It seems that after every two minutes of watching Bloomberg TV, I am reminded that crude futures have hit $70 a barrel and are hovering thereabouts. Although this is a staggering price, I really can't say whether it'll dent America's great petroleum addiction. (See the Economist
cover.) Now, Americans have many things going for them, but common sense isn't always one of these. At a time when health care costs are going through the roof, they decide to become lardier than all get out. At a time when an entire (baby boomer) generation is set to retire, they decide to whittle down their savings rate to zero. At a time when oil supplies are pinched, they decide to roil markets with a war of convenience that so far has actually dented oil supplies.
Will the real-estate led consumption binge fed by mountains of debt and boundless unwarranted optimism continue? It's really the country's choice. With a net international investment position of -$2.5 trillion
and counting with no end in sight, painful adjustments are on the horizon. $70 a barrel might trigger a bout of sanity, but evidence so far suggests the party may go on. Delaying the onset of less consumer spending and more saving, as well as investment in things that actually help roll back the trade deficit instead of real-estate, will only make the eventual bitter pill that much worse.
Posted by Emmanuel |
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