This is an interesting discussion and one in which I'd like to join with
my take.
Milton Friedman stated that inflation is and always will
be nothing more
than a monetary phenomenon. I believe that this makes a
lot of sense.
It hearkens back to the simplicity of the barter system of
trade.
You bring up an important point, namely, that productivity gains
can
offset inflationary growth in the monetary base. I believe this makes
sense also. If we can produce more stuff with fewer resources, then the
price of that stuff should come down relative to everything else.
Right? If we increase the money supply by the same amount, give or take
a bit, then I would think that price reductions from productivity
improvements would be erased. Perhaps remaining about the same as it
were before the inflation of the money supply. So, why is that maneuver
by central bankers necessary at all? Why can't consumers just keep the
benefits derived from these productivity improvements and passed along
to the masses, creating a higher standard of living for all?
What
am I missing?
Just my thoughts.
Dan
hostmaster
wrote:
>
> Ira's post in thinly veiled nonsense. Yes, the Saudi's
still have
> almost 2 million bbl/day reserve output available.
However, the
> Saudis CORRECTLY point out that an increase in
production by them
> would not have any material effect on the markets.
The markets
> themself are setting the price largely due to speculation
in futures
> trading (the sort of thing this list is really supposed to
be about
> but that Ira's article totally ignored to comment upon). A
look at
> the price fluctuations compared to net changes in inventories
shows
> they are decoupled and therefore therefore we can conclude
price is
> not currently linked to supply/demand. In fact the net
inventory
> changes in crude oil (both in the US and globally) show
that prices
> are rising while inventories are rising. Rising
inventories indicate
> a declining demand (or at least demand in excess
of supply). Either
> way one wishes to interpret it the conclusion is
that price is
> decoupled from supply and demand and an increase in
supply would
> merely increase inventories without moderating
prices.
>
> Likewise, Ira's rant goes on about inflation and
interest rates and
> money supply expansion without discussing
productivity. While I won't
> attempt to argue that productivity gains
completely offset some of the
> money growth supply factors, the fact
Ira completely ignores that part
> of the equation again exposes his
tirade for what it is (as opposed to
> any kind of sound financial
analysis). I have been a member of this
> list long enough to know that
Ira is not a fool nor unaware of these
> counterbalancing economic
factors. Therefore I can only conclude his
> article was authored
deliberately in a way to justify a viewpoint
> rather than to provide a
financial analysis of any kind. That's just
> my opinion but if you go
back and reread his tripe in detail I think
> you will find it funny
instead of freightening.
>
> Boater805
>
> At 11:55 AM
5/17/2008, you wrote:
>
>> First of all, I seriously doubt if
the Saudi's can raise output. I
>> strongly suspect they are at full
production now.
>>
>> As to filling up the reserves, Bush is
hell bent to keep the reserves
>> up rather than use them for a short
term solution to high prices. (A
>> solution which would do little to
help the price problem anyway).
>>
>> Ira's post offers some
sobering thoughts but what would happen if oil
>> came down? What if
it came down to $80? And if we stopped promoting
>> the insane idea
of bio fuels driving up food prices? If grain came
>> down 50% and
meat 30%? Then what would the consumer situation look
>> like?
Science fiction? I don't think so. I think the whole ethanol
>> craze
is being seen for just what it is, crazy. A fuel that costs
>> more
to make, pollutes worse than fossil fuels, and drives food
>> through
the roof is certainly not the answer. Atomic energy and
>> hydrogen
fuel cells are where I'm putting my energy dollars from this
>> point
forward. Solar and wind will be minor players, especially for
>> home
use but they do little or nothing for transportation and large,
>>
commercial purposes.
>>
>> So, a lot of the problems can be
solved by simply forgetting about
>> ethanol and I feel there is a
large amount of speculation in oil
>> now. We moved from 100 to 125
in days but demand most certainly
>> didn't increase by 25% in days.
Who knows, maybe things will work
>> out after
all.
>>
>> Bob
>>
>> At 01:46 PM
5/17/2008, you wrote:
>> >And strangly Mr.Bush justifies Saudi for
not raising oil outputs,not
>> >only that he was not in a favour
of stopping filling oil reserve
>> >near Gulf of Mexico...very
strange attitude and this has been
>> >discussed among all leading
newpapers round the world.
>> >--- In realtraders@yahoogroups.com
>> <mailto:realtraders%40yahoogroups.com>, "Ira"
<mr.ira@xxx> wrote:
>> > >
>> > > It is
time to take a good look at where we are at this time. In
>> >the
first quarter of this year more than 158,000 families lost their
>>
>homes to foreclosure. The American public is going deeper in
debt
>> >every day. In a society where 70% of the economy is
driven by
>> >consumer spending, inflation and debt are economy
killers. Millions
>> >of people have homes that are worth less
than the mortgage amount on
>> >their home. When they look at the
economics of the situation will
>> >they pay the inflated mortgage
payments or walk away from the
>> >house? Family homes were the
main source of their wealth and now
>> >with that gone they have
no place to go for that extra money they
>> >need to pay the
ever-increasing cost of living. Duke Power said
>> >that they are
cutting off utilities to 50 people a day because of
>> >unpaid
utility bills. Whether the government wants to admit it or
>> >not
we are in a recession. We are also in an inflationary spiral
>>
>that won't quit. The government is pumping liquidity into the
>>
>system at an alarming rate to save the financial institutions
that
>> >created a large portion of the problem.
>> >
>
>> > >
>> > >
>> > > The
balance of the article is on the web site if you are
>>
>interested.
>> > >
>> > >
>> >
>
>> > > Just one man's opinion.
>> >
>
>> > > Ira
>> > > www.delta100.com
<http://www.delta100.com/>
>>
> >
>> > > No virus found in this outgoing
message
>> > > Checked by PC Tools AntiVirus (4.0.0.26 -
10.072.012).
>> > > http://www.pctools.com/free-antivirus/
>> <http://www.pctools.com/free-antivirus/>
>>
> >
>> >
>> >
>> >
>>
>------------------------------------
>>
>
>> >Yahoo! Groups Links
>> >
>>
>
>> >
>>
>> No virus found in this incoming
message.
>> Checked by AVG.
>> Version: 8.0.100 / Virus
Database: 269.23.20/1452 - Release Date:
>> 5/17/2008 6:26
PM
>