I found this American Politics Journal - Be Ready for $400-a-barrel Oil... And Worse! provoking article today. This more and more reminds me of a classic financial bubble.

May be a speculative article. Here are

Some facts:

1. Yesterday DJIA fell below 11 000 for the first time in some years and it has now moved into bear territory,
2. The US (still the worlds largest) economy may be in a recession and there are some fundmental long term imbalances according to a Cnn interview with Larry Summers (Treasury Secretary for Bill Clinton) Jeff Sachs (Director of UN Millennium Project), and Paul Krugman (op-ed columnist on economy for The New York Times). Personally, I agreed most with Jeff Sachs in that very interesting Cnn interview.
3. Some releated links:
   
   Recessions and Depressions: News & Videos about Recessions and Depressions - CNN.com
   
   National Economy: News & Videos about National Economy - CNN.com
   
   RealClearMarkets - Topics - Economy

So the market combined with acellerated research, investment in and use of alternative energy resources may fix the bubble itself.

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It would be difficult to justify $400 per barrel oil, at $400.00, it simply will not be used in many circumstances where it is currently used.

Check out the GDP/bbl stats. You can see that there is quite a bit of economic production occuring below the $400 GDP/bbl mark which by definition will be quashed.

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Just imagine how much increase in price for other commodities will happen if ever we reach a $400 per barrel price in oil. More people will become incapable of sustaining the cost of living expense.

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My bolding.

Economics is not always about rationality. There is nothing new under the sun in financial markets. Here are some classic book recommendations.

1. Reminicenses of a Stock Operator (1923) Edwin Lefevre.
2. Extraordinary popular delusions and the madness of crowds by Charles Mackay (1841) and Confusion de Confusion by Joseph de la Vega ( 1688 ). Martin S. Friedson, Editor.
3. The interpretation of Financial Statements (1937) by Benjamin Graham and Spencer B. Meredith. New introduction by Michael F. Price.

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With Cheney and Kissinger working Rockefeller lunacy any fraud or another "fake war" can happen, even WWIII.

These guys have to make up for all the banks going under due to their oil market rigging some how !!!!

These criminals should all be put behind bars, all of them !!!

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According to Cnn news:
90 billions of barrels of oil in the Arctic according to Arctic Circle (if that is the correct one).

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The oil companies and the conspirators they hired in the White House are responsible for US bank failures, hyper inflation, GM, Ford and Chrysler going broke, record consumer debt, record government debt, record trade deficits and record budget deficits.

Yet Americans still will vote for the criminals represented by John McCain while they lose their homes and retirements !!!

America is being taken for a ride and it's citizens are sitting back while con men steal everything they have while their congress does nothing to stop the Houston Oil Criminals.

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Where?

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Everywhere

You are an economist who does not know about food production ???

Did you miss the fact that fertilizer is made from natural gas and that the entire world is dependent upon "modern agricultural farming technology" due to flawed methods taught to farmers ??

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One of the most elementary errors in economice is confusing absolute and relative prices. Inflation is an increase in the general price level. Hyper inflation is what Zimbabwe now experiences.

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So world record oil and food prices are just regular inflation to you KGun ??

So are record steel and copper prices and world record prices in many other commodities just a "regular general increase in prices" ??

What is happening in Zimbabwe is outright fraud, but so is what happened in the USA under Bush and Cheney !!

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Its inflation, I think its fair to say that the economy is experiencing 'stagflation'

Hyperinflation - Wikipedia, the free encyclopedia

On that article there is a picture of a German woman burning Marks since the marks burned longer than the firewood it could purchase.

You can even see past inflations in some former currencies, ie. at one point in time there was a 1,000 lira note in Italy (which was worth less than a dollar), but they treated it like you would a dollar bill. Same thing with the Turkish lira which had million dollar denominations until they just recently chopped off some zeroes.

Bush & Cheney do not control the money supply. If you want to stop inflation, the Federal Reserve can simply raise interest rates and keep raising them until it stops. They obviously have not been doing that....

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Quoted from your Wikipedia article:

In economics, hyperinflation is inflation that is "out of control," a condition in which prices increase rapidly as a currency loses its value. Formal definitions vary from a cumulative inflation rate over three years approaching 100%.

Some prices have gone up much more than 100% in the last 3 years.

What was a barrel of oil when Bush took office?

It topped out near 150 per barrel.

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Its based on a basket of goods, not just one or two.

Rates on 30-year mortgages jump sharply - Real estate - MSNBC.com

Its a chart of the 30-year mortgage rates over time. By definition, inflation must be below that rate because no bank would lend money at say 10% over thirty years if the inflation rate were, in actuality, 20%.

Inflation has its concerns, but there are winner and there are losers in inflation. Those with incomes not keeping up with the inflation rate obviously see their real incomes decline (the data indicate that indeed this is the case in the US since about 2001 or 2002)

Those in 'fixed' debt situations do better as the debt begins to shrink in real dollars.

Some people are in both camps, inflation helps them and hurts them. Take for instance a salaried worker with a large 30 year mortgage whose wages are not keeping up with inflation (this hurts him); but the inflation helps him because it reduces the real impact of the debt and the debt payments in real dollars over time.

Inflation also tends to hurt investors and discourages investment inasmuch as the projected cash flows are inherently more difficult to predict and the value of those future predicted cash flows is less than in an economy with less inflation.

Yes, the US is experiencing inflation. We are in the midst of a 'stagflation' recession. But it is NOT hyperinflation (at least not yet). The US went through a very similar economic episode in the late 70s, double digit inflation, double digit unemployment, double digit interest rates....

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Over 95% of the people in the US with home loans are making those payments each and every month.

The people who are going to be bailed out are;

* People who knew they were buying more house than they could afford.

* People who got home loans in spite of bad credit ratings.

* People who bought the house, took out the loan, and moved on in knowing full well that they wouldn't be able to make the payments when the interest rates went up.

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Janeth, major banks and Wall Street firms are failing due to the mortgage crisis, Ford and GM are closing plants and have lost billions.

So the situation is getting worse, not better and foreclosures are still moving up at a very fast clip.

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Ford and GM have been closing plants and loosing money since I was old enough to understand what everyone was talking about.

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Look up the following measures of the general price level.

1. The GDP deflator.
2. The consumer price index.

Inflation is defined by an increase in the first or sometimes the second.

The FED has another much used concept, core inflation.

Hyper inflations is experienced when the real forces in the economy are decoupled and there is a direct link between the increase in the money supply and the price level like that Zimbabwe experiences now. Hyperinflation is a monetary phenomena.

Enjoy chapter 9 of this

Nonstationary Time Series Analysis ... - Google Book Search

book.

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Don't worry KGun, inflation will become deflation as we go into depression, when no one has cash prices drop drastically, the main thing fueling inflation is fraud and commodity market speculation in energy sectors, but this will crash soon, bet on it.

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Oh, kgun, sometimes things are written in a way that is three times more complicated than they need to be.....

simply put Zimbabwe is printing money and A LOT of it...although on the bright side 100% of the population are 'billionaires'

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Inflation is used to tax the people, inflation tax. There is a related concept, seigniorage.

"Seigniorage can also refer to a form of tax levied on the holders of a currency, and as such a redistribution of resources to the issuer. Expansion of the monetary base, by issuing currency, can however induce inflation and a government relying heavily on seigniorage as a source of revenue will find it counterproductive in the long run. Examples include the hyperinflation in Germany, during the 1920s. Most governments opt instead to raise revenue primarily by taxation, thereby preventing excessive inflation".

Source: NationMaster - Encyclopedia: Seniorage

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This is absolutely true and you can see the government incentive to create inflation in a number of different scenarios.

The government is a net debtor, to the extent that inflation is higher, the less 'real' dollars the government will have to pay back.

Many government liabilities (other than debt) are fixed or adjusted in accordance with the CPI. (think Social Security)

Bracket creep - the Federal Government taxes income progressively. The more you earn, the greater percent of your income will be taxed. Assuming arguendo that real wages keep pace with inflation, this is a great way for the government to 'increase taxes' WITHOUT increasing taxes.

While I am way to busy to conduct an empirical study; I have a very strong feeling that the government is grossly understating inflation (I believe by 2-3% points). It has a strong incentive to do so. By understating inflation, the Fed will keep rates low (reducing government borrowing costs) and the government social payments adjusted for CPI will not increase as much as they should.

Frankly the government shouldn't be entrusted with tracking inflation, its an inherent conflict of interest.

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That is called money illusion where people look at nominal and not real values.

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Face it KGun, fraud in the oil markets caused all of the problems we now face, Bush and Cheney set up the entire world for a fall as front men for the Houston Oil syndicate, they still have designs on Iran, to control that government, which all along was the true goal, they are using the proxy state of Israel as a false front for their continued war mongering and oil market control lust. The entire problem here is that Putin has his hand on the trigger and will not just sit back and watch us attack Iran.

The problem with this Iran/Iraq blundering that most Americans don't understand, is the fact that this situation is creating vast wealth for our enemies, Putin does not care if the war goes on forever, he is laughing all the way to the bank as oil prices enrich Russia and their partners in Iran while Bush and Cheney still look for ways to start WWIII by bombing Iran before the American elections put them out of power.

This entire fraudulent Iraq War was intentionally orchestrated by Cheney who as former defense secretary and Chairman of Halliburton has gotten filthy rich from taxpayer money by signing no bid contracts with his "former company" to provide services and support to the military effort.

America is Trillions in debt with the largest budget deficits in the history of the world for any government, China and Japan are financing our wars, but the well is going to run dry soon when China stops purchasing US Treasury bonds leading to a default of the US government itself.

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So the best for you would be to create a global (hyper) inflation to depreciate that debt. I think you would get problems with Ben S. Bernanke.

<cite>
See my 11 and 24 December 2007 posts. You agree with Jefferson, "banking establishments are more dangerous than standing armies". Matthew 21:12-13 has Jesus disbursing the money changers.
</cite>

My bolding.

Answer
<cite>
It seems to me that identifying the central banks as the culprit erases the distinction between central banks in these different countries. The central bank in China is not the same as the Fed, even if it has parallel functionality, because it has no political independence at all.

Whatever the Chinese central bank does has to be understood as a policy action of the central government.

One problematic issue of globalization which tends to be disregarded is the difficulties creating by the economic integration of such different political systems. In this instance that means that the issues of mercantilism and the currency peg are much bigger than the financial architecture (unfortunately).
</cite>

Source: Interfluidity :: Central banks are dangerous

"His opposition to the Bank of the United States was fierce: "I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."[34] Nevertheless Madison and Congress, seeing the financial chaos caused by the lack of a national bank in the War of 1812, disregarded his advice and created the Second Bank of the United States in 1816".

Thomas Jefferson - Wikipedia, the free encyclopedia

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The War of 1812 underscored the inherent weakness of a central government. The result of the conflict was 'Status quo ante bellum' and frankly at the time of the signing of the Treaty of Ghent the United States was lucky to get it (The Battle of New Orleans hadn't happened yet). When declaring war on Great Britain Madison was hoping that the ongoing conflict between England and France would keep the British preoccupied which would permit the (on paper at least) numerically superior US to strike where the British were weakest (Canada). The problem is that the New England states didn't really go for it and essentially failed to cooperate with the Federal government. Many milita failed to cross into Canada and governors such as Caleb Strong (Massachussets) were outright defiant.

Ironically, those defying the Federal Government were the Federalists themselves (a little hypcritical, huh?) and they wound up holding the Hartford Convention just prior to the end of the war, which when coupled with the end of the war and the news of the victory at New Orleans completely discredited the Federalists for the election of 1820.

While the Federalist Hartford Convention turns public opinion against the Federalists, their 'core' belief of a strong Federal government is vindicated inasmuch as the US effort to focus the nation's energies is frustrated militarily, politically and economically (they had difficulty raising money for the war). The initial cause of the war was ostensibly 'free trade and sailor's rights' (essentially decrying British impressment policies and the Continental blockade of Napoleon); the only military objective the US could conveivably attain was the conquest of Canada (Britain was far too strong at sea) which it utterly failed to accomplish.

After the war, of course, the US essentially 'forgets' these salient facts and 'declares victory' (as a result of New Orleans which occurs after the war is officially over of course) in its 'Second War of Independence', ie. 'we win because we stayed independent', which was complete nonsense because it was never a British war aim to reconquer the US.

Ahhh, I digress, but but history is history.

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The American people elected a new congress in 2006 to get rid of the criminal syndicate operating out of Cheney's office, the Democratic leadership under Nancy Pelosi did little to oust Cheney from power other than being content to allow the moron to play out his string.

Here are today's headlines:

AP - Consumer spending, after adjusting for inflation, fell in June as shoppers were hit with the biggest increase in prices in nearly three decades.


GM, Ford and Chrysler going broke.

American government in danger of default and shutdown !!!!

Exxon and Chevron make world record profits for any corporations in history (Exxon).

Bush and Cheney transfer US treasury to friends and family accounts.

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Exxon's profit margin stood at 10% for 2007, which is hardly out of line with the oil and gas industry average of 8.3%, or the 8.9% for U.S. manufacturing

Yet if its profits are at record highs, its tax bills are already at record highs too. Between 2003 and 2007, Exxon paid $64.7 billion in U.S. taxes, exceeding its after-tax U.S. earnings by more than $19 billion.

What Is a 'Windfall' Profit? - WSJ.com

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I agree with Janeth, if you calculate what the profit margin of U.S. oil companies is compared to the profit margin of most other large U.S. companies, their percentages aren't really that high. And if we penalize oil companies in the U.S. further, then we are really doomed to dependency on foreign oil because U.S. oil companies will have less incentive to drill and perform expensive R&D.


-Stephanie
Trials

Federal and state taxes account for a greater percentage of the total sale than oil company profits.

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Yup, it's not the oil companies making a huge profit, it's the government.

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Here are the facts about where Exxon sends cash, to enrich shareholders at the expense of consumers, while plotting with Cheney to rig oil markets.

They also financed lies against John Kerry to help install their boys in the White House, now you tell me what is more criminal than the Houston Oil Mafia !!!

The government was forced to bust up Rockefeller's Standard Oil which was a monopoly, but the Rockefeller's have found a new way to monopolize the oil trade, that is by placing shills in the White House to take care of the government for them.

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Nationwide, combined federal and state taxes averaged 56.4 cents a gallon (obviously the state portion varies by state). The federal and state tax tends to be a flat per gallon tax, so as the price of a gallon of gas his increased, the tax portion, as a total percent of the sale did decrease. Yes, the oil companies make a TON of money, no doubt, but that doesn't mean that the oil companies share of each gallon of gas sold has 'always' (meaning as far back as I can remember) been less than the government's economic interest in taxing it.

Exxon runs on a 10% margin, meaning for every dollar they sell they earn a profit of $.10 - if I ran my business on that margin, I'd be out of business.

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I guess you folks missed the part about:

Exxon generating World record profits for any corporation in the history of the human race !!!

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My opinion:

1. There is a strong relation between the ongoing wars and the high price of oil.
2. There is a relation between wars and inflationary pressure. Historically wars have been financed by printing money, that is taxing the population via inflation tax.
3. Related links:
   
   Cookie Absent
   
   F. A. Hayek
   
   Reviewed work(s): How to Pay for the War. by J. M. Keynes
   
   The Economic Journal, Vol. 50, No. 198/199 (Jun. - Sep., 1940), pp. 321-326 (review consists of 6 pages)
   
   Amazon.com: keynes: how to pay for the war
   
   
   KW Search:
   
   How to pay for the war
   
   This is elementary economics.

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China is financing our entire government when they buy Treasury bonds with our money sent to them so we can import goods from China.

The government is in default right now, the Federal Reserve is working a cover up to avoid a complete panic and run on American banks.

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Hyperbole, more like foreigners own 40% of the T-bills out there, but the point is taken.

Congress has demonstrated, time and again, that it lacks fiscal responsibility.

Perhaps this sort of spending can be declared unconstitutional as applied to the future generations?

Wanna buy a T-bill, sucker? - By Daniel Gross - Slate Magazine

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Iraq's oil profits huge while U.S. shoulders reconstruction, GAO says - Yahoo! News

"Iraq has benefited handsomely from this year's surge in oil prices and is well-positioned financially to shoulder a greater share of its own economic and security needs, the U.S. government's accounting watchdog concluded in a report released Tuesday."

Hmmm, looks like they're trying to shift the cost elsewhere to me. That's another way, I suppose.

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33% ownership of the stock of a public company is enough to give control in most cases.

So what does massive offshore ownership of our debt really mean to the American citizen and the future generations that you mention ??

Warren Buffet mentioned many times that Americans will one day be sharecroppers on land owned by foreigners !!

That day is here when our largest bank, Citibank begs UAE for money to stay afloat, even Cheney is moving Halliburton to Dubai to escape congressional investigations.

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Well, I suppose we can agree on the statement, "America for Americans" ? Or perhaps that we know more about Kandahar than any American ought to know?

Set America Free

Just curious, are you looking to get out of UN/NAFTA/NATO?

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Look, the Russians and the Arabs are laughing all the way to the bank and taking full advantage of the greed of Cheney, they have all the power today, given to them by Kissinger policy worked by this administration.

To these people Americans are fools, just a market to be exploited, the largest market of suckers who have sat back and taken it, got ripped off, lied to by a party, the Republican party who stole the last two Presidential elections and trillions of dollars in the last 8 years.

America was built on MANUFACTURING MIGHT, until we get that back, we will continue to suffer, Republicans are anti-union and have driven all the union jobs offshore.

We need a pro-manufacturing and pro-union stance in this nation or we are doomed, Americans will buy American if they have decent jobs that pay more, this requires tax law changes and trade legislation.

I think we should work with the UN, Europe, Arab nations and trade fairly with all, as far as dropping out of NATO, I think Europe could not care less if we do, but I highly doubt it will ever happen.

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Is this fact or own speculation?

And which nation dominates the digital age? Microsoft, Google, Yahoo, eBay, Amazon, ...

IMO you will come out of this crisis economically stronger than ever. The internet fits seemless to your open free enterprise economy.

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The US government has been in unofficial default for years, do you know the national debt number ??

The function of the US government is to cover up the massive fraud of Wall Street and the Banking system where trillions are stolen each year.

Where and who do you think the Trillions are diverted to KGun ??

There is an old saying, there are two types of people, taxpayers and tax spenders, which side do you think Cheney and Bush Senior are on ?

Remember the savings and loan scandal orchestrated by Bush Senior ??

THE SUSPICIOUS TRAIL OF DENVER S&L FAILURE [Free Republic]

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No, it would take me some seconds to look it up, but as far as I understand it is not alarmingly high as a per cent of your GDP. As far as I understand your unbalanced trade with China is your biggest problem, but you (eBay) earn much money on selling Chineese goods all over the world. There is no serious global competitor to eBay.

And my view is that you Americans pay too little in tax. Don't discuss taxes with a Scandinavian economist trained in thinking within the Scandinavian model that has combined a high tax level with relatively high economic growth and welfare.

G(overnment) spending - T(axes) = The budget.

Haavelmo's balanced budget theorem says that the absolute magnitude of the budget is important. A balanced increase in the budget is expansive, because the positive multiplier effect of increased government spending is greater then the negative effect of tax increases.

Haavelmo is also responsible for the famous Keynesian "balanced budget multiplier theorem" (1945).

This is an authorative site for some economists.

Related link: Theory of Investments

AVC, you talk to a Scandinavian economist.

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Economics is not the problem here, fraud and corruption is KGun, this is what we have entrenched at the highest levels of government in the USA.

Lawmakers are not doing their job, the judicial system is corrupt and is in bed with the crooks, justice is not working, it is broken and the citizens of the USA and the world should demand better.

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In accordance with Haavelmo's Probability approach in Econometrics (an exellent Dr thesis cited in a link in a post above) I urge you to test your hypothesis before you publish them as facts here.

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Federal, State, Local$4,401.435.4

That's 35.4% of GDP

You guys are over 50%, Sweden/Finland's per capita GDP is lower than US; Norway is higher, but don't you think that oil bubbling out of the ground is helping?

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Yes to the last part of your statement, but sometimes an even income distribution says more about the welfare level and you depreciate much of your capital equipment (production) abroad.

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For purposes of calculating the Gini coefficient, the United States calculates income BEFORE benefits. Those programs (Medicaid/Medicare/Social Security/Food Stamps/HUD) aren't exactly small either (You're looking at well over $500 billion plus per year)

The problem is that you're advocating for something that is contrary to a fundamental American idealolgy. In Germany, they have a concept of 'Sozial Ordnung', Scandanavia has the 'welfare state', but the US has 'rugged individualism.' Much in the same way that imposing the 'American model' on a country that values collectivism wouldn't work; doing the reverse isn't going to work either.

In my mind, collectivism is nothing more than the subjugation of the individual to the group.

The Audacious Epigone: Government spending as a percentage of GDP by country

Frankly if government expenditures are in excess of 50% of GDP, don't you think that system is closer to socialism than capitalism?

Find out what happens here if you call somebody a socialist.

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No. There is also a saying in the Central Bank of Norway where I worked, that there is no more capitalistic institution than our government (read Ministry of finance).

Yes I know. Even worse, some of you mean that people that disagree with you and say their meaning is an enemy of the USA. At least the Bush administration have contributed to that impression.


Let us take two extreme opposites:

1. Command economy a la former Soviet Union.
2. Turbo Capitalism a la (former) Hong Kong.

In the middel you find a mixed economy a la the Scandinavian countries. In the first there are no economic cycles. In the last there are extreme cycles (booms and recessions). System 2 above may have the highest long term average production level, but at a price since social security is individual and some times bad.

It has been said that "The road to hell is paved with good intentions," but I think Aristotle once said that there is a golden middle way.

And don't forget my above statement about our Ministry of Finance.

Now Kristin Halvorsen from Sv (Socialist Pary) is our Finance Minister, and I think she has adopted the same procedure as last year from the academia in the Ministry.

The coalition is called red (the complementary color for a color blind to) / green.

<side note>
IMO: The axis of evil go through people and not between people.
</side note>

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