Phil, inflation is not caused by rising prices
how do you like that paradoxical statement???
the effect of rising energy prices has a dampening effect on economic growth, taking money out of the hands of folks who must make daily decisions on discretionary spending... more paid for gasoline, less available to spend on clothes, restaurants, movies, etc... higher energy prices act like a tax on the economy
sure higher energy costs on the commercial side do pressure prices... no doubt, but that is where the efficiency gains in productivity and technology utilization have been central... competition is so intense, that costs often cannot be passed on so easily
I have maintained for over a year the extreme misconception in thought pattern within American investing public, even the Federal Reserve board governors... inflation is caused by radical increases in the Money Supply... the first place that inflationary surge is felt in the stock market... case in point this Dec-March in Nazdq index stocks... but that money was pulled out by the Fed as fast as it was infused, thus the Naz steep correction
imagine money as water in a pond... prices give and take from all assets residing in the pond... technology is like a pervasive new species of seaweed that soaks up surplus water in that pond, thereby reducing pressure on expanding prices of floated assets
the proportion within the GDP for energy costs is going down every year... how many more months can we be frightened by this empty argument of "energy costs"... I predict technology developments will not only compensate the rising energy costs, but will eventually produce alternatives that attack the power center of OPEC
in the meantime, the present continues despite any future
your implication of higher mortgage rates is also incorrect IMO... the yield curve is inverted right now, which calls (no, screams) of lower shorterm rates soon... mortgage rates went up for several months, now have subsided... as the economy cools only somewhat, watch rates continue to stabilize... continued federal budget surplus puts a lid on rising rates on the longend, where mortgages are based
in summary, the pond only has so much water to feed prices... with no substantial increase in water (money supply) within the pond, higher energy costs do NOT immediately pump up prices... they invite more efficient competitors to snare market share from the less efficient... if anything, Phil, higher energy costs will reduce earnings... this will also keep the lid on interest rates
just an opinion from a jackass
/ jim |
