Way back in the late 70s, gas prices were going up

The Fed raised interest rates in response, which kicked the economy in the nuts.

The problem, then and now, is that the cause was outside the country. Slowing the economy would hurt us, but OPEC wasn't going to care.

I am worried that this is about to happen again.

You see, price increases show up in raw inflation data. But if they don't persist, they aren't inflation. The price of commodities goes up and down a lot, that's unpleasant at times, but it's normal.

If the Fed keeps raising rates, we could kick the economy in the nuts, again..

It's a delicate balance, and we are all guessing what's going to happen next. Personally, I was expecting half what the Fed appears to be about to do.

 

Raising interest rates reduces demand so it is always a kick in the economic nuts. It fixes nothing because it doesn't actually deal with inflation.

Nope. The world is still producing as much oil as it did before Biden. The problem is with the unwillingness of the US oil industry to produce because of the risk of government trying to put them out of business. The problem is actually emotional. Perhaps you recall how the economy languished, barely growing during the Obama administration. Same problem. An anti-business attitude in federal government. Trump turned that around day one and the economy charged. No kidding. It is emotional.

Worry fixes nothing. Not worth the effort.

Excellent. You are one of the few who understands that supply and demand is completely divorced from inflation.

Not only does that occur every time but it doesn't even address inflation. It addresses demand.

Supply and demand are a balance. When they get out of balance one of two occurrences bring it back in line. If we work on the supply side we get growth instead of a kick in the nuts. We could do with a lot less of the FED. Government can't seem to manage itself. It is unbelievable that it thinks it can manage the economy. It can't.

 

1) My point exactly, it won't work if the cause is exogenous, outside the country.

2) It's the war causing sanctions, which disrupts supply. It's also the result of a demand spike which is a result of Covid.

There is always a lag when there's a big change in demand with oil. Sure, there's emotion, but mostly not for the reasons you cite.

3) Not like I have a choice..

4) The demand destruction sometimes reins in inflation.

5) Not like we have a choice. We got the Fed, a century ago, because the biggest bank was getting the crap kicked out of it.

The few countries with little corruption and strong regulation recover faster. For me, the first step is dealing with corruption. It's always been central to the Progressive agenda.

 

Disagree. We don't need Russian oil. We have our own. We just need to get government out of the way.

The reduction is US productions is all on the white house and emotion.

Never. It only reduces demand. Inflation is additive and permanent.

We could get along without the FED. A consortium of banks in the private sector could handle what the FED does. The FED is a problem because it is government.

I can't even imagine where you got that idea.

 

Markets don't like uncertainty, doesn't matter where it is.

Permanent? Where on Alpha Centauri did you get that idea??

The reality is there isn't much presidents can do in the short term. You love your fantasy, but..

And speaking of fantasies, that's just plain amazing. In your fantasy, a banking crisis could throw us in an economic depression overnight.. Economic history suggests that would be like a horror movie, complete with zombies trying to shuffle their way into bankrupt banks....

Look at the history of BOA..

 

So if Biden has nothing to do with any of this could you please explain what it is that presidents are actually responsible for?

 

Not what I said.

 

You are normally a smart guy, so I don't know why you would post this. Interest rates ABSOLUTELY deal with inflation. Why? Because they reduce the number of loans, thereby reducing money creation through the money multiplier.

Most people don't know this, but it is not just government that can create money, banks do it too, through the fractional reserve system:

https://www.khanacademy.org/economi...banking-and-the-expansion-of-the-money-supply

The bottom line: Every dollar is loaned into existence. With a factional reserve requirement of 10%, this means that the multiplier is 10, so you can imagine how much money can be created by a dollar deposited in a bank and then 90 cents of it are loaned.

That's why higher interest rates will affect inflation, because they reduce money creation by banks.

 

All that
And your President has already coopt to it.. Damn, lefty's can't even get it when it's told to them by their own President

Granted not the whole story but a good part of the acceleration and difficulty we face correcting it.. Bottom line is the Fed needs to pull all that money back and the only way to do it is interest rates and or taxation..

Biden says COVID stimulus checks fueled spike in inflation (nypost.com)
Biden admits pumping to much stimulus money caused inflation - Search (bing.com)

 

Sorry, I don't buy any of that. If a bank loans 90 cents, it doesn't create the 90 cents. It transfers 90 cents from funds borrowed from the FED or from other sources to the borrower in return for a note which becomes an asset for the bank replacing the asset that was loaned. The settlement of the note will include some interest which is also not a creation of money but another transfer from the borrower.

Given what you linked, anyone could create money by loaning it and that isn't true. Somebody has to spend non-existent money by increasing the money supply. Only government can do that. It is the money supply that is "inflated" not the bank's assets. The bank loans existing money. I'm not sure how the nation created all these definitions for inflation. It makes the whole thing deceptive, probably on purpose. Inflation is created by government. Price changes are created by the economy itself based on supply and demand. Combining them simply makes no sense. You can see that by all the conflicting opinions about inflation. The opinions are caused by mis-definition of the terms. Economists should get over it and straighten it out.

 

Yes.

It doesn't have to be permanent but it is in effect because government as a debtor will never allow any deflation of the money supply. So every inflated dollar adds on every other inflated dollar. The U.S. dollar is worth less than 10% of what it was worth in my youth. It is additive. You need ignore the noise about prices reflecting inflation. They don't. Currency devaluation reflects inflation. Government seems to have included supply and demand to the definition of inflation probably to deflect blame. You shouldn't buy into it.

There is nothing government can do other than to stop printing money out of thin air. That can at least stop inflation. Government doesn't control the economy. It is part of it. The only way it can affect prices is mandated price controls which always make matters worse.

Thanks for joining others in criticizing something I didn't say. It is very irritating. Perhaps that is your goal.

 

Just because you don't buy any of that doesn't make it less true. People generally have a problem understanding fractional reserve banking, or they don't even attempt to understand it. .

Here is a video that makes the process very easy to follow:

https://peakprosperity.com/lessons/crash-course-chapter-7-money-creation-banks/

Now, you could say that the money "created" has to be payed back, which is true. However, the "beauty" of the process is that the 10x multiplier means that the the initial deposit has people thinking that 10x of that money is in their pockets, so they spend accordingly. What happens when more dollars chase the same amount of goods? Inflation.

Of course, the whole house of cards comes crashing down when the money has to be payed back. That's why there are usually recessions or depressions associated with debt deflation, because money supply all of a sudden disappears form the system.

Now, I am not saying that the Fed and government spending have no effect on the money supply, they clearly do, but it is not the ONLY factor that affects the money supply, fractional reserve banking has a huge impact.

 

that is the big question, will corporations lower prices once the supply issues are fixed overseas

will foreign oil keep prices of oil high, lot's of unknowns

 

Democrats seem to be in the vise of catch 22. They want to destroy the economy by printing money absent real value to prop it up, ad at the same time, they don't want to be perceived as having done this. Which is why they fecklessly try to "cool" inflation by making money more costly. (Welfare to their super rich donors..fyi) and at the same time, they want Americans punished for not wanting to join their idiocy vis a vis the green new deal, but at the same time, they can't just make companies produce at a higher rate because businesses aren't stupid and are reluctant to just go along with a government that isn't making economic policy for their or the nations benefit.

Democrats see themselves as the dictators of outcomes. But the outcomes they have dictated are the kind that will kick them quickly out of office. Thankfully, the citizens of the nation can see through their BS. Suddenly, deep blue places like the border in TX are kicking the bums out. It's a start.

 

it does if it gets the money to make that loan at zero percent interest, that is basically just printing money at that point

Under Trump ... BEFORE COVID ... that is a lot of money dumped into the economy

"Fed Ups Its Wall Street Bailout to $690 Billion a Week as Media Snoozes" Oct 2019

https://wallstreetonparade.com/2019...ilout-to-690-billion-a-week-as-media-snoozes/

and

"The Federal Reserve Has Already Pumped $9-Trillion into Wall Street in the Past Six Months, and Now Is Offering Banks Another $1.5-Trillion" March 2020

https://needtoknow.news/2020/03/the...d-now-is-offering-banks-another-1-5-trillion/


then we have Covid, and supply issues.... that equals inflation

 

And, then, there were Trump's tax cuts without spending cuts. More money in people's pockets to spend (created out of thin air), chasing the same amount of goods. So, why don't tax cuts lead to inflation?

 

the President can't force foreign countries to increase supply

are you suggesting Biden can force US oil to sell their oil to America at a lower price?

Republicans told us American oil would be cheaper, they lied

US Oil wants prices higher

 

OK, so it's not permanent, it's compounding interest. What is relevant is how many hours of work it takes to get something. If it costs ten times as much, but you can get it for half the work-hours, you're way ahead of the game. The underlying issue is income inequality. That the really rich guys keep grabbing more and more of the economy for themselves, leaving everyone else wondering why nothing works the way it used to..

You need to get over that fiat crap. Stop creating (very little gets printed) today, and you have a Great Depression next week. If you look at the 1800s (which had a fixed money supply) the economy would start to grow rapidly, they'd run out of money, and instant recession. Like a guard dog hitting the end of his chain the first time. Winds up on his back wondering what the hell went wrong.

 

Actually there is a law that would allow Biden to ban oil exports. I don't think he'll do that, but it is possible.

 

"Way back in the late 70s, gas prices were going up"
...and people didn't learn a thing. Instead, they continued to buy oversized, overweight, overpowered, uneconomical vehicles. Now they wonder why there is a price to pay for gluttony.

 

It is nonsense. Debt is not inflationary. Neither is spending. Neither is what people think. You either inflate the money supply or you don't. In your case you don't.

 

Sorry you are simply incorrect. Don't feel bad, half the economists are incorrect as well.

 

While this is a valid point, we are all guilty here, it's the American way.

 

US oil is making so much right now, don't think they would care

only thing gonna lower prices is the foreign oil supply increasing

 

And the world market price feeling downward pressure BUT, every other country is now competing with Europe for energy from the Russian shortfall. That's not going away. We can always rebuy from China and India but that still lines Vlad's coffers.