Goldman’s $105 Oil Prediction a Little Too Slick

INTELLECTUAL CONSERVATIVE.COM ^ | APRIL 5, 2005 | NOEL SHEPPARD

[cherry]

yep...maybe it ain't a bad idea to do the vegetable garden and the whole Y2K bit again....the way things are going up...

I'm a shopper...and I have noticed big increases in groceries, and other items...

I think the price of fruits and veggies will be very high all this spring and summer...due to increased transportation costs...

the thing about oil is that it does affect the price of everything...

if everything goes up, we have inflation...

If someone could tell me two things I would be most apprecitative....

1. why is the price of oil so high? ....

2. why is the price of beef still so high ?

[RightWhale]

The thing about gardening is that the amount of knowledge for best results is huge and comes mainly from actual gardening over many seasons. It would be tough to run out of food and only then to plant for the first time. It should be a lifelong hobby at least.

Another advantage of getting oneself somewhat free from maxxed-out debt is that the world seems somewhat manageable even in crisis if one's nose is above water.

[Only Waxing]

With all due respect, you really need to get your historical facts in order. The Federal Reserve under Volcker began defending a sinking dollar by aggressively raising interest rates starting in March 1987 a full five months before Greenspan took over on August 11th. Please refer to the following chart:

http://futures.tradingcharts.com/histcharts.php?cbase=TR&year=1987&cpp=3&action=Display+Charts

As you can see, T-bond futures and prices declined by about 14% in value BEFORE Greenspan was sworn in. In fact, most economists and analysts believe that this combination of dollar and bond collapse in early 1987 presaged the stock market crash. To blame this on Greenspan who was in power all of two months before October 19th is specious to say the least.

As for the cost of technology, this is always declining. However, could you say the same for cars, houses, and all healthcare related expenses? Certainly not. In fact, if healthcare expenses were properly weighted within the Consumer Price Index, inflation would be depicted as much worse than what is reported each month. Unfortunately, because many government programs have COLAs that are tied directly to CPI, it is NOT in the government's best interest to measure inflation accurately.

Finally, you continue to suggest that higher interest rates cause inflation. Do you truly believe this? As such, do you believe the cure for rising inflation is for the fed to LOWER interest rates?

[The Great Yazoo]

If someone could tell me two things I would be most apprecitative....

1. why is the price of oil so high? ....

2. why is the price of beef still so high ?

Adam Smith could have told you in 1776. People want to buy more oil and beef than supplies currently on-hand. As demand increases, price increases, unless supply also increases. To steady (or, "forfend" (as Smith would have said), reduce) prices, one must either increase supply or reduce demand. Despite all sorts of wishful thinking by all sorts of people (from paupers to presidents), those are our only two choices!

[T. Jefferson]

You seem to have ignored my entire point and cherrypicked one sentence and implied something I never said. The catalyst for the market crash was a false dollar floating rumor coupled with no computer lockdown pricing at the market. It was an unnecessary event, the market quickly recovered, but the economy didn't.

For 20 years the Phillips Curve has been proven wrong. High employment does not equal inflation, history is our guide; perhaps Al should notice it. Rising markets do not create inflation, inflation is price based. To have a fed base policy based on falsehoods is sad.

Finally, you continue to suggest that higher interest rates cause inflation.

I continue to suggest that Greenspan provided higher rates in the 90's during a deflationary cycle, causing an completely unnecessary and avoidable recession. That's my opinion, and I'm sticking to it. Have a nice day.

[Only Waxing]

Actually, I quite believe that I have been trying to engage you in a discussion of facts, and have consistently had the decency and respect for a fellow poster by providing links that support my assertions. If you see this as cherrypicking, I'm sorry.

That said, let's stick with your core premise -- that we were in a deflationary cycle in the 90's. Okay. Well, below is a link to the Consumer Price Index figures since 1913. Could you please demonstrate to me WHERE this deflation was? After all, we began the 90's with a CPI of 125.3. We ended the decade with this figure at 167.8. That's almost exactly a 33% increase during that decade. Is that what you call deflation?

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

[T. Jefferson]

We've been discussing 1996-2000. The graph is only one half of the equation. The rate of GDP growth, income and assets far and above exceeded the CPI growth. Note what happened during the ill timed rate increases.

[cdrw]

Well last night turned into a very late night and I didn't get a chance to dig up the numbers but it sounds like you've seen them anyway.

Second homes and ARM's have got to be an exposure. If there is to be a dam burst then those sectors would be the first leaks. I've not seen any data on that so I could only speculate as to how large that risk exposure is right now. I've always hated the underwriting policies for ARM's. They make it WAY to easy for people to get in over their heads. I must admit I was really taken by surprise when real estate hot spots remained hot in the post-bubble environment. Many of the hot spots are tech sector employment centers and the tech sector was having its butt handed to it while home prices were rising astronomically. Its amazing what happens when they fire up the money printing presses.

My perception (no data to back this up at all) is that people rolled what stock market gains they had left into real estate and used low interest rates to help cover the carrying costs. We may indeed have traded one bubble for another. I suppose we're better off with two major down drafts than one calamitous crash. Lets just hope we never see the second act of this play.