Oil Prices and the economy for the next year to a year and a half
Quick note, given I think that the economy is going to roll off a cliff in the new year, and soften between now and then, that means I think that oil prices are going to drop further. I won’t be surprised to see them go under $50/barrel, unless something stupid like war with Iran happens.
Bernanke’s going to have to do quantitative easing again (aka. give money to banks) and may have to bail out Europe, since Europe probably won’t bail themselves out. If Romney wins, Bernanke stands a good chance of losing his job, and he really doesn’t want that. The conservative inflationist who replaces him won’t be noticeably different for the rest of the world, but if Bernanke is fired it’ll be the end of his legacy. Yes, his legacy is depression no matter what, but he doesn’t see it that way, he thinks he can move to a stable Japanification scenario. He can’t, but eh.
Oil prices dropping further will cause widespread unrest in the oilarchies, so expect more uprisings. Also expect more slaughters. The lesson of Mubarak is that if you give up power, you’re going away for life, so you might as well fight. Lower oil prices will push Canada’s economy into the dirt, as well, but Harper has years to go on his mandate, so whatever. A lot of oil sands projects will go bankrupt or into hiatus.
How long will the downturn last? I don’t know. Dropping oil prices means that there is room for growth, but the oligarchs want austerity so they can buy up more public goods and services on the cheap. Privatization is the order of the day, and bankrupt states are what they want.
China has lost patience with the West. If the West won’t stimulate, then China doesn’t see why it should be required to carry the rest of the world’s economy on its back.
Things are going to get FAR worse before they get better. That doesn’t mean there won’t be recoveries, there may even be a bit of one this year, but none of them will last, and none of them will do much good for anyone earning less than 6 figures.