Monday, June 30, 2008

Glimmers of a Silver Lining

The host of Squawk Box was scrounging for some good news this AM while making an appearance on Morning Joe. He started out speaking about inflation in Asia, added in fuel costs, and presented the notion that American companies were rethinking outsourcing, as in the jobs may come back. Got me to thinking.... Not to make light of the economic situation, but could there be positive aspects to a dismal situation?

Let's take his example, if inflation is pushing up Asian wages, and oil prices increasing transport costs, then producing in the USA becomes possibly more attractive. Heck, maybe the United States Army will actually purchase its berets from an American manufacturer.

And won't rising global inflation, particularly the increased cost of gasoline, help tamp down global demand and potentially loosen supply?

Could, potentially, these higher costs spur the development of alternative technologies to the point that they could eventually be more cost effective?

Haven't the increased prices at the pump already had an effect on driving habits? As we curtail the use of our cars, won't supplies be increased, thereby putting pressure on the price, and if nothing else won't reduced carbon emissions cheer up the "global warming" crowd?

Speaking of increased transport costs... horrible on the trucking industry, I know. But will they mean that the long, neglected railroads might get a bit of attention?

What about the housing debacle? Granted that it will be more difficult to get a mortgage and the job situation can be iffy, but will the declining home prices provide more first time home buyers, particularly the young, a shot at owning a home?

Although I foresee a great deal of pain, I am optimistic. Markets tend to right themselves over time; they are incredibly efficient in that way. And when this all plays out, we will have had a lesson in the risks inherent in our dependence on fossil fuels, and we will have progressed a bit in developing alternative fuel sources before falling costs lead us back to our old ways. And that's important, remember Hubbard's Pimple? We are ever closer to the day when oil prices will be dictated by geologic fact and not the vagaries of markets.

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