TMFTmonie (< 20)

What happens to the Global Economy Under High Oil Prices?

July 14, 2008 – Comments (0) | RELATED TICKERS: XOM , CHN

If we did not have a transformation to a global economy, I would say that this current period represents the 1969-1981 stock market cycle when the stock market was stagnant and the overall economy was suffering from Stagflation. Free trade limits some of the inflation problems as goods can be shipped from developing countries that have low wages to more advanced nations. The question is what impact will high oil prices have on trade. I think the issue for the global economy is that oil resides mostly in countries with low populations. As a result capital will be taken out of the system and most likely placed in Middle Eastern Banks. Unfortunately, for the Global economy India and China are not oil producing countries. If they were, the global economy would continue to roar as these two countries would trade oil for products. I think we are eventually headed towards some form of stagnation due to high oil prices.