Oil and inflation

[phantom power]

(...)
Bernanke needs to get people to stop buying so much oil. It's a weakness, a bull market that any idiot can exploit, and it's now becoming self-reinforcing as all bull markets (and bubbles) do at certain stages. The more money that is chasing a fixed number of barrels, the higher they get bid.

What is further clear from these charts is that Bernanke isn't tightening fast enough. He needs to stop pumping the gas pedal and slam on the brakes. The reason is that inflation is beginning to really hurt in the US, it's even getting to the point where so called core inflation (the inflation that measures, as Ritholz notes, what your life would be like if you didn't eat, have to pay a mortgage or property taxes, walked everywhere and didn't need to cool or heat your house) is beginning to show real inflation. Other measures of inflation have been overheated for some time now.

So the choice, as I noted before, remains the same. Slam on the braks and have a nasty recession - or ease the brakes on, have a nasty inflationary bout, and then have a nasty recession.

Scenario two will be chosen, because scenario one would lead to a Republican wipeout in November 2006. And Bernanke has spent his entire life trying to figure out how to avoid the New Deal by avoiding the Great Depression. And that means he isn't going to be the one who, by doing his job by the book, puts Democrats back in charge of the House and the Senate.

Which, essentially, is the decision Greenspan made in 2002 and 2004 - that politics trumped economics. Neither man is going to be looked on favourably by posterity, because both men have taken a non political position and turned into a partisan office.

http://agonist.org/ian_welsh/20060722/the_gusher

[WCGreen]

1. The price of Oil is all based on speculation...

It's ridiculous that the "financial Press" refuses to admit that what we have here is a clear case of chasing the return...

All these hot shots left over from the 90's that pissed on a list of NASDAQ tech stocks to pick which ones was "hot" that day, week or minute, are frantic to recapture some of those double digit returns on investment...

And since the market, at least for long term investors, has been basically sideways for the last five years, they have turned to commodities in general and Oil and Gold and get this, copper, in particular to wring out their returns...

[Roland99]

2. The dollar devaluation has a part in it, too.

[NNadir]

3. I'm surprised there isn't more discussion of this.

With the full fury of what Bush has meant to the United States now apparent worldwide, it's unlikely that the dollar can remain the reserve currency.

We ain't seen nothing yet.

[Javaman]

4. shush! why do you hate America???

Just like all our problems here, can't you just sweep it under the rug and let someone else worry about it?

Jeez!!!








:sarcasm:

[jpak]

5. The Stagflation Redux

Only this time they can't blame it on Jimmy Carter.

Hmmmmm...time to whip out the ol' WIN pin...

:evilgrin:

[phantom power]

6. They can blame the Clenis. You can *always* blame the Clenis.

These days, it seems as though they can blame whoever they feel like, and it will work. Our once-useful 4th estate seems to only write two kinds of stories anymore: "problem X is the Democrat's fault" Or "Democrats and the GOP are equally to blame for X."