Inflation

[3rdnlng]

This topic is stupid we've had varying degrees of inflation as long as I remember ( which is from Nixon with his price freezes) - the difference now is wages are not moving with inflation and you can't get an interest rate on your savings while maintaining a reasonable level of risk that keeps up with inflation, This has nothing to do with QE and everything to do with neo-liberal economics and the constant drive to the lowest labor costs possible- and while I understand that the trickle down crowd applauds wealth and income moving from the working class to the managing class and the owning class I find it hilarious that people don't understand when you destroy consumption power from high wage countries and only replace a fraction of that power in low wage counties you of necessity have reduced overall growth. You don't even understand what real wealth is, every person who has gone from unemployed to unemployable is destruction of national wealth, every college graduate who has been delayed from finding a job in his field of study is destruction of national wealth.

 

 

Classic definition of "trickle down economics". Most people have to try to be this dumb.

[TPS]

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/367d1436-75da-11e2-b702-00144feabdc0.html#ixzz2KsP8eyww

 

http://www.ft.com/intl/cms/s/0/367d1436-75da-11e2-b702-00144feabdc0.html#axzz2KsOhcq2J

 

From this morning's Financial Times:

“The cuts  in Saudi production indicate Opec’s ability to fine-tune output to meet global appetite. The price ceiling may not be as well-articulated as the price floor, but it is clear that Saudi Arabia remains well placed to ensure a price environment that it desires,” says Gareth Lewis-Davies, energy commodity strategist at BNP Paribas.

 

 

“Oil as an investment class has seen a surge of non-commercial money, which is driving prices higher. That means there is clear potential for a correction over the next one to three months,” says David Wech, head of research at Vienna-based JBC Energy.

 

I'm going to have to drop this paper because they clearly only quote clueless people...

[Dean Cain]

Like any commodity oil can be used as a hedge against inflation. So much like smart investors have positions in gold & silver, they also take positions in oil.

 

The best part is they can front run the bull market, and due to their ability to control supply either they're an exporter in the case of Saudi Arabia, producer like Exxon, or investment banker with insider information Goldman Sachs they can also front run any bear market.

 

It is the ability to front run that creates the market fluctuations in prices that greases the skids of liquidity. But the one constant we all know is oil, like gold and silver is a finite resource, and capitalism's basic premise is ever expanding growth. There will always be a break even point where we can no longer have growth beyond the price of oil. It is at this point and slightly below where we find the price of oil. Inflation is merely the capitalist producers profit realized on this price discovery.

 

 

[Magox]

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/367d1436-75da-11e2-b702-00144feabdc0.html#ixzz2KsP8eyww

 

http://www.ft.com/intl/cms/s/0/367d1436-75da-11e2-b702-00144feabdc0.html#axzz2KsOhcq2J

 

From this morning's Financial Times:

“The cuts  in Saudi production indicate Opec’s ability to fine-tune output to meet global appetite. The price ceiling may not be as well-articulated as the price floor, but it is clear that Saudi Arabia remains well placed to ensure a price environment that it desires,” says Gareth Lewis-Davies, energy commodity strategist at BNP Paribas.

 

 

“Oil as an investment class has seen a surge of non-commercial money, which is driving prices higher. That means there is clear potential for a correction over the next one to three months,” says David Wech, head of research at Vienna-based JBC Energy.

 

I'm going to have to drop this paper because they clearly only quote clueless people...

 

Ok, I'm gonna with that you're not pretending, just simply that you are one.

 

You desperately are trying to find any article to support your views and every time you think you have, you produce one that supports my argument. The term "correction" implies short-term pull back in an UPWARD trend.

 

Look it up

 

You keep posting short-term analysis, while I talk about the long-term.

 

You don't need to drop this paper because of them, the problem is that the person reading it is clueless.

 

 

 

Thanks for posting this. lol

Edited February 14, 2013 by Magox

[TPS]

Ok, I'm gonna with that you're not pretending, just simply that you are one.

 

You desperately are trying to find any article to support your views and every time you think you have, you produce one that supports my argument. The term "correction" implies short-term pull back in an UPWARD trend.

 

Look it up

 

You keep posting short-term analysis, while I talk about the long-term.

 

You don't need to drop this paper because of them, the problem is that the person reading it is clueless.

 

Thanks for posting this. lol

I understand the point, prices move in long term trends. The difference is that I argue short term fluctuations are now dominated by financial bets, creating greater volatilty.

 

You apparently can't see how futures markets dominated by investment flows has created a new restraint on economic growth, which is the process I describe.

Keynes said it best:

Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.

Yes, we all agree, speculators are fine and necessary, but not when they are the dominant force in a market.

 

And just to add, I've certainly beat this horse to death, so we disagree and I'm clueless. You win.

Edited February 14, 2013 by TPS

[Magox]

I understand the point, prices move in long term trends. The difference is that I argue short term fluctuations are now dominated by financial bets, creating greater volatilty.

 

You apparently can't see how futures markets dominated by investment flows has created a new restraint on economic growth, which is the process I describe.

Keynes said it best:

Yes, we all agree, speculators are fine and necessary, but not when they are the dominant force in a market.

 

And just to add, I've certainly beat this horse to death, so we disagree and I'm clueless. You win.

 

Speculators aren't responsible for the rising trend in oil prices. And again you misplace the blame for the commodity inflation we have today, it's not because of the "speculators", it's because of the economic conditions that we have and the response from monetary policy makers. Once monetary policy changes and becomes more hawkish, then we will see prices drop off for a sustained period of time. Until that happens, prices will continue to remain high, and even climb to higher levels once we have decent domestic/global growth.

 

Speculators will only place bullish bets for a sustained period if the conditions indicate an environment for rising prices. Simply put, your blame is misguided, if you want to find the culprit, look no further than the central banks.

[....lybob]

http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx

 

a chart of historical inflation rates

[TPS]

Speculators aren't responsible for the rising trend in oil prices. And again you misplace the blame for the commodity inflation we have today, it's not because of the "speculators", it's because of the economic conditions that we have and the response from monetary policy makers. Once monetary policy changes and becomes more hawkish, then we will see prices drop off for a sustained period of time. Until that happens, prices will continue to remain high, and even climb to higher levels once we have decent domestic/global growth.

 

Speculators will only place bullish bets for a sustained period if the conditions indicate an environment for rising prices. Simply put, your blame is misguided, if you want to find the culprit, look no further than the central banks.

You've missed the point. I've never said they are responsible for trend. Their dominance in the futures markets creates bigger short run movements away from trend. Yes, those bets can't be sustained and also create demand destruction, so prices come back to trend (a trend that has been flat for 2 years now). We are talking past each other. It's all been said.

[Magox]

Simple question, since we know that supply has continued to increase at a healthy rate, yet demand growth for oil both here and in the rest of the world has significantly dropped off, what do you believe is propping up prices?

 

And btw, oil prices are not flat the past two years. Brent Crude oil is the most used oil in the world. And there is no close second.

Edited February 14, 2013 by Magox

[....lybob]

Simple question, since we know that supply has continued to increase at a healthy rate, yet demand growth for oil both here and in the rest of the world has significantly dropped off, what do you believe is propping up prices?

 

And btw, oil prices are not flat the past two years. Brent Crude oil is the most used oil in the world. And there is no close second.

 

wiki

 

"The oil-storage trade is a trading strategy where oil tank owners and companies that lease storage buy oil for immediate delivery and hold it in their storage tanks, then sell contracts for future delivery at a higher price. When delivery dates approach, they close out existing contracts and sell new ones for future delivery of the same oil. The oil never moves out of storage. Trading in this fashion is only successful if the forward market is in "contango", that is if the price of oil in the future also known as forward prices are higher than current prices or spot prices. The concept was introduced on the market in early 1990 by the Scandinavian Tank Storage company, Scandinavian Tank Storage AB and its founder Mr Lars Jacobsson. Storing oil became big business in 2008 and 2009,^[1] with many participants—including Wall Street giants, such as Morgan Stanley, Goldman Sachs, or Citicorp—turning sizeable profits simply by sitting on tanks of oil.^[2]

It has been estimated that one in twelve of the largest oil tankers are being used for the storage, rather than transportation of oil,^[3] and that if lined up end to end, the tankers would stretch out for 26 miles"

 

 

 

(Reuters) - Iran has been forced to deploy more than half its fleet of supertankers to store oil at anchorage in the Gulf as buyers of its crude cut back because of sanctions, two Iran-based shipping sources said.

The sources, who are familiar with operations at Iran's main export terminal Kharg Island in the north of the Gulf, said 14 of National Iranian Tanker Company's (NITC) fleet of 25 very large crude carriers, each loaded with about 2 million barrels of oil, are now at anchor acting as floating storage.

A further five of Iran's nine Suezmax tankers, with capacity of one million barrels, are also parked offshore with oil aboard.

That means that of Iran's 59-million-barrel fleet of VLCCs and Suezmax sized tankers, 33 million barrels of capacity are being used to store crude at sea in the Gulf, or 56 percent of the fleet.

The shipping data suggests Iran's difficulties in selling its oil are getting more acute. With more than half the NITC fleet at anchorage, Iran's capacity to export oil is severely curtailed.

The Iranian shipping sources said that storage tanks on land at Kharg Island, with capacity of some 23 million barrels, are now full.

 

 

 

The market can remain manipulated longer than you can remain solvent - to misquote Keynes

[Magox]

Ok, that's not the answer.

[TakeYouToTasker]

Ok, that's not the answer.

No. No it isn't. It might have been the answer if the global oil supply was static, or if a large percentage of the global oil supply were being handled this way, or if we were well into the downside of "peak oil" and this storage could reasonly be construed as hoarding for the purpose of gouging, or in some bizzare distopian universe in which the production of oil - all the way through the refining process - were indexed directly to offshore storage capacity. None of those is the case, however.

 

Terrible answer is terrible.

Edited February 14, 2013 by TakeYouToTasker

[TPS]

Simple question, since we know that supply has continued to increase at a healthy rate, yet demand growth for oil both here and in the rest of the world has significantly dropped off, what do you believe is propping up prices?

 

And btw, oil prices are not flat the past two years. Brent Crude oil is the most used oil in the world. And there is no close second.

Brent has essentially been below its April 2011 peak. As I said earlier in this thread and as was stated in the article from the FT today, the Saudiis adjust production to meet demand, so supply has not been chugging along; and from that data I have seen from the IEA, global demand has not declined, but it has slowed. If you have other sources, I'd like to see them. Edited February 14, 2013 by TPS

[Magox]

That's not what I said.

 

since we know that supply has continued to increase at a healthy rate, yet demand growth for oil both here and in the rest of the world has significantly dropped off, what do you believe is propping up prices?

 

Generally speaking, markets are driven on growth. When growth slows, and supply continues to increase, prices usually drop. And yes, supply has been "chugging along". Excess capacity factors in to prices, you didn't know that.

[....lybob]

If QE was causing some type of massive devaluation of the dollar you'd see it in a wide spectrum of commodities and currency exchange rates not just oil- it's just not there, maybe it's coming who knows - there's a reason I linked to historical inflation rates, what exactly looks different between today's inflation and the inflation we've had the last 99 years? - the one real difference isn't the rate of inflation it's that wages are not keeping up ( in other times almost everyone I knew was getting cost of living adjustments that were keeping up with inflation and maybe a tad better-now not many people I know get that) and savings, ( it's almost impossible to get 2% on a 5 year cd so with even mild inflation you're losing purchasing power). I for one have no doubt that our government would actually like to see a little devaluation to help exports, a few countries most noticeable Japan are blatantly trying to devalue their currency and I think our country would like to follow suit but they have been unsuccessful as yet. The thing is it's not enough to print money to cause inflation the money has to find it's way rapidly into circulation ( I could print 10 trillion dollars but if I kept it in my basement it doesn't make a difference) .

 

The real story is that since the mid 1970s wages for a large percentage of the U.S. workers have been stagnant- and in the last 5 years they have actually declined, this has happened in spite of good productivity gains. So while the top 10% top 1% have made substantial gains the people who drive demand have declining wages and now no longer have access to credit or equity to push aggregate demand. This all leads to a slow growth world with potential for recessionary death spirals ( low demand? cut jobs, hours, wages ,which leads to lower demand) . This is not a world most people will enjoy but I'm sure a few people would love to see a deflationary spiral where they can buy assets for pennies on the dollar and pay slave wages.

[TPS]

That's not what I said.

 

Generally speaking, markets are driven on growth. When growth slows, and supply continues to increase, prices usually drop. And yes, supply has been "chugging along". Excess capacity factors in to prices, you didn't know that.

Provide a link to your data that shows this. The IEA data that I've seen on global demand shows supply below expected consumption.

 

If QE was causing some type of massive devaluation of the dollar you'd see it in a wide spectrum of commodities and currency exchange rates not just oil- it's just not there, maybe it's coming who knows - there's a reason I linked to historical inflation rates, what exactly looks different between today's inflation and the inflation we've had the last 99 years? - the one real difference isn't the rate of inflation it's that wages are not keeping up ( in other times almost everyone I knew was getting cost of living adjustments that were keeping up with inflation and maybe a tad better-now not many people I know get that) and savings, ( it's almost impossible to get 2% on a 5 year cd so with even mild inflation you're losing purchasing power). I for one have no doubt that our government would actually like to see a little devaluation to help exports, a few countries most noticeable Japan are blatantly trying to devalue their currency and I think our country would like to follow suit but they have been unsuccessful as yet. The thing is it's not enough to print money to cause inflation the money has to find it's way rapidly into circulation ( I could print 10 trillion dollars but if I kept it in my basement it doesn't make a difference) .

 

The real story is that since the mid 1970s wages for a large percentage of the U.S. workers have been stagnant- and in the last 5 years they have actually declined, this has happened in spite of good productivity gains. So while the top 10% top 1% have made substantial gains the people who drive demand have declining wages and now no longer have access to credit or equity to push aggregate demand. This all leads to a slow growth world with potential for recessionary death spirals ( low demand? cut jobs, hours, wages ,which leads to lower demand) . This is not a world most people will enjoy but I'm sure a few people would love to see a deflationary spiral where they can buy assets for pennies on the dollar and pay slave wages.

Not just a slow growth world, but also one prone to speculation with so much money concentrated at the top. There's a reason there has been a proliferation of new HFs.

[Dean Cain]

Provide a link to your data that shows this. The IEA data that I've seen on global demand shows supply below expected consumption.

 

Not just a slow growth world, but also one prone to speculation with so much money concentrated at the top. There's a reason there has been a proliferation of new HFs.

 

And last most QE has resulted in the big U.S. investment banks taking money from the fed at 0.25 interest and making loans to the BRIC countries of Brazil, Russia, India & China.

 

The smart money has exited the U.S., U.K., Japan & the Euro. How quickly the western middle class fell.

Edited February 15, 2013 by BigCountryBills

[Keukasmallies]

Inflation, erection, it's all the same: Something increases and someone gets screwed.

[TPS]

Simple question, since we know that supply has continued to increase at a healthy rate, yet demand growth for oil both here and in the rest of the world has significantly dropped off, what do you believe is propping up prices?

 

And btw, oil prices are not flat the past two years. Brent Crude oil is the most used oil in the world. And there is no close second.

It's pretty simple, the marginal cost of producing the last barrel of oil puts a floor on the price, for the most part. The value has been estimated to be $85-90. This has nothing to do with monetary policy.

 

Your Brent comment is ignorant, if by most used you mean actual consumption.

[Magox]

It's pretty simple, the marginal cost of producing the last barrel of oil puts a floor on the price, for the most part. The value has been estimated to be $85-90. This has nothing to do with monetary policy.

 

Your Brent comment is ignorant, if by most used you mean actual consumption.

 

What a bunch of poppy rooster.

 

Brent is used to price 2/3 of the world's internationally traded crude oil supplies. You didn't know that? talk about ignorant

 

And why is the OPEC price of oil basically at par with Brent rather than WTI?

 

And you really shouldn't talk about oil, or for that matter currencies, every time you do, you come away looking like a dumbass.

 

And how is it that you don't understand "Spare Capacity"?

 

Do you even know what this means? Do you understand it's impact on pricing? I'm guessing you don't, actually I'm not, I'm pretty damn sure that you don't.

 

And what's saddest of all, is that you don't understand the impacts of currency devaluation to commodities. How in the world do you not understand this?

 

This is economics 101 and you don't even understand this concept

 

 

 

Pretty pathetic

 

Get back to me when you learn this concept

 

.

 

Not just a slow growth world, but also one prone to speculation with so much money concentrated at the top. There's a reason there has been a proliferation of new HFs.

 

More poppy rooster

Edited February 15, 2013 by Magox