8 ms·

Crude prices have been a lot higher in the past, 2007-2008. The production is fairly in line with the demand. US actually needs higher crude prices to make sur

Crude prices have been a lot higher in the past, 2007-2008. The production is fairly in line with the demand. US actually needs higher crude prices to make sure the incentives exist for shale production to get back to pre covid levels. The supply chain sluggishness (worldwide) combined with excessive, irresponsible spending (although I hear it "costs nothing"...) explain these figures. Euro area has higher inflation than pre covid but nowhere near these levels. It's not transitory, and it's not good.

eloff 5y ago
It's becoming increasingly clear that the "it's transitory" narrative is dead wrong. But now all the policy makers are committed to the lie. I fear this will make any reaction much slower and weaker than it otherwise might be. Are we going back to the stagflation of the 70's? How should one prepare financially for that possibility?
- MrPowers 5y ago
  I think the Fed clarified that they won't be using the word "transitory" anymore last week: https://fortune.com/2021/12/03/inflation-no-longer-transitory-higher-prices-fed-chair-powell-treasury-yellen/ https://fortune.com/2021/12/03/inflation-no-longer-transitor...
- apeescape 5y ago
  You could ask your employer to match the inflation with a raise every year (on top of the actual raises you might've earned). I think this is a reasonable ask, though understandably not all companies are able to cover the inflation by raising their prices etc. When it comes to protecting your assets from inflation, I suppose investing in companies that pay good dividends and are able to cover the inflation in their business model should be a relatively safe bet, as they continue to provide a steady cashflow. If you think the inflation is here to stay and you want to take on more risk, you could take out a loan and leverage that by investing it, as the inflation should cover the interest. Note that this is NOT financial advice -- I'm anyway not qualified to give that, so take this only as food for thought.
- bryanlarsen 5y ago
  I bet you're wrong, and it looks like a very small majority agree with me. Want to stake some internet points on that position? https://www.metaculus.com/questions/7977/inflation-above-3-in-2022/ https://www.metaculus.com/questions/7977/inflation-above-3-i...
  - djrogers 5y ago
    Historically speaking, the only way out of massive inflation has been a recession, so I'm not sure which I'm rooting for here.
- tastyfreeze 5y ago
  If the value of the dollar is at risk then preparing financially means getting out of the dollar by getting some assets that are not priced in dollars or physical assets that have intrinsic value. I am leaning more heavily on physical assets as even foreign stocks will suffer to some extent in the event of a dollar crisis. With USD as the current global reserve it's failure will ripple through financial markets and economies around the world. The best thing you can do is learn how these kinds of things have played out in the past and make a plan to "weather the storm" as it were. I have really been enjoying stories of living through high inflation in other countries on https://www.youtube.com/c/StarPathAcademy https://www.youtube.com/c/StarPathAcademy. Not saying that is where we are certainly headed but all of the indicators are the same as other high/hyper-inflation periods in history.
SubiculumCode 5y ago
Wrong and wrong. This is transitory in the sense that the biggest helicopter drops have already occurred, savings are already dwindling in the bottom 20%, and CC debt is beginning to rise again. I'd also argue that this was not irresponsible spending. We'd have had a near economic depression when we shut down for COVID were it not for this money printing, instead we have some inflation...which is still magnitudes away from what is reasonably called hyperinflation. The poor and middle classes have had stagnant wages and salaries for decades, and our inflation has been *too low* limiting growth and burdening debt holders, which most are with student loans. We've just witnessed a large transfer of wealth to the lower and middle classes, and the economy is booming. Transitory inflation will be seen until production increases. As you know, supply shortages can be overcome by increasing production and we do not have major wars disrupting production capacity. All this hysteria over moderate inflation is being stoked by those that have been rent seekers sitting on their wealth, enjoying that the value of their lent money barely decreases. edit: We've had higher inflation just for a few months and to those saying that its now clear it isn't transitory, 'Transitory' for an economy is a year, at the minimum, not several months.
- UncleOxidant 5y ago
  Agreed. It's way too early to say that this inflation is not transitory. Check back in a year and if it's still at this level then it's not transitory, but for now it's too early to make that call.
  - willcipriano 5y ago
    It's not too early to call it transitory, but it's too early to call it not transitory? Why does the counter view have a higher standard of evidence?
    - dionian 5y ago
      Everything is transitory, the earth will explode at some point and I'm sure the US dollar won't be around by then.
    - 5y ago
kaycebasques 5y ago
> US actually needs higher crude prices to make sure the incentives exist for shale production to get back to pre covid levels. This reminds me on an interesting take on international politics I read last week. Shale has enabled far greater energy independence for the US. Energy independence has partly led to a de-prioritization of the Middle East, which made withdrawing from Afghanistan/Iraq more probable.
nabla9 5y ago
Inflation must be transitory unless it moves into wages. If prices increase 5-6% per year without similar wage increases demand drops naturally and prices fall.
- MattGaiser 5y ago
  Wages are surging too.
- notch656a 5y ago
  Why? A great proportion of physical goods we buy are overseas, only loosely linked to the cost of labor in the US. Prices increasing 5-6% may decrease demand in the US but on a global stage we only consume something like 25% of world GDP; prices aren't going to fall in the same way they would if the whole world's wages fell equally. 5-6% increase in price could just mean less is produced, or the US commands weaker exchange on the world market. In that case it would be real inflation as appears to the consumer.
  - nabla9 5y ago
    Overseas prices do not increase continuously. They reach some level and stop growing.
mempko 5y ago
We need to get away from oil. Global Warming is very serious. Higher prices will encourage it and lowering prices will postpone it. We don't need to increase production.
- rank0 5y ago
  It’s not that simple. Oil is the most important commodity in the world. We can’t just “get away from oil” as the technology isn’t there to replace it. Your entire lifestyle is dependent on oil. It powers global supply chains and critical societal infrastructure which is simply not optional. Renewables and batteries are great, but they come with their own set of problems which haven’t been solved yet. For example, electrical grids currently do not have the capacity to run completely on renewables as renewables cannot generate scalable energy locally. Overhauling our power grids is a massive undertaking, and we’re going to need to use a ton of oil products to make that happen. Attempting to reduce the worlds dependence on oil via market manipulation is not the correct or effective path towards sustainability.
  - mempko 5y ago
    Oil gets $5 trillion a year in government subsidies worldwide. The market manipulation train left the station long ago.

eloff 5y ago

It's becoming increasingly clear that the "it's transitory" narrative is dead wrong. But now all the policy makers are committed to the lie. I fear this will make any reaction much slower and weaker than it otherwise might be. Are we going back to the stagflation of the 70's? How should one prepare financially for that possibility?

MrPowers 5y ago
I think the Fed clarified that they won't be using the word "transitory" anymore last week: https://fortune.com/2021/12/03/inflation-no-longer-transitory-higher-prices-fed-chair-powell-treasury-yellen/ https://fortune.com/2021/12/03/inflation-no-longer-transitor...
apeescape 5y ago
You could ask your employer to match the inflation with a raise every year (on top of the actual raises you might've earned). I think this is a reasonable ask, though understandably not all companies are able to cover the inflation by raising their prices etc. When it comes to protecting your assets from inflation, I suppose investing in companies that pay good dividends and are able to cover the inflation in their business model should be a relatively safe bet, as they continue to provide a steady cashflow. If you think the inflation is here to stay and you want to take on more risk, you could take out a loan and leverage that by investing it, as the inflation should cover the interest. Note that this is NOT financial advice -- I'm anyway not qualified to give that, so take this only as food for thought.
bryanlarsen 5y ago
I bet you're wrong, and it looks like a very small majority agree with me. Want to stake some internet points on that position? https://www.metaculus.com/questions/7977/inflation-above-3-in-2022/ https://www.metaculus.com/questions/7977/inflation-above-3-i...
- djrogers 5y ago
  Historically speaking, the only way out of massive inflation has been a recession, so I'm not sure which I'm rooting for here.
tastyfreeze 5y ago
If the value of the dollar is at risk then preparing financially means getting out of the dollar by getting some assets that are not priced in dollars or physical assets that have intrinsic value. I am leaning more heavily on physical assets as even foreign stocks will suffer to some extent in the event of a dollar crisis. With USD as the current global reserve it's failure will ripple through financial markets and economies around the world. The best thing you can do is learn how these kinds of things have played out in the past and make a plan to "weather the storm" as it were. I have really been enjoying stories of living through high inflation in other countries on https://www.youtube.com/c/StarPathAcademy https://www.youtube.com/c/StarPathAcademy. Not saying that is where we are certainly headed but all of the indicators are the same as other high/hyper-inflation periods in history.

SubiculumCode 5y ago

Wrong and wrong. This is transitory in the sense that the biggest helicopter drops have already occurred, savings are already dwindling in the bottom 20%, and CC debt is beginning to rise again. I'd also argue that this was not irresponsible spending. We'd have had a near economic depression when we shut down for COVID were it not for this money printing, instead we have some inflation...which is still magnitudes away from what is reasonably called hyperinflation. The poor and middle classes have had stagnant wages and salaries for decades, and our inflation has been *too low* limiting growth and burdening debt holders, which most are with student loans. We've just witnessed a large transfer of wealth to the lower and middle classes, and the economy is booming. Transitory inflation will be seen until production increases. As you know, supply shortages can be overcome by increasing production and we do not have major wars disrupting production capacity. All this hysteria over moderate inflation is being stoked by those that have been rent seekers sitting on their wealth, enjoying that the value of their lent money barely decreases. edit: We've had higher inflation just for a few months and to those saying that its now clear it isn't transitory, 'Transitory' for an economy is a year, at the minimum, not several months.

UncleOxidant 5y ago
Agreed. It's way too early to say that this inflation is not transitory. Check back in a year and if it's still at this level then it's not transitory, but for now it's too early to make that call.
- willcipriano 5y ago
  It's not too early to call it transitory, but it's too early to call it not transitory? Why does the counter view have a higher standard of evidence?
  - dionian 5y ago
    Everything is transitory, the earth will explode at some point and I'm sure the US dollar won't be around by then.
  - 5y ago

kaycebasques 5y ago

> US actually needs higher crude prices to make sure the incentives exist for shale production to get back to pre covid levels. This reminds me on an interesting take on international politics I read last week. Shale has enabled far greater energy independence for the US. Energy independence has partly led to a de-prioritization of the Middle East, which made withdrawing from Afghanistan/Iraq more probable.

nabla9 5y ago

Inflation must be transitory unless it moves into wages. If prices increase 5-6% per year without similar wage increases demand drops naturally and prices fall.

MattGaiser 5y ago
Wages are surging too.
notch656a 5y ago
Why? A great proportion of physical goods we buy are overseas, only loosely linked to the cost of labor in the US. Prices increasing 5-6% may decrease demand in the US but on a global stage we only consume something like 25% of world GDP; prices aren't going to fall in the same way they would if the whole world's wages fell equally. 5-6% increase in price could just mean less is produced, or the US commands weaker exchange on the world market. In that case it would be real inflation as appears to the consumer.
- nabla9 5y ago
  Overseas prices do not increase continuously. They reach some level and stop growing.

mempko 5y ago

We need to get away from oil. Global Warming is very serious. Higher prices will encourage it and lowering prices will postpone it. We don't need to increase production.

rank0 5y ago
It’s not that simple. Oil is the most important commodity in the world. We can’t just “get away from oil” as the technology isn’t there to replace it. Your entire lifestyle is dependent on oil. It powers global supply chains and critical societal infrastructure which is simply not optional. Renewables and batteries are great, but they come with their own set of problems which haven’t been solved yet. For example, electrical grids currently do not have the capacity to run completely on renewables as renewables cannot generate scalable energy locally. Overhauling our power grids is a massive undertaking, and we’re going to need to use a ton of oil products to make that happen. Attempting to reduce the worlds dependence on oil via market manipulation is not the correct or effective path towards sustainability.
- mempko 5y ago
  Oil gets $5 trillion a year in government subsidies worldwide. The market manipulation train left the station long ago.