You Bears And Your Stagflation Talk!

In only four months oil's made nearly 20% gain, gold has been one of the best investments of the last decade and you might want to stockpile your Costco food now, if you haven't already.

Unemployment claims spiked about 17,000 last week.

Know what these warning signs all point to?

So hey, I wasn't around in the 70s, but I only grew up listening to the horror stories of Richard Nixon (and yet somehow Ronnie was a saint) and Old Jim Carter, who always seemed to be the one really getting "kicked around" for the gas prices, the rationing, and the unemployment and the inflation--what economists call stagflation, where an economy paradoxically both declines or grows insignificantly, coupled with high inflation.  In spite of Dick Nixon's Price Controls and Vietnamization and the OPEC dollar, things Nixon began doing 6 or so years before Carter got inaugurated.

And look what we have now.  Another mad Imperial President, wiretapping not only himself but the world, with an Iraq surge that, if not in total scale but obsessive quality recalls Vietnamization, is also a multi-billion dollar black hole for the taxpayers.  An economic path cut out of serpentine rock going absolutely no where that's somehow the best thing since Jesus if we're to believe the "free market"eers.  And an energy policy written not de facto by OPEC but literally by Texan and multinational Oil companies.

But they assured us there would be no cost.  (From CNN)

(AP) -- Oil prices have steadied in Asian trading after climbing in the previous session to a record near $120 a barrel.

Traders work in the crude oil options pit at the New York Mercantile Exchange Tuesday in New York.

Crude futures have risen on concerns about unstable supply, firm global demand and a weakening U.S. dollar.

Light, sweet crude for June delivery rose 12 cents in electronic trading on the New York Mercantile Exchange, midmorning in Singapore Wednesday.

The contract rose $1.44 on Tuesday to settle at $118.07 a barrel. The May contract added $1.89 to $119.37 a barrel before expiring Tuesday.

Remember when all of a sudden, $100 oil was here?  If we didn't have such short-attention spans and markedly increasing lack of interest in things not about us, we might, um, be demonstrably outraged as a nation.  However, it'll be some consolation to  see snake oil salesman McCain get thumbs down at the polls in protest.

What's interesting is that, in the wake of the stock market crash last fall, we're now in a situation where gold and oil--commodities--look less risky than stocks and bonds, having returned respectable not only into this year but back even before the stock market boom which began in March 2003 (see also, Iraq War).  During stagflation some of the best places to invest were, incidentally, oil and gold.  Er, not so incidentally.

We all know the dollar is just a little object spiraling around this black hole.  Americans going to Europe are getting financially slaughtered like pigs.  Europeans coming here can feast like pigs.  In a world where money is always somewhat illusory and seems even more so in economic turmoil, finding the most stable, dependable thing seems to be commodities.  I am not a commodities trader, I have no serious connections to the industry, and I do not recommend buying up commodities.  For all I can tell Gold too has broken out of a few too many bases, but I'm not a Gold trader.  I have no idea how long this will last.  But it does mean we're screwed.

"LONDON (AFP) — World oil prices climbed back toward this week's record peaks Friday as traders fretted over threats to global energy supplies in Britain and Nigeria, analysts said."  

You know what happens when tension over oil builds in Nigeria?  People die.  Chevron mercenaries have killed protestors.  Neighborhoods explode because the poor are forced to sneak oil from homemade taps in the pipelines every day.  It's a little bit easier to picture the murder connected to the gas tank when you actually know how it goes down.  This is a country with all the great problems of Sub-Saharan Africa.  Poverty, HIV, diarrhea, malaria, deforestation, seperated Muslims and  Christians, over-peopled, diminishing land and water, mob-inducing fear of witches despite the men of the villages themselves practicing the only real "witchcraft", female circumcision.  It was strained when oil was about half this price about two years ago.

You see, I write these horrible things because I've always had a great love for peoples and cultures all across the planet.  My own and those of others.  Nigeria has strong lyrical traditions, world famous drum music, the cloth designs and the hand art of the Ibo and the Hausa.  An ethnically diverse country with biodiverse rainforest, semi-arid land, mountains, a great river. Two of my favorite writers, Wole Soyinka and Chinua Achebe, both hail from Nigeria.

What financially illiterate and the morally oblivious (many of whom are financial experts) fail to realize is, when the bottom majority of our economic system suffers, these things all get weakened or destroyed.  Children, women, the poor, elders and families on up to indigenous culture as a whole.  In America, by contrast, things keep going on the same as they do.  We're not only tough under economic attack but we have much more stability, and that's the thing we forget.  We won't have to worry about being hacked to death with machetes or fleeing our neighborhoods en masse.  But a global markets crash and inflation can lead to these things elsewhere.

And so these threats are inducing food riots all across the globe.

But hey, let's bring all on back to YOU and ME.  As I was saying about the 70s. Um.  Rationing.  Meet.  Food.

Sam's Club, Costco limit rice purchases as prices rise
The move comes as U.S. rice futures hit a record high amid global food inflation

(AP) -- The two biggest U.S. warehouse retail chains are limiting how much rice customers can buy because of what Sam's Club, a division of Wal-Mart Stores Inc., called on Wednesday "recent supply and demand trends."

The broader chain of Wal-Mart (WMT, Fortune 500) stores has no plans to limit food purchases, however.

The move comes as U.S. rice futures hit a record high amid global food inflation, although one rice expert said the warehouse chains may be reacting less to any shortages than to stockpiling by restaurants and small stores.

Sam's Club followed Seattle-based Costco (COST, Fortune 500) Wholesale Corp., which put limits in at least some stores on bulk rice purchases.

Assuming this single source is right and we don't face a rice shortage, at the least the inflation is causing millions more to go hungry or not eat rice at their typical grain-including meal.  In Haiti, the poorest nation of the Americas, pregnant women eat cakes made out of mud and shortening because the mud is a) something and b) at least has nurtients in it.  Inflation has hit Haiti hard.  Food rioting there, too.

And what of Obama?

The next president is going to be a Jimmy Carter (9+ / 0-)

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as far as how secure their stay in the White House. Unless he's got some FDR-martyred JFK kind of charisma and fandom going for him.  Not even Barack Obama has that kind of insulation yet, and it's foolish to pretend otherwise.  

He will inherit a stagflationary abyssal which we cannot fathom based on our present experience, but would have to look to the past or else deeply imagine.  We are only at the precipice or the stumble into the extreme expense, the rising unemployment, the energy crisis.  The increasing momentum from the fall will be far more terrifying for those left to clean up the economy.

by Nulwee