I wanted to look @ where we are in the oil markets along with some of the other markets to see whether growth has taken hold anywhere besides in the ‘Food Stamp’  and ‘homelessness’ markets.

Here’s the weekly front- month Brent chart from TFC chartz:

European crude is having a hard time with $90 as it has had in the recent past. Keep in mind this contract was a ‘forward’ month back in May when the Greek default panic took place.

You will notice the resistance area and the unexciting open interest. The medium- term trend is up but a decline below $78 would probably indicate a retest of old lows of $ -70. Will this happen? The long- term trend in crude is bearish, with the old high of $147 safely out of reach.

Right now, oil is very expensive. As has been the case since Spring of 2009, when oil prices punch above $80, the world’s economies get the bends. They are certainly getting them right now!

The perspective from the oil market has the dollar becoming stronger as the oil/dollar relationship puts pressure on short- dollar trades and risk assets. Not only is oil freely traded for dollars, the current POMO asset swaps taking place (Bernanke Money Laundry) are for dollars, which are what the Fed is trying to sell.

As long as Wall Street insiders and Saudi Arabia accepts it, the dollar will be a hard currency, becoming ever harder. As this process unfolds, commerce will shrink and demand for ‘utilitarian’ items such as crude will decline along with price making the dollar stronger, still. This is a very powerful feedback loop that is abetted by the short- term greed of market participants.

Oil prices in dollars can indeed rise due to market action, speculation or a short- term interruption in supply. As they do so the economic damage becomes more pronounced and the likelihood of out- and- out demand destruction increases, along with the consequent collapse of oil prices and everything else.

It looks like $90 is the new $147.

Increasing dollar strength is what is undermining the euro and luring defectors from euro- denominated fixed income. All that is needed is for crude to drop below $70 and the rout will be on. Euros are backed by worthless finance deals written in Ireland to escape EU taxes. Dollars are backed by worthless mortgage securities … and crude oil. People focus on the mortgages and forget the crude oil.

No cheap(er) crude means no economies at all. The rump of an economy we have now exists because crude costs less than $100 a barrel!

I’d look for a lot of pressure on the euro as the ECB continues to buy European bank debt and default noises come out of Ireland and Portugal. If the euro ‘breaks down’ all at once, the dollar will become stronger. You will see the euro below 1.20. Since any euro breakdown would be the result of high energy costs, there is nothing to suggest that the a euro- break would force oil prices higher.

Gold and silver prices are hard to predict. What would the flight from risk look like? Would it be disorderly? If so, margin calls would torpedo gold and silver prices and the dollar would be super- charged.

If the euro slowly strangles and the peripherals fall out of the EU, the euro will stabilize as a lot of bad debt denominated in euros will be written off. Keep in mind, if the peripherals exit the currency union, the euro will become stronger but a ‘minor currency’ like sterling. Eurozone GDP would fall minus the periphery. The ECB would have to mop up or repo excess euros or face stagflation. Depending on how default takes place and under what conditions, bank debt denominated in euros would be swapped for new Irish Dingleberries or whatever currencies the Niewe Periphery comes up with. Since the longer- term outcome of exiting the Eurozone would be devaluation of … whatever currencies the Niewe Periphery comes up with … these countries would face energy shortages and very high prices.

Keep in mind, the euro was designed to be a hedge against high oil import costs. No euro membership, no cheap(er) fuel!

Ireland needs to think outside the box and invite the Kingdom of Saudi Arabia to build a air force naval base on the Emerald Isle.

Meanwhile, Zero Hedge/Tyler Durden (not real name) had these nice chartz from Case- Schiller illuminated the sorry residential real estate market. Is it any surprise that real estate is suffering alongside the $80 oil? Who wants to buy a house when the economic framework that supports house prices is broken?

The top chart indicates the number of sales nationally and in the top twenty markets. The bottom chart tracks sales prices. Neither data sets look too hot.

The effect of oil prices on real estate is a ‘heads I win, tails you lose’ proposition.

It’s hard to see any relief for the housing business. Lower oil prices would theoretically make housing less costly overall, but ‘cheaper’ oil will be offset by credit that becomes increasingly difficult to come by. Credit is held hostage by oil prices and the hardening dollar. Any oil price increases from the current levels will directly stifle sales particularly in far- removed exurbs. Decreases in price would signify an effective tightening of credit. It would be ‘available’ but no one would be able to qualify for a loan!

Until people start thinking about the interconnectedness of oil and rest of the economy, the pain will increase. At some point the oil/economy connections will ‘solve’ the issues for us and we will have no choice but endure our new lives without available crude.

This is indeed the issue that matters, not growth which can be taken or not. Oil must be available at a price that allows a profit in its use. Right now, that price is much lower than the market price. We must change our use of oil to reflect its higher value. That means less ‘growth’ and no more waste.

How hard can that be, eh?