Why your world is about to get a whole lot smaller

image I just polished off Jeff Rubin’s book “Why your world is about to get a whole lot smaller.”  Jeff’s book is a excellent foray in the complications of oil, the economy and our future.  As the former chief economist of CIBC World Markets he carries a lot clout, although he has been branded something of a maverick. 

While most of the book was review for me he did make one point that has stuck with me.  High oil prices are what tipped the global economy over in to recession.  The recession drops demand for oil and the price of oil comes back to normal.  What happens when we recover?  Oil demand will increase and the price will come back up again, until another recession forces it back down.  As oil production declines the economy will hit a continuously dropping ceiling and retreat.  Only decoupling ourselves from oil will enable us to break this cycle.

Jeff tackles the issue of Peak Oil with the depth and breadth of a seasoned economist.  He carefully illustrates how our society is deeply dependant on oil and paints a picture of a smaller de-globalized world. 

  1. #1 by Rev. Mike on June 7, 2009 - 3:40 pm

    I don’t think the price of oil has anything whatsoever to do with causing the recession. The bulk of the uptick in oil prices had to do with the weakness of the dollar prior to the stock market crash combined with a speculative bubble of its very own.

    When the stock market crashed, there was a flight to safety, i.e., U.S. Treasury’s, that is, right up until the point where people figured out that the U.S. Treasury’s weren’t such a good bet after all. When the flight to safety occurred, the dollar strengthened, and the price of oil plummeted because oil is denominated in U.S. dollars. This also burst the oil bubble at the same time.

    Then Obama and Co., a wholly-owned subsidiary of Goldman-Sachs, decided to double down on their bet and run the U.S. debt up even more in a classic “hair of the dog” solution. No one in the entire world will buy our debt anymore as a result, and the dollar is weakening once again. Voila — up goes the price of oil again!

    Watch it as it happens, LT … every time Geithner makes some boneheaded statement that scares the mess out of people about the long-term safety of the U.S. economy, e.g., sure, we’d listen if the Chinese want to push a new international reserve currency, the dollar plummets, and the price of oil goes up. It’s like clockwork.

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