Trains, planes, and homes?

Every morning it seems oil hits a new record high. The economic and political results are reverberating throughout the world: corporations are restructuring their supply chains, car sales are shifting, subsidies are being slashed and politicians are posturing about "gas tax" holidays and suing OPEC governments. The stakes of this oil spike are as high as prices.

Much verbiage has been spewed about our addiction to oil and its coming end. Americans don't seem to realize that while this will most certainly be painful, proper policy may ensure the economy can gain some benefits from the necessary and unavoidable restructuring. The obvious changes will be in the energy industry, manufacturing and shipping. But the words oil, housing, and unemployment are rarely mentioned together.

Whether or not this is "peak oil", the American government must act swiftly and drastically to buoy the economy. As the housing market slumps with no indication of quick resurgence, unemployment is also on the rise. Proper policy would encourage restructuring that promotes long term growth while limiting short term losses. There is no doubt moving our country away from oil dependence will be expensive and painful. But there is no reason the end result has to leave us worse off. So what to do?

Tax, tax, tax. The sooner gasoline reflects the true price of oil (or ideally, more) we will begin to see the housing and labor markets, which are imperative to proper reconstruction, bottom out as workers move from "exurbs" and more homes are foreclosed. The spike will be a painful, short term symptom with a more efficient and fluid housing and labor market as the end result.

The process will most certainly hurt but knowing the true extent of the housing crisis quicker will help the financial industry glean their sheets honestly and encourage labor mobility - benchmarks for a "new economy".

The Internet Can Can

The Internet Corporation for Assigned Names and Numbers (ICANN) ruled today in Paris that any organization, company, or entity can now apply for an individual domain ending.  

The decision, while creating room for hackers and other internet improprieties, provides a unique laboratory to monitor how organizations value their internet property. How this move will affect internet culture remains to be seen. The expected explosion of requests will be monitored by the ICANN while an unnamed third party arbiter will handle objections and disputes. Unfortunately ICANN's power to regulate remains woefully inadequate for such a task. Nor can governments be trusted to ensure transparency and cooperation in global electronic commerce. Internet freedom remains a fringe political issue but one of great importance. 

What exactly does this spell for the average surfer? More streamlined advertising is a foregone conclusion. With monitoring techniques growing more sophisticated and advertisers targeting users, ads tailored to personal surfing habits do not seem far off. To facilitate this search engines must refine their business plans and technological capabilities. In their quest to open up and personalize the internet the ICANN may have boxed in users to a new generation of surveillance.

The possibility of restricted web names and generic copyrighting will undoubtedly spew legal challenges and corporate interference. But one thing is certain. The internet will continue to spur innovation and cooperation. In the end it will be the user who defines how new domain names will be received. Just as difficult as it would have been twenty years ago to imagine Google as a verb, perhaps .com will soon be a quaint relic of the 00s in an era of unsurpassed ubiquity.

Steady as she goes

The FED opted yesterday to keep interest rates at 2%, indicating that while inflation is a growing concern, it is still secondary to stimulating growth. Meanwhile, the ECB is getting even more hawkish on the issue, with Trichet signaling that they will likely raise rates by 0.25 points to 4.25%.

Essentially, the US and the EU are taking opposite bets on what's a bigger economic threat: recession or inflation. In a way this is par for the course: as an institution modeled on the Bundesbank, the ECB is much more inflation-adverse by design. But you can't help wonder if somebody's making a mistake.

That the dollar is still the world's primary reserve currency only complicates things. Countries pegged to the dollar cede their monetary autonomy to the FED and have to follow its decisions or get knocked off their peg. In China, where inflation is closer to 8%, low interest rates are probably not what you want.

Add to this the fact that lower interest rates are more likely to cause further dollar depreciation, and you've got some real problems. Especially when you need to import things like oil (black gold, Texas tea), where contracts are denominated in dollars. If dollars are worth less, it will drive up the price. 

Spooky, scary, indeed.