Commentaries from The Big Picture.

Read some interesting comments from the transcripts of The Big Picture program. ( link )

Regarding oil:

Ok, as Joe Friday said, “Just the facts, Ma’am.” Let’s start out with a few simple facts. And one thing that people have to understand is in the last 3 years, where we’ve seen oil prices go up from the mid-20s to today’s price somewhere in the 73 to $74 range, demand worldwide has grown unabated for the last 3 years, unaffected in any way by rising prices. If we look at the United States, in the first half of 2006, we reached a 20 year high in US drilling activity. So it’s not like the oil companies are standing by saying, “look, we’re making lots of money, but, you know, hey, tough, that’s the way it is.” No, with their drilling activity, their amount of capital expenditures is at near records.

But here’s the thing that I think these news people do not put in perspective. This is it in a nutshell. In 1985, the world consumed 60 million barrels a day of production; we also had 70 million barrels of capacity for production. In other words, John, we had a spare capacity of 10 million barrels a day between what we could produce and what was demanded by the world.
Also, in 1985, capacity at our nation’s refineries was running at 78%, so if there was more demand our refineries could crank up and produce more gasoline; if there was a problem in the Middle East, if a refinery went down, we had 10 million barrels of spare capacity. They could handle anything like a war in Lebanon, rebels in Nigeria, a refinery catching fire in Venezuela. Today, oil demand is running at 85 million barrels a day; refinery capacity is at over 92%
today; and spare capacity has dwindled to somewhere between 1 and 2 million barrels a day. And that is the main picture in a nutshell.

And on the issue of 'Soft landing' (is it ever possible to have a manufactured 'soft landing'?)

Soft Landing or Has the car gone off the cliff?

• SEN. CLINTON: A lot of Americans can’t work any harder, borrow
  any more, or save any less. And those same costs of health care, retirement,
  transportation, energy are impacting our businesses as well. It’s time for a new
  direction: 5 years we have lived with deficits, this agenda will help bring back
  fiscal responsibility.

JOHN: That was Senator Hillary Clinton from New York, Jim, speaking this week at a private speech, and she’s keyed the first part correctly – I’m not sure the second part is a realistic appraisal given how bad the deficit is, but she does reflect the problem that the Fed has. We seem to be stuck between – well, an old sailing term, Scylla and Charybdis. Remember that?
The Straits of Messina between Sicily and Italy. They can’t go one way, they can’t go the other, and everyone is beginning to feel the pinch as the Fed has been tightening everything up. So the real big question, right now, are we experiencing a soft landing or have we just yelled, “Geronimo,” and gone off the cliff.

JIM: You know, John, it is amazing what a difference a quarter makes. I mean if you take a look at the GDP numbers reported on Friday, growth has gone from 5.6% in the first quarter to just barely below 2 ½%. And one of the reasons for that slowdown is a dramatic shift in consumer spending. The downturn in consumer spending is accelerating. And why is that? Number one, the savings rate has been negative, so there is no cushion for consumers to offset what it is they’re receiving in income; wages have not kept pace with inflation. And that was Ok, as long as the price of the family castle was going up, and you can extract equity out of the family castle, and then refinance at a lower payment. So, that was the fuel that was sort of feeding this consumption, or increase in consumption, that we’ve seen in the last 3 years. That’s because one of the unusual characteristics about this economic recovery from the 2001 recession is that the consumer accounted for 80% of GDP growth the last 3 years.

Today’s dramatic slowdown is showing the accelerating impact of all those 17 rate hikes, meaning that anybody that got an adjustable rate mortgage in 2003 is seeing their mortgage probably adjust this year; there’ll be even more mortgages adjusted according to the National Association of Mortgage Brokers. The average family has seen their house payment go up by $400. And John, you know we’re dealing with $3.50 gasoline. So gasoline costs have gone
up, interest rate costs have gone up, the cost of food, inflation rates are up, so the cost of living is going up for consumers while labor wages are falling further behind the rate of inflation.

Now that's the BiG picture!