I was in the midst of writing a diary about how there aren't "2 Americas", a la John Edwards, but 3, when it became clear that so much information has become available this week concerning the forces affecting Americans' demand for oil, that it demanded its own diary. Even if the world has reached the plateau of "Peak Oil" and supplies will gradually be rationed at higher and higher prices, there are going to be booms and busts along the way. I'm here to tell you that the evidence suggests that there has been a speculative boom in the last 6-9 months and we may shortly see a bust, echoing the sudden decline of oil from $80 to $55 a barrel just before the 2006 elections.
Average (not median) inflation-adjusted incomes and spending declined in April as average per capita disposable incomes fell back to levels of last summer.
Today’s BEA report on personal incomes for April shows that total PRICE ADJUSTED incomes fell -0.1% as sharp declines in total real compensation of -0.4% and real proprietor’s incomes of -0.3% were only partially offset by a remarkable spike in real rental income, up 12.7%, and government unemployment insurance payments, up 3.7%.
Beware analysts, media and politicians that (still!) ignore the effects of inflation on incomes and spending. Prices rose 0.23% in April.
In the diary below this, my esteemed co-contributor midtowng argues that "we are facing the most serious recession of our lifetime." He notes that while he might be ignored, you ought to pay attention to George Soros, and belittles the politicians and other morons (I guess that would include me) who have argued that this recession might be over by election day.
In the spirit of economic debate on this site, here's what I believe he is overlooking:
1. Soros may be a great currency trader and social commentator but...
"The global capitalist system… is coming apart at the seams". So declared capitalist and arch-speculator George Soros before a US congressional enquiry...*. He has since expanded on this in a book entitled The Crisis of Global Capitalism. What has he in mind?
"This is a period of wealth destruction. The people who make money will be few and far between. There will be a lot more money lost than made.
"I think this is probably more serious than anything in our lifetime," he says. In short, his feeling is that the United States and Britain are facing a recession of a scale greater than the early-1990s, greater even than the 1970s.
If it was someone other than Soros that was saying this (someone like me, for instance), you could probably ignore these sorts of warnings. There is always someone who will yell, "The End Is Near!"
There is a fundamental problem these days with economic policy - US corporations have run amok. No longer do they act in the national interest or even give a pretense of being good national corporate citizens. It's all about profits, maximizing profits. In fact, we are told that is a corporation's only responsibility. But is that really the case or have we been spun a lie so long and often we believe it to be true without question? How does the United States align it's Corporations to the interests of the nation?
Maybe it’s the latest sign of the apocalypse or simply another indication of the continually jaw-dropping nature of the 2008 presidential race. But the biggest reason to question Democratic frontrunner Barack Obama’s commitment to be a major change agent – as this campaign’s signature buzz-phrase would have it – for U.S. trade policy is his failure to pander wholeheartedly.
didn't even really make the headlines, but Minyanville states the obvious:
Months ago this news would have taken out the financials. Bears believe it’s only a matter of time before investors realize the continued stress in the credit markets
I couldn't help but notice the screaming, above-the-fold headline this week in the SF Chronicle, Homes sales get lift, but lid still on prices. It sounded like nearly two years of a contracting real estate market was coming to an end.
The long slide in home sales may be nearing an end, but that doesn't mean prices are going to rise anytime soon.
...some people saw last month's unusually big surge as a sign the market may be bottoming out.
Any time the news media uses the term "some people" is a clue.
As it turns out, the article was not just misleading, it skirted the shaky edge of being an outright lie.
And the tooth fairy creates a million jobs when the kids spend their money,'' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania
This article is in Treasury Secretary Paulson's claim that Bush's economic stimulus would create 1,000,000 jobs.
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