[Chicken_Little]

Energy, water, tax and high housing costs (house price bubble) in both the US and UK must be draining money out of the economy. Since most of the economy depends on non-essential spending, at some point this must surely cause a recession.

[mmasters]

...

[jaws]

Both.


Scary, isn't it?

[emersonbiggins]

$this->bbcode_second_pass_quote('jaws', 'B')oth.


Scary, isn't it?

[cube]

To quote the elected president of Iran, Ahmadinejad:

"Oil Prices Have Not Reached its True Value"

Yeah! I like the way this guy thinks.

[falser]

It's dollar destruction (fiat inflation), plain and clear. All commodities are rising day after day. Once the Fed stops raising interest rates you will see a very hard spike up on anything priced in US dollars.

[rushdy]

Well I'm sure glad it's not just me

A few days ago when all the markets were up and oil was climbing inflation was the first thing I thought of. Not that I know much about economics!

They stopped publishing that M3 report a month ago didn't they? T'would seem like a good time to print money.

[DantesPeak]

As implied above, high oil prices are caused by the plateau of oil production and inflationary monetary policies around the world.

The savings of the peasants of China and India have indeed allowed the US to hardly feel the effects of PO, which is instead being pushed upon less developed countries first. This is what the $1 trillion current account deficit of the US is all about.

However the problem is more than that. It is about worldwide inflationary policies. For example, China's and Japan's 'money base' (that is the money actually controlled directly by the central bank like the Fed) now exceed the US's, so in reality the rest of the world has more to do with commodity price inflation than the US does now.

The Fed's current policy, looked at closely, is not ' tight' nor loose - but designed to keep growth more or less going. China's money supply on the other hand is growing very rapidly - almost 19% per year.

The Fed will be unable to stop inflation even when the US economy one day slips into an energy-withdrawal depression. In fact, economic hard times will be the trigger that causes the Fed to increase the money supply even more. Is the Fed going to sit idly by while millions of Amercians default on their home mortgages?

Least we forget - the US dollar was devalued by 75% (against gold) in a relatively short time period in the middle of the early 30s depression.

Hey - hasn't the dollar been devlaued 75% against gold over the last year or so???

[jdumars]

The trouble, as I see it, is that the wealth distribution in this country is so unequal that even if the money supply is radically increased, very, very little will reach "the little guy" and will instead go in the pockets of the already rich. Then they can do great things with their money like outsource, buy fancy things made in other countries and inflate prices further. This really doesn't bode well.

[big_rc]

OK folks, Is it just me or has the "all-time" high oil price been bouncing around alot lately. Examples:
Wall Street Journal (4/22/06) $this->bbcode_second_pass_quote('', '[')The Oil Price] is still short of the inflation-adjusted record of $97.55, reached in April 1980

[Concerned]

$this->bbcode_second_pass_quote('big_rc', 'O')K folks,

Is it just me or has the "all-time" high oil price been bouncing around alot lately. Examples:

Wall Street Journal (4/22/06)

$this->bbcode_second_pass_quote('', '[')The Oil Price] is still short of the inflation-adjusted record of $97.55, reached in April 1980

[big_rc]

Another reason why this topic interests me is because since the market is setting record after record these days, this "inflation adjusted oil price" is going to be used more and more. It would help to know if what we are reading is complete BS.

[Shiraz]

there is no one agreed way to measure inflation. different groups use different data to calculate the history of inflation effects. over 30 years, the usage of slightly different data will lead to slightly different results. Inflation adjusted highs are probably between $80 and $100, but there is no such thing as the 'correct' answer for this, it just depends upon which data you use, none of which are perfect or decisive.

As the oil price rises, you will see even more creative and infuriating comparisons. The most annoying I can imagine is the relative price of oil to the average family home. Obviously, the price of the family home has gone up enormously, so by this metric, even oil at $200 per barrel would look cheap in 2006.

[Synergist]

It is extremely difficult to even guess at what the "inflation-adjusted" price of oil is compared to the highs made in the late 70s/early 80s (a period of vast inflation too, on its own), compared to the highs in oil price we have now, primarily because the government's own official inflation index -- which is used to make these calculations is demonstrably and provably a wicked lie.

So I think given that inflation has been deliberately and grossly lied about by the government, oil prices today are probably not all that high as they sound like, or as high as they will eventually get. That is to say, without lies about the rate of inflation and hidden money creation, oil is still not even close to being priced at its real market value given the reality of Peak Oil.

If we say that oil properly priced in a depletion scenario should be $100 or $200 a barrel, or US gas should be $4 or $5 if we do not take into account the whip hand of hidden inflation, we are grossly underestimating the true value of oil in an era when spineless politicians and their lackeys simply turn on the money spigot in a desparate attempt to prop up the housing bubble and print checks for these unsustainable ridiculous projects of intergenerational thievery called Social Security, Medicare, Medicaid, and all that.

In a true hyperinflationary scenario, oil could hit $10,000 dollars a barrel, easily. But in such a miserable age of course those dollars would be worthless; a candy bar in a vending machine would cost $100. And of course the government -- and this is the only way they can ever fulfill these ridiculous promises to the Baby Bummers -- will be handing out Social Security checks of a couple thousand dollars a month. Enough for seniors to buy a sandwich.

[pigleg]

And the way Americans foam at the mouth at the word 'TAX' you'd think more people have figured out that's what inflation is! Every out-of-thin-air dollar the gov't prints, the value of your dollars are reduced.

[rushdy]

Would oil price to average earnings give a good comparison of how affordable it is? (Rather than average house price)

[darren]

$this->bbcode_second_pass_quote('emersonbiggins', 'R')ecord $75 oil at least partially indicates a nearing of PO, but what's with the Dow posting a 6-year high (11,347.45) and commodities trading at record levels? I know squat about economics, but I think Helicopter Bernanke is doing what he does best - flooding the world with phunny money, and those dollars are quickly making their way into the marketplace. So, do we have a consensus on this?

[sjn]

Surely if you're talking about the inflation of the money supply you also have to take into account (correct for) the size of the market. There are more people chasing petrodollars today than there were in the past.

[Seth]

CPI is a load of crap, but one of the better metrics we have available for looking back in time. A great example of CPI problems includes no accounting for health care cost increases, higher education cost increases, and (in 2005) a minimized approach to calculating housing cost increases (average real "rental" costs--the figure used for housing estimates (for both renters and homeowners)--increased by over 80% between 2004 and the end of 2005, but the CPI measurement only ratcheted up around 30%).

My former grad advisor has been keeping tabs on CPI calculations for a number of years now. As he says, "Stating dollar figure conversions in dollars and cents nearly always suggests more precision than the data allow", but you can't beat it for quick reference. Here is a link to his conversion site:

http://oregonstate.edu/Dept/pol_sci/fac/sahr/sahr.htm

[grabby]

I bought a gallon for 17 cents in 1970. That same 17 cents now will buy 1 cup of gasoline.
It doesnt matter if there is adjustment or not, the same 17 cents in my piggy bank on coins that say 1970 now buy 1/16 of what they did.

AND I DO NOT MAKE 16 TIMES MORE THAN WHAT I MADE IN 1970.


There fore our quality of life is decreasing.