America threatens the rest of the World over ITS falling $!

[Jay]

Re: America threatens the rest of the World over ITS falling $!

Plot the oil price against the FFR during the last rate raising cycle...;)

Mind spelling this out? I don't have the graphs and was a kid during the Volker era.

[GRG55]

Re: America threatens the rest of the World over ITS falling $!

Mind spelling this out? I don't have the graphs and was a kid during the Volker era.

The last rate rising cycle was under our good friend Greenspan when he finally decided to raise rates from the Fed's 1% level during the post-tech bubble deflation scare.

Oil hit bottom at the end of 1998, made a second bottom in the recession early this decade, and hasn't been back anywhere near that level since.

Any actual rise in the Fed funds rate short of another Volckeresque clobbering of inflation, which seems entirely out of the question in present circumstances, is likely to provide only minimal and temporary relief from rising energy and raw materials costs.

[FRED]

Re: America threatens the rest of the World over ITS falling $!

Mind spelling this out? I don't have the graphs and was a kid during the Volker era.

Here you go. Circled are points of value for CPI, the dollar, and Fed Funds when oil prices peaked previously versus the current case.

[Jay]

Re: America threatens the rest of the World over ITS falling $!

The last rate rising cycle was under our good friend Greenspan when he finally decided to raise rates from the Fed's 1% level during the post-tech bubble deflation scare.

Oil hit bottom at the end of 1998, made a second bottom in the recession early this decade, and hasn't been back anywhere near that level since.

Any actual rise in the Fed funds rate short of another Volckeresque clobbering of inflation, which seems entirely out of the question in present circumstances, is likely to provide only minimal and temporary relief from rising energy and raw materials costs.

OK. Couple of questions as this seems like a fairly important piece of information here and I want to try and understand it:
How does true CPI, i.e. CPI plus Fed lies, change this chart? Especially since energy is stripped out. Since true inflation is much higher, looking at recent historical trends, the FFR is much too low, so that would explain the continuing escalation of energy and raw materials costs. So, that would mean no cycle peak until/if the FFR increases dramatically, right? However, the basic tenant of EJ's theory is that Bernanke won't raise rates, or at least will try to continue to find backdoor ways to keep liquidity in the system.
As all the other peaks and troughs occurred with out such large real estate bust pressures, how does this fit in here? This is the ultimate piece of info not reflected directly in this chart, and what has put the US in such a bind, right? Can't raise rates as it will put us into a deflationary tailspin, so oil continues skyward regardless of true supply and demand issues and gold eventually catches up as the Fed watches the global economy burn.
Hmm, a silver lined tin foil toque does sound chique!
Do I have this basically right? Or maybe not. FRED you have put "cycle peak?" next to the present spike. Question mark noted on graph. Your thoughts? A sharp downward movement in energy costs without rate hikes? Or a series of rate tightenings after the election to stem inflation worries, and prick the spike, yet continued backdoor liquidity inventions that screw the tax payer and bail out the banks?

[GRG55]

Re: America threatens the rest of the World over ITS falling $!

OK. Couple of questions as this seems like a fairly important piece of information here and I want to try and understand it:
How does true CPI, i.e. CPI plus Fed lies, change this chart? Especially since energy is stripped out. Since true inflation is much higher, looking at recent historical trends, the FFR is much too low, so that would explain the continuing escalation of energy and raw materials costs. So, that would mean no cycle peak until/if the FFR increases dramatically, right? However, the basic tenant of EJ's theory is that Bernanke won't raise rates, or at least will try to continue to find backdoor ways to keep liquidity in the system.
As all the other peaks and troughs occurred with out such large real estate bust pressures, how does this fit in here? This is the ultimate piece of info not reflected directly in this chart, and what has put the US in such a bind, right? Can't raise rates as it will put us into a deflationary tailspin, so oil continues skyward regardless of true supply and demand issues and gold eventually catches up as the Fed watches the global economy burn.
Hmm, a silver lined tin foil toque does sound chique!
Do I have this basically right? Or maybe not. FRED you have put "cycle peak?" next to the present spike. Question mark noted on graph. Your thoughts? A sharp downward movement in energy costs without rate hikes? Or a series of rate tightenings after the election to stem inflation worries, and prick the spike, yet continued backdoor liquidity inventions that screw the tax payer and bail out the banks?

IMHO a "cycle peak" in oil, if indeed that is where we are, implies a cycle trough in the US$ international exchange rate.

I may not be buying oil at these prices, but, unlike OPEC, I am not prepared to sell the oil I have for US$.

[Yusef Asabiyah]

Re: America threatens the rest of the World over ITS falling $!

What amazes me is the way third world production goes to US or other first world domestic markets. Third world production for its own domestic markets gets short-changed. Then later, internationally, when circumstances get out of control or go bad for one reason or another, third world domestics are the ones who get to tighten belts the most. All along I've wondered whether the Chinese would be able to break out of this pattern and what would happen if they did. Or what it means if they don't.

[GRG55]

Re: America threatens the rest of the World over ITS falling $!

What amazes me is the way third world production goes to US or other first world domestic markets. Third world production for its own domestic markets gets short-changed. Then later, internationally, when circumstances get out of control or go bad for one reason or another, third world domestics are the ones who get to tighten belts the most. All along I've wondered whether the Chinese would be able to break out of this pattern and what would happen if they did. Or what it means if they don't.

They are and they will. And they are not alone.

But the road will not be as smooth as that mag-lev train from Shanghai airport...