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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (67824)8/9/2006 7:16:35 PM
From: Tommaso  Read Replies (1) of 110194
 
>>>oil has noting to do with inflation
NOTHING<,,

That's what I used to say. But high-priced oil reduces the production of all sorts of things and contributes to an imbalance between what is produced and the money that is available to pay for it. Inflation can occur because of excess money creation, but it can also occur because a scarcity of goods to spend what money there is on. That is one of the things that happen in real wars, when goods and services are consumed by the destruction of the war--even if there is no appreciable increase in the money supply. (In fact, there usually is an increase in money supply unless constrained by svaings, as happened in the U. S. in WW II).

So the seemingly benign current U.S. monetary statistics do not guarantee an absence of price inflation. If there is less to spend money on, prices will rise. And scarce and expensive oil tends to restrict what there is to spend money on.
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