Source link: http://archive.mises.org/16938/they-are-getting-what-they-want/
They are getting what they want
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The Ludwig von Mises Institute
Tu Ne Cede Malis
Advancing the Scholarship of Liberty in the Tradition of the Austrian School
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When did QE2 start?
The Misery Index is well into double digits, hitting levels not seen since the great Carter stagflation of 3 decades ago.
Just a thought: this might have more to do with global oil markets and political instability than monetary policy.
No, global oil markets and political instability have everything to do with the USA’s monetary policy. The USA messed with the world economy with it’s cheap money policy ever since Bush came into office, this has caused political instability worldwide and increases in oil prices.
It’s all the FED’s fault. The US Dollar is the world’s reserve currency and therefore any monetary policies will have huge impacts on the rest of the world.
Ever since the 2008 crisis, the world is slowly reorganizing away from the US dollar and the US market. In the end, the world will do better but the USA’s monetary and fiscal policies will fall back on us all.
Really? All of it? The civil war in Libya is caused by the FED (why always all caps)? This is taking hatred of central banking a bit too far in my view, but to each his own.
Civil war & revolution are usually triggered by rising food costs. Thank the fed for that.
Even if they “usually” are (source? I would guess “occasionally” is more accurate), do we have any evidence that *this* civil war was triggered by rising food costs? That it was the only or primary trigger?
I think it was built on the momentum from other Arab nations revolts.
Libya doesn’t make up 50% of the world’s oil production.
If the Dollar wasn’t printed out the wazoo, oil prices would be around $64/barrel, not $99.30.
http://mises.org/daily/5255/Another-Reason-to-End-the-Fed
But demand for oil is inelastic, so a small decrease in supply will cause a larger increase in price (in percentage terms).
Elasticity doesn’t explain the exchange rate factor when compared with a currency that wasn’t printed at the same rate. Libya, at best, only explains around 20% of the dollar denominated price change. If demand and supply were the true culprits, the % price increase would be relatively the same no matter what currency was selected.
In the future, try to rebut the entire response, not half of it.
Writes Michael S. Rozeff: “The revolt in Libya was engineered by elements in Gaddafi’s government who obtained French support in November 2010. The French then obtained British and American cooperation.”
http://www.lewrockwell.com/blog/lewrw/archives/87928.html
Still unclear what this has to do with the Federal Reserve.
1. U.S. dollar = World Reserve Currency. Example: Italians purchase Arab oil with American Dollars.
2. U.S. Fed Reserve arbitrarily manipulates the currency by printing more of it.
3. Other markets have to then manipulate their currency to not be at a disadvantage.
4. **Production backing the paper currency does not change.** This is very important: governments can print money, but they cannot poof factories into existence.
5. The paper value of production drops. What cost the oil producer $20 to drill and ship now costs $80, because of inflation.
It’s laughable that one cannot connect the dots that “more paper currency” equals “more expensive goods.” Global instability comes from states acting in such an arbitrary and pernicious manner. You are mixing the “cause” and “effect,” Jeremy.
No Jeremy not to each his own. Each’s own is controlled by the arbitrary power of a very few individuals at the central bank. Is oils price, libya or any of the other problems caused by the fed? Most likely yes but what is a guaranteed 100% fact is that the savings of millions of hard working Americans are being destroyed/stolen by the whim of a bunch of egotistical, arrogant, supposed geniuses whose only solution is to inject money and dilute the buying power of earned wealth. It is counterfeiting, it is theft and it is immoral. There are and will continue to be serious consequences and a worse life for everyone except the a privileged few as a result. One cannot take hatred for these thieves too far.
Look at the relationship between U.S. dollar and oil prices – very tight.
There is a reason why there is little inflation in other commodities than food and energy.
People are broke, poor, unemployed and can only afford to spend in food and energy, other goods must compete for whatever disposable income is left and as the economy is stretched thin, not very much of such income remains.
People will cut all other expenses but are forced to buy food and energy.
Until the government starts handing them out…then the worker’s paradise will finally be here!
…Until farmers quit producing, or are liquidated. With the slow starvation comes the worker’s paradise!
There is some plausibility to this explanation, given that the demand for food and energy is less elastic than goods in general. But then why didn’t we see a huge spike in gas prices when unemployment was at its peak, in mid-2009? Why is it just spiking now, when the economy is recovering? (However weak that recovery may be.)
The point is demand for food and energy remains relatively stable (in fact, demand for oil will drop with more people out of work, since they drive less, and work less), while demand for other less essential goods will drop.
The fact that the price of much less essential goods was still going up with many people out of work should tell you something (the price of those goods should drop with a drop in demand, all other things being equal)
Perhaps someone can clarify this for me. I read somewhere that the CPI is calculated differently now than it was back in the 70s. If it were still calculated the same way now, the rate of annual inflation would be above 10%. Is this true? And can someone provide a link?
http://www.shadowstats.com/alternate_data/inflation-charts
Thanks. Still not quite as bad as 1981 yet (15% inflation), but Helicopter Ben is sure trying…
(I stole this from the internets – and I wonder were there massive deflationary forces operating during 1981? )
A Counterfactual Look at Inflation
By Vedran Vuk
[deleted interesting discussion]
With this in mind, the topic of 2 to 3% inflation is only a discussion about the tip of the iceberg. The real question is, “What would the CPI be without the Fed?” It’s hard to say for sure, but it probably wouldn’t be 2 or 3% inflation. It would rather be something like 5 or 6% deflation. If you look at it through this lens, then the Fed is already inflating at 7 to 9% inflation per year. Furthermore, this means things could get out of hand quickly. If the natural contracting of the economy ends, we could suddenly see a rapid pickup in inflation where these numbers are openly evident.
And this end of the natural contraction of the economy that dooms us all to massive inflation stems from what magical force?
Please tell me from where you expect the end of the current deflation to spring from?
The Confidence Fairy, perhaps?
3% inflation? The end of the world is approaching!
Repent from you sins now or it will be too late.
Have you taken a look at how overfull the dam is from which this flow has started to emerge from?
Lord, here comes the flood
We will say goodbye to flesh and blood
If again the seas are silent in any still alive
It’ll be those who gave their island to survive
Drink up, dreamers, you’re running dry.
Yeah this is the CPI. Generally, inflation is higher than the CPI shows. But that hardly matters, the trend is the problem. It is continually upward, at rapid rate.
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