Oil and The Fed

From the US perspective, there are two predictable economic
pillars we have always relied on: Oil and The Fed. We look at the
price and supply of oil to calibrate our economic position in the
global economy, and we rely on The Fed to insure our economic
security. In the past 2 months we have had the pillar of oil
completely yanked away from the foundation of our financial
institution. Is another pillar, even more central to the US
economy, The Fed really immutable? Starkly, is Doomsday
possible?     


The Fed


Whenever we get into any kind of real serious financial trouble –
like the recession in 2008, or the economic slow-down we’re in
now – we’re confident that the world is not coming to an end. The
reason we’re so certain that the financial system is not going to
crash, is because we believe The Fed is not going to let it.


The Federal Reserve is the central bank of the United States.
It’s actually a series of 12 Federal Reserve banks. Here in
Louisiana we’re in the Federal Reserve’s 6th District, anchored
by the Federal Reserve Bank of Atlanta.


The Vice President & Regional Executive of the Federal
Reserve Bank of Atlanta is Adrienne Slack. In this conversation
Peter Ricchiuti takes Adrienne back to a statement by the
Chairman of the Fed, Jerome Powell, on April 9th. Powell said,
"The Fed will provide up to $2.3 trillion in loans to support the
economy. This funding will assist households and employers of all
sizes, and bolster the ability of state and local governments to
deliver critical services during the coronavirus pandemic.”


In other words, on April 9th The Fed gave the United States $2.3
trillion. The Fed is not actually printing money, but on April
9th it did in fact create $2.3 trillion that didn’t exist on
April 8th. Adrienne explains how this works, and discusses the
bigger question: could gthere be a day when it stops working?


Oil


Nothing sums up the strange and unprecedented economic times
we’re living in more than a simple, three-letter word: Oil.


Maybe there’s a fiction writer somewhere who imagined the day oil
became a worthless commodity that you had to pay someone to haul
away, like garbage. But it's doubtful there is an economist on
earth who saw that day coming. Or even the days we’re living
in now, where we’re discussing what’s called “$20 oil.” That is,
oil that sells for $20 a barrel.


What does it cost to produce a barrel of oil? In Louisiana the
common wisdom has always been, around $60. Over the last couple
of years though, the oil field seems to have been staying alive
with prices of around $35 a barrel. Is $20 oil finally going
to kill off the energy business in Louisiana? Keep in mind
that the reason this matters is, the energy industry in Louisiana
employs over a quarter of a million people. And it pays over
$2billion in annual state taxes. So whatever happens to the oil
business in Louisiana affects all of us.


One good thing about a business that is continually in a cycle of
boom or bust, is predictability. A bust is always followed at
some point by a boom. Or it has been. This time, though, it
looks like we’re going to need a more robust survival strategy
than “Wait for better times to come around.” Do we have that
strategy?


Gifford Briggs is the lucky person who gets to answer that
question. Gifford is President of the Louisiana Oil and Gas
Association.


Crisis Leadership


No matter which part of Louisiana you live in, you’ve survived
disasters. From catastrophic downturns in the oil business, to
biblical floods, and storms. One of the most cataclysmic of
these in our lifetime was Hurricane Katrina. New Orleans was
brought to its knees in a way that, till it happened, had only
existed as a theoretical “worst case scenario.”


Beyond the threat to life itself, hardship like that - and the
crisis we’re going through now - creates enormous
suffering. It also creates heroes. After Katrina, one of
those New Orleans heroes was Blake Haney.


Blake is the owner of a business called Dirty Coast. Dirty Coast
makes hip T-shirts with a New Orleans flavor. After Katrina, they
also made a sticker. The sticker said, “Be A New Orleanian
wherever you are.” Dirty Coast was then a small store. But demand
was so great for those stickers that Blake gave away around one
million of them. That slogan united a far-flung diaspora of New
Orleanians and captured the resilience that directly led to the
rebuilding of New Orleans.


Today, Dirty Coast has 4 outlets and a significant e-commerce
component. Blake Haney still runs the company. He’s also the
co-founder of locally.com, a nationwide e-commerce site that
drives consumers to brick and mortar stores, and Bayou Brands, an
e-commerce and product development consultancy. 


There are very few thought-leaders who have actually been on the
front-line of rebuilding a shattered economy. Blake is one of
them. Can the lessons he learned  last time be applied now
to rebuild the local, state and national economy?


Photos by Jill Lafleur and more info is at our website. More
examination of the current Louisiana economy is here.


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