, who are the consumers, don't have good paying jobs and never get raises. Workers use to be able to borrow by using their homes as collateral but with the housing market crash, workers can only rely on their paychecks and that ain't much.

Since Raygun double our payroll deductions by doubling SS taxes and cutting the wealthiest's taxes, the American poor and middle class have become the backbone of government funding. The biggest market in the world has lost most of its customers. The customers are busy using up what little they have paying taxes and paying for necessities (food, water, heat, gas). The demand for the junk the corporations are spewing out has faded. Demand is down and corporations have no one to sell to.

Welcome to Stagflation and soon to be followed by depression.

If the Fed would just stop cutting interest rates and let our savings work for us, then maybe we could generate a demand based on savings. Low interest rates are useless if no one is borrowing.

[Deja Q]

14. Low interest rates are useless if no one is borrowing.

Which doesn't explain why it's more difficult than ever to get credit (house, car, student loans, shopping cards)

If Liz Pulliam-Weston from MSN is right (google 'credit card myth MSN $9000' and the article should be toward the top... or this one)

[Initech]

16. If we ever get these oil-shilling motherfuckers out of the white house...

then maybe we might have a chance. Come on, Congress, get off your asses!