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sasguru
17th July 2008, 09:09
Posted this on another thread, but think it deserves a thread of it's own:

Oil prices are just one side of the doom.
The main problem as I see it is debt caused by poor lending practices. Currently we are seeing a credit crunch caused by poor lending on mortgages in the US. This debt was sold on to the world banks who have suffered as a result and withdrawn credit. This has led to a destruction in the housing market and hence confidence. This in turn will lead to a contraction in spending, which will lead to companies going bust/and or poor results, which will lead to rising unemployment. That will lead to the fallout from people defaulting on their massive credit card debt and a second round of pain in the financial industry. (Credit card debt is sold on just like mortgage debt). All the while the housing market will be falling like a stone. The whole pack of cards is collapsing.
Oil prices and hence higher costs for everything are just accelerating the process.

ferret
17th July 2008, 09:18
I think the current cliché is "A perfect storm".

Doomed.

Badger
17th July 2008, 09:20
... companies going bust/and or poor results, which will lead to rising UNemployment.

:spel

sasguru
17th July 2008, 09:21
:spel


Thanks.

BrilloPad
17th July 2008, 09:25
Posted this on another thread, but think it deserves a thread of it's own:

Oil prices are just one side of the doom.
The main problem as I see it is debt caused by poor lending practices. Currently we are seeing a credit crunch caused by poor lending on mortgages in the US. This debt was sold on to the world banks who have suffered as a result and withdrawn credit. This has led to a destruction in the housing market and hence confidence. This in turn will lead to a contraction in spending, which will lead to companies going bust/and or poor results, which will lead to rising unemployment. That will lead to the fallout from people defaulting on their massive credit card debt and a second round of pain in the financial industry. (Credit card debt is sold on just like mortgage debt). All the while the housing market will be falling like a stone. The whole pack of cards is collapsing.
Oil prices and hence higher costs for everything are just accelerating the process.

And my reply from the other thread :-

**if** oil prices drop then most things will cost less so interest rates will drop. Though I agree the bigger effect at the moment is the difference between libor and base rates.

But there has not been a massive effect on economy - yet. The shopping centres still seem full(or is it my imagination?). The roads still seem choked with cars. Where are people getting the money?

Maybe at the moment people are maxing out credit cards and overdrafts? When will this really start to bite? I can see alot of sense in your 2 year reasoning - in fact there is an outside chance of another depression?

As an aside - I find it incredible that inflation is **only** at just under 4%. food up 10% - but offset by falling cost of cars (who can afford one with petrol so high?) and DVDs and eating out.

rootsnall
17th July 2008, 09:31
Currently we are seeing a credit crunch caused by poor lending on mortgages in the US

I think poor lending all over the place ! This one has been a whopper of a boom due to the exceptionally low interest rates used to patch things up post the twin towers events and dotcom crashes. They can't do any more patching so it's time for a whopper of a bust.

oracleslave
17th July 2008, 09:38
so it's time for a whopper of a bust.

Artificially created or natural?

Xenophon
17th July 2008, 09:39
so it's time for a whopper of a bust.

Fnar...

DimPrawn
17th July 2008, 09:41
Can I make a point about oil prices (like gold prices).

Oil is not going up because there is a shortage of oil, it is going up because it is priced in US $, and the US economy is bolluxed and their currency is becoming worthless.

Since oil has intrinsic value and worth(like gold), the price of a barrel rises as the currency becomes worthless.

HTH

BrilloPad
17th July 2008, 10:59
Can I make a point about oil prices (like gold prices).

Oil is not going up because there is a shortage of oil, it is going up because it is priced in US $, and the US economy is bolluxed and their currency is becoming worthless.

Since oil has intrinsic value and worth(like gold), the price of a barrel rises as the currency becomes worthless.

HTH

So if it is priced in EUR it will be okay? It might help but it will not affect root cause. production has not risen as fast as consumption.

PerlOfWisdom
17th July 2008, 11:01
Can I make a point about oil prices (like gold prices).

Oil is not going up because there is a shortage of oil, it is going up because it is priced in US $, and the US economy is bolluxed and their currency is becoming worthless.

Since oil has intrinsic value and worth(like gold), the price of a barrel rises as the currency becomes worthless.

HTH
I've been telling people this for ages (same with food) but no-one believes me.

Chantho
17th July 2008, 11:22
As an aside - I find it incredible that inflation is **only** at just under 4%. food up 10% - but offset by falling cost of cars (who can afford one with petrol so high?) and DVDs and eating out.

So why is eating out cost falling when food etc. is up 10% or more ?

Makes no sense.

BrilloPad
17th July 2008, 11:25
So why is eating out cost falling when food etc. is up 10% or more ?

Makes no sense.

I am no expert - but will comment as if I know what I am talking about! Food prices make up small part of restaurant costs. Fewer people are eating out so they have to cut prices. Eventually restaurants will close and more will be out of work (or go home to Poland).

DimPrawn
17th July 2008, 11:34
I am no expert - but will comment as if I know what I am talking about!

You are AtW and I claim my free bullet proof X5!

BrilloPad
17th July 2008, 11:36
You are AtW and I claim my free bullet proof X5!

:rollin:

I knew I should have added "in true cuk tradition".

HairyArsedBloke
17th July 2008, 11:48
Oil is not going up because there is a shortage of oil, it is going up because it is priced in US $, and the US economy is bolluxed and their currency is becoming worthless.

Oil has been going up, even in non-dollar terms, because of the demand for it. This is partly to hold other classes of asset as an alternative to stocks and real-estate. It is also to build stocks for reserves and ahead of perceived further price rises. However, demand is not need. Actual consumption from India, China, etc has not gone up anything like as much to warrant these prices. The producers know that there isn’t the real need for the volume of oil that’s why they do not respond to idiots like Brown asking them to pump more. There is plenty of oil sitting in tankers in the gulf with nowhere to go. The problem is that it‘s heavy oil. What there is a shortage of is refining capability. It’s a problem that has been a long time in the making and will take even longer to fix.

sasguru
17th July 2008, 13:01
So why is eating out cost falling when food etc. is up 10% or more ?

Makes no sense.

Coz some idiots who ate out in the boom have been stupid enough to pay the sky high margins restaurants have been getting away with.
Take polenta, marketed as a delicacy. Genius! The Italian peasants and poor Africans who eat a similar dish would laugh their tits off at the London idiots who pay £10 a pop for it.

DimPrawn
17th July 2008, 13:14
Oil has been going up, even in non-dollar terms, because of the demand for it. This is partly to hold other classes of asset as an alternative to stocks and real-estate. It is also to build stocks for reserves and ahead of perceived further price rises. However, demand is not need. Actual consumption from India, China, etc has not gone up anything like as much to warrant these prices. The producers know that there isn’t the real need for the volume of oil that’s why they do not respond to idiots like Brown asking them to pump more. There is plenty of oil sitting in tankers in the gulf with nowhere to go. The problem is that it‘s heavy oil. What there is a shortage of is refining capability. It’s a problem that has been a long time in the making and will take even longer to fix.

Okay smart arse.

DimPrawn
17th July 2008, 13:15
Coz some idiots who ate out in the boom have been stupid enough to pay the sky high margins restaurants have been getting away with.
Take polenta, marketed as a delicacy. Genius! The Italian peasants and poor Africans who eat a similar dish would laugh their tits off at the London idiots who pay £10 a pop for it.

They can't help it, they also think £500K is a good price for an ex-council flat in Hackney,

oracleslave
17th July 2008, 13:16
Coz some idiots who ate out in the boom have been stupid enough to pay the sky high margins restaurants have been getting away with.

It sounds like a sad existence when you have to ask yourself what state the economy is in before decidng whether to go out for a meal or not.

DimPrawn
17th July 2008, 13:18
It sounds like a sad existence when you have to ask yourself what state the economy is in before decidng whether to go out for a meal or not.

I bet sas spends 4 hours scouring all the menus, totting up the margins, before opting to go home and have another pot noodle in the back room.

:laugh

Peoplesoft bloke
17th July 2008, 13:21
Oil has been going up, even in non-dollar terms, because of the demand for it. This is partly to hold other classes of asset as an alternative to stocks and real-estate. It is also to build stocks for reserves and ahead of perceived further price rises. However, demand is not need. Actual consumption from India, China, etc has not gone up anything like as much to warrant these prices. The producers know that there isn’t the real need for the volume of oil that’s why they do not respond to idiots like Brown asking them to pump more. There is plenty of oil sitting in tankers in the gulf with nowhere to go. The problem is that it‘s heavy oil. What there is a shortage of is refining capability. It’s a problem that has been a long time in the making and will take even longer to fix.

Good point - my cousin designs refineries and has never been so busy - good rates too - boomed.

IIRC don't the Iraquis and Iranians price their oil in Euros just to annoy the septics?

Ruprect
17th July 2008, 13:25
Good point - my cousin designs refineries and has never been so busy - good rates too - boomed.

IIRC don't the Iraquis and Iranians price their oil in Euros just to annoy the septics?

No, they threatened to trade it in Euros instead of $. That really would send the dollar to sh1t

sasguru
17th July 2008, 13:29
I bet sas spends 4 hours scouring all the menus, totting up the margins, before opting to go home and have another pot noodle in the back room.

:laugh

:laugh:laugh
Given that the missus can cook better than most restaurants I know and genuinely enjoys it, I see little point in eating out.

Moscow Mule
17th July 2008, 13:38
:laugh:laugh
Given that the missus can cook better than most restaurants I know and genuinely enjoys it, I see little point in eating out.

:spel better pot noodles than

HairyArsedBloke
17th July 2008, 13:55
Okay smart arse.

Thank you. You look nice too. :hug::wave:

Nicky G
17th July 2008, 14:50
Posted this on another thread, but think it deserves a thread of it's own:

Oil prices are just one side of the doom.
The main problem as I see it is debt caused by poor lending practices. Currently we are seeing a credit crunch caused by poor lending on mortgages in the US. This debt was sold on to the world banks who have suffered as a result and withdrawn credit. This has led to a destruction in the housing market and hence confidence. This in turn will lead to a contraction in spending, which will lead to companies going bust/and or poor results, which will lead to rising unemployment. That will lead to the fallout from people defaulting on their massive credit card debt and a second round of pain in the financial industry. (Credit card debt is sold on just like mortgage debt). All the while the housing market will be falling like a stone. The whole pack of cards is collapsing.
Oil prices and hence higher costs for everything are just accelerating the process.

Have long have we got until things get really bad then?

TimberWolf
17th July 2008, 20:01
Have long have we got until things get really bad then?

Too late, you might have missed it.

IMF raises world economic targets
The International Monetary Fund (IMF) has raised its global economic forecast after the impact of a credit crunch was not as severe as had been first feared.
http://news.bbc.co.uk/1/hi/business/7511766.stm