Magox Posted July 8, 2009 Share Posted July 8, 2009 As I mentioned, I am looking at the (relatively) near term that futures contracts cover, which of course is all about anticipation, hence the term...futures. I am saying their bets about the near term are wrong. Inflation is a rise in the general level of prices. Your definition expresses the monetarists' belief that it's caused from the Fed printing too much money. This is wrong. While the Fed has "created" huge volumes of money, that money is not being circulated (as JA mentioned). The Fed can also destroy money, and will do so when the economy starts to recover. Btw, one doesn't need money to buy something; one needs "credit." While money has been increasing, credit has been decreasing. Which one is more imortant for its impact on inflation? If you look a bit further back you'll find that the dollar-oil relationship is fairly recent. In fact, it starts about the time that speculators took over the futures markets.... The Dollar -oil inverse relationship is not a recent one, it goes back to the beginning of the commodity cycle we had entering at the beginning of the millenium. Also, I can't see how one can argue that a "near term" price is "wrong". The price is whatever people are willing to pay for it, once it gets over valued, people will stop buying it and prices will go down, and same vice-versa. I agree that credit reduction is deflationary, I am not arguing with you there. I am saying as a result of deflation, policy makers and central banks will continue to create potentially inflationary measures, and that they won't have the political will to reign it in because of the stagnant growth that we will be facing. We will just have to disagree with our definition of inflation, and also that you believe that the Fed will reign in the money they created, specially the MBS purchases. Link to comment Share on other sites More sharing options...
TPS Posted July 9, 2009 Author Share Posted July 9, 2009 The Dollar -oil inverse relationship is not a recent one, it goes back to the beginning of the commodity cycle we had entering at the beginning of the millenium. Also, I can't see how one can argue that a "near term" price is "wrong". The price is whatever people are willing to pay for it, once it gets over valued, people will stop buying it and prices will go down, and same vice-versa. I agree that credit reduction is deflationary, I am not arguing with you there. I am saying as a result of deflation, policy makers and central banks will continue to create potentially inflationary measures, and that they won't have the political will to reign it in because of the stagnant growth that we will be facing. We will just have to disagree with our definition of inflation, and also that you believe that the Fed will reign in the money they created, specially the MBS purchases. wrt the "right price," I was trying to say that speculators had once again pushed the price of oil up, but the underlying fundamentals suggest the rise was not sustainable (and we're seeing that now). It's quite possible that the CFTC's announcement this week also helped bring the price down. While I might agree with your conjecture about future inflation, I disagree with the extent of it. Policy makers will not let inflation go past double digits. However, a "little" inflation will actually be good for the economy. As for the definition of inflation, there is only one. We are disagreeing on its cause. Link to comment Share on other sites More sharing options...
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