The Macro Chain Reaction of Oil Shocks | Bob Elliott
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Central banks never ease into an oil shock. Doesn't happen. When you have an oil shock, it's a very difficult scenario for basically policymakers to respond to because it both increases inflation and decreases real growth. I think a lot of people are getting ahead of themselves on talking about the disinflationary impact of an oil price rise. The first step is prices go up, real spending goes down and that's where we're at right. Has to get bad before someone does something about it in order to make it fun. People are kind of looking through that has to be bad in order for something to happen
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Great. Thanks so much for having me. I feel like when we tried to find a good time, which was a few weeks ago, you know, the world was a very different place than it is today. So we'll just roll with the punches and talk about what's going on.
Yeah, honestly, probably silver lining that, yeah, we were planning to do this a few weeks ago, then it got delayed. And now we're in a completely different situation, completely different conversation that we're about
to have.
So at least it'll yeah. We're we're in amongst it now. We're gonna try and put on our geopolitical hats on a little bit and try to figure out how to understand everything that's going on with the Iran strike and how it impacts the global economy. So you've been writing a lot on your substack, which is really great. You've been writing a few different pieces on how to understand the context of this oil shock of the Strait Of Rimuth is being closed and its impact on the global economy. And yeah, like I said, you're, you're really excellent at these high level macro frameworks. So I just want to
Yeah, well, I think we were coming into the beginning of the year experiencing something that I called the savings driven economy, which I sort of describe in contrast to what was for many years post COVID an income driven economy. And what I mean by a savings driven economy was we started to see basically that spending continued to hold up and investment continued to hold up despite the fact that, you know, it took more to savings from households to keep that spending going as labor markets weakened and more to savings from businesses to keep their pace of investment, particularly related to
Yeah, so contrasting that with 2022, you know, back then we had probably one of the hottest labor markets we've ever seen, like job openings are just absurd. And so I'd love to just hear, you know, back then when we had that one in 2022, it seems like we narrowly missed a recession on its own. You know, some people debate the semantics that we did see a little one, but whatever. The fact is that we came out of that somewhat unscathed. It feels to me like that is because, yeah, the labor market was in an excellent place. People were stuffed with cash from COVID era stimulus. Companies had plent
Well, I think 2022 is really helpful because to study it helps you understand all the different mechanics. So what happened, while
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