Uh oh. Oil up. Dow down. Gold screams higher. What next?
“Oil price approaches US$90,” Bloomberg reports, “Crude oil rose above US$86 a barrel for the first time in New York on concern Turkish forces may pursue Kurdish militants in Iraq, curbing shipments as refiners prepare for the peak-demand heating season.”
Well there you have it. A Turkish invasion of Northern Iraq would be just the sort of historical monkey wrench no one saw coming. Oil doesn’t need a whole lot of impetus to march higher. Geopolitical tensions only add to an already powerful mix of upward price pressures.
Oil—like nearly all commodities—is also rising because the supply of US dollars is rising faster than the supply of raw materials. The supply of US dollars keeps growing because the US keeps spending money it doesn’t have. And strangely enough, non-US investors keep lending the US government money, via the bond market.
UBS Securities reports that the US Treasury Department will try and hawk nearly US$220 billion in new bills, notes, and bonds in the next fiscal year (the fiscal year for the US government begins in October). That’s just new debt, and marks a 50% increase over last year’s figure. But don’t forget about the old debt that matures during the year and must be rolled over.
Markets and Money