Shortly after the opening bell on Wednesday, the price of oil topped $100 per barrel…a 26 percent increase in less than two months. What gives?
The Associated Press tells us it was the Labor Department’s Wednesday report, that consumer prices fell to 3.5 percent from 3.9 percent in October, which pushed oil’s price back above triple digits for the first time since July. Here at the Economic Prism we don’t quite comprehend the connection.
Maybe AP is inferring that, somehow, lower consumer prices will encourage higher consumer spending, which will boost the economy, result in higher oil demand, and, thus, higher prices. But that is just conjecture on our part since the author failed to elaborate their supposition.
Perhaps what they meant to say is that $100 per barrel oil represents the potential for increased demand butting up against a more limited supply. Still, that’s just half the story…
How to Celebrate $15 Trillion Government Debt
Another way to look at $100 per barrel oil is that it’s a measurement of the infinite supply of digital monetary units racking up against a more finite production supply. Regardless, the economy’s shown it can’t handle $100 per barrel oil for long.
The last two times it topped the century line the economy’s taken a nose dive…along with the price of oil. Nonetheless, we may have to wait to see if this again holds true. By yesterday afternoon oil had fallen back to $98.
One hundred dollar per barrel oil was not the only round number hit on Wednesday. In addition, the Treasury Department announced on Wednesday that the U.S. national debt topped $15 trillion. This amounts to nearly $48,000 per citizen.
To celebrate this milestone, Congress passed a spending bill to allow the government to keep spending money when current funding expires on Saturday. At the same time the Congressional “super committee” is determined to keep borrowing from the future. They have until next Wednesday night to figure out how to whittle the deficit down by $1.2 trillion over 10 years. It is doubtful they’ll meet the deadline.
Congressional Super Committee Farce
No doubt, $1.2 trillion is a lot of money. In fact, it is so much money it is hard to comprehend. Still, we’ll attempt to offer perspective so that you can understand what a standup bunch of rascals and cads presently inhabit Congress.
The current deficit is $1.3 trillion. That means, just this year alone, the government will spend $1.3 trillion more than it collects in tax receipts. If you project $1.3 trillion out over the next 10 years, you get $13 trillion in new debt. What this means is that in 2021 the national debt will balloon to $28 trillion.
In short, what the Congressional super committee is tasked to do is to cut $1.2 trillion in deficit spending over 10 years…or $120 billion per year for 10 years. So even if Congress is successful in doing this, which isn’t likely, the U.S. government would run deficits of $1.18 trillion per year.
In other words, if the Congressional super committee meets its objective, instead of adding $13 trillion of new debt over the next 10 years, the government will add just $11.8 trillion. What this means is that in 2021, all things being equal, the national debt will balloon to $26.8 trillion rather than $28 trillion.
What this means is the Congressional super committee is a farce.
Sincerely,
MN Gordon
for Economic Prism
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