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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: dijaexyahoo who wrote (23864)8/18/2006 9:56:45 PM
From: Kirk ©  Read Replies (2) of 42834
 
"a) The evidence indicates brinker is correct. Oil has soared from $11 to $77, has stayed above $40 for a number of years, and yet core inflation is in the 2% range."

#1 Core inflation is closer to 3% now. About 50% above what is considered comfortable by the FED. My insurance costs and the cost to buy a home are far higher than reported by the fake numbers the government uses.

#2 Rising energy prices are inflationary. That does not mean they will cause hyper inflation. It simply means the purchasing power of your dollar will go down. We don't have to have high inflation for Brinker to be wrong. We might actually have had DEFLATION if not for higher oil prices.... considering food has gone up less than inflation in the past 20 years.

#3 At the time oil prices have gone up, food prices have come down. Core inflation is food and energy. We import illegal aliens to pick, cook and serve us our food at below market wages. I think this has been as deflationary as higher oil prices have been inflationary. It shows up in our higher medical bills since those of us with insurance have to pick up their emergency room bills.

If you think about it, energy prices are no different than labor prices if you are building a product or selling burgers under Golden Arches. Nobody argues that sending some jobs overseas has been deflationary because it gives us labor content at a lower price. If we discovered oil under your appartment in Las Vegas that was the size of Saudi Arabia's reserves and easy to get to... supply would go up and prices would come down. This would have a deflationary effect on CPI the same way lower labor costs do.

Now a tax... that has nothing to do with supply and demand.

One thing for sure, put 100 economists in a room and you usually get 101 opinions but very few of them are crazy enough to agree with Brinker on this.
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