Greenspan scratches the surface on energy and the shifting of wealth.
>>To be sure, the higher energy expenses of households and most businesses represent a transfer of income to producers of energy. But the capital investment of domestic energy producers, and, very likely, consumption by their owners, have provided only a small offset to the constraining effects of higher energy costs on spending by most Americans. Moreover, a significant part of the extra expense is sent overseas to foreign energy producers, whose demand for exports from the United States is unlikely to rise enough to compensate for the reduction in domestic spending, especially in the short-run. Thus, given the evident inability of energy users, constrained by intense competition for their own products, to pass on much of their cost increases, the effects of the rise in energy costs does not appear to have had broad inflationary effects, in contrast to some previous episodes when inflation expectations were not as well anchored. Rather, the most prominent effects have been to depress aggregate demand. The recent decline in energy prices and further declines anticipated by futures markets, should they occur, would tend to boost purchasing power and be an important factor supporting a recovery in demand growth over coming quarters. <<*
federalreserve.gov
In other words, this time around don't look for any new shows such as the Beverly Hillbillies or Dallas. This money is going to foreigners. And, since we don't make anything as unique to sell them in return, how are we going to get that money back? Well, according to Alan, at least we won't have to worry about inflation coming from too much demand of what we don't have to sell, or already have plenty of competition for anyway.
Also, I don't know what recent decline in energy prices he is talking about, but he does mention anticipated declines by the futures market....um....should they occur.
*bold is mine |
