SocraticGadfly: Of #oilprices, recessions, Saudi Arabia and China

August 26, 2015

Of #oilprices, recessions, Saudi Arabia and China

They tie together, as ships and rings and sealing wax and kings, etc.

First, the oil side. A good piece here wonders how long the Saudis can flood the market, even as they dip into their own cash reserves. That said, since the U.S. rig count actually went up two last week, it seems that many private American oil drillers still aren't ready to cry "uncle."

Add into it that the looming likelihood of recession in China will dampen oil demand. Sometimes, the smaller the bone, the more two dogs fight over it. Shrinking demand is certainly a smaller bone.

Those fears, meanwhile, are stoking fears of recession elsewhere, as the WSJ notes.

This ties back to the first piece. Cheap oil is crippling Russia, hamstringing Nigeria, and obliterating Venezuela.

The journal piece notes that cheap oil may also destabilize the Middle East. Iran, even coming back out from sanctions, will have little money to throw around. Iraq has less money to battle ISIS. The Saudis have less money to control other portions of the Middle East. (On the other hand, to the degree ISIS or other terrorist groups have oil connections, they now have less money, too.)

As for America being affected by China, this once again illustrates the gap between Wall Street and Main Street.

The American economy is doing well, despite employees still getting stiffed on wages. China's Potemkin villages and Potemkin market shouldn't affect America; Japan's early 1990s bubble didn't, after all. Unfortunately, Wall Street, by kowtowing to Beijing has fueled both bubbles even as it knew better. (Of course, China's done plenty of internal bubble inflating, too.) Sounds familiar, no?

So, if we do have another recession, even if not as bad as the Great Recession, the first unofficially official sign, before rearview hindsight of two quarters of economic retraction, will be the boo-hooing of banksters.

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