First Pain then....................
Every global
recession since 1970 has followed a sharp increase
in oil prices, not a decline. And economic analysis supports the same
conclusion, since a US$60 fall in oil prices redistributes US$2trn of income
annually from producers to consumers and also guarantees extremely dovish
central banks………………………………
To put it another
way, the sharp fall in oil prices this year has certainly been disruptive, but
a low price level,
once it stabilizes, should be good for economic growth.
Anatole Kaletsky
This is a very smart
guy and I pay attention to what he says. However I see a bit of disruption and
loss of money everywhere. A lot of oil companies will be bankrupt, wind and
solar will be comparatively very expensive. If real estate market fell 50% in
one day what would happen? It would be very good for the people who want to buy
a house but everybody that has one house on credit would be bankrupt in one
day. What I want to say is that this big moves are very painfull in the short term
and a lot of wealth is destroyed.
Another headwind are
the oil companies that had their below the ground reserves valued at 100 and
now are valued at 30! That is a big big fall. Someone is loosing a lot of
money. In conclusion I see pain before blue skies. He are already in Bear
Market territory in most of the markets.
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