People have been asking me what is going on with the economy, and the answer is rather simple: there are two posts that mark the global economy. One is the upper bound of oil where NEG phase change from a globalized economy to a localized economy occurs, this is somewhere around $110/barrel for oil. The other is the collapse of the credit system from dollar drought. Thus the Fed and other monetary authorities must "skip the stone" over the water, neither allowing the banking system to freeze over and deleverage, nor the economy get so hot that the trade system unravels. Having seen the top an the bottom viscerally recently, they actually believe in these sign posts, and thus we wander between them.
This "skipping stone" cannot go on for very long, because on each down leg more economies fall into recession or depression: the UK is in a stagflation recession now, and Greece dropped out the bottom on this down skip. Spain and Italy are next.
While various people speculate about what might happen, all you really need to know is this: upskips cannot even generate enough jobs to soak up the new people coming into the job market, which means that the unemployed become the unemployable, and then the disemployed.
The various political movements running around are going to do nothing about this, so there are no unforeseen factors in developed economies. This is it until such time as the patience with bear depression cycles ends. Since there is only one workable way to produce a fast shot of growth, that is a non-conventional carbon boom, that is what will be done, under a Republican in all probability. This will lead to another raid on the atmosphere, until the tail effects of climate change are unavoidable. The Baby boom will be gone then, and they will have packed power with generation asswipe: the obsequious courtiers of the Millenial generation willing to osculate posterior to get ahead, but who are incapable of doing anything other than balance the various immovable ideologies in a room.
It's over people, only when Generation #Fail – that amalgam of Silent, Boom, X, Millenial that we have now – passes off the stage, will there be change, however, it will be tumultuous violent change, because every component of power today knows they can stop real change by simply not agreeing. Thus, only when people are to the point of violence will this be broken.
Sorry about that.
So look forward to about a year of skipping stone as Obama and Bernanke try and save their jobs, and then Drill Baby Drill after that.