While we dodged a bullet, however, there are between one and three more bullets headed our way.

First, housing has further to fall. There’s been a further plunge in building permits and starts since the credit crunch began in August; these take a while to be reflected in construction spending, so there’s a fresh hit to GDP definitely in the pipeline. Even now, residential investment as a share of GDP is only down to its long-run average; you’d expect it to fall below that average for an extended period.

Second, there are hints of a slump in business investment, especially commercial real estate, which seems to have had a bubble of its own and is feeling the effects of the credit crunch.

Third, there are hints that consumers have finally started to cut back. On the other hand, exports still seem to be growing fast. So I’m actually uncertain about where things go this year.

The price of a barrel was below $25 as recently as 2003 and, almost unimaginably, below $11 in 1998, a time when there was a glut in the world oil markets.

Booming economies in recent years have led to more consumption of oil-derived products like gasoline, jet fuel and diesel. Political tensions in countries like Nigeria, Venezuela and Iran have threatened world supplies, while important fields in Mexico, the United States and other countries are aging and producing less.

Big oil companies, though flush with cash from record profits, are having trouble finding promising new fields to increase supplies. Newly found fields in the deep waters of the Gulf of Mexico and off the coast of Brazil will take years to develop.

The Bush administration has further tightened supplies by announcing that it would add to the nation’s Strategic Petroleum Reserve in the coming weeks, a move that some leading Democrats have urged President Bush to call off to ease the tight oil market.

Investors and hedge funds have contributed to the run-up in prices. Oil, like other commodities, has become a perceived safe haven for traders who are skittish about the weakening dollar and fallout from the American credit crisis.

Reply
Mr.Cbl January 2nd, 2008 at 11:01 am
15
In response to bigbrother @ 12

7 years of decline of the manufacturing base is far more than political will can fix over night. Our manufacturing might was built on GENERATIONS of federally funded research, affordable education, industry with the will to pay decent wages and keep the keepers of the institutional knowledge until the knowledge was passed on to the next generation, build and maintain ifrastucture, not to mention spend the time and money to build an orginization that could compete and dominate on a global scale. That and so much more is GONE. Alternative energy is great as a talking point but please don’t believe that we can crank it up like we used to.

Oh dear. You see it that way, too?

Re who’s responsible: probably every Chief Executive since Carter. Remember the scoffing when he said something along the lines of “freeing ourselves from our dependence on oil is a moral obligation equivalent to a war”? Now that I try to remember what he said, I don’t see where ‘war’ entered into it, but the effect at the time was to evoke derision, which probably scared off anyone else from broaching the question. Not that Ronny ever would have, or Bush 41. And Clinton liked the middle-ground too much.

Is AM-CHI still there? I didn’t notice. There’s a good bookstore and Newberry comics, and a reasonably priced italian restaurant with nice seating on the second floor. Barsie’s is gone! Judies expanded in its space.

We went to Alpha Delta Thursday – the frat behind the Harlan Fiske Stone stone, near Hastings.

Is Zeta Nu still there or is it one of the three frats that were raised on the right side of N Pleasant heading toward UMass? What was the name of the frat made of white brick on the left side of N. Pleasant heading toward campus from town? I had some cutter friends (ARHS) who were members. I think it became the Hillel House eventually, doomed to closure resulting from chronic excess.

Russells is about the only thing still on that block, even from my days in the 80s.

But the fed gov’t still enables oil, gas, petrochemicals via tax structure.