How $10 Gas Will Wreck the Fed’s Stupid Game

7 comments

There’s no relief in sight for gas prices that seem headed to at least $10 gallon.  The chart above suggests July crude will likely hit $128 this week or early next, a whopping 7.5% gain over last week’s high. But watch out if the futures shred their way past this Hidden Pivot resistance, since that would portend a continuation of the trend to $140, a target first drum-rolled here several weeks ago.  It’s a safe bet that Californians will be paying $10 or more for gasoline by then, even if far fewer of them are driving. Realize that it is not consumer demand that has been pushing up prices, or even conspiratorial constraints on supply, but rather a flood of speculative money into energy resources as a hedge against inflation.

The irony is that the coming price collapse in crude will be part of a deflationary tsunami that wrecks the banksters’ moronic shell game. It will occur simultaneously with a real estate collapse that has already begun. Indeed, bidding wars for homes appear to have ceased due to the steep rise in mortgage rates, record-high prices for homes, a dearth of inventory and a scarcity of qualified buyers. These factors have created perfect conditions for a real estate collapse.

No Escape

Inflation in energy and real estate are similar in that neither contains an escape hatch for investors. Because energy prices cannot continue to rise without eventually throttling the economy, the rally is doomed. But when prices finally plunge, as they must, that will suck the air from a $2 quadrillion derivatives market that was largely built using energy resources as collateral. The collapse in mortgage-backed securities did the same thing to the banking system in 2007-08. This time, although tens of millions of homeowners are sitting on huge paper gains from real estate inflation, none of them can cash out because there are no reasonably priced homes for them to move into.

A well-known quote from the late economist Herb Stein encapsulates the endgame: If something cannot go on forever, it will stop. Inflation is close to that point. When it finally arrives, the economy will not simply level off and enter a glide path to renewed prosperity, stability and economic health. On the contrary, it will experience a wrenching dislocation with no remedy save the kind of brutal price discovery that we have not seen since the Great Depression.

  • James Charles June 13, 2022, 3:38 am

    “This time, although tens of millions of homeowners are sitting on huge paper gains from real estate inflation, none of them can cash out because there are no reasonably priced homes for them to move into.”
    Sell and rent?

  • Nicholas DeMarco June 10, 2022, 4:45 pm

    Ricky, I sincerely hope that 10 bucks does not come to fruition. The dems seem hell bent on sending us back to the stone age. Black outs, brown outs and costs that skyrocket will cause us all to end up on the gov’t doleout.

  • RICHARD CHARLES June 10, 2022, 11:37 am

    We bought some TQQQ

  • Ben June 8, 2022, 5:24 pm

    I’m not saying this is a good idea or a bad idea, nor that I’m for or against it. Just sharing it with you all as a possibility.

    What do you think of it, Rick?

    https://www.youtube.com/watch?v=WO2485yFor4

    &&&&&

    Sorry, Ben, but life is too short to click on someone’s 20-minute video. RA

    • Ben June 10, 2022, 3:46 am

      Then you must be in very bad health, in which case…. I wish you a very swift ending so that you don’t suffer any longer than your poor and tired lack of patients allows.

      &&&&

      I am seeing only a few patients a week now, and that seems to have helped. RA

  • Rich June 6, 2022, 9:44 am

    We are reminded of 0’s comment he would drive coal out of business.
    That led to a bottom for BTU of 80 cents in Sep 2020, with 33.29 this April 2022.
    (Despite 1000+ years of US coal reserves, including Bears Ears and Escalante UT clean coal returned to market by T.)
    Uncle apparently had similar green wet dreams to the C’s and 0, with $GASO targeting + 126 % from $4.155 to $9.38.
    Price still destroys demand and getting to work.
    Round and round we go.
    Where we stop, nobody knows.
    Not even the Fed, apparently.

  • Ben June 6, 2022, 9:35 am

    “Realize that it is not consumer demand that has been pushing up prices, or even conspiratorial constraints on supply, but rather a flood of speculative money into energy resources as a hedge against inflation. The irony is that the coming price collapse in crude will be part of a deflationary tsunami that wrecks the banksters’ moronic shell game.”

    That has to be the conclusion because even I see that coming!

    But along with that will come unprecedented mass migration. So far, I’ve heard that Sri Lanka, Pakistan, and Egypt — about 300 million people in total — are or are about to be hit hard by food and energy shortages. Not just high prices, but shortages… as in NO FOOD, in the midst of multi national bankruptcies. The shortages and resultant unrest will be the driving forces behind that coming crisis.

    And there’s nothing that can stop that now. Even if Russia gives up this very instant and withdraws 100% from Ukraine, the damage is already done, the course is set.


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