Quote from traderlivermore:
Undoubtedly, it's better to have people with money surrounding you. Or, an economy with a lot of money and low interest rates. The trouble arises when these resources are inefficiently allocated. Or, in other words, some idea didn't pan out, was out of timing, or, the money is spent in Vegas...
So, if a few investments have negative or no return, you get a downturn. If, the downturn is big, because of the multiplying effects of credit, for instance, you get a big hole or contraction in the money circulating: a recession.
Since there's little money to go around, people have, at times, tried to get it from their banks. But, how stupid of you to ask for --your-- money from a trusted and prestigious bank, they lent it, it's not there...
So, here comes the saviours of the unprotected, the central banks of the world, or your local Fed, pouring the missing bills into the vaults of your treacherous (no misspelling...) bank. Lowering reserve levels, discount, fed rates, you name it... The multiplying effects are 10x and more., 20x...
The system is flooded with money. Unfortunately, easy money, means poor investments in the short run. And you get to start the business cycle all over again.
Did I mention that the banks made a killing playing the spreads, while everybody was choking under a recession... Wonder how that happened?? Maybe it's because cb's are private banks chartered to protect banks, not the little guy!!
Add to this the war (700+ billion) --> government deficit.
Add to this China (the black hole of production synergy) --> trade deficit
Add to this that oil is mostly produced abroad.... (in very unstable places: Venezuela, Saudi Arabia, Nigeria, Russia....)
You get the picture: it ain't looking very pretty.
This bounce out of the recession looks more to me like a dead cat bounce.
But, getting to the specifics of your question:
Oil up --> production down --> oil down --> production up?? maybe.
The problem with our economy in recent years is that it wouldn't be that bad if we had inflation. The trouble is, that the dollars are ending in the Arab countries, Japan, China... And, not in our economy, as the trade deficit clearly shows, which dries up the well of our economy...
Having thrown so many stones at the Fed, I do recognize that they have done an incredible job of placing their notes at negative real rates. Therefore, easing in great amount the pain of this last recession to all of us. Foreign cb's are footing the bill. Have they stopped already? Some suggest they have, which doesn't help much to the overall picture...
To end the litany, an advice: short the dollar!! buy oil!!
