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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: Les H who wrote (22157)6/24/2006 3:18:57 PM
From: David Bogdanoff  Read Replies (3) of 42834
 
BB keeps talking about high oil prices are not inflationary.
Can he be right and our leading economists wrong?
BB's reasoning is that paying extra at the pump is like a tax and leaves the consumer with less money to but goods and services, a non-inflationary scenario. This argues against the more traditional inflation caused by too much money chasing too few goods, which occurrs when the government prits too much money. But it does not argue against higher production costs caused by higher cost costs of raw materials (i.e. energy costs). Companies actually pay more to produce many goods and also deliver them, and must either pass the costs on to consumers or eat the difference. this is not like a tax anymore. Beyond that, the dollars that the consumer pays for gas go to the producers who then spend those dollars, creating more demand for goods, again putting upward pressure on prices.

Has our economist wanna-be friend not thought this out carefully?
Comments invited.
Bogtalk
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