Quote:
Originally Posted by hogtied
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.
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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