by Calculated Risk on 8/15/2005 12:49:00 AM

My most recent post is up on Angry Bear: Oil Prices Revisited.

It looks like oil imports will add about $1.2 Billion to the July trade deficit.

It is possible that higher oil prices are leading to lower interest rates! As Dr. Setser noted:

"High oil prices = oil windfall = global savings glut = low long-term rates ... and the low-long term rates help even as high oil prices hurt."

And finally, back in March, I speculated that there was a relationship between housing and the trade deficit. In fact, it was possible that a virtuous cycle had developed that might become vicious when housing slows down.

UPDATE: Here are the graphics from the Virtuous-Vicious post.


Click on diagram for larger image.

The following diagram depicts the possible unwinding of the current cycle.



Check out the post for a discussion of how this could work (and some numbers).

It all ties together (hopefully). I'm focused mostly on housing because I think housing is the linchpin for the US economy.

Best to all.