Oil up another two dollars

Note that oil was the first responder to trouble in the middle east.

So oil just wiped out part of the dollar futures market.  Because oil in the tanks is surplus for producers and they can make forward contracts right way, before the currency speculators.

Also note that this means less manufacturing and more fracking for the USA. Frackers like oil above $65 the last time I heard a number. It is likely to be a permanent oil price hike as our middle east costs just soared.  I think Japan win here, they are the most efficient users of oil.

We should see dollar chaos for a few days as portfolio shifts require time in the dollar reserve, but the dollar should already be lower, the immediate effect on our balance of payments. The new wild card is the efficiency of the frackers.

The ten year is low at 1.81%, part of the flight to reserve currency. Stock futures down.   With a 2.1% growth rate we are always on the edge of stall, I have no idea if this pushes us over. Transportation, already in a recession, will take a hit, as will manufacturing. he cost to the federal budget will be around 40 billion over a few years, an order of magnitude higher if we send our armies across the border.

Currency markets should be no arbitrage at equilibrium. They will be large, monopsonies, moving alrge volumes with white noise residual error. Mainly the result of dealing with comparative advantage, which sides have excess inventory right now.  The real good transaction takes place almost simultaneously with the currency exchange, it is simply scheduled for delivery days later, a small wedge. So thee is a constant force working to squeeze the currency market futures. Most of the currency futures becomes bets about central banks and trilemmas.