We are now officially in Feedback Loop Territory. Earlier today, oil hit another all time record: this time $140 a barrel. Gordon says it’s “the most worrying situation in the world”.
But here’s the interesting part. Why the latest jump? In essence, because of more bad economic news from the US. This week, it was worse-than-expected manufacturing data; last time, it was the worst unemployment figures in a quarter century. Either way, the net effect each time has been the same: to send the dollar lower still on foreign exchange markets.
And, because oil is priced in dollars, each time the greenback falls, it takes more of them to purchase a barrel of oil. And each time a barrel of oil goes up, the key input for the US economy gets more expensive, and… oh, you get the picture. Pretty grim to watch.
