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The consumer inflation was around 6% before the Ukraine conflict started in March. Its understandable that oil price hike is caused by sanctions on Russia and w

by rajeshp1986 5y ago

The consumer inflation was around 6% before the Ukraine conflict started in March. Its understandable that oil price hike is caused by sanctions on Russia and will affect other commodities too but blaming all the inflation on solely Russia-Ukraine conflict is nothing but a blame game and inability to take control of the situation by WhiteHouse.

UncleOxidant 5y ago
> inability to take control of the situation by WhiteHouse. I see this sentiment a lot here, but it's really unclear what the WhiteHouse can do about it. Maybe they should take Gerald Ford's lead and start printing up "Whip Inflation Now!" buttons? Maybe you want a wage and price freeze à la Richard Nixon? The Federal Reserve is where your ire should be aimed. They left rates way too low for way too long kicking the can down the road and now the next kick of the can could reveal it to be a bomb. The way to deal with inflation is the way Paul Volcker dealt with it in 1980: raise interest rates significantly - not these piddly 1/4% raises.
- jayspell 5y ago
  What they could have done is not cancel the Keystone pipeline. Enact common sense energy policy instead of pushing all their chips into green technology, a key component of which is battery based and whose supply chain is heavily linked to Russia.
  - elihu 5y ago
    What key part of the battery supply chain is Russia involved in?
    - UncleOxidant 5y ago
      Probably they meant Ukraine and Nickel.
    - alexanderdmitri 5y ago
      Russia is the third largest producer of nickel in the world: https://qz.com/2139399/surging-nickel-prices-are-bad-news-for-electric-car-manufacturers/ https://qz.com/2139399/surging-nickel-prices-are-bad-news-fo...
      - elihu 5y ago
        Nickel isn't essential, or cobalt for that matter. It's used in high-end batteries, but LFP is good enough for use in EVs and using nickel-based batteries for grid storage is just plain wasteful.
  - UncleOxidant 5y ago
    The Keystone pipeline isn't the issue here. We still get that Canadian oil, it just comes by train instead of pipeline. As I understand it oil producers are currently sitting on oil leases that they could take advantage of to increase production, but they aren't because the investors think this oil bump is going to be too short-lived especially as we're transitioning more in the direction of EVs.
  - mywittyname 5y ago
    You realize that the original pipeline is still there? KXL was a shortcut that would save some money. Also, the fuel processed from the pipeline is chiefly an export, so it wouldn't have affected prices in the USA. Lastly, the XL pipeline was a huge risk to the American agriculture industry. There was opposition to it it on the right, particularly from ranchers in the region. Do you really think it's wise to put the beef and wheat industries in the north at risk just so refineries can sell oil overseas at a slightly lower cost?
    - coredog64 5y ago
      > Also, the fuel processed from the pipeline is chiefly an export, so it wouldn't have affected prices in the USA. Oil is (mostly) fungible. An export from Canada is additional capacity that doesn't compete for American oil that can stay in America.
  - mike00632 5y ago
    Isn't it more "common sense" to support green energy than to further invest in fossil fuels that we know will need to be phased out AND has price volatility that is currently causing major issues? Doubling down on fossil fuels right now seems like the exact opposite of "common sense", especially considering that investments now won't do anything to help in the short term.
- arcticbull 5y ago
  The Fed's contribution is small. What an be done avoiding dramatic intervention re: monetary policy, working to unclog ports, fix supply chains and shore up domestic manufacturing of silicon for next time. And potentially leverage the defense production act to make more oil. Then sit back and wait as it blows over. It's already blowing over, prices are stabilizing. Month over month 0.3% increase in CPI is 3.6% annualized inflation.
  - UncleOxidant 5y ago
    > working to unclog ports, fix supply chains and shore up domestic manufacturing of silicon Much of this is outside of the purview of the US president. These are areas where the private sector has to take the lead. AFAICT there have been efforts to increase domestic manufacturing of semiconductors - Intel is taking a big lead here, but it's going to take at least a couple of years (probably closer to 3 or 4) to get these new fabs online. There's not much a US president can do about that. And much of what he could/can do is limited by congress passing laws. > The Fed's contribution is small. It's not. ZIRP has had a huge impact on this inflation and fueled lots of market speculation both in housing and the stock market (not to mention crypto). With interest rates closer to their historical mean this speculation wouldn't have happened.
    - arcticbull 5y ago
      Again your speculation about low interest rates is unfounded. Housing prices are driven by zoning as evidenced by the Japan housing CPI being dead flat with similar interest rate policies. Housing prices across the US on an inflation adjusted $/sqft basis are the same as they were in the 70s. Outside metros the average new house is twice as big; and inside councils refuse to allow supply to meet demand - these are both zoning issues. There aren’t really “historical average” interest rates, they’ve been going down continuously for like 40 years. Crypto is the same kind of speculation that drew folks to beanie babies. The entire crypto world market cap is like 2/3 of apple, it’s really not a big thing.
      - UncleOxidant 5y ago
- tsss 5y ago
  They can't do a whole lot because they already fucked up monetary policy in the last 10 years. They spent the last decade dismantling the breaks from the car to get it going and now that it's going, they can't slow down anymore.
  - arcticbull 5y ago
    That makes no sense, of course they can, they can raise interest rates which decreases the supply of money. The thing is that would hurt the economy and their goal is to maximize employment.
    - UncleOxidant 5y ago
      Maximizing employment is one goal. The other is to keep inflation in check.
      - arcticbull 5y ago
        I’m aware but really their goal is to do both at the same time not to sacrifice one at the expense of the other.
        UncleOxidant 5y ago
        Sure, but right now unemployment is under 4% (pretty much at record low levels) while inflation is running hot at 8.5%. Seems like they've got some room on the employment side.
    - tsss 4y ago
      They can not, because the enormous amount of money that they printed the last 10 years is not in circulation yet. They can't simply take that back (only very indirectly through ways that are both illegal and would political suicide). The private banks who hold that money now decide when to put it into circulation; the central bank has no power here.
- gonzo 5y ago
  Ford took office in August 1974 amidst one of the worst economic crises in US history. Inflation had risen to 12.3% that year following the 1973 oil crisis.
- ac29 5y ago
  > The way to deal with inflation is the way Paul Volcker dealt with it in 1980: raise interest rates significantly - not these piddly 1/4% raises. The market is pricing in a 87% chance the next hike is 50 bps, and a roughly 95% chance of the rate being at least 2.25-2.5% by the end of the year. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html https://www.cmegroup.com/trading/interest-rates/countdown-to... The market isnt always right, and even a series of back to back 50 bp hikes might not be enough. We'll see.
  - codebolt 5y ago
    There is so much leverage in the economy that an abrupt shift towards anything approaching Volker-level rates would mean a catastrophic level of defaults in all sectors. By keeping rates so low for so long what they've really done is paint themselves into a corner. The best case I see is that they raise rates by 1-2 pct and accept a few years of elevated inflation followed by a gradual normalization towards a long term mean. I really don't believe hyperinflation is a big risk.
    - ac29 5y ago
      There was an abrupt shift in the bond market already. BND fell by 8% this year, which is a terrible 3.5 month return for an intermediate bond fund (prices move inversely to market interest rates). Corporate bond funds have fallen even more.
    - mmarq 5y ago
      > anything approaching Volker-level rates would mean a catastrophic level of defaults in all sectors That’s the point: raise interest rates until they cause a recession, that suppresses demand and so kills inflation.
quickthrowman 5y ago
The White House does not have tools to fight inflation. The best they can do is not add new spending. The Federal Reserve Bank’s job to control inflation (and unemployment)
Koshkin 5y ago
> conflict started in March Nitpick: it was still February in Ukraine.
bufferoverflow 5y ago
Actually the inflation was 7.9% in February, before the war in Ukraine started. Nothing to do with Russia. Source: https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical_us_table.htm https://www.bls.gov/regions/mid-atlantic/data/consumerpricei...

UncleOxidant 5y ago

> inability to take control of the situation by WhiteHouse. I see this sentiment a lot here, but it's really unclear what the WhiteHouse can do about it. Maybe they should take Gerald Ford's lead and start printing up "Whip Inflation Now!" buttons? Maybe you want a wage and price freeze à la Richard Nixon? The Federal Reserve is where your ire should be aimed. They left rates way too low for way too long kicking the can down the road and now the next kick of the can could reveal it to be a bomb. The way to deal with inflation is the way Paul Volcker dealt with it in 1980: raise interest rates significantly - not these piddly 1/4% raises.

jayspell 5y ago
What they could have done is not cancel the Keystone pipeline. Enact common sense energy policy instead of pushing all their chips into green technology, a key component of which is battery based and whose supply chain is heavily linked to Russia.
- elihu 5y ago
  What key part of the battery supply chain is Russia involved in?
  - UncleOxidant 5y ago
    Probably they meant Ukraine and Nickel.
  - alexanderdmitri 5y ago
    Russia is the third largest producer of nickel in the world: https://qz.com/2139399/surging-nickel-prices-are-bad-news-for-electric-car-manufacturers/ https://qz.com/2139399/surging-nickel-prices-are-bad-news-fo...
    - elihu 5y ago
      Nickel isn't essential, or cobalt for that matter. It's used in high-end batteries, but LFP is good enough for use in EVs and using nickel-based batteries for grid storage is just plain wasteful.
- UncleOxidant 5y ago
  The Keystone pipeline isn't the issue here. We still get that Canadian oil, it just comes by train instead of pipeline. As I understand it oil producers are currently sitting on oil leases that they could take advantage of to increase production, but they aren't because the investors think this oil bump is going to be too short-lived especially as we're transitioning more in the direction of EVs.
- mywittyname 5y ago
  You realize that the original pipeline is still there? KXL was a shortcut that would save some money. Also, the fuel processed from the pipeline is chiefly an export, so it wouldn't have affected prices in the USA. Lastly, the XL pipeline was a huge risk to the American agriculture industry. There was opposition to it it on the right, particularly from ranchers in the region. Do you really think it's wise to put the beef and wheat industries in the north at risk just so refineries can sell oil overseas at a slightly lower cost?
  - coredog64 5y ago
    > Also, the fuel processed from the pipeline is chiefly an export, so it wouldn't have affected prices in the USA. Oil is (mostly) fungible. An export from Canada is additional capacity that doesn't compete for American oil that can stay in America.
- mike00632 5y ago
  Isn't it more "common sense" to support green energy than to further invest in fossil fuels that we know will need to be phased out AND has price volatility that is currently causing major issues? Doubling down on fossil fuels right now seems like the exact opposite of "common sense", especially considering that investments now won't do anything to help in the short term.
arcticbull 5y ago
The Fed's contribution is small. What an be done avoiding dramatic intervention re: monetary policy, working to unclog ports, fix supply chains and shore up domestic manufacturing of silicon for next time. And potentially leverage the defense production act to make more oil. Then sit back and wait as it blows over. It's already blowing over, prices are stabilizing. Month over month 0.3% increase in CPI is 3.6% annualized inflation.
- UncleOxidant 5y ago
  > working to unclog ports, fix supply chains and shore up domestic manufacturing of silicon Much of this is outside of the purview of the US president. These are areas where the private sector has to take the lead. AFAICT there have been efforts to increase domestic manufacturing of semiconductors - Intel is taking a big lead here, but it's going to take at least a couple of years (probably closer to 3 or 4) to get these new fabs online. There's not much a US president can do about that. And much of what he could/can do is limited by congress passing laws. > The Fed's contribution is small. It's not. ZIRP has had a huge impact on this inflation and fueled lots of market speculation both in housing and the stock market (not to mention crypto). With interest rates closer to their historical mean this speculation wouldn't have happened.
  - arcticbull 5y ago
    Again your speculation about low interest rates is unfounded. Housing prices are driven by zoning as evidenced by the Japan housing CPI being dead flat with similar interest rate policies. Housing prices across the US on an inflation adjusted $/sqft basis are the same as they were in the 70s. Outside metros the average new house is twice as big; and inside councils refuse to allow supply to meet demand - these are both zoning issues. There aren’t really “historical average” interest rates, they’ve been going down continuously for like 40 years. Crypto is the same kind of speculation that drew folks to beanie babies. The entire crypto world market cap is like 2/3 of apple, it’s really not a big thing.
    - UncleOxidant 5y ago
tsss 5y ago
They can't do a whole lot because they already fucked up monetary policy in the last 10 years. They spent the last decade dismantling the breaks from the car to get it going and now that it's going, they can't slow down anymore.
- arcticbull 5y ago
  That makes no sense, of course they can, they can raise interest rates which decreases the supply of money. The thing is that would hurt the economy and their goal is to maximize employment.
  - UncleOxidant 5y ago
    Maximizing employment is one goal. The other is to keep inflation in check.
    - arcticbull 5y ago
      I’m aware but really their goal is to do both at the same time not to sacrifice one at the expense of the other.
      - UncleOxidant 5y ago
        Sure, but right now unemployment is under 4% (pretty much at record low levels) while inflation is running hot at 8.5%. Seems like they've got some room on the employment side.
  - tsss 4y ago
    They can not, because the enormous amount of money that they printed the last 10 years is not in circulation yet. They can't simply take that back (only very indirectly through ways that are both illegal and would political suicide). The private banks who hold that money now decide when to put it into circulation; the central bank has no power here.
gonzo 5y ago
Ford took office in August 1974 amidst one of the worst economic crises in US history. Inflation had risen to 12.3% that year following the 1973 oil crisis.
ac29 5y ago
> The way to deal with inflation is the way Paul Volcker dealt with it in 1980: raise interest rates significantly - not these piddly 1/4% raises. The market is pricing in a 87% chance the next hike is 50 bps, and a roughly 95% chance of the rate being at least 2.25-2.5% by the end of the year. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html https://www.cmegroup.com/trading/interest-rates/countdown-to... The market isnt always right, and even a series of back to back 50 bp hikes might not be enough. We'll see.
- codebolt 5y ago
  There is so much leverage in the economy that an abrupt shift towards anything approaching Volker-level rates would mean a catastrophic level of defaults in all sectors. By keeping rates so low for so long what they've really done is paint themselves into a corner. The best case I see is that they raise rates by 1-2 pct and accept a few years of elevated inflation followed by a gradual normalization towards a long term mean. I really don't believe hyperinflation is a big risk.
  - ac29 5y ago
    There was an abrupt shift in the bond market already. BND fell by 8% this year, which is a terrible 3.5 month return for an intermediate bond fund (prices move inversely to market interest rates). Corporate bond funds have fallen even more.
  - mmarq 5y ago
    > anything approaching Volker-level rates would mean a catastrophic level of defaults in all sectors That’s the point: raise interest rates until they cause a recession, that suppresses demand and so kills inflation.

quickthrowman 5y ago

The White House does not have tools to fight inflation. The best they can do is not add new spending. The Federal Reserve Bank’s job to control inflation (and unemployment)

Koshkin 5y ago

> conflict started in March Nitpick: it was still February in Ukraine.

bufferoverflow 5y ago

Actually the inflation was 7.9% in February, before the war in Ukraine started. Nothing to do with Russia. Source: https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical_us_table.htm https://www.bls.gov/regions/mid-atlantic/data/consumerpricei...