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Tuesday, June 10, 2008

Rupee Weather

At this point, I think the oil craze is a speculative bubble of its own. Demand is clearly impacted by price. I'm guessing that diesel isn't as much, because of the patterns of usage. There probably is a shortage of diesel refinery space, but the last few days on diesel look to be a spec run also.

This cannot structurally continue.

Look at the situation poor India is in:
Rupee is fast approaching the crucial 43 level as the local unit lost nine paise at 42.96/97 against the greenback on Tuesday with demand from oil companies for dollar continuing amid inadequate supply of the US currency and sluggish equity markets.
A dealer with a private bank said with foreign institutional investors continuing to pull out from Indian equity markets, the dollar supply has become inadequate which has further dampened the rupee sentiments.

The capital outflows amounted to more than 4.5 billion dollars so far in the calendar year.
It's a total mess.

It's a total mess.

I couldn't help but think that last winter as I was buying T-Shirts at the Eddie Bauer Outlet Store. T-Shirt prices (especially relative to the price of rice and fuel anyway) had never been cheaper. It made me seriously question my stagflationary name.

I was also thinking it was a total mess this spring as I was attempting to buy more Basmati rice at Costco. The attempt failed and so far continues to fail. It doesn't make me question my stagflationary name though.

Nothing is easy. The easy days are seemingly over and have been replaced with perpetual conundrums.
One more thought.

At this point, I think the oil craze is a speculative bubble of its own.

You might get a kick out of this somewhat tongue-in-cheek chart that might back your theory to some degree.

Toilet Paper Economics
Mark - the trade as it has emerged is unsustainable on both sides. Asia sends very cheap goods to the developed countries. The price paid doesn't really cover the cost of production, labor and shipping. The developed world sends currency back (esp. $$). That currency is recycled to buy imports (fuel, food, inputs).

Most of the governments subsidize the cost of the inputs (food, fuel and often some other commodities) so that corporations and labor can sell goods cheaper, and makes up its deficit (or doesn't) by taxing export goods.

The whole thing in recent years really depended on the additional inflows of capital from the developed world.

Just about every participant believed that this could go on, and that each individual entity could go on not paying the real cost of playing the game.

Mark - the trade as it has emerged is unsustainable on both sides.

Don't get me started on unsustainable trends. I'm liable to use some exclamation points. ;)

Exponential Growth and Immortality!

Sustainability is such a word. It was popularised in 1968 when 12 million copies of the Club of Rome's The Limits to Growth showed that exponential growth was unsustainable.
Exponential growth is unsustainable whether or not we achieve immortality.

In fact it makes little difference. Just as the difference between average of 4 or 5 children doesn't really matter.

In fact immortality may help. Older people are experienced and generally wealth-producing.
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