Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
... in terms of US CPI ... having passed the level of 1979 in terms of US GDP-deflator by about 10% ... and so we are still in the range of the previous response to "2007 consumer-purchasing-power-dollars $100 oil" from 1979, which included substantial improvements in technical efficiency of the private motor-road transport system, until the motor vehicle lobby was able to stall that progress.

Which means that its $5/gallon where we in the US start to hit serious trouble based on the price of crude oil alone.

However, the other change since 1979 is the much greater proportion of crude oil imported from abroad, so that in addition to direct price effects, we are also exposed to direct Keynesian effects from an increase in our trade deficit as a result of an oil price spike.

And that risk could be amplified, if China and other sources of much of our consumer goods are pressed into a position of raising their currency peg against the dollar. With the per unit cost of so many imports held stable, the US has not seen a J-curve effect from its currency devaluations, and so our trade deficit has been tapering off in response to the falling US dollar.

However, if we get the double-whammy on our external account of an oil price surge, and an substantial increase in per-unit price of imports, we are going to lose the primary motor for economic expansion that is offsetting the ongoing collapse of the housing market.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Nov 1st, 2007 at 10:57:46 AM EST

Others have rated this comment as follows:


Top Diaries

The Sciences of the Artificial

by Cat - May 30

City Agriculture - May 23, 2024

by gmoke - May 23

Occasional Series