Oil, Banks, and The Economists

Oil: “Goldman: Get ready For Oil Prices To Go Back To $147” is the headline from The Business Insider-Green Business Insider (businessinsider.com) post on 8/6/09 via LATOC (lifeaftertheoilcrash.net) on 8/17/09. Here are some of the articles key points:

• “Goldman Sachs is once again warning the world of a coming spike in oil prices that will remind everyone of 2008.”
• “The spike from 2008 will return because there’s been ‘decades’ of poor investment decisions by oil producers.“
• “Says Goldman via Alphaville, ‘As the commodity markets rebound with the broader global economy we expect a redux of 2008 when severe supply constraints forced the rationing of demand through sharply higher prices to keep the markets balanced.’”

Banks: News Max (money news.newsmax.com) posted this Julie Crenshaw piece on 8/17/09: “Warren: Banks Are Sitting on Bad Assets”. Here are some highlights:

• “Elizabeth Warren, head of the Congressional Oversight Committee, says most of the toxic assets former treasury Secretary Henry Paulsen convinced Congress to give him $700 billion to buy are still on the books.”
• “That’s because selling those assets at actual values would mean banks would have to recognize their losses, which would put some banks out of business.”
• “The final piece of bad bank news: Warren says default rates on the commercial mortgages that are coming due 2010-2012 may be as high as 60 percent.”

The Economists: “Taleb: Bernanke, Summers and Geithner Are Idiots; Economists Have Been No Better in Their Predictions than Cab Drivers” is the title from Washington’s Blog (georgewashington2.blogspot.com) on 8/17/09. The post is from an open letter to British Conservative leader David Cameron by the noted economic writer, author, analyst and commentator Nassim Nicholas Taleb. Here’s some of that letter:

• “I despair of the Obama administration’s ability to fix this financial crisis and prevent future ones. I am appalled by the dangers it has been creating and it’s takeover by the same economic  establishment responsible for this crisis.”
• “Be careful, too,  of the so-called science of economics. Economists have been no better in their predictions than cab drivers. We have an ‘expert’ problem, in which the expert provides you with misplaced confidence, but no information. Because we think, correctly, that the dermatologist, the baker, the chemist are true experts (they know about their respective subjects than the rest of us), we swallow the canard that the economists at the World Bank, the Bank of England, and the US Federal Reserve are also experts, without checking their record. This reliance on faux experts is, for the most part, what got us here.”
• “We replaced the heuristics  of our elders with arrogant (and incompetent) beliefs, breaking, in the name of science, the chain of knowledge. Old, conservative bankers and traders have been replaced by keen young mathematical analysts, yet anyone who listened to a grandmother who survived the depression would have been warned against debt and been better prepared than Ben Bernanke and Alan Greenspan, respectively chairman of America’s Federal Reserve.”

We plan on continuing our discussion of “What to Garden In Hard Times” at next time.

Until then: keep your eyes on the horizon as the weathers changing fast.