Austerity is failing Greece and Ireland
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mame
Well-Known Member
http://money.cnn.com/2011/04/27/markets/markets_newyork/index.htm?hpt=T1
Here is a quick analysis of the market effects from Bernanke's lack of news today, I guess.
Here is a quick analysis of the market effects from Bernanke's lack of news today, I guess.
mame
Well-Known Member
Okay so I watched the Bernanke address and the Q&A after.
http://www.youtube.com/watch?v=c1YLPYix0kM
(warning: It's an hour long, and fairly jargon heavy)
Bernanke is treating the 2% inflation "target" as more of an "upper bound" which is actually bad... There is a reason that 0% inflation has never been considered a priority after all(for the fed) - consider "the Price stability Trap(PK)"(.PDF can be found here)... Basically limbo for the entire economy...
I really wish the board would let go of thier fears of inflation... They're likely to be forced into more expansionary monetary policy("printing money" ala buying treasuries) a couple years down the line anyway, why not do it soon instead of sit in limbo for the next few years?
My only explanation revolves around the idea around "inflation expectations". Bernanke is wary of investors' fears of inflation. Maybe he feels the need to prove over time that inflation levels are fine. If he just goes ahead and prints money, it creates uncertainty and creates an expectation for further inflation which then adds onto whatever inflation was happening due to non-speculative forces... But if he waits a bit, lets oil prices do their thing, waiting for the inevitable"evening out" between headline inflation and core inflation... He can then stem inflation expectations and pursue monetary policy with the the worlds blessing. Unfortunately, that means continued slow growth... Likely into 2012 at least - until Bernanke and the board decide further expansionary policy is safe to do. So basically, I'm saying the delays are all due to speculation.
http://www.youtube.com/watch?v=c1YLPYix0kM
(warning: It's an hour long, and fairly jargon heavy)
Bernanke is treating the 2% inflation "target" as more of an "upper bound" which is actually bad... There is a reason that 0% inflation has never been considered a priority after all(for the fed) - consider "the Price stability Trap(PK)"(.PDF can be found here)... Basically limbo for the entire economy...
I really wish the board would let go of thier fears of inflation... They're likely to be forced into more expansionary monetary policy("printing money" ala buying treasuries) a couple years down the line anyway, why not do it soon instead of sit in limbo for the next few years?
My only explanation revolves around the idea around "inflation expectations". Bernanke is wary of investors' fears of inflation. Maybe he feels the need to prove over time that inflation levels are fine. If he just goes ahead and prints money, it creates uncertainty and creates an expectation for further inflation which then adds onto whatever inflation was happening due to non-speculative forces... But if he waits a bit, lets oil prices do their thing, waiting for the inevitable"evening out" between headline inflation and core inflation... He can then stem inflation expectations and pursue monetary policy with the the worlds blessing. Unfortunately, that means continued slow growth... Likely into 2012 at least - until Bernanke and the board decide further expansionary policy is safe to do. So basically, I'm saying the delays are all due to speculation.
Its funny that you mention the Wizard of OZ. The book was originally written because of the demonetization of silver, its really a story about secret intrigue and how silver follows the path of gold. In the book Dorothy's shoes are made of silver, not ruby. Once you learn who the characters are ( In real life) it becomes a historical piece, not just some story a guy wrote.
mame
Well-Known Member
Interesting factoid.
Last week we got 429,000 new unemployment claims, thats 1 week.
The fed won't do QE3, but they will probably come out with a new program that prints plenty of money, but they will give it a new name, something like "lots o Cash" or something. Hopefully no one throws any wooden shoes into his money printing machine.
Now we have CORE inflation, something Bernanke said wouldn't happen.
3 more points and we hit an all time new low in the dollar, just 3 points, we lost 2 points just yesterday when Bernanke opened his big fat mouth. http://www.marketwatch.com/investing/index/dxy
Oil will not go down in price, it is rising because of inflation and supply problems, not speculation.
If Bernanke REALLY wanted low inflation he would set the Fed Funds rate at something like 5-6%, not 0-.25%. Its a proven, and easily verified fact that high inflation will lead to high unemployment. the fact that the markets did not take a dive after the announcement of the end of QE2 in June is leading me to believe that inflation may now be completely out of control.
mame
Well-Known Member
Core inflation remains below target levels(they shoot for 2%, but like I said they seem happy with <2% which is bad). I wasn't saying the oil prices were speculation I was saying his motivation for not implementing more monetary policy right now (as I said, he'll do it but he will wait a bit first) is speculation. Inflation expectations is a real thing that economists must take into account as I'm sure you know, as it leads to a snowball effect.
Gas prices will go down. While do you do have demand issues stemming in part from increased demand in emerging markets, a lot of the pricing is due to supply constraints in the middle east. Libya, for example, isn't likely to make up for lost production anytime soon, although it'll happen eventually(or they'll at least be at full capacity again stopping further supply issues and price increases).
supply problems and inflation????? whaaaaa???? oil companies are raking in major profits b/c of speculation, and those profits are hampering our recovery... reason oil price is too high?? PROFIT.
budsmoker87
New Member
speculation AND inflation are two of the main reasons oil prices are so high
Ernst
Well-Known Member
Interesting indeed. I own a copy of the remastered film.
IMPOSSIBLE!!
Inflation is first and foremost a Monetary event, the only way you can have inflation is with more money, THE ONLY WAY!! Inflation = increasing the money supply. It does not mean an increase in prices, that is the effect.
OZ=Ounces
One quick question for you all. If I have 100 ounces of gold and the dollar price of gold goes from $1500 to $2000, am I wealthier?
UncleBuck
Well-Known Member
not if the money is worth less. then you just have some fancy rocks.
MuyLocoNC
Well-Known Member
I certainly can't claim any specific knowledge of the oil market, but I did see an interesting article on Yahoo Finance that outlined why oil prices are increasing. Basically, the gist was that because oil is ONLY traded in US dollars, that the price was going up due to the decreasing value of the dollar. Certainly made sense to hear them explain it and it would explain the fact that there is no shortage and demand is virtually the same as what it was a year ago.
Has gold ever been just "fancy rocks"? How long has gold been used as money? How long has paper been used as money?
UncleBuck
Well-Known Member
fancy rocks. you can't eat them.
just like money, gold gets all of its value from the shared confidence we all put into it...just like paper money.
i'd rather have a commodity that people can't or won't do without, and i do.
mame
Well-Known Member
No, not impossible. It's part of what is happening right now. If supply is low, demand is high or any combination of the two - prices go up on that item. Prices have primarily gone up on crude oil because of supply and demand - not inflation. Now, because oil is obviously a main driver of the world economy(as we all know) gasoline prices effect the prices of pretty much everything else... driving the costs up. Costs moving up means that the dollar buys less and by extension is worth less... But headline inflation is very volatile and has shown throughout history to even out over long periods of time. For example, oil prices peaked near $150 a barrel right before the 08 recession(and by extension food and shit was more expensive) before taking a nosedive far below levels we are seeing right now - the end result is that the overall weakening in purchasing power is close to core inflation numbers.
Now, headline inflation as measured by the CPI is one of the causes of - as I've already said - "inflation expectations", which is used by investors to determine the "real rate of return" on their investments - every investor takes this into account. Investments in gold, for example, are commonly used (as you obviously know) in part of ones portfolio to minimize losses via inflation - maximizing the real rate of return.
The other cause of inflation expectations is monetary policy, as we are all aware. Before gas prices spiked (again, due to supply and demand) inflation expectations were still quite low. This was because there was actually a bit of fear of deflation* floating around circles of economists and investors at the time(one of the characteristics of a liquidity trap btw, see Japan's lost decade).
Now, as I've already explained in a previous post inflation expectations bring with them a snowball effect... so they aren't to be ignored and when QE2 was already in motion and gas prices began their most recent climb it created a sort of double wammy for these expectations. QE2 was expected to bring acceptable levels of inflation along with it but, like I said, these levels were supposed to be around the target rate**. The increase in gas prices causes investors to have to "expect" a ripple effect of price inflation to follow and they respond accordingly.
To combat this snowball effect (despite the fact that core inflation is low) Bernanke said they wont be continuing with monetary policy - even though they probably will(they'll wait till gas prices drop probably). What this accomplishes is that it stems inflation expectations. Once QE2 ends, inflation expectations will be lower than what they would have been if investors were to be expecting more monetary policy. This allows Bernanke to say, "See! I told you so! Inflation isn't a problem!".
*see here, specifically the IMF commodity index around 08
**see the Phillips curve for information on the inverse relationship between unemployment and inflation - which suggests a little bit of inflation is good (how much is debated... most central banks use 2% as their target, I've seen arguments for closer to 4% core inflation numbers that made sense as far as allowing for better response to recessionary periods... but that's a whole other argument)
Now, addressing proof of supply/demand issues:
Long term, notice demand increases over time, especially China as NoDrama pointed out: http://www.nationmaster.com/graph/ene_oil_con-energy-oil-consumption
Even The Heritage Foundation has this one right:
CNNMoney says:
So yes, I believe I had it right. Oil is placing inflationary pressures on our economy right now. While it is true that there are inflationary pressures on the price of everything, including oil, right now these pressures are essentially a nonfactor in the equation - stepping aside to supply and demand. The game Bernanke is playing is purely about expectations. That's it. If gas prices were normal, QE3 would've been announced yesterday. Expectations, expectations, expectations...
Increased demand from what? Not from increased production, the demand is increased because of fear of inflation. You want to keep your purchasing power so what do you do? You invest in commodities when inflation is high( like it is now). Oil is the #1 commodity in the world, its no surprise people are buying a shit load of it to keep from losing their asses to inflation.
If you were correct that oil is causing the inflation then all prices of all goods in 2008 when oil was 40% higher than it is now would be higher than it is now. The price of gold in 2008 was $850, its $1530 now, the price of corn was $6 a bushel, it is now $7.30. cotton cost $.70 a bushel, now its $2.55 etc etc etc etc. Inflation IS money printing and NOTHING else. The price of oil is being increased by people who keep buying it in the hope that they save purchasing power.
The Price of Gold is double what it was in 2008, but it costs LESS to get it out of the ground than in 2008. Oil Prices were HIGHER in 2008. Your argument has been disproven.
When you go to the store and see prices are higher than before, they haven't really gone up in price, your dollar just buys less than it did.
Gas prices are going higher, not lower, and you can take that to the Bank!
The central bankers have looted Greece and are looting the US.
They will cause/are causing a dollar collapse.
The Central bankers will tell you we have supply issues with energy.
However Gas is now cheaper then it has EVER been.
One 1964 silver dime will buy a gallon of Gas.
We should institute competing currencies.
The only way we are going to get out of this Mess it to produce our way out.
We can't inflate our way out it, it will be a disaster.
Gold and silver do not get their value from faith.
They are valuable because of the labour it took to produce it.
Gold and silver are money, plain as that.
Gold has been money since at least 700 BC.
Nations fail when they debase their currency.
They will cause/are causing a dollar collapse.
The Central bankers will tell you we have supply issues with energy.
However Gas is now cheaper then it has EVER been.
One 1964 silver dime will buy a gallon of Gas.
We should institute competing currencies.
The only way we are going to get out of this Mess it to produce our way out.
We can't inflate our way out it, it will be a disaster.
Gold and silver do not get their value from faith.
They are valuable because of the labour it took to produce it.
Gold and silver are money, plain as that.
Gold has been money since at least 700 BC.
Nations fail when they debase their currency.