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2011-06-06 Economy
Obama monetary policy fueling pain at the pump, report says
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Posted by Sneque Sherens1501 2011-06-06 00:00|| || Front Page|| [11130 views ]  Top

#1 Duh?
Posted by newc 2011-06-06 01:09||   2011-06-06 01:09|| Front Page Top

#2 Printing money leads to inflation?

Waitaminute... I think somebody mentioned that before ... in high school, come to think of it!
Posted by Bobby 2011-06-06 06:20||   2011-06-06 06:20|| Front Page Top

#3 Printing money does cause inflation, but oil is a poor example.

The main reason for more expensive gas is a depreciating dollar and OPEC manipulating the oil price to maintain the price (in undepreciated dollars).
Posted by phil_b 2011-06-06 06:36||   2011-06-06 06:36|| Front Page Top

#4 It's like inflation is always and everywhere a monetary phenomenon or something...
Posted by Bright Pebbles 2011-06-06 06:47||   2011-06-06 06:47|| Front Page Top

#5 The report says about 50 cents per gallon is the monetary increment. That's plausible, however, the monetary easing is also responsible for some increment of economic growth, perhaps 0.25% to 0.5% (say, 30,000 to 70,000 jobs), so blasting the inflationary effects is only looking at one end of the teeter totter.
Posted by Lord Garth 2011-06-06 07:05||   2011-06-06 07:05|| Front Page Top

#6 Inflation causes economic growth?

What colour is the sky on your world?

Deliberate monetary Inflation always causes unemployment. Always has, always will.
Posted by Bright Pebbles 2011-06-06 07:09||   2011-06-06 07:09|| Front Page Top

#7 bright,

It wasn't the inflation that caused the growth. The inflation (call it "A") is an effect of the increased money supply (call that "B") and the growth (call it "C") is also an effect of the increased money supply.

So B causes A, and
B causes C

The growth was because, at the margin, a few companies could get financing or refinancing at lower rates and increased their spending accordingly; some of the spending went into capital, some into services, some into hiring.

No mystery here. The low interest rates subsequent to 9-11 were also designed to increase growth and they did marginally. The high interest rates subsequent to the Carter stagflation years were designed to reduce the inflation rate; they did but also sent the economy into recession.
Posted by Lord Garth 2011-06-06 09:39||   2011-06-06 09:39|| Front Page Top

#8 inflation is always and everywhere a monetary phenomenon, because more money chases the same goods. That is not the case with oil. Except to the extent a declining USD allows other currencies to buy more oil and hence demand increases.

IE, its a deflationary effect.
Posted by phil_b 2011-06-06 10:36||   2011-06-06 10:36|| Front Page Top

#9 Whats the matter with Kansas?
Kansas is the Wheat state. 50% of the wheat has been plowed or bailed. 50% of the 50% left is poor quality. Not much wheat in the wheat state. No grass in western kansas which produces beef. Cattlemen are selling off their herds because they can't feed them economicaly. Not much beef in kansas.

But Kansas is not alone: Eastern and southern Colorado, Western and the panhandle of Oklahoma, west Texas and the panhandle. This area is in an intense drought with corresponding lack of the production of food stuffs.
Posted by bman 2011-06-06 11:11||   2011-06-06 11:11|| Front Page Top

#10 Lord Garth the money supply didn't increase, the volume of credit/debt pairs did.

This "growth" is temporary if used for non-investment in real wealth creation (i.e. not land right inflation).

I always discount the growth in debt from nominal GDP to work out the real state of the economy... It says it's been shrinking for a long while.
Posted by Bright Pebbles 2011-06-06 11:49||   2011-06-06 11:49|| Front Page Top

#11 My way of estimating the government-based component of inflation is to divide the deficit by the GDP - somewhat above 10% for the past 2-3 years.
Posted by Glenmore 2011-06-06 11:57||   2011-06-06 11:57|| Front Page Top

#12 bright, glen, etc.

I think a number of you have either your own idiosyncratic definition of money supply or you are referring to some definition that is less used than the usual ones.

Here is a chart of M1, M2 and M3 (there is a discontinuity in the M3 graph because the definition was modified). This actually shows the year to year change. Note the sharp decline in M3 (the 'new' M3) in 2010. The M3 includes CDs and money market funds and the decline of the aggregate was enough to contribute to the fed's QE2 (I'm sure it wasn't the only factor).

btw, for many years the 'normative' view was that 2% inflation was about the optimum; the normative view is, IMO, trending down and now the optimum is estimated to be closer to 1%
Posted by Lord Garth 2011-06-06 12:15||   2011-06-06 12:15|| Front Page Top

#13 
It also says the price of a gallon of gas has increased by 146 percent from an average of $1.61 per gallon when George W. Bush left office to a national average of $3.93 per gallon today.


Posted by DepotGuy 2011-06-06 12:50||   2011-06-06 12:50|| Front Page Top

#14 Lord Garth: I'd like to see the chart that's the integral of the one you link to, it would actually show the money supply, rather than the rate of change of the money supply.

And I'm distrustful of the changing definition of M3.
Posted by Thing From Snowy Mountain 2011-06-06 12:58||   2011-06-06 12:58|| Front Page Top

#15 The main reason for more expensive gas is a depreciating dollar

Which is caused by inflation of the money supply.
Posted by Thing From Snowy Mountain 2011-06-06 12:59||   2011-06-06 12:59|| Front Page Top

#16 With all the shadow banking etc still going on M3 is about as meaningful as the inflation figures...

However of course M3/4 will fall in advance of Basel 3s return to actual bank reserves and thus a cap on the volume of credit.
Posted by Bright Pebbles 2011-06-06 14:30||   2011-06-06 14:30|| Front Page Top

#17 $1.61 per gallon when George W. Bush left office

Must have been Halliburton etc. keeping their profits low to help out their buddy Dubya.
Posted by KBK 2011-06-06 15:05||   2011-06-06 15:05|| Front Page Top

#18 Let me rephrase my above post. If you ain't got bread, and you ain't got meat you ain't got nothing. You can't eat money, inflated or otherwise.
Posted by bman 2011-06-06 15:07||   2011-06-06 15:07|| Front Page Top

#19 thing from snowy mountain

here are many of the charts that give the 'actual' numbers

the problem with the 'actual' charts is that the money supply has numerous jumps; a lot of these are do to massive buys and sells by the fed or, in some cases, foreign holders and some because some large companies, mutual funds, etc., tend to move funds around to refinance, say at the start of their fiscal year.
Posted by Lord Garth 2011-06-06 16:18||   2011-06-06 16:18|| Front Page Top

#20 He has monetary policies other than destruction of the economy?

His monetary policies are fueling pain at the pump as well as unemployment and massive debt that we may never be able to dig ourselves out of. The pain at the pump sends waves of inflation through the economy. Everything goes up.
Posted by JohnQC 2011-06-06 17:18||   2011-06-06 17:18|| Front Page Top

#21 Which is caused by inflation of the money supply.

Moot

The federal deficit is a bigger factor.

Australia has had a similar growth in the money supply and the AUD has been appreciating for years.
Posted by Elmaviper Hupolutle1138 2011-06-06 21:33||   2011-06-06 21:33|| Front Page Top

#22 "Obama monetary policyies fueling pain at the pump in the a**"

Fixed.
Posted by Barbara Skolaut 2011-06-06 23:19||   2011-06-06 23:19|| Front Page Top

#23 Oddly, the price of gas is going down, here in Alabama it's $3.37 (Cheapest) and while that's MUCH higher, it's going down,Finaly.
Posted by Redneck Jim 2011-06-06 23:53||   2011-06-06 23:53|| Front Page Top

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