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Old 06-28-2008, 09:58 PM   #61
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Originally Posted by hogtied View Post
that the 100% increase in oil cost over the last year is not causing inflation but rather a contraction of our ecomomy. He argues that dispite oils 100% rise, the core inflation rate is only 2.1%. Thus, high oil prices are not currently inflationary, according to Bob.
I did not listen today, but I have heard him make that statement many times.

On one hand, I see where he is coming from, OTOH, what makes oil any different from anything else? Seems like *any* price increases are anti-inflationary. You have less money to go around, so you cut your spending, that reduces demand and prices drop again. It seems like a self-limiting thing.

Hmmmm, maybe his point is this: Since oil demand is relatively inelastic (people have to get to work, etc), they can only cut back so much in the short run, so that means that most of their cutting has to be out of other areas, so it is anti-inflationary to the rest of the 'basket'? Is that it?

I've also heard about runaway inflation, I know it has occurred, but I guess I don't understand it. Is it like thermal runaway?

-ERD50
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Old 06-28-2008, 10:12 PM   #62
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Hmmmm, maybe his point is this: Since oil demand is relatively inelastic (people have to get to work, etc), they can only cut back so much in the short run, so that means that most of their cutting has to be out of other areas, so it is anti-inflationary to the rest of the 'basket'? Is that it?

-ERD50
That is his point as I understand it. He compares it to a tax increase. It seems to have shown up in Starbucks earnings first. I think they are handing out $5 coupons now to lure back their former customers.
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Old 06-28-2008, 10:19 PM   #63
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It's not oil "causing" the contraction; the contraction was well on its way.

Oil is partially a "peak" concern, but primarily another near-term bubble caused by the flight from everything else.

The exquisite irony is that the Fed having swapped investment banks' crap mortgage collateral for "cash", may be fueling this, as the self-same banks now try to boost capital by chasing opportunity in the commodities mkt. (with our 'cash', remember).
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Old 06-29-2008, 09:15 AM   #64
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It's not oil "causing" the contraction; the contraction was well on its way.

Oil is partially a "peak" concern, but primarily another near-term bubble caused by the flight from everything else.

The exquisite irony is that the Fed having swapped investment banks' crap mortgage collateral for "cash", may be fueling this, as the self-same banks now try to boost capital by chasing opportunity in the commodities mkt. (with our 'cash', remember).
Bingo except that I think "our cash" is better described as "our future obligation" that reduces our purchasing power for years.
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