In the general chaos Friday, oil in the largest single-day spike ever, near $140/bbl, Dow off 394 points, the only market that did not move was credit.

Mortgages are still near their 90-day high, 6.375 percent, and the 10-year T-note is still in its trading range at 3.92 percent. Long-term rates have held in belief that economic rebound, or inflation, or a weak dollar would force the Fed to raise its rate, and soon.

OK, group: a show of hands, please. We’ve got a million homes in foreclosure right now, delinquencies rising fast; we shed 45,000 jobs in May; gasoline is on the way to five bucks, $100 per fill-up; the purchasing managers’ indices were zero-growth for May; overall vehicle sales in May fell 14 percent; credit ratings were cut for Merrill, Lehman, Morgan, WaMu, Wachovia, Ambac, MBIA, MGIC, and PMI, all with negative outlook, and you think the Fed should raise the cost of money? Really?

I suppose a case could be made for quick suicide by Fed bullet instead of all that time burning expensive gas, waiting for carbon-monoxide to get me, but I’d rather take my time. If energy markets do not break, all roads lead to global recession: here, directly; other places in the aftermath of a losing fight with inflation.

My hoped-for reprieve: a break in oil. Not a big one, just a few years around $100 to let the global economy adapt. Protracted slow growth, but not a bad recession.

Chances? Excellent. Evidence for that opinion? Modest, but different.

The overriding rule: Supply and consumption of energy are elastic to price, but the elasticity takes time. It takes time and capital to find more energy, whether the same stuff or substitutes; and it takes time and capital for consumers to adjust (last month sedans were the top-selling vehicles for the first time in 16 years). Capital expenditures are further delayed by uncertainty about the future floor price for energy: only two years ago, $40 seemed an iffy bet; $80 looks solid now. Consumption adjustment has been delayed by subsidy: China, India, Iran, et al have provided oil-based fuel at or below global wholesale, only now beginning to end.

***

What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

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