Stagflation 2011

padre31 · Feb 27, 2011

A rapidly rising price for oil is really bad news for the U.S. economy, because it is going to mean lots of inflation. Unfortunately, this also comes at a time when the economy is also feeling the inflationary effects of more quantitative easing by the Federal Reserve.

So if rising oil prices are going to cause more inflation and if rising oil prices are also going to cause our economy to become even more sluggish, what does all of that add up to?

It adds up to stagflation.

Wikipedia defines stagflation in the following manner....

In economics, stagflation is the situation when both the inflation rate and the unemployment rate are persistently high.

It is going to be just like the 1970s all over again.

Only worse.

Economists differ as to how much rising oil prices affect U.S. GDP, but almost all of them agree that rising oil prices do cause a decline in U.S. GDP at least to some extent.

If American families have to spend $10 or $20 more each time they visit a gas station, that means that they are going to have less discretionary income. They won't be able to spend as much at the stores.

So where is the price of gasoline going from here? Well, the average price of gasoline in the United States is rapidly sneaking up on the $3.20 a gallon mark. Almost everyone believes that it is going to be going significantly higher.

Tom Kloza, the chief analyst for the Oil Price Information Service, was recently quoted in USA Today as saying that he believes that the average price for gasoline in the United States will reach somewhere between $3.50 and $3.75 a gallon by April.

As I wrote about yesterday, there are other analysts that believe that we are going to see $4.00 gasoline in the United States by the end of the year, and there are some that believe that we could see $5.00 gasoline if revolution sweeps Saudi Arabia.

Just remember what happened back in 2008. Andrew Busch of BMO Capital Markets recently told CNBC the following....

"Remember when oil was last at $140 (a barrel), Americans reacted and cut the amount of miles they drove."
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http://www.lewrockwell.com/rep2/stagflation-2011.html

Well, isn't that nice?

And keep in mind, Fuel price inflation coupled with Fuel price inflation will literally remake the Carter Era, double digit unemployment, double digit inflation (de facto) after the Carter Era several items were taken off of the list to be monitored for inflationary pressures, you know, food and fuel the stuff we all use.

Dol-Fan Dupree · Feb 28, 2011

I was hoping this would be about strip clubs and drinking too much.

padre31 · Feb 28, 2011

Dol-Fan Dupree said:

I was hoping this would be about strip clubs and drinking too much.
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I am learning how to home brew and have a couple of internet pron sites picked out..that is all that I can afford.

jason8er · Feb 28, 2011

Dol-Fan Dupree said:

I was hoping this would be about strip clubs and drinking too much.
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What are you trying to do....get Pads to fall off the wagon? :lol:

padre31 said:

I am learning how to home brew and have a couple of internet pron sites picked out..that is all that I can afford.
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Oh ****, too late!

Actually congrats on that. I've been a homebrewer for about 18 years now. Awesome hobby, but isn't cheap. Especially now that plans to open a brewery by the fall look like a go. :up:

padre31 · Feb 28, 2011

Congrats on opening the brewery!

And home brewing need not be expensive, Hard Cider is actually quite inexpensive to make...:shifty:

Real problem is matching a container to the vapor lock as brewing specific ones are not cheap.

Eh, on the wagon anyway.

jason8er · Feb 28, 2011

padre31 said:

Congrats on opening the brewery!

And home brewing need not be expensive, Hard Cider is actually quite inexpensive to make...:shifty:

Real problem is matching a container to the vapor lock as brewing specific ones are not cheap.

Eh, on the wagon anyway.
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Thanks bro!

Yes, homebrewing can be as cheap, or as expensive as you want to make it. However, we're men, and we tend to like our "toys". That's all I'm gonna say. :lol:

Oh, and I may see you this fall when I make my annual pilgramage up there to get unpasturized cider! May have to bring a truck this time.

padre31 · Feb 28, 2011

Hard to find the unpasteurized Cider at the local Ingles, even worse the stuff they do have has addititives in it.

For me, Stagflation does not mean what it does for other people, but man o man, a family of 4 is going to get hammered, heaven forbid one or both parents be out of work as this will be a rough rough patch.

jason8er · Feb 28, 2011

padre31 said:

Hard to find the unpasteurized Cider at the local Ingles, even worse the stuff they do have has addititives in it.

For me, Stagflation does not mean what it does for other people, but man o man, a family of 4 is going to get hammered, heaven forbid one or both parents be out of work as this will be a rough rough patch.
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What do you think of the rush to by precious metals?

Stringer Bell · Feb 28, 2011

Rising oil prices are not going to cause inflation

Dol-Fan Dupree · Feb 28, 2011

Stringer Bell said:

Rising oil prices are not going to cause inflation
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I have heard that inflation is bad and deflation is bad. I have come to the conclusion everything is bad.

padre31 · Feb 28, 2011

jason8er said:

What do you think of the rush to by precious metals?
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Depends, as I'm not sure if it is the Employed fleeing to the perceived safety of metals, or overseas demand in places like China and India is driving up prices.

padre31 · Feb 28, 2011

Stringer Bell said:

Rising oil prices are not going to cause inflation
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Heh, if you say so at the very least rising oil prices means less disposible income and slower economic activity.

Nice how the Govt does not include Fuel prices in core inflation metrics, which makes .Gov stats useless.

Stringer Bell · Feb 28, 2011

Dol-Fan Dupree said:

I have heard that inflation is bad and deflation is bad. I have come to the conclusion everything is bad.
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At certain levels, they are both bad. Which is why the Fed has their targets where they are currently.

Stringer Bell · Feb 28, 2011

padre31 said:

Heh, if you say so at the very least rising oil prices means less disposible income and slower economic activity.

Nice how the Govt does not include Fuel prices in core inflation metrics, which makes .Gov stats useless.
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Inflation cannot happen unless unemployment drops. You can't have inflation with 9% unemployment.

You could say that rising oil prices will lead to less disposable income, or you could say say rising oil prices will lead to people wasting less energy.

maynard · Mar 11, 2011

Stringer Bell said:

Inflation cannot happen unless unemployment drops. You can't have inflation with 9% unemployment.

You could say that rising oil prices will lead to less disposable income, or you could say say rising oil prices will lead to people wasting less energy.
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this what they said until it actually happened in the 70s

padre31 · Mar 11, 2011

Stringer Bell said:

Inflation cannot happen unless unemployment drops. You can't have inflation with 9% unemployment.
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Hence "stagflation".

You could say that rising oil prices will lead to less disposable income, or you could say say rising oil prices will lead to people wasting less energy.
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Consider:

-products made with petroleum such as fertilzers
-we have never had such a trade imbalance as we have now, the dollar will lose value on every item that imported, which means..more inflation.

And therein are just a few of the problems that the Political Leadership has created.

Stringer Bell · Mar 11, 2011

More inflation? We haven't even supported the argument that inflation is even occurring.

padre31 · Mar 11, 2011

Stringer Bell said:

More inflation? We haven't even supported the argument that inflation is even occurring.
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Well, believe what you will, I've grown past doing homework assignments for other people.

maynard · Mar 12, 2011

padre31 said:

Well, believe what you will, I've grown past doing homework assignments for other people.
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one can look at my CPI chart i made to see the rise. CPI is nearly bunk anyways. it somehow assumes that as gas prices rise to a certain level, i will not keep buying it and instead "logically" choose to not go to work. of course such a thing is too volatile to count towards it.

CPI says that if a plasma tv sold for for $1000 in 2010 and the same model got a couple new minor features in 2011 and sells for $1000, the price has gone down or if the 2011 TV sells for $1100, the price has stayed the same.

any time an item spikes highly in price, it is removed from the calculation and substituted for something else or weighted lower. this happens with the rise of health care costs for example.

or the fact that quantitative easing slowly chips away at every dollar we own, giving us lower purchasing power for every transaction

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