My last post described my fear that the current economic situation will become the new American paradigm...one where the generally accepted rules simply don't apply. Looks like I'm right. Witness the following recent Holy Shit! moments:
1. Today, OPEC made the biggest production cut ever...2.2 million barrels a day. What happens to oil prices? They hit a 5 1/2 year low despite the dollar plunging vs. the Euro. Remember, oil is priced in dollars and a weaker greenback means you need more of them to buy it.
2. For the second day in a row, the price of platinum is below the price of gold. Six months ago platinum was approaching two grand an ounce, with gold about half that. Today it's three dollars cheaper than gold.
3. Chrysler is stopping production of all vehicles for at least the next 30 days. Every model. Every factory.
4. The Fed Funds rate is now .25%. It's never been this low. Conventional economics says this is inflationary. But "core " prices, which exclude volatile food and oil, have been flat two months in a row. I remind you, dear reader, that the Japanese government lowered their equivalent of the Fed funds rate to zero...while stuck in an economic meltdown lasting more than 10 years. Didn't help.
5. There are almost 180 banks on the FDIC's list of troubled banks. There were about 20 last year.
These things, according to every economic rule in the book, can't happen. But yet they have. I always said those bean-counting MBA's were full of lukewarm shit. I called this better than they did.
It's a vicious circle. No or shaky job means no buying. Those that want to buy can't get a loan. No buying means no production. This leads to layoffs. Lather, rinse, repeat. All the TARP programs in the world won't help if Economics 101 doesn't work. I'll make another prediction here: We as a country will never be the same. Even when/if things pick up we'll never see things as good as they were.
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