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246 comments on DrumBeat: May 24, 2006

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john milton on May 24, 2006 - 9:48am Permalink | Subthread | Parent | Comments top
So, When the year is up and folks fuel bill jumps by say 50% (assuming that the pump price is at $3.5 / gal then) that would be at the same time that lots of them have to refinance their ARM on the McMansion and find that monthly payment steps up by 50% also. Maybe just to put a head on it they will be hitting personal "peak debt" at the same time due to credit card "max out", so they now have to pay for the "other stuff" like food for example, with cash rather than plastic... Lets add that cash outflow step function on top of the other 2. Sounds like a "perfect storm" to me.
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Todd on May 24, 2006 - 10:04am Permalink | Subthread | Parent | Comments top
Well, as long as we're going for the gusto, let's throw in the tanking US$ which will drive up the price of all those imported goodies they have to have.
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Darwinian on May 24, 2006 - 11:16am Permalink | Subthread | Parent | Comments top
The Dollar index, which is the dollar measured against a basket of all other major currencies, sits at .85 today. This is a drop of .04, from .89 where it sat at the beginning of 2006. However at the beginning of 2005 the index sat at just above .81. It goes up and down. There is no reason to believe that the dollar will not recover as it usually does.
http://futures.tradingcharts.com/chart/US/W

The ultimate cause, but not the proximate cause, of this oscillation is the inflation rate in the US as measured against the inflation rate of the other currencies. If our inflation rate is higher than theirs is, the dollar will drop, otherwise it will climb.

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BrianT on May 24, 2006 - 11:18am Permalink | Subthread | Parent | Comments top
In the short term. In the longer term, the fundamentals will win out.
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Darwinian on May 24, 2006 - 11:21am Permalink | Subthread | Parent | Comments top
Yes, the fundamentals will always win out in the long run. However the inflation rate in the US verses the inflation rate in the rest of the world ARE the fundamentals in this case.
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BrianT on May 24, 2006 - 11:30am Permalink | Subthread | Parent | Comments top
No. The fundamentals are the current account deficit (mainly) and the fiscal deficit. The published inflation rate in the USA doesn't have the credibility it once had.
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Oil CEO on May 25, 2006 - 1:59am Permalink | Subthread | Parent | Comments top
How are they measuring it? The credibility, I mean. And where do they publish it? Somewhere near the American League East box-scores, I hope.
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BrianT on May 25, 2006 - 7:34pm Permalink | Subthread | Parent | Comments top
Don't believe everything you read.
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tate423 on May 24, 2006 - 11:39am Permalink | Subthread | Parent | Comments top
Real inflation is approaching 10%.  Our own Fed doesn't get it right, so why should I trust any inflation number coming out of any other country?  Bottom line is countries are becoming more disinterested in our money, so the Fed is monetizing the debt.  Any other countries doing this?  I don't know, but if not I think it's safe to say we will have higher inflation than most any countries.
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Darwinian on May 24, 2006 - 11:49am Permalink | Subthread | Parent | Comments top
The published inflation rate does not matter. What matters, what moves the dollar verses other currencies is the REAL inflation rate. Currencies will always seek their own level in the world marketplace. When the dollar buys less in overseas markets, that means it is inflating faster than other currencies, therefore it will fall. If the dollar buys more it means the dollar is stronger, or rising if you will. Published reports count for nothing, real buying power, currency verses currency, determines the level of all currencies.
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tate423 on May 24, 2006 - 1:13pm Permalink | Subthread | Parent | Comments top
I completely agree.  I'm pointing out that the published rates do not jive with the reality, that's all.  So real PPP is determined on a micro level every day.
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Apuleius on May 24, 2006 - 11:25pm Permalink | Subthread | Parent | Comments top
Those fundamentals include all sorts of emerging problems around the world. China has a bad loan and corruption problem. The euro is causing all sorts of problems by making the European countries have roughly the same interest rates instead of letting them float. Not a problem in America because people in America move. But Europeans stay put even if their home country's economy is in the pits (relatively speaking) and so the euro has them kicked in the shins pretty bad. Then you have Chavez making every economy around him jittery.

So in other words, the dollar won't tank, but for reasons that don't leave much for hope.

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DIYer on May 25, 2006 - 8:08am Permalink | Subthread | Parent | Comments top
In the long term, you die.

Meanwhile the 'invisible hand' is gonna slap you silly.

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wstephens on May 24, 2006 - 11:42am Permalink | Subthread | Parent | Comments top
If the dollar index makes a little rounded bottom at 85 on your chart then the "chartist" could see this as a head-and-shoulders bottom (on the monthly chart). -- Shoulder early 2004, head late 2004 / early 2005, and shoulder mid-2006 (now). BTW, I am not a chartist.
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AlanfromBigEasy on May 24, 2006 - 10:12am Permalink | Subthread | Parent | Comments top
You forgot the increase in their utility bills.  

Most thermostats do not go high enough to make cooling said McMansion affordable with higher NG prices for those that have NG fired utilities.

And heating ??

Oil, natural gas, electricity, propane.

Chose your poison if local wood is not a viable option.

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tate423 on May 24, 2006 - 10:23am Permalink | Subthread | Parent | Comments top
Time to pile on...

Think about the lowly folks in our society.  Not the poor, but the working high schoolers.  I worked in high school and I did so to have cash in my pocket and a car.  That will come to a stop.  Imagine when gas is $5 a gal and those high schoolers are getting paid 6-8 hour or something around that.  If they are spending an inordinate amount of cash on gas, I think many start questioning if it's worth it.  

The parents can drive them around, but what teenager wants that?  I think many will be swallowing pride to keep a job.  But it gets worse because the parents are also paying those prices and they are also making adjustments.  So how long does mom & dad cart them around in their busy lives?

When  I worked I was using those funds to pay for gas, insurance, & savings.  I saved a ton of money, but more & more will be spent on gas.  Discretionary income left over for these teens will be spent because they will try in vain to keep up with the Jones's around them.  

Restaurants are seeing the first of cutbacks in consumer spending.  People are eating out less which I surmise employs a large % of those high schoolers.  So business is slowing, paychecks may be shrinking, & gas is increasing.

There are far more people in the bottom & middle (income), so I wonder how long everything ho hums along with no one stopping to complain.

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homebrew on May 24, 2006 - 7:41pm Permalink | Subthread | Parent | Comments top
Teenagers might have to OMG, RIDE THE BUS!!!
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R W Reactionairy on May 24, 2006 - 8:32pm Permalink | Subthread | Parent | Comments top
Or ride [gasp] two or maybe even four in a car ... or cut totally optional mileage by half ... or get a bicyle or that is too un groovy even a motorcyle ... or [well you get the picture.] The horror of it all!

BTW, it ain't just the kids. If Americans adults analyzed what they were doing in terms of driving and managed that mileage / fuel consumption downward through car pooling, reasonable use of public transport and combining trips, the reduction in usage would IMO be be a very big number.

BTW, that these behaviors have not become second nature is an indication that the pricing point at which pain is clearly evident has not been reached. Further evidence is the fact that U.S. pump prices are very low by European standards.

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Oil CEO on May 25, 2006 - 2:44am Permalink | Subthread | Parent | Comments top
Ride the Bus! Oh My Firkin God ! 95 cents!? I'll skate to the beach, and look better doing it.
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Oilrig medic on May 24, 2006 - 10:24am Permalink | Subthread | Parent | Comments top
Alan,

  I saw your reply on the stale thread...I stand by my post.  The entire chain of command was responsible for not doing enough but this does not remove personal accountability to new orleaners.  All americans have a "It can't happen to me" attitude.  When there is a disaster self rescue is the preferred method.  

Chance favors the prepared mind.

matt

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fallout on May 24, 2006 - 10:40am Permalink | Subthread | Parent | Comments top
The Mormons (LDS) have a scripture I enjoy a great deal:
"If ye are prepared ye shall not fear."
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Oil CEO on May 25, 2006 - 3:43am Permalink | Subthread | Parent | Comments top
This is odd. At first I was going to joke, and then I read it again and got smart. Now I have a serious question. Or more. Are the Mormons Christians? If so, why are their scriptures different, and how are they different? Oh, now you've really pissed me off, I can't remember which book had that great piece on the midwest and Kansas, so now I have to go search the internet. Where the hell is Don Sailorman man you need him?

The other question is. Do you watch LOST? Did you see the season finale tonight? Episode should have been named "Prepared and Fear."

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DIYer on May 25, 2006 - 8:14am Permalink | Subthread | Parent | Comments top
Mormons are Christians. I am not a member of the LDS sect, but my understanding is that they believe Jesus came to America back when He was in the Middle East. I don't know if the visits were supposed to be sequential or synchronous.

They have this additional Bible text, written by their spiritual founder about 150 years ago.

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tate423 on May 25, 2006 - 8:47am Permalink | Subthread | Parent | Comments top
John Smith founded it who coincidentally was murdered here in Missouri.  Following that Brigham Young took them to the Great Salt Lake Basin and settled.  I know several Mormons.  They interpret the Bible very different, very literal.
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Oil CEO on May 26, 2006 - 12:54am Permalink | Subthread | Parent | Comments top
As you all know, Mitt Romney, Republican governor of Massachusetts is most certainly running for President. Massachusetts produces both contenders and winners. He is a  Mormon, so this issue will be coming to the forefront soon.
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fallout on May 25, 2006 - 10:06am Permalink | Subthread | Parent | Comments top
I'm not a Mormon, either, but have a few friends who are.
They are most certainly Christians (as the Amish are), but have some secondary beliefs that go along with traditional Christiandom.  
One of their main tenants (of being prepared) is illustrated by the biblical story of Noah and his Ark.
"It wasn't raining when Noah built the ark."

I think you may enjoy this.  Kind of useful, too:
http://www.theideadoor.com/RS/Noah_booklet.pdf

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Oil CEO on May 26, 2006 - 12:48am Permalink | Subthread | Parent | Comments top
I do. I like this a lot. I downloaded it and will be reading it more slowly soon. Thanks. Funny where we get led sometimes.
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fallout on May 26, 2006 - 10:41am Permalink | Subthread | Parent | Comments top
So true.
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246 comments on DrumBeat: May 24, 2006

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