Stagflation and Cheney

[aleonard]

Nothing groundbreaking about this article but I found the quote below to be interesting.

Then as now, Dick Cheney was close to the helm. What's more, the erroneous lessons he took away from the 1970s contribute to the problems that haunt us today. Cheney was Gerald Ford's chief of staff in 1976, when soaring oil prices helped doom Ford's reelection campaign. Cheney became obsessed with the fight to control the flow of Middle Eastern oil. That obsession, which by many accounts contributed to Cheney's urge to launch the Iraq war, has made the United States much more vulnerable in terms of energy, not only by tying the United States down in a disastrous military effort but also by diverting attention from a more coherent energy strategy.
Stagflation is back. Here's how to beat it

The world is running short on energy, food, and water. The answer: a massive dose of technology.


http://money.cnn.com/2008/05/27/news/economy/sachs_stagflation.fortune/index.htm?postversion=2008052805

[goodwitch58]

wow! what a flashback. Thanks for posting.

[hnooe]

Thanks for the post..and, as much as I would like to bash Bush, Cheney, Nixon, Carter, and Clinton--the real culprit overall is American "mental stagnation." We use to think anything was possible, we set our goal, and made we it happen (...i.e., the race to the Moon?) I will hope real change is a coming, we have a lot of work to do, and we need a leader who feels the same way...and it ain't gonna be Clinton or McCain...:lolabove:

[traderx]

We give politicians too much credit and too much blame for the economy. Over seventy-five percent of our GDP derives from the private sector. Oil prices are the result of demand and supply like any other commodity. The Cheney connection between then and now is silly IMHO. For anyone interested in a counterpoint discussion of stagflation's chances this go around, see the linked article. It was written by Richard Berner who is the Chief Economist at Morgan Stanley.

http://www.morganstanley.com/views/gef/archive/2008/20080225-Mon.html

[6thGen]

We are still far, far from stagflation. We have yet to post even one quarter of negative GDP growth, and while inflation is beyond our comfort level, it is still metrics away from the Jimmy Carter days of double-digit inflation. Further, the high oil prices are not near as felt today in the US as they were in the 70s, thanks to de-industrialization.

China is the one that is really worried, as they are far more manufacturing oriented than even the US in the 70s. The state has gone so far as to freezing (basically subsidizing) prices, which is causing a revolt from the Chinese oil companies. The state is in a precarious position since a wave of business failures would be a disaster and provide plenty of unrest. They know this since the financial system has been capitalizing interest for years which has led to a wave of non-performing loans. The gas subsidies are coming from depressing margins on exports, so while the global economy is slowing and importing less, the state is taking more of the profits, and the state's reserves are dwindling from the non-performers while taking incentive away from production. This could be a train wreck, and in order to build reserves, one easy option is selling US treasuries. Of course, with the return low and the dollar in the ditch, it is a less attractive option than in a normal business environment, so while making it less fun to go to London or Paris right now, the lower dollar and weaker economy has attracted foreign capital and made it less attractive for liquidating treasuries. I'd still prefer the Euro model, but since maintaining employment is a wrongheaded task of the Fed, we might get lucky this time.

The states benefiting are obviously the exporters. Iran is the 5th largest exporter of oil, but the second largest importer, so it's basically a wash for them but it has put some strain on the leadership and the mullahs. The Saudis are the real winners here. Unlike the Nigerians, Indonesians and Venezuelans and some other less developed countries, they can put the money to use. They are spending money stabilizing the Middle East. The are supporting Israel-Syria peace talks, they are encouraging Sunnis in Iraq to smoke out al Qaeda, and they are keeping the Shiites flush with cash to take away Iranian influence and incentive to shut the Strait of Hormuz. All the while they are re-establishing relations with the US that were hurt after 9/11.

In the US, the oil price increase hurts, but it's a wash on our overall economy since we are still one of the largest (I think the largest) exporter of grain, so the benefits from the increases in food prices are balancing the negatives from the increases in oil prices.

Through all this, Russia is starting to scare the hell out of me. And we can't find a politician to endorse more drilling in the US, ANWR or off our coast or other shorelines. Long term we'll trend towards less fuel consumption, but unless this mother of all bubbles of oil bursts soon, James Bond might start making movies again.

But what the hell do I know? It's more fun to bash Evil Dick Cheney.

No Blood For Oil!

[Andy A.]

6th Gen, from all I have read and observed, I'd say your post is very close to being exactly what is occurring in our economy and political spectrum. Your last paragraph regarding Russia is dead on and you are correct about drilling in ANWR and elsewhere as well. While I believe we should pursue all forms of alternative energy development, we can't continue to say, as many Democrat politicians continue to do, "it will be seven years before we see any results from drilling if we begin now". If we had begun seven years ago when we should have, we would definitely be in a better position energy wise now than we are. We haven't built a new refinery in the U.S. in decades. And everyone wants to blame the politicians? It sure isn't all their fault. We, collectively, as U.S. citizens need to get off our dead butts and find someone besides the politicians to speak out and offer the leadership necessary to bring this nation back to what it was when I was growing up, even with a World War going on. I wish I could offer a precise and thoughtful answer but I can't. Maybe some of you out there who are so brilliant can.

[aleonard]

I agree we all need to be responsible. But no matter who's name was in the article I posted and I would have posted it........... could one person in power...could their personal agenda since the 70's play a major part in the debacle we are seeing today? I think it's a fair question.......:idontno:

[Bob]

Thanks for the post..and, as much as I would like to bash Bush, Cheney, Nixon, Carter, and Clinton--the real culprit overall is American "mental stagnation." We use to think anything was possible, we set our goal, and made we it happen (...i.e., the race to the Moon?) I will hope real change is a coming, we have a lot of work to do, and we need a leader who feels the same way...and it ain't gonna be Clinton or McCain...:lolabove:Yes, just as NASA used Von Braun, all we need is a fresh batch of Nazi scientists. We should sequester them in North Alabama, and make them wear pink labcoats until they come up with synthetic fuel made from clay.

[Bob]

We are still far, far from stagflation. We have yet to post even one quarter of negative GDP growth, and while inflation is beyond our comfort level, it is still metrics away from the Jimmy Carter days of double-digit inflation. Further, the high oil prices are not near as felt today in the US as they were in the 70s, thanks to de-industrialization.

China is the one that is really worried, as they are far more manufacturing oriented than even the US in the 70s. The state has gone so far as to freezing (basically subsidizing) prices, which is causing a revolt from the Chinese oil companies. The state is in a precarious position since a wave of business failures would be a disaster and provide plenty of unrest. They know this since the financial system has been capitalizing interest for years which has led to a wave of non-performing loans. The gas subsidies are coming from depressing margins on exports, so while the global economy is slowing and importing less, the state is taking more of the profits, and the state's reserves are dwindling from the non-performers while taking incentive away from production. This could be a train wreck, and in order to build reserves, one easy option is selling US treasuries. Of course, with the return low and the dollar in the ditch, it is a less attractive option than in a normal business environment, so while making it less fun to go to London or Paris right now, the lower dollar and weaker economy has attracted foreign capital and made it less attractive for liquidating treasuries. I'd still prefer the Euro model, but since maintaining employment is a wrongheaded task of the Fed, we might get lucky this time.

The states benefiting are obviously the exporters. Iran is the 5th largest exporter of oil, but the second largest importer, so it's basically a wash for them but it has put some strain on the leadership and the mullahs. The Saudis are the real winners here. Unlike the Nigerians, Indonesians and Venezuelans and some other less developed countries, they can put the money to use. They are spending money stabilizing the Middle East. The are supporting Israel-Syria peace talks, they are encouraging Sunnis in Iraq to smoke out al Qaeda, and they are keeping the Shiites flush with cash to take away Iranian influence and incentive to shut the Strait of Hormuz. All the while they are re-establishing relations with the US that were hurt after 9/11.

In the US, the oil price increase hurts, but it's a wash on our overall economy since we are still one of the largest (I think the largest) exporter of grain, so the benefits from the increases in food prices are balancing the negatives from the increases in oil prices.

Through all this, Russia is starting to scare the hell out of me. And we can't find a politician to endorse more drilling in the US, ANWR or off our coast or other shorelines. Long term we'll trend towards less fuel consumption, but unless this mother of all bubbles of oil bursts soon, James Bond might start making movies again.

But what the hell do I know? It's more fun to bash Evil Dick Cheney.

No Blood For Oil!what percentages for inflation do you come up with when you add in oil and food as the government did in the days o' disco? Would you stand by the cooked numbers today?

[30ashopper]

Thanks for the post..and, as much as I would like to bash Bush, Cheney, Nixon, Carter, and Clinton--the real culprit overall is American "mental stagnation." We use to think anything was possible, we set our goal, and made we it happen (...i.e., the race to the Moon?) I will hope real change is a coming, we have a lot of work to do, and we need a leader who feels the same way...and it ain't gonna be Clinton or McCain...:lolabove:

Doesn't the internet revolution fit within the category of "thinking anything is possible, setting our goals, and making it happen"? Or mapping the human genome as another good example?

[hnooe]

Doesn't the internet revolution fit within the category of "thinking anything is possible, setting our goals, and making it happen"? Or mapping the human genome as another good example?

Yea, that is true 30shopper, thanks to the Internet you can get your Chinese made J Crew outfit faster, without having to drive to the mall and waste gas, but the Internet won't feed the poor folks of the world!

[6thGen]

what percentages for inflation do you come up with when you add in oil and food as the government did in the days o' disco? Would you stand by the cooked numbers today?

For napkin math - Core inflation, which is garbage, is around 2% and CPI is around 4.5%. I believe CPI will trend down as the economy slows and as the oil bubble bursts and the commodity bubble deflates. Today is to stagflation in the 70s is to what Crystal Skull would be to me now compared to Raiders of the Lost Ark was when I was a kid.

[Gypsea]

We are still far, far from stagflation. We have yet to post even one quarter of negative GDP growth, and while inflation is beyond our comfort level, it is still metrics away from the Jimmy Carter days of double-digit inflation. Further, the high oil prices are not near as felt today in the US as they were in the 70s, thanks to de-industrialization.

China is the one that is really worried, as they are far more manufacturing oriented than even the US in the 70s. The state has gone so far as to freezing (basically subsidizing) prices, which is causing a revolt from the Chinese oil companies. The state is in a precarious position since a wave of business failures would be a disaster and provide plenty of unrest. They know this since the financial system has been capitalizing interest for years which has led to a wave of non-performing loans. The gas subsidies are coming from depressing margins on exports, so while the global economy is slowing and importing less, the state is taking more of the profits, and the state's reserves are dwindling from the non-performers while taking incentive away from production. This could be a train wreck, and in order to build reserves, one easy option is selling US treasuries. Of course, with the return low and the dollar in the ditch, it is a less attractive option than in a normal business environment, so while making it less fun to go to London or Paris right now, the lower dollar and weaker economy has attracted foreign capital and made it less attractive for liquidating treasuries. I'd still prefer the Euro model, but since maintaining employment is a wrongheaded task of the Fed, we might get lucky this time.

The states benefiting are obviously the exporters. Iran is the 5th largest exporter of oil, but the second largest importer, so it's basically a wash for them but it has put some strain on the leadership and the mullahs. The Saudis are the real winners here. Unlike the Nigerians, Indonesians and Venezuelans and some other less developed countries, they can put the money to use. They are spending money stabilizing the Middle East. The are supporting Israel-Syria peace talks, they are encouraging Sunnis in Iraq to smoke out al Qaeda, and they are keeping the Shiites flush with cash to take away Iranian influence and incentive to shut the Strait of Hormuz. All the while they are re-establishing relations with the US that were hurt after 9/11.

In the US, the oil price increase hurts, but it's a wash on our overall economy since we are still one of the largest (I think the largest) exporter of grain, so the benefits from the increases in food prices are balancing the negatives from the increases in oil prices.

Through all this, Russia is starting to scare the hell out of me. And we can't find a politician to endorse more drilling in the US, ANWR or off our coast or other shorelines. Long term we'll trend towards less fuel consumption, but unless this mother of all bubbles of oil bursts soon, James Bond might start making movies again.

But what the hell do I know? It's more fun to bash Evil Dick Cheney.

No Blood For Oil!

Have you ever had to step over the tar balls at the beaches in Texas? Not pretty!!! So I guess we don't care about the economic impact of tar balls at our pristine Florida beaches. :eek:

[Bob]

consider inflation adjusted wage growth and that nearly three quarters of our economy are individual purchase decisions, current 4.5 percent CPI[which I believe to be cooked], and the ramifications are not rosy.

[Bob]

http://www.dickipedia.org/dick.php?title=Dick_Cheney there's no easier target around

[6thGen]

consider inflation adjusted wage growth and that nearly three quarters of our economy are individual purchase decisions, current 4.5 percent CPI[which I believe to be cooked], and the ramifications are not rosy.

By no means. The lifeblood of the economy (financials) is in the toilet and will be for at least two more quarters, but we are still squeeking out positive growth. Of course, doubling the capital gains tax sure as hell won't help and the threat of such may be the death rattle of this decade.

[traderx]

what percentages for inflation do you come up with when you add in oil and food as the government did in the days o' disco? Would you stand by the cooked numbers today?

The CPI-U, US City Average, All Items is the index typically described in press releases. It has increased 3.9% since April 2007 and includes food and oil. There is also a gauge referred to as core inflation which omits increases in food and oil but the above CPI index is the one quoted by the Bureau of Labor Statistics and by the press. So called core inflation is a silly idea IMHO.

[Mango]

The CPI-U, US City Average, All Items is the index typically described in press releases. It has increased 3.9% since April 2007 and includes food and oil. There is also a gauge referred to as core inflation which omits increases in food and oil but the above CPI index is the one quoted by the Bureau of Labor Statistics and by the press. So called core inflation is a silly idea IMHO.

There's a huge disconnect, because non-durable goods, such as food and oil, only make up 12% of the CPI-U. Last time I checked my wallet, a much higher percentage of what was in it went towards just gasoline. It doesn't taste that bad after a while. That is, if you don't have enough to get you to the grocery store.

[aleonard]

There's a huge disconnect, because non-durable goods, such as food and oil, only make up 12% of the CPI-U. Last time I checked my wallet, a much higher percentage of what was in it went towards just gasoline. It doesn't taste that bad after a while. That is, if you don't have enough to get you to the grocery store.


And if you do you might be eating more......
http://msnbcmedia1.msn.com/j/ap/207d5f0e-5447-40c7-aba1-bf9958190176.hmedium.jpg

Sales of Spam — that much maligned meat — are rising as consumers are turning more to lunch meats and other lower-cost foods to extend their already stretched food budgets.What was once cheeky, silly and the subject of a Monty Python musical, Spam is now back on the table as people turn to the once-snubbed canned meat as costs rise, analysts say.


http://www.msnbc.msn.com/id/24861341/

[Mango]

And if you do you might be eating more......
http://msnbcmedia1.msn.com/j/ap/207d5f0e-5447-40c7-aba1-bf9958190176.hmedium.jpg

Sales of Spam — that much maligned meat — are rising as consumers are turning more to lunch meats and other lower-cost foods to extend their already stretched food budgets.What was once cheeky, silly and the subject of a Monty Python musical, Spam is now back on the table as people turn to the once-snubbed canned meat as costs rise, analysts say.


http://www.msnbc.msn.com/id/24861341/

and can be used as fuel too to get you back to the grocery store. :floor:

[traderx]

At the rate cited in the MSNBC article, Spam costs $3.49 per lb. How much is a pound of ground beef?

[aleonard]

At the rate cited in the MSNBC article, Spam costs $3.49 per lb. How much is a pound of ground beef?


Fresh ground chuck is 1.48lb at Winn Dixie this week.Ground sirloin is 3.49lb:blink:

[traderx]

Fresh ground chuck is 1.48lb at Winn Dixie this week.Ground sirloin is 3.49lb:blink:

The price of ground beef vs. Spam puts the MSNBC article in a poor light. I just read another article and Hormel's own statements that the increase in Spam sales is attributed to increased advertising and new single serving packs. In fact, Hormel said it was the first Spam advertising in 71 years, if I remember correctly. If ground chuck is two dollars per pound less than Spam, it is reasonably to conclude that increased Spam sales are not due to the economy. MSNBC continues to be the unofficial election headquarters for Obama.

I am old enough to remember when the news media was not so lopsided in its "reporting". Of course, I am also old enough to remember when the air was clean and sex was dirty.

[Bob]

By no means. The lifeblood of the economy (financials) is in the toilet and will be for at least two more quarters, but we are still squeeking out positive growth. Of course, doubling the capital gains tax sure as hell won't help and the threat of such may be the death rattle of this decade.Bingo! Romney's best idea ever was the elimination of capital gains.

[6thGen]

Bingo! Romney's best idea ever was the elimination of capital gains.

True, but it loses ground thanks to his worst idea ever, "universal" health care. That's unravelling as we speak.

[Bob]

True, but it loses ground thanks to his worst idea ever, "universal" health care. That's unravelling as we speak.we are already 2/3rds the way there on health care.