Thursday, September 29, 2011

Oil is money

Literally, the US economy adjusts to maintain the barrel standard. When Green Shoots are in the wind, oil ranges from $90-$95, and when things are Brown, oil is $80-$85. I call that well quantized. Oil is in short supply in the largest, most inefficient economy of the advanced set. Oil is liquid, and traded on an open market. That makes the barrel, not the dollar, a reserve currency.

The dynamics would say the economy is sorting through firms that can operate in that price range. The household has adapted already, and the household was always the faster adapter. Stable energy prices yields soft landings.

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