Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: TobagoJack who wrote (4985)	6/16/2001 1:33:56 AM
From: pezz	Read Replies (1) of 74559

Is this guy the same one that has been an inflation hawk for the past ten years? Was on the old FNN . Slender guy with horned rimmed glasses? I thought he was "Grant's interest rate adviser" or something. My contention as I think you know is that the price of oil is of the most importance in the inflation story... I think it is reflected even in the "core" numbers. Energy is used in any form of production and the transportation of both raw materials and finished products. Not all suppliers or producers of finished products eat these increased costs. <<The CPI, ....rose at a 3.8% annual rate during the first four months of this year, compared with a 3.4% increase for all of last year. Remember, too, that last year's increase went into the books as the biggest since 1990>> I agree that inflation has been higher in the last year. But if it is oil related I believe that it will work out of the economy as long as we don't get another oil spike.Perhaps oil might even decline in price... We can see that this inflation started with the oil spike not with the FED's lowering of rates. <<Productivity? It was growing at 5.4% as recently as last year, but now it's growing at a 2.5% rate; >> My understanding is that this is typical in the early stage of a recession. But when the economy rights itself this factor will not be a drag on productivity. Whether or not it will return to the recent levels ...I don't know. <<Finally, Meyer can invoke the gap between the 10-year Treasury note and the three-month Treasury bill, which now stands at 169 basis points, its fattest since January 1995,>> Himmm.... And did we have inflation problems in 1996 or 1997 or 1998? AG'a argument seems to be with the slowdown /recession it will become difficult for producers to raise prices and labor to demand more,no?...I mean isn't that what the FED raised rates for last year? They engineered a slow down / recession. More so than they intended to be sure, perhaps with the aid of higher oil which I also think acts as a tax increase on consumers. It seems to me that AG is right. The risk is more on deflation than inflation. The one wild card IMO is oil and you can raise rates till blue inna face and we wouldn't solve that one.

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