Inflation hit the stock market a long time ago, inflation is now hitting consumers, the fed rate is now many percent low.
What actually needed to happen is QE needed to end a lot sooner, interest rates needed to be raised moderately months ago.
All of this should have been entirely predictable, but instead of "oh god this is ready to blow" when stock market valuations were way above prepandemic levels everyone was like "this is awesome, I bet it'll keep going!"
There's no free lunch, you can't pump that much money into an economy that isn't doing a lot and not have consequences.
Powell spoke when he didn't have to. He didn't have to speculate on inflation being transitory. He didn't have to make precise forecasts. But he did. That's left egg on the Fed's face. But calling a 75 bp rate hike panic is hyperbole.
Not the top event I'd imagine a bank predicting well.
Has the Ukraine war made the inflation problem worse? Yes. Did it cause the problem? Absolutely not!
I don't intend to pile on against President Biden, but his recent speech before the labor union sounded like a kid blaiming the dog for eating his homework, when he never did his homework.
I will probably make a bunch of people here mad at me, but there is so much to blame on both political parties. Putting Wall Street's and the War Industry's interests unapologetically before the American public's interests can only go on for so long before everything crashes.
Anyone who can't agree with that statement isn't living in reality.
They are currently 1800.
If all that extra money had devalued fiat currencies globally (at roughly the same value), why hasn't gold increased?
There have been a number of cases of banks being found guilty of it as well: - https://www.reuters.com/article/us-usa-metals-charges/u-s-ch... - https://www.reuters.com/article/jp-morgan-spoofing-penalty-i...
Look up naked short selling if you want to see how this works. Essentially, futures markets allow trading gold without holding any physical gold so banks can take dollars and use that to short the price of gold. It has gotten to the point where more “paper gold” is bought and sold on futures markets than physical gold that exists in the world.
US M1 supply has increased 40 fold since 2011. If that's hiding "real" inflation, why are commodities less than 1/10th of the cost they were 10 years ago?
Of course, that leads to the question of "what would serve as a good proxy for the actual value of currency", and I don't have a good answer to that. CPI is the traditional answer, but I don't think it's a sufficient one because
1. CPI misses out on some of what people care about (e.g. asset prices are actually important in determining what kind of long-term lifestyle people can afford) 2. We want to disentangle "commodities went up because of supply shocks that will resolve themselves" and "commodities went up because money is permanently worth less", to the extent that it is even meaningful to disentangle these things
So yeah, it is entirely possible that the dollar is worth less [relative to what people care about], and also gold is worth less [relative to what people care about], and it is even possible that that is causally downstream of injecting a bunch of dollars into the economy, but I have no idea how one would robustly demonstrate that that was or was not the case. If you have any ideas on that front I'd love to hear them.
Also if you are aware of any assets that are _strongly and reliably anticorrelated_ with most other assets during recessions, I would be interested for much more personal reasons.
If I have a 300k mortgage over 25 years at 7% that's $2121 a month
If I have a 500k mortgage over 25 years at 2% that's $2120 a month
The "price" doesn't really matter at that scale, it's the monthly payment, which hasn't gone up despite house prices increasing 67%
(More importantly with things constrained by zoning/land availability, the monthly price will be set to take all my spare case, as there's more demand than supply, so prices rise until the demand drops, which means people choosing not to live in that area. In other words the higher the salaries in a given area with fixed supply, the higher the cost of housing - be it mortgage or rent)
On the other hand if my weekly shop goes from $150 to $200, that's a 30% increase, and does make a difference.
Velocity * Money Supply = Price Level (changes in this are inflation) * Economic Output
During early pandemic, velocity tanked because people were spending less so it was not a foregone conclusion that increasing the money supply as much as the Fed did would lead to inflationary changes in the price level.
Now, we are seeing velocity somewhat rebound while output is not increasing as much as we would expect and the Fed is doing little to scale back money supply.
More seriously, Ukraine is probably not the reason of scarcity, but if you want to solve the supply chain, you’ll hit China very fast: Their growing local population means that one day, they’ll keep everything they produce for themselves. And that’s big enough to be the cause of inflation: Mid-term inflation is probably due to lack of productivity during Covid; long-term inflation is certainly due to the lack of goods produces in the West, while the East starts to keep their production.
Putin did not force the reduction of our own supply. The current administration did.
The invasion may have been the consequence of the reduction of our production and amplified the "price hikes", but it wasn't the cause of the "price hikes", the initial action of reducing production and relying on foreign imports was.
This is the policy the current admin enacted that cut our production:
https://www.csis.org/analysis/biden-makes-sweeping-changes-o...
Please point to something that supports your theory that "covid did it" and oil companies are "dragging their feet".
- edit, at my post limit -
@vel0city: Banning new leases two years ago hurt our production output. Banning new subscribers and preventing renewals would hurt your revenue, why would you think it wouldn't apply here?
It seems you're trying to rationalize away the obvious change in policy and its effects because of some reason unknown to me.
Would you support retracting this policy decision since in your mind it has little effect and in my mind it's the leading cause of our loss of net export status?
@deeg: the article says offshore leases may not show declines for 10 years as the leases are longer, but onshore could "conceivably show up faster".
Your point seems to be this policy hasn't hit us fully yet? Are you for it? How confident are you that it didn't cause the loss of our net export status?
[1] https://energynow.com/2022/02/not-even-at-200-a-barrel-shale...
Second, that has nothing to do with our production capacity, doesn't prove that "covid" caused us to drop our net export status, or that the industry is unwilling to fill production.
It's one misconstrued quote from an exec. He was talking about not collapsing the price when we overproduced for a brief period during our time of net exporting.
This is the REAL response from the oil & gas industry and it's concerning the federal lease bans: https://www.api.org/news-policy-and-issues/exploration-and-p...
When you're looking for the perspective of the oil & gas industry, API statements are a lot more reliable than an EnergyNow article.
Now that I've addressed your article, would you like to address the administration policy decision I linked above?
-- edit, at my post limit --
In short, this is the effect of the federal leasing ban:
https://www.api.org/-/media/Files/Policy/Exploration/2020/fe...
-- edit2 --
@vel0city: the "if" was contingent on the federal ban on new leases, which happened... two years ago.
We are seeing these predictions play out. Tech support using the covid excuse is annoying, but when government leaders use it to hide behind poor policies, it's dangerous.
You're pointing to theoretical projections and acting as if that's the ground truth today. These aren't the results of a current policy but are the theoretical projections of a theoretical policy decision that hasn't been enacted yet.
That is what you requested and that is what I provided. There are other articles if you would like to research them yourself.
The full quote is "“Whether it’s $150 oil, $200 oil, or $100 oil, we’re not going to change our growth plans,’’ Pioneer Chief Executive Officer Scott Sheffield said during a Bloomberg Television interview. “If the president wants us to grow, I just don’t think the industry can grow anyway.’’"
>Now that I've addressed your article, would you like to address the above administration policy decision I linked?
"Federal land accounts for about 24 percent of oil and gas production in the United States, mainly in the offshore Gulf of Mexico. But since companies with existing leases will not be affected, the near-term impact on exploration and production as well as royalties to states will be limited. With more than 26 million onshore acres and 12 million offshore acres already under lease, there is a deep inventory of exploration opportunities. "
> A more permanent leasing ban would have a significant impact, although visible offshore production declines may not materialize for up to 10 years, given the typical timeframe for planning, exploration, appraisal, and development.
My source pointing that the current admin's actions haven't significantly changed things today is your own article.
https://www.csis.org/analysis/biden-makes-sweeping-changes-o...
"At the beginning of 2021, 129 refineries were either operating or idle in the United States (excluding U.S. territories), down from 135 operable refineries listed at the beginning of 2020. The additional refinery closures in the 2021 Refinery Capacity Report largely reflect the impact of responses to COVID-19 on the U.S. refining sector."
Claims below that leases reduced production is a canard. It takes years to develop a lease. In 3 or 4 years you could blame Biden, but unless Exxon produces by time machines it has nothing to do with production issues in 2021. Domestic oil producers are sitting on 1000's of leases.
Refineries are active and will be active as you need them when importing crude oil from other countries.
The issue is the reliance and importing of crude oil in the first place.
API estimation of impact by federal ban: https://www.api.org/-/media/Files/Policy/Exploration/2020/fe...
-- edit to reply to below (post limit) --
New leases have been banned for the past 2 years.
Companies constantly need to lease land, leases expire, new land is needed.
That's like shutting down new user registrations and pausing all subscriptions and saying there will be no revenue impact because people have paid you in the past.
Those existing users can't resubscribe when their cycle runs out and new users can't enroll at all.
How does that not impact production?
I suggest you research how leases work. They cover ranges, not a single well. There are tens of thousands of leases which have volume for additional wells. The industry is sitting on 9000 untapped leases.
Again, this has nothing to do with production today. It has nothing to do with prices today. I've provided links on Covid impacts and 141 oil executives dragging their feet. Am not going to make more effort.
And still do, today. None of those leases has been closed. If you're making some claim that Biden shut down existing leases in production, please provide a citation.
https://www.nytimes.com/2022/04/26/business/energy-environme...
"Executives at 141 oil companies surveyed by the Federal Reserve Bank of Dallas in mid-March offered several reasons that they weren’t pumping more oil. They said they were short of workers and sand, which is used to fracture shale fields to coax oil out of rock. But the most salient reason — the one offered by 60 percent of respondents — was that investors don’t want companies to produce a lot more oil, fearing that it will hasten the end of high oil prices."
inflation was clearly caused by injecting trillions into the economy for "covid" slush funds.
as far as energy goes, we were net exporters until the federal restrictions started coming in, only then did we start relying on foreign production.
blaming your domestic problems on a foreign adversary is routine, but it's not accurate, helpful, or even actionable.
does the "putin price hike" talking point really work on anyone? do they think we have memories of a gold fish?
It was clearly caused by supply chain collapse
Yes, that juiced the demand side. At the same time, the supply side was kneecapped by shutdowns and other "mitigation" measures. More money + fewer available goods.
Unfortunately, yes it does. It works very well for a significant amount of the population. I've found that there is an incredible overlap in the number of people who think Putin is to blame and those still wearing masks in public.
Reminder: https://www.csis.org/analysis/biden-makes-sweeping-changes-o...
Russia is now selling a fraction of the oil they were pre-war for 70 cents on the dollar. The sanctions haven't failed.
Two days ago: https://www.bbc.com/news/business-61785111
Seeing the news this week that Bernanke said that the Fed should be able to pull off a soft-landing now in 2022 gave me an uncomfortable déjà vu -- he said the same in 2006 and 2007, right before he raised rates enough to kick off a global financial crisis.