Looking out ahead, and where we are

0.03

0.24

-0.38

-0.74

-1.28

-1.43

-2.10

-1.48%

-1.29

-0.18

CPI price changes for 2009 (Inflation Data)

From the CPI numbers above for the months of 2009, we can see that the deflationary retail pattern has abated. So, for whatever happened in this phase of the Recalculation, the retail sector has made its adjustment. With the retail sector stabilized, we see that oil is just under $80/barrel. When we are constrained by oil, and the retail sector has zero inflation, then that price of oil is an estimate of the medium equilibrium price or oil, representing the oil price we have to pay to pump goods through the retail sector with stability. So we have an economic data point built using the distance between wholesale oil prices and retail consumer price volatility.

Poil = Fcpi I rely in the price of the constrained good as a function of retail price volatility. This statistic should be good when the economy is constrained by a single essential input, like energy.

The economy will treat this condition as the new normal. If oil prices rise, the retail sector will threaten a round of deflation, pushing oil prices back down. The new normal changes due to increased oil efficiency around regional economies. Economies that gain in relative oil efficiency will see relative gains in currency. Developing regions have the most to gain coming from the least efficient. The dollar will retain reserve status to the extant that relative USA oil efficiency gains outpace the developing world.

Other economic issues:
I think the pension and health care costs are painful, but orthogonal to the energy issue. Cause goes from energy to pension, to the extent that we fail to increase energy efficiency, pensions will continue to devalue while local government increasingly goes bankrupt. Federal involvement in the health insurance industry will be very disruptive to the medical industry, but medical goods are not a direct constraint in the economy.

So my conclusion is straight forward. Future economic conditions depend on the specific application of technology to increase energy efficiency.