[Pops]

Don’t forget that the NEW and IMPROVED CPI uses the idea that when steak gets too expensive you will just eat hamburger hence a way low number.

Which is not surprisingly a benefit to the budget since entitlements are linked to the CPI.

All of which of course is an airball because US family budgets today are waay different than 20 or 30 years ago when many folks only had one car and job, actually saved money, paid cash instead of plastic for a much larger percentage of purchases and weren’t in hock for nearly 35% of income on a mortgage.

I don’t really see any way (or need for that matter) to compare except the overall effect on foreclosure or bankruptcy rates.

[btu2012]

$this->bbcode_second_pass_quote('MrBill', ' ')To be sure governments have abused their sovereignage, but mainly to give their electorate all those goodies they demanded like pensions they have never really paid for, but want anyway. As well as medical insurance that is not really insurance, but a taxpayer give away. Or even that those taxpayers even paid for all that they consumed, but passed along the remaining costs to foreign creditors and/or unborne generations of taxpayers.

[btu2012]

$this->bbcode_second_pass_quote('MrBill', '
')This is essentially the infamous 'Washington Consensus' that everyone loves to hate. It is self-imposed fiscal discipline, or in the case of the IMF and its aid recipients, externally imposed fiscal discipline.

[bodigami]

$this->bbcode_second_pass_quote('MrBill', '(')...)
So you that are so grounded in reality. Let us read your predictions in black & white here? What are your solutions? Tell us how we are going to transition to a fossil free future? By cutting back money supply?

First of all that 'comment' alone shows you do not even know where we are much less where we are going? Money supply is not something you can 'arbitrarily' cut back on. Money supply is a function of demand for money and credit as controlled by interest rates set by the Federal Reserve. You raise the cost of money and borrowing and you reduce demand. You cannot simply reduce money supply.

Secondly, demand for money and credit is global. So you can hike US interest rates to 20%, but if investors can still borrow freely at 1% in yen then you have done zero to reduce potential money supply.

Yeesh, I read ill-informed comments all day long here. Posters just expect to be able to say anything, so long as its populist and plays to the crowd. Don't worry if it makes sense. Decoupled from reality indeed.

[Hagakure_Leofman]

Enjoy

EDIT : On request, here is a rough chart showing the same data adjusted for inflation. I could only find a chart going to December 2007, so I've done a rough edit on this and extended the graph to show our current summit.

[cipi604]

It's still very very cheap. The graph in a few years will look like a hockey stick.

[mgibbons19]

I would prefer it to be inflation adjusted.

[Dreamtwister]

I was thinking the same thing.

[mos6507]

$this->bbcode_second_pass_quote('mgibbons19', 'I') would prefer it to be inflation adjusted.

[Dreamtwister]

$this->bbcode_second_pass_quote('mos6507', 'M')e too. But that tends to be where the chart starts to become less trustworthy, since the formula used to adjust for inflation can easily make it seem as though the runup in price is not as severe as it really is. There are just too many parties who would like to make it seem as though oil prices during the 1970s oil crisis will always have been worse than today no matter how bad things get.

[Hagakure_Leofman]

Bump.

I've added a chart adjusted for inflation to my original post above.... I had to modify it slightly as it only went to Dec 2007.

[idiom]

If food or Oil are becoming more difficult to produce then their value is going up. If the price adjusts to match that value then that is not inflation.

Inflation is an increase in the money supply (which is happening hand over fist too.)

However people are being told not that prices are going up because of PO and that everything is becoming more valuable, but that inflation is causing it. Thus Peak Oil and its world crushing implications are being masked.

The message people are not hearing is:

"The Price of Oil is NOT inflating. It is getting HARDER TO COME BY. The Price of Food is not inflating, it is getting HARDER TO COME BY."

[Olle]

$this->bbcode_second_pass_quote('idiom', 'I')f food or Oil are becoming more difficult to produce then their value is going up. If the price adjusts to match that value then that is not inflation.

Inflation is an increase in the money supply (which is happening hand over fist too.)

However people are being told not that prices are going up because of PO and that everything is becoming more valuable, but that inflation is causing it. Thus Peak Oil and its world crushing implications are being masked.

The message people are not hearing is:

"The Price of Oil is NOT inflating. It is getting HARDER TO COME BY. The Price of Food is not inflating, it is getting HARDER TO COME BY."

[chenopodium]

The problem is that not only food and oil will go up, but almost anything else too because of PO (steel, iron, plastic products, fertilizer... you name it!). The main thing that won't go up because of PO is salaries.

I agree that this could cause "money" inflation at the end, but I think it is very important to distinguish the two.

The fed and other governments are likely to increase interest rates because they think this is all "regular" money inflation.

So I wonder if increasing interest rate would help.
It would only help to stem "money" inflation, but it will have no impact on "PO inflation".

What will happen if they increase interest rates, and "PO inflation" keeps going up (and they think this is "money inflation")? Will they keep increasing interest rates, further hurting everyone?

Assuming for a moment that we are able to stop money inflation and only have "PO inflation", then nothing will help - in fact in my opinion they may have to reduce interest rates to basically 0 once the growth paradigm falls apart.... otherwise nobody will be able to afford loans anymore.

(As a side question: why in the world is food and energy taken out of the core inflation??? To me energy and food are the most important parts. Do they know that PO will lead to increasing food/energy costs and is that why it is taken out???)

[Micki]

Easing interest rates certainly wouldn't help.
If oil price (and cost of anything related) increases becasue of shortage, then increasing money supply can only make it worse as more money chases the same amount of goods.
No doubt some countries will decrease interest rates but that will be more of an attempt to keep people from rioting.

[chenopodium]

I'm thinking of all the people who have mortgages.

In a "PO inflation" scenario, everything (except salaries) gets more expensive, and people have less money available for everything, including paying the mortgage.

So given the same interest rates, more people will default and foreclose.

Increasing interest rates would make this even worse.

Only lowering interest rates would help in this case (as long as this doesn't increase the money supply... and cause "money inflation").

[idiom]

What I mean is that people are not catching the idea that the Loaf of Bread today is NOT the same Loaf of bread as four years ago. It is harder to make it now than it was four years ago.

The CPI based on a basket of goods is not taking Peak Oil into account. The REAL value of the items in the CPI is going up. Its not meant to. The whole index is being thrown off by PO.

[chenopodium]

I wonder if there is a better way to compute "money" inflation.

Something like total amount of a currency divided by the number of people...

Or maybe we should just look at salaries to compute inflation, as they won't increase because of PO

Any other ideas ?

[Olle]

$this->bbcode_second_pass_quote('chenopodium', 'I') wonder if there is a better way to compute "money" inflation.

Something like total amount of a currency divided by the number of people...

Or maybe we should just look at salaries to compute inflation, as they won't increase because of PO

Any other ideas ?

[Micki]

$this->bbcode_second_pass_quote('', 'I')nflation in itself is not necessarily dangerous to the economy, only spiralling inflation is. That is why the Fed measure core inflation without the volatile commodities of food and energy.
This is a good article that explains it all: http://www.economist.com/finance/displa ... d=11622353