Two weeks ago, Bloomberg showed a graph, going back to 1996, which showed a very high correlation between the Crude Oil price and the US GDP growth. I doubt that the same is true for 1970-1995. Is the cause and effect reversed, i.e., could it be that higher GDP growth leads to greater demand and, hence, to higher prices? It is true, in general, but shouldn’t it impact negatively on other consumption? (BTW, OPEC has made the argument that the world economy doesn’t seem to be impacted negatively by higher oil prices; hence, they can keep the oil prices high).

What I believe has been happening in the US for the past 3 years is that the remedy for all economic ills is to take on more debt. Therefore, when a consumer is pressed in one area with higher cost, e.g., gasoline and heating oil, he, or she, after bitching about it, will borrow rather than cut back on consumption. While, there are some people and companies who do better with higher oil prices, e.g., oil companies. Furthermore, the earnings of the energy sector have given a big boost to the stock market. Thus, the overall net impact of the higher oil prices is to give boost to the economy.

For a large importer of oil, this can happen only in an Artificial Economy.

distractions”!) How come the Swiss and the Japanese, who have lot lower rates, don’t do the same? And what about “the sick man of the Europe”

Germans? Lower rates, in general, are symptom of a long-term weak economy, or low inflation, either one of which would make debt service more burdensome. No?

In Alan In the Wonderlust economy, higher home prices allow Americans to consume more of everything! That, ladies and gentlemen, is the best evidence of an Artificial Economy. Healthy economies don’t function like this; only a sick economy does.

Do you think that Americans are ready for the real economy? Can they handle the real economy? And when they meet the real economy they will call it a sick economy!

Are you ready for 0% short-term rates and 2% long-term rates in the US?

Because, that is what will happen when the Artificial Economy stops functioning. Not too many people will have the appetite to borrow-and-spend.

That is how you will know that we have arrived at the real economy. Where you arrive depends upon what route you have been on and not where you have wanted to go. The Alan In the Wonderlust economy train has been on a winding path that leads to collapse . It has been a bit sluggish in reaching the destination, because of the winding path, but it will get their. Have patience. I would love to see the expression on our conductor Alan's face when he finally arrives at his destination. The man himself may simply collapse.

Jas

PS: As to the Japanese economy, which has sled back into a recession, with a depression like that who needs prosperity! Americans would die for a depression like the one in Japan when they meet the real economy. The lucky Japanese, the vast majority, are enjoying the blessings of a sustained deflation! I love deflation and every sane person I know does the same.

Sustained inflation is the single best indicator of a corrupt and rogue politico-economic system. The Swiss have had the lowest inflation among the Western nations since 1950 and have the least corrupt politico-economic system. The Japanese are so lucky to get a head start and adjust to the real economy while things are not too bad, globally, after having indulged in excess of their own. National savings have its privileges. And so does the national Debt!