January 16, 2016

THE SUPPLY AND DEMAND OF OIL IS NOT THE FUNDAMENTAL...:

$29 Oil and the Dollar (WSJ, Jan. 15, 2016)

While not ignoring the fundamentals of oil supply and demand, especially lower oil demand from slower growth in China, Morgan Stanley estimated that increasing dollar strength could take the oil price down to $20 a barrel.

The Fed's inevitable unwinding of its post-panic monetary exertions explains part but not all of the dollar's rebound. Central banks in Japan and Europe have been pursuing a devaluation strategy and capital flight from China is causing the yuan to depreciate. As more investors demand dollars, the greenback strengthens and the chances of currency markets overshooting grows.

If oil does fall to $20, the economic pain is likely to be considerable throughout the oil patch and commodity markets. Energy bankruptcies will proliferate. Eventually low prices will lead to cuts in supply and oil will find a bottom. But the carnage might be reduced if the dollar stabilized against major currencies. Meantime, the world desperately needs pro-growth economic policies, but it's hard to see where they'll be coming from any time soon.


...the supply and demand of dollars is, which is why our falling deficit is catastrophic for the global economy.  Alan Greenspan was right : they need the safe haven that only we can provide.




MORE:
Why Isn't Anyone Talking About The Deficit Anymore? (ANDREW FLOWERS, 1/16/16, 538)

Most GOP candidates this cycle aren't even paying lip service to the conservative goal of not adding to the deficit; they're not trying to hide that their tax plans would add billions and in some cases trillions of dollars to the deficit. Mitt Romney's tax plan in 2012 purported to be deficit-neutral. Not so this cycle among Republican candidates, Strain said. "A lot of these candidates, even with dynamic scoring, are just losing so much money," he said. (Candidates of both parties routinely make cosmetic improvements to their tax plans by using dynamic scoring -- the process of factoring in higher government revenue and better economic growth.) And that may factor into how much they're willing to talk about federal debt. "You can't talk about it and then try to make it worse," Strain said.

Perhaps this is simply a reflection of an improving budget outlook. But political calculations surely matter, too. By bringing up the deficit, Republican candidates could be opening themselves up to the retort that it has declined under a Democratic administration. Sure enough, Obama bragged about "cutting our deficits by almost three-quarters" in his final State of the Union address Tuesday night.

And it's not just GOP candidates, either. Members of Congress utter the words "deficit" or "debt" far less frequently than they did a few years back. That's according to Capitol Words data provided by the Sunlight Foundation, which mines the Congressional Record to measure how frequently politicians use certain words.

Total mentions in Congress of "deficit" peaked in 2011 at 8,101. The count declined to 1,543 mentions in 2015. The use of "debt," too, has fallen precipitously since 2011.

Posted by at January 16, 2016 10:38 AM

  

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