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Turning Donald Trump’s totally awesome 1980’s boom into a 1970’s quagmire?
As soon as the bombs started falling over Teheran, American markets crashed. Bonds fell. Silver plunged. Even gold is down.
Oil, of course, jumped from $67 to $75 per barrel.
Oil Disruption
Markets always react fast to war – and they can over-react. The question for the real economy is how long does this war last.
This is because the main impact is oil prices. And these are driven by supply disruptions from the Middle East.
About one-fifth of oil exports pass Iran’s Strait of Hormuz. Another third are in range of Iranian missiles.
The US actually imports almost none of this Middle Eastern oil – it’s just 2% of our consumption. But oil prices are global so what happens in Iran does not stay in Iran
On the day bombs started, ship traffic in the Strait of Hormuz fell 70%. Within 3 days it ground to a “total halt.”
Trump responded with government guarantees on ship insurance, which helps. But traffic won’t recover until the bombs stop. So it’s a question of how long the bombs continue.
Trump is currently promising the war will last just 4 weeks. But the administration is also messaging it will go “as long as it takes.”
You do that to demoralize the other guy. But it means this is not a one night stand like Venezuela or last time Trump bombed Iran.
Iran’s Impact on the Economy
There’s 3 key baskets of economic fallout: Growth. Jobs. And inflation.
Historically every $10 rise in oil knocks about two-tenths of a percent off economic growth. That’s small in an economy that’s growing over 3% – it lowers wage growth by about $200 per year.
But it goes on top of expensive oil to heat your home or gas your car. A $10 jump translates into 25 cents a gallon of gas. Together with heating and trucking raises household costs another $300 a year.
And it bumps inflation by up to a third of a percent.
Next, expensive oil and growth both hit job creation – $10 might drop job creation by 10 to 15 thousand per month.
All this is painful. But it’s not recession. What would put us in recession is a long war.
A recent study by Deutsche bank looked at historic oil shocks, concluding you need a 50 to 100% ongoing jump in oil to set off a recession.
This would imply oil prices of $100 to $150 — on a sustained basis, not just a spike.
The good news is, according to Deutsche, even at $100 — or $150 — oil only causes recession when you’re already limping.
The 1970’s is the poster-child for an oil crash. But we were already in bad shape thanks to Washington’s so-called guns and butter policy of dumping trillions into the welfare state while ramping up the Vietnam War.
It’s important to note the Nixon Shock and lost decade kicked off long before the oil embargo.
In contrast, today we’re growing at 3 percent according to FedNow. Productivity is soaring 4.9% – one of the highest since the Reagan boom.
So oil could knock us into the 1% to 1.5% on growth. But it won’t set off a recession unless the Fed panics on oil prices and hikes rates. Which could mow down millions of jobs.
What’s Next
For now the war’s biggest impact is oil prices.
But if it keeps going those cascade into growth, jobs, and inflation.
At which point Donald Trump could throw away his hard-earned boom just in time for Midterm elections.
Pro tip for buying bananas! While manually telling the self-checkout machine that the item you’re purchasing is bananas, rest another item (such as a small container of baking soda) on the crack between the scale that weighs your bananas and the rest of the counter (in order to play it off as an accident in case your grocery corporation cares about a mistake when measuring bananas). Then, hold your bananas to the scanner as if you are only now counting them towards your total. Be careful as to not actually weigh the bananas(!!!!) as that will make the tip not work. Then, pay for your reduced cost bananas; place them into your shopping bag along with your other items (such as a small container of baking soda and a small bag of coffee grounds). Then, realize that you still spent 27 dollars on three small items, even though you acquired a discount on one of them.
Is $4-$6 for single issues a justified price for comics?
Genuinely asking.
I’ve only been in this hobby for a few months so i have no history of what people thought of comic prices from years passed. But i heard someone say nowadays it feels like a luxory, but that was just one opionion.
2009-2010 was such a good time for autism. Like you had the first Avatar movie and then Tron: Legacy the year after?? My interests were specialized. I was thriving back then.
A lot of us at work have started noticing there have been many more shared orders than there used to be last year. There has especially been an uptick in non-appetizer shared orders like sandwiches.
It’s a subtle, but still serious recession indicator.
I think the biggest recession indicator is that the latest Waterbottle fad has lasted more that a year
Jim Cramer just said that “they’re [alphabet/mag7] are too smart to bet against” and I can’t help but wonder if that’s a recession indicator.
I got two jobs by walking in two years ago. Anything locally owned still in existence around you, that is owned by nonassholes then are golden places to work, focus your search there to begin to escape. Note that I worked at four places prior to these that were local but run by assholes and that experience is worse than the corporate hellscape experience so it’s not an easy path but once you find one it’s a huge step towards a better existence.
I have cookies and cream gelato from Aldi’s. it was $2 so I had low hopes, but this is delicious. Go to Aldi’s y’all. It’s half price groceries
I’ll never snitch. Especially, not a person stealing food. Here’s some seasoning too.
Internet connection dropped throughout Iran on Thursday among throughout the nation demonstrations, according to internet monitoring companies.
“I think we go to a near-total interference from the outdoors currently,” Amir Rashidi, an Iranian cybersecurity researcher that benefits the not-for-profit Miaan Team, informed TechCrunch.
Doug Madory, the manager of internet evaluation at Kentik, a…
Internet falls down in Iran in the middle of arguments over economic crisis
https://substack.com/home/post/p-183918353
I wrote this after realising how much inflation and recession have quietly changed the way I think …. not just about money, but about ambition and risk too. If you’ve felt more cautious lately without quite knowing why, this one’s for you 🤍
Now that the Holidays are pretty much out of the zeitgeist, I’ve noticed that this year there were hardly any charity advertisements - a staple I’d come to expect from the December period in the UK.
What I have noticed, however, is a huge increase in gambling adverts. I think that says something about our economy right now. Has anybody else noticed this?
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This cartoon calls for a poll.
Which bubble will burst first?
AI
Crypto
They’ll burst at the same time and create the “Greater Recession”
See Results
