Thread: Oil Tumbles as Signs of Slowing Economy Spur Commodity Selling

It's shocking to see so many who remain in denial about the economy, specifically the pundits. Until they see two consecutive quarters of negative GDP growth (a ridiculously misleading metric – see my previous article “How Washington is Fooling You With GDP Data”) they refuse to admit we are in a recession. And the media acts as puppets, repeating these same lines without scrutinizing the data. Who do these people think they're kidding? If you're running a show designed to help investors, shouldn't you be ahead of the curve instead of behind it? Serving as broadcasters for inaccurate data that's been manipulated to fool the public does nothing to aid an audience looking for real investment guidance.

Apparently, even Washington realizes GDP data is highly inaccurate and makes revisions for up to five years. As of 2004, such revisions have already introduced question as to whether there was a recession in 2001. By 2012, we might see data that indicated we were in a recession in 2008. But that certainly won't help anyone except historians who document the Bush era, in what will be remembered as the worst recovery attempt in U.S. history.

By now, even the most financially unintelligent consumers realize we're in a recession. They feel it every time they fill up their gas tank and buy food. They've been patiently waiting for real pay increases. Instead, all they've gotten are a couple of rebate checks from Washington . What kind of charade is this? Giving consumers money you have to borrow from China , hoping they will spend it on goods (most likely from China ) so you can inflate GDP data? You have to be kidding me. I would expect such an approach to fly in some third world country, but not the United States . When Washington sends you rebate checks and tells you to go out and spend it rather than pay off your credit cards, you need to interpret that as an admission that we are in a deep recession.

Even for those lucky enough to have received the standard 2% or 3% raise, they're still making much less than a few years ago due to the inflation data that continues to be fudged. As the data shows, there have been no real median wage increases for eight years. Only now does Bernanke admit inflation is a problem and states there are "significant challenges" to the economy. But still he is understating what to me has been obvious for over two years.

Why didn't Bernanke warn people ahead of time. Why did he wait for all of the blood to spill before confessing the obvious? If Bernanke wishes to play the role of broadcaster he needs to apply for a position on one of the television networks. The problem is that consumers have been fooled into thinking the Fed provides accurate guidance on the economy. Their track record speaks for itself. At best, the Fed is a broadcaster and at worst a cheerleader, much like those seen on TV. And if Bernanke wants to play the role of bailout chief he needs admit that America no longer has a real free market economy. In real free market economies, the risk of failure is present; no exceptions. If companies get in trouble they need to allow the free markets to determine their fate, not taxpayers. Otherwise, all you really have is socialism for corporations.

Always remember, you cannot have a truly strong economy when the dollar is weak. The same holds true (although to a lesser extent) for high commodity prices and inflation. And when you're in a war, things don't get any better, except for the GDP component due to military spending in Iraq – more debt used to boost GDP numbers. Not only has the dollar been weak for several years now, but we've also had high oil and commodity prices ever since the U.S. occupation of Iraq .

Perhaps you recall as I do the excuses made for the dotcom meltdown a few years back. As their only way to escape admission of guilt in creating what was at that time the biggest asset bubble in history, analysts and economists finally started to proclaim “It's the economy stupid.” And yes, in fact it was the economy. It was the inherent weakness in America 's consumption-based economy that expanded the Internet bubble. But it was Wall Street and the media who created the grand illusion that really pumped it up. The economy only revealed its true nature once stripped of these illusions. But soon after, Greenspan re-inked the presses and started the charade again.

Today we see much of the same. America is dealing with the aftermaths of a huge credit bubble. Similar to the Internet bubble, we've witnessed the creation of a real estate-driven credit bubble by the Fed and Wall Street, while encouraged by Washington and the media. And now reality is setting in as we continue to see the true nature of America 's real economy without the grand illusions created by overconsumption. Soon, the economy will become even weaker than after the dotcom meltdown.

Since Bush took office, America has lost millions of jobs, and investors have lost trillions of dollars as a result of the implosion of the two largest asset bubbles in history. Bush's list of records is too long to list. Foreign nations have bought trillions of dollars of critical assets at fire sale prices - from the Chrysler building, to every single bit of America 's once highly acclaimed underwater fiber optic network. Meanwhile, U.S. banks have begged Asia and the Middle East for billions. Where did they get this money? From huge trade surpluses created via spending habits of U.S. consumers. If you think this has been bad, brace yourself for much more, because this is only the beginning.

Continued here:

America's Financial Collapse- It's the Economy Stupid! :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

I agree economy has slowed, but its still chugging along!

^Brit clearly has difficulty reading the quoted article from my post.

However, maybe he is better with pictures. Focus on the following chart:



Source:

St. Louis Fed: Series: BORROW, Total Borrowings of Depository Institutions from the Federal Reserve

United States economy shrinks for first time since 2001

The US economy shrank at the end of 2007 for the first time in six years, according to official figures, leading analysts to speculate the world's largest economy may be in recession.

The commerce department revised its estimate for the fourth quarter to show gross domestic product contracted 0.2% - rather than growing 0.6% as it previously reported. It was the first three-month period in which GDP shrank since growth contracted by 1.4% in the third quarter of 2001 during the last official recession.

The department also reported that GDP grew at an annual rate of 1.9%, up from a revised-down 0.9% in the first quarter. This figure was lower than analysts' expectations of a 2.3% rise in second-quarter growth.

Paul Ashworth, senior US economist at Capital Economics, said: "At first glance, the 1.9% annualised gain in US GDP in Q2 would seem to make a mockery of claims that the economy is in recession. However, given that the Treasury pumped in $91bn (£45bn), or nearly 4% at an annualised pace, in the form of tax rebates during the quarter, the actual outturn is pretty disappointing. It was also below the consensus forecast of a 2.3% gain.

"Moreover, GDP growth in the preceding two quarters was revised down. In particular, the economy is now estimated to have contracted by 0.2% in Q4 of last year, raising the possibility that the National Bureau of Economic Research (NBER) will eventually conclude that the recession began some time during the final three months of 2007."

Recession is popularly defined as at least two quarters of negative economic growth but the US has its own method of assessment, with the NBER's business cycle-dating committee making a judgment.

Consumer spending, which accounts for two-thirds of the US economy, rose 1.5% in the second quarter of the year, up from 0.9% in the first quarter and 1% in the fourth quarter last year.

The department noted that personal incomes had risen more sharply in the second quarter and attributed it primarily to the stimulus payments that the government was issuing to qualifying consumers.

Activity in the construction sector is still plummeting at a double-digit rate. Spending on home building contracted at a 15.6% annual rate in the second quarter, down from rates of 25.1% in the first quarter and 27% in last year's fourth quarter.

In other data released today, the US labour department said the number of workers filing claims for new jobless benefits jumped 44,000 last week. Initial claims for state unemployment insurance benefits rose to a seasonally adjusted 448,000 last week from a revised 404,000 the week before, and the highest reading since April 2003.

(My bold) Anyone else want to argue that the US economy is not in a state of collapse?

Source article: US economy shrinks for first time since 2001 | Business | guardian.co.uk

U.S. Economy: Growth Rate Falls Short of Forecasts (Update1)


By Bob Willis and Timothy R. Homan




July 31 (Bloomberg) -- The U.S. economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, signaling that the country is in worse shape than investors had anticipated.

``We're in a recession,'' Allen Sinai, chief economist at Decision Economics Inc. in New York, said in a Bloomberg Television interview. ``It's going to widen, it's going to deepen.''


Continued at:

Bloomberg.com: Worldwide

...(unless you are called Butterfly and believe that wild-eyed, crazy-hair speculators are to blame):

Oil Falls More Than $2 as Fuel Demand Drops to Three-Year Low

By Mark Shenk




July 31 (Bloomberg) -- Crude oil fell more than $2 a barrel, capping the biggest one-month decline since December 2004, as a slowing U.S. economy caused fuel consumption to weaken to the lowest in three years.

The economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, curbing fuel demand. Consumption averaged 20.7 million barrels a day in the past 12 months, the lowest for the period since 2004-2005, according to U.S. Energy Department data.

``Expectations about the economy have deteriorated, which is weighing on the oil market,'' said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``With demand so poor, we have to re-examine price expectations. The market will be guided by the economic outlook here, in Europe and in the emerging markets.''

Note:

I have put the most relevant bits in bold to enable those unable (or unwilling) to understand these matters (pay attention Messers Butterfly and Britmaverick) to see them more clearly.

Originally Posted by bkkandrew

...(unless you are called Butterfly and believe that wild-eyed, crazy-hair speculators are to blame):

Oil Falls More Than $2 as Fuel Demand Drops to Three-Year Low

jesus, you couldn't be a bigger troll even if you tried

What happened to all those Chinese cars, troll ? or are you a complete flip flop and starting to realize what a complete idiot you have been,

care to explain your price elasticity theory where demand will go up as price rises

^Er, no. The cars are still there, being driven and more being purchased to boot. If you could read, you would have seen that this demand is being negated by the collapse in demand in the US.

It would be helpful if you you sought assistance on reading my posts, rather than commenting immediately after the first word you get stuck on...

Supply and demand. Its really that simple.

GDP Rose 1.9% In Second Quarter


Gross domestic product -- the economy's total output of goods and services -- grew at a 1.9% annual rate in the second quarter, after adjustment for inflation, following a meager 0.9% pace in the first quarter, the government said.

Free Preview - WSJ.com

^As Brit somehow failed to copy and paste the next sentance of the WSJ article, I will do the honours:

Newly revised data showed for the first time that the economy contracted at a 0.2% rate in the final three months of 2007, raising the prospect that a recession ...

Link: Free Preview - WSJ.com

So we are left wondering if Brit was trying to mislead everyone, or if he simple doesn't/cannot read the contents of documents he copies and pastes to the board...

^^ well, it's still not official troll, it's 2 quarter in a row last time I checked, so technically Brit is right, even though a recession is very likely

Originally Posted by bkkandrew

^Er, no. The cars are still there, being driven and more being purchased to boot. If you could read, you would have seen that this demand is being negated by the collapse in demand in the US.

but you said earlier, that nothing will stop oil from rising because of China and India ? are you suffering from short term memory loss troll ? or being caught in your lies and deception again and changing your tunes ? you are fucking priceless, you know that

^^The point was that the revision for Q7 07 was down (as is normally always the case for US GDP numbers), so when Q1 08 is revised the magic number wil be...

Originally Posted by Butterfly

but you said earlier, that nothing will stop oil from rising because of China and India ? are you suffering from short term memory loss troll ? or being caught in your lies and deception again and changing your tunes ? you are fucking priceless, you know that

Oh get a brain. The consumption from Chindia is increasing rapidly and, indeed has increased massively to date. Short-term, the resultant rise in oil price is being pared back by the collapsing US economy, however, when either:

Chindia's rising consumption outstrips US decline

or

US Economy recovers

The rise in price will continue. Unless production is increased significantly (and remember that has stagnated and marginally reduced since 2005).

And there's the rub. The 2008 production numbers are key. Unless the supply shows an increase from the 05/06/07 figure, we have to assume that they cannot increase production (based on the assumption that if you cannot increase at a time of a market price IRO $140/barrel, then you cannot increase production at all).

yeah, yeah, keep dancing troll

Originally Posted by bkkandrew

The rise in price will continue. Unless production is increased significantly (and remember that has stagnated and marginally reduced since 2005).

quoting just in case you re-edit your posts when nailed with lies and mistakes, like you did previously with that IEA thing,

your dishonesty knows no limit, usually the case with ignorant trolls

^And what is wrong with that?

The oil price will, naturally, rise, unless prodution increases to match demand. How difficult is that to understand?

The fact that demand from the US has reduced, due to the collapsing US economy, only delays this fact.

Originally Posted by bkkandrew

Originally Posted by Butterfly

First, demand for oil is price elastic in the long term, not in the short term, as it takes time to adjust oil consumption habits.

It is not possible to state this, as for a large part, new technology is required for the conversion to take place. This technology has yet to be invented, implimented or funded.

Another jewel for posterity, just in case you start claiming you were right all along and never said anything like that

Originally Posted by Butterfly

I don't see riots, I don't see people going bankrupt over oil, all I see, is a reduction in demand,

Blind as well as dumb:

(1) Riots.

Anti-government rioting spreads in Cameroon - International Herald Tribune

China Fuel Riots

Fuel riots: 70,000 Spanish truckers blockade French border, strike turns ugly // Current

BBC NEWS | World | Middle East | Dozens dead in Yemen fuel riots

African scientists call for biofuel moratorium as fuel riots break out in Mozambique : Biofuels Digest

(2) Bankruptcies.

Maxjet shuts down, stranding holiday flyers - SmarterTravel.com

All-business-class carrier Silverjet shuts down - SmarterTravel.com

Skybus ceases operations - SmarterTravel.com

Eos Airlines stops flying - SmarterTravel.com

Aloha Airlines to stop flying by April 1 - SmarterTravel.com

Another one bites the dust: ATA ceases operations - SmarterTravel.com

Originally Posted by Butterfly

Originally Posted by bkkandrew

Originally Posted by Butterfly

First, demand for oil is price elastic in the long term, not in the short term, as it takes time to adjust oil consumption habits.

It is not possible to state this, as for a large part, new technology is required for the conversion to take place. This technology has yet to be invented, implimented or funded.

Another jewel for posterity, just in case you start claiming you were right all along and never said anything like that

So you have invented a replacement technology for mass use of oil then? I think we should be told!

^^ hardly the world world, or big enough to explain the BIG drop in prices

Finished playing with you for today. Have to attend a meeting on 'collapse in demand'. I am sure that the delegates will listen to me a little more attentively than Butterfly.

Originally Posted by bkkandrew

It is not possible to state this, as for a large part, new technology is required for the conversion to take place. This technology has yet to be invented, implimented or funded.

Originally Posted by bkkandrew

So you have invented a replacement technology for mass use of oil then? I think we should be told!

yes your quote, isn't it ridiculous

Originally Posted by bkkandrew

Finished playing with you for today. Have to attend a meeting on 'collapse in demand'. I am sure that the delegates will listen to me a little more attentively than Butterfly.

priceless !!! another trip to the mia noi ? love it when you do that everytime you lose your argument or when I expose your little lies

Butterfy - Andrew talks a good game, but I have to agree he has the wrong reasons for the high prices.