Rebuke From The Oil Patch: Plunging Crude Again Signifies Central Bank Cluelessness

There is one false alarm around 30% (1994), but none over 40%. If oil declines by that much, then in the past it has meant some variety of downturn ahead. Supply simply doesn’t matter, when demand shifts nothing good comes out of a 40% crash. Even the first crude collapse in the panic cycle showing up in early 2007 was something policymakers should’ve taken seriously (liquidity).

But they don’t ever. The reason is simple; Economists don’t trust markets, they steadfastly follow models that assume no matter how much evidence stacks up against them monetary policy always leads to success (growth). And for plainly dubious reasons.

 

 

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