oil, economy, and constitutions

We at the height are ready to decline.
There is a tide in the affairs of men
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures.
-- Brutus, Julius Caesar

Little remarked upon has been the price of oil return to $90 a barrel. The last time we saw $90 was two years ago, as oil rapidly retreated from its $147 all time high, with the global economy in full meltdown along side the financial mess. But the more relevant time oil hit $90 was the first, October of 2007, which was the official start of the recession. In watching the American economy sputter and shake as oil climbed mid-decade, the question was at what price does the cheap oil dependent American economy no longer function well? I concluded somewhere around $90 a barrel, which if we're already there, doesn't bode well for vigorous future growth prospects.

Another question is why is oil at $90 a barrel when, as nice piece on Seeking Alpha points out, US oil demand is down 7% from its 2007 historical highs and "developed world is still down 4.5% from its 2007 high, which has led to a substantial increase in global inventories of crude and crude products. We currently have 10% more global inventory of crude products than we did back in 2004 when crude prices started their march higher."

The simple answer to this is dysfunctional commodity markets and the Fed's pumping dollars into a corrupt and dysfunctional financial/banking system. They have to go somewhere, and they're going into equity and commodity markets, creating asset inflation across the planet. Which now acts as a corruption tax on the rest of us, as inflated assets prices are just another way our financial lords extract money from all of us without in anyway providing value to the economy.

We have a dysfunctional/corrupt economy at this point, pretty much in every aspect, and whether its the Fed or the soon to be enacted DC tax cuts, simply pouring money into a dysfunctional/corrupt economy helps matter neither in the short or long run. We have completely missed the high tide of the recent crisis, failing in anyway to change the course our economy has been set on for the last thirty years. Instead we have locked in an economy that works for ever fewer and grows an ever starker line between haves and have-nots -- an untenable position for any republic.

One thing we have seen is the growth of power in the Fed, which has now been institutionalized over the past two years. The most radical element of the tax cuts, and don't kid yourself it's a very radical bill, and may very well, as planned, lead to a short-term funding problem rather quickly. So my suggestion, in two years as the Fed hauls out QE IV, we begin associating the buys with actual programs. So in 2013, as the now perpetual payroll tax cuts cause a short-term funding problem, Ben puts it to the bondholders, "This week's fifty billion is for social security? Yay or Nay?" Ok, I forgot to add we make the bondholders sort of an extra-constitutional senate. And there you have it, as the French say, "voila", a cutting of social security.

So Caesar comes to America, as the old German said, first time tragedy, second time farce.