Your Money and GAIA

Uncle Sam is on a Roll Again

Last Friday the US unemployment rate was reported as 5.1%. 

As economists consider  5.0% full employment - as maternity leave, illness and other factors always cause some workers to be off -  this is the best employment numbers since April 2008, just  before the Financial Crisis --- so the real US economy is back in high gear.

Why now? 

1. Globalization has peaked, as a recent article in the Globe and Mail noted, and new markets and rapid increase in international trade is a thing of the past.  We have reached more or less world trade equilibrium.  

China and its supposedly endless demand for foreign resources and goods is crashing or slowing down as should have been anticipated: a country with men in space is no longer a 'developing" nation but a fully developed one.  China has completed its 'economic great leap forward' and is more like Europe’s France or Italy or Spain  as an economy. So rapid growth and raw materials import demand will decline as China has given up on being the world’s cheapest factory and moved upscale in its products; and now caters to over 300 million of its own middle-class citizens.

India, the world’s second most populous country is booming as well and sends probes to Mars like any other, respected first world country:  with deep expertise in science, engineering and technology.

The revival of Britain’s Jaguar luxury brand and the even more august Land Rover lineup is due to India’s Tata Group which has over 100 companies in over 100 countries around the world (See tata.com).

Europe - if it can sidestep the crisis and flood of illegal immigrants from war torn and politically corrupt Arab Middle East and Africa --  will start to roll again to meet 5 years of pent up demand after prolonged austerity and high unemployment.

Socialist overly generous 'benefits' will continue to be reined in and working for a living will return to the mindset norm. 

2. PEAK OIL has been a sham for decades but is still promoted by the Nuclear Energy industry and wind and solar powered 'environmentalists' who ignore production costs and environmental degradation at the manufacturing level.  

Technology has always found ways to extract more oil and natural gas and the planet is awash in both. EVERYWHERE!

A recent estimate predicts oil and gas reserves still untouched in the Arctic Circle are 4 times greater than all no known world reserves.

Through fracking technology, US oil production now exceeds that of Saudi Arabia!!!!   Even at $40 a barrel the US industry seems to be viable and surplus oil supplies -- not shortages -- are the norm.

Yes, the days of $80 a barrel oil let alone $120 or $200 a barrel are gone as they should be - unless OPEC or some major player suddenly creates a boycott situation again. 

The most cost intensive oil on the planet, Canada’s tar sands, is still profitable at US $80 a barrel so any oil price above $80 has been a windfall to nearly all producers and government royalty collection.  (Saudi Arabia’s break even point is under US$30 a barrel!!!)

And the open-market hasalways been a legal, market-manipulation scam as 'investors' are allowed to buy oil - with almost free money thanks to the Federal Reserve near zero interest rates - and store it for up to a year at costs of approximately $2.50 a barrel per year!!

Put simply, as world supply stayed up and up, these 'investors' got cold feet and flooded the market with oil; and so the price dropped suddenly by some 2/3.

So where do we stand in 2016 and thereafter?

USA will lead the world economy for the next decade thanks to OIL. OIL,OIL and natural gas!!!!

1. Cheap oil and natural gas prices will continue to revitalize the US economy and industry and make the cost of living drop and allow more consumer spending on 'frills' such as a new vehicle, renovations, travel, etc.

2. US interest rates will rise as the Fed. will return to its proper focus in good times: limiting inflation by raising rates and encouraging savings.

3. Taxes will rise somewhat to pay for the excess 3 trillion dollar extra debt the Fed.’s “monetary easing” added: a short term parachute that should have ended by 2010 but has continued for some 5 more years adding to the burden of the next two generations of tax payers.  But high employment and a booming economy should generate a lot of tax revenue to help.

4. SUV and truck sales will continue to dominate and subcompact and electric cars will be built for the few and to meet 'overall gas consumption' government mandated numbers. 

5. The stock market will continue to fall.  Wildly overvalued stocks have been pumped higher and higher on almost free money from the Federal Reserve’s super low interest rate and “monetary easing’ policies. Now that the Fed. will be raising interest rates due to full employment and interconnected, almost automatic, rising inflation,

stock ‘plays’ and short term ‘gambles’ will again be reined in or face chapter 11.

Then, when the stock market  return to its senses, slow and steady growth will begin again for companies that make and sell real products that people need -- and which pay dividends.  

Yes, soon the good times will roll again in North America; all thanks to human ingenuity and Gaia's great gifts of OIL and natural gas!!!