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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (13695)	10/19/2004 6:48:15 PM
From: michaelrunge	Respond to of 116555

>One of the misconceptions about oil is that as a >percent of GDP it's only half of what it was back >in the late seventies and early eighties during the >last oil spike, so the effect of high oil prices is >only half now compared to then. True that as a percent of GDP it is half of what it was. But that can also be viewed as meaning that we are twice as leveraged to oil. Twice as much GDP relies on the same amount of oil -- what happens when oil is dear? Also it reflects the exodus of manufacturing and industry from home to abroad. We may be less dependent upon the oil relative to GDP, but when the increased cost of oil hits where manufacturing/industry are today (China), then it gets recycled back to as as finished goods inflation (with some lag of course). And when the cost of imports rises, then the cost of goods produced at home can also be passed along. I think it is just a matter of time that we start seeing the result of 20 years of monetary inflation. Of course, that's not gonna show up in the CPI. Mike