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Oil prices remain firm

If the price of crude oil tells us anything about the resilience and underlying strength of global demand, then it would appear that the global economy is doing just fine—no sign here of any collapse in demand. On the contrary, crude oil futures prices are up almost 30% since Oct. 4th, which also marked the year's low for equity prices.

The agonizing over Europe is over what might happen if Greece and Italy default, but to date the evidence from real-time prices suggests that day-to-day activity, around the globe, remains unaffected.

This is consistent with what I argued in this post from last July, namely that debt defaults do not destroy demand: they mainly result in a wealth transfer from lenders to debtors, and "much of the disruption that can be expected from debt problems has already happened."

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