[Graeme]

On May 17, I posted this "crazy" idea that the American economy was being manipulated by bankers.

$this->bbcode_second_pass_quote('', 'M')eanwhile, through the financiers’ control of the U.S. Federal Reserve System, the producing economy was shattered through the Fed-induced recession of 1979-83, where interest rates were raised to the highest in history to combat the inflation the financiers had themselves caused by the oil price shocks.

[Graeme]

It is good to see that I did not recieve any abuse after I posted this story. At the time, I thought it was "interesting" and I posted it because I'm still "exploring hydrocarbon depletion". Nobody has expertise in all subjects that are relevant to peak oil - there's quite a wide range. So I take the risk that sometimes I will post a story that is naive and it will provoke ridicule. If I didn't take a risk, then I probably wouldn't post at all!

In view of the above, I think that this story that I've posted in it's own thread will be better received. But I haven't finished with the Fed yet.

Oil and Inflation

$this->bbcode_second_pass_quote('', 'T')he Fed’s decision Wednesday to hold interest rates steady — after a string of cuts to stabilize financial markets and support the economy — underscored its growing concern about prices.

Then came Thursday and Friday. The stock market plunged into bear market territory, leaving no doubt that the credit crunch persists and the economy is still very fragile. At the same time, oil prices surged, sharply increasing inflationary pressure. The Fed would have preferred to deal with the threats of recession and inflation sequentially. But it does not have that luxury.

The Fed is in a bind. If it keeps rates low and loans plentiful to combat a recession, inflation could worsen. If it raises rates and tightens the money spigot to fight inflation, the downturn could be deepened and prolonged.

We don’t know how the Fed is going to get out of this bind. In the long run, however, the bigger challenge is not the Fed’s. Policy makers must come up with strategies to prevent the recession-and-inflation problem from happening time and again. Foremost would be a systematic plan for reducing the nation’s dependence on oil. From this perspective, high oil prices are actually a good thing — cutting use and spurring the development of alternative energy — but there must be help for the most hard-hit Americans, like lower-income workers.

The country first saw how high oil prices can wreak economic havoc with the oil shocks of the 1970s. Congress and presidents have failed to reduce America’s vulnerability by reducing its dependency. The Fed will have to feel its way through the current crisis. But the next president and Congress will have to tackle the oil problem once and for all.

[jbrovont]

It's good to see stories like this posted. It's not surprising at all to see interest rates used as a way to 'consolidate' wealth again, considering who controls the fed in the united states. These techniques were used extensively prior to wwI and wwII to destroy economies while concentrating wealth. The fact that oil as the primary basis for the western economy should be used as the leverage for such destruction should come as no surprise. The tactic is not new. The spread of poverty and economic hardship is calculated and premeditated for the benefit of the few.

[DantesPeak]

I agree that the Fed will take actions that have and will increase the price of oil. But basically this is a resource depletion issue.

To sum up, we have past the peak of net available oil and are headed downward. The price of oil is mostly determined by supply/demand but also being prodded up by Fed policies that have become much more inflationary since last November 2007.

The Fed will react to the weaking economy and coming banking collapse by creating even more inflation. If oil is viewed as the most stable essential commodity - and basically a currency - then the price of oil will just keep climbing in the long term.