Inflation

[Magox]

So what was the "message" and objective of the release of the SPR suppose to be? Why did you applaud it if it achieved virtually nothing? Also can you link me the thread so that I can see exactly what i was responding to?

 

Thank you for bringing this up, because it pretty much backs up my account, which was that you supported the release of the SPR, because you did believe that it would have an impact. Sorry, but a 1-2 day impact on prices affects no one other than traders.

 

Also I seem to remember that I made this prediction before the release of the SPR and we both argued over it's impact then and after the release of the SPR. Correct?

 

 

And when you said this

 

Regarding WTI, BO has threatened to release oil from the SPR when its price exceeds $100.

 

What was the point that you were making? If you "agree" that it doesn't have a long-term impact, and let's be real here, you only agreed with it once you realized that it didn't have an impact on prices as I told you that it wouldn't, then why support the release of the SPR?

Edited February 7, 2013 by Magox

[TPS]

So what was the "message" and objective of the release of the SPR suppose to be? Why did you applaud it if it achieved virtually nothing? Also can you link me the thread so that I can see exactly what i was responding to?

 

Thank you for bringing this up, because it pretty much backs up my account, which was that you supported the release of the SPR, because you did believe that it would have an impact. Sorry, but a 1-2 day impact on prices affects no one other than traders.

 

Also I seem to remember that I made this prediction before the release of the SPR and we both argued over it's impact then and after the release of the SPR. Correct?

 

 

And when you said this

 

 

 

What was the point that you were making? If you "agree" that it doesn't have a long-term impact, and let's be real here, you only agreed with it once you realized that it didn't have an impact on prices as I told you that it wouldn't, then why support the release of the SPR?

Here's the thread: http://forums.twobillsdrive.com/topic/131205-spr-release-targeted-at-speculators/page__st__40

 

As I stated, I supported the idea of using the SPR as "threat" against speculative froth. Of course it would have no long run impact. By definition any release would be about trying to impact the very short run. The idea, as I said earlier, is that the threat is used when the Saudis/Administration believe financial flows are behind any short term run ups.

[Magox]

Here's the thread: http://forums.twobil...rs/page__st__40

 

As I stated, I supported the idea of using the SPR as "threat" against speculative froth. Of course it would have no long run impact. By definition any release would be about trying to impact the very short run. The idea, as I said earlier, is that the threat is used when the Saudis/Administration believe financial flows are behind any short term run ups.

 

Thank you for the link.

 

Pretty much nailed it

[TPS]

 

 

Thank you for the link.

 

Pretty much nailed it

Thanks, I thought I did too.

[TakeYouToTasker]

It's absolutely bizaare that you believe supply and demand curves essentially don't exist.

[Magox]

It's absolutely bizaare that you believe supply and demand curves essentially don't exist.

 

Dude, I've spent a fair amount of time trying to explain this to him. No luck

 

Thanks, I thought I did too.

 

How so? That they taught those evil speculators a lesson?

[TPS]

It's absolutely bizaare that you believe supply and demand curves essentially don't exist.

Curves only exist in text books. In real life, there are general forces of supply and demand, but no curves. I'm not sure how you come to that conclusion, as I've said over and over that prices, like that of oil, are determined by the real forces of supply and demand over the longer run. The difference is I argue that financial players have the biggest influence in the short run, but their bets are government by underlying S&D in the longer run. I'm not sure how you can be so dense as to not see that.

[TakeYouToTasker]

Curves only exist in text books. In real life, there are general forces of supply and demand, but no curves. I'm not sure how you come to that conclusion, as I've said over and over that prices, like that of oil, are determined by the real forces of supply and demand over the longer run. The difference is I argue that financial players have the biggest influence in the short run, but their bets are government by underlying S&D in the longer run. I'm not sure how you can be so dense as to not see that.

...

 

And where, pray tell, do you believe that these text books got the empirical data that they base these curves on? Put down your !@#$ing Bible, man. Your religion is dead.

[TPS]

 

...

 

And where, pray tell, do you believe that these text books got the empirical data that they base these curves on? Put down your !@#$ing Bible, man. Your religion is dead.

Maybe my response was too difficult for you to understand. There is no smoothly differentiable curve, either supply or demand. There are plots of points that will never fit on a smooth curve, but you can esimate a line of best fit using regressions.

[TakeYouToTasker]

Maybe my response was too difficult for you to understand. There is no smoothly differentiable curve, either supply or demand. There are plots of points that will never fit on a smooth curve, but you can esimate a line of best fit using regressions.

The only person who has even implied the possibility that the curves might be ridgid is you. The curves obviously aren't ridgid because individuals aren't robots, and respond differently and on different time tables, to market conditions. Or, to put it another way, the "curve" is based on a series of individual micro-transactions responding to market incentives, not an aggregate.

[TPS]

The only person who has even implied the possibility that the curves might be ridgid is you. The curves obviously aren't ridgid because individuals aren't robots, and respond differently and on different time tables, to market conditions. Or, to put it another way, the "curve" is based on a series of individual micro-transactions responding to market incentives, not an aggregate.

To quote Ronald Reagan, "Well, there you go again..."

You continue to try to attribute things to me that YOU make up. If you want to find posts that back up your creations, please do. I'll be happy to debate them. Otherwise, STFU.

[IDBillzFan]

To quote Ronald Reagan, "Well, there you go again..."

You continue to try to attribute things to me that YOU make up. If you want to find posts that back up your creations, please do. I'll be happy to debate them. Otherwise, STFU.

 

You know a liberal is in trouble when they start quoting Ronald Reagan.

[Magox]

You guys understand the concept of "baselines" right?

 

The way I see it is that a result of ongoing loose monetary policy, the baseline for the price of oil is continuously rising. Having said that, that baseline or trend doesn't always move up or down in a consistent linear fashion. Think of it in a prism of a long-term chart. Of course there are plenty of fluctuations and volatility in the price of oil, but when you look at the charts there are other factors that affect the price of oil, such as supply, supply disruptions, demand, geopolitical risks etc.

 

http://futures.tradi....com/chart/CO/M

 

(I tried to paste image but was unable to)

 

 

 

If you see, the trend for the past years has been rising. You can imagine drawing a line right through the trend line. If you see, with the exception of the big crash of 08/09, the lows are consistently getting higher. That's the baseline.

 

There are two main factors that drive these markets, or for that matter in this case inflation, which is growth and currency. There are some years that growth/demand is the primary driver of the market and other years it's currency devaluation. In the earlier to mid to mid late part of the last decade, we had both growth and Dollar depreciation occurring which led to an explosive rise in commodities. Then of course we had the crash, which led to a significant drop off in demand and a run to safety to the dollar which led to its precipitous fall.

 

In the beginning of the global "recovery", there was significant action from both the Fed with QE, which led to the erosion of the value of the dollar and we had lots of global stimulus in China, India and the US, which led to a increase in growth and demand, so we had both engines temporarily working again which led to a rapid rise in prices.

 

Once stimulus wore off, growth world wide began to decline.

 

So now, we have one of the two main engines that has broken down, which is growth. Since there isn't much of an appetite for more "stimulus" from governments across the world, actions from governments through out the world have relied on their central banks to try to help stimulate their own economies. The actions taken have been to further erode the value of their currencies in order to make their own goods cheaper and more competitive for exports to their global partners. In essence a currency race to the bottom.

 

So we do have ongoing currency devaluation through out the world, which means we have one of the two engines that are operational.

 

Growth: No

 

Currency devaluation: Yes

 

So even without growth, we still have prices that are slightly rising. Reason being is not because of a refinery shut down, or supply disruption or seasonality, those are just the day to day reasons why the markets move, the reason why the baseline is continuously and steadily rising is because of global monetary policy.

 

If the world were to begin growing again at a normal healthy growth rate, then we would be seeing significantly higher prices. At least $120 a barrel Domestic oil and $135 Brent Crude.

 

 

What will make this "bubble" end for the long-term, which is the term that TPS incorrectly likes to use will be the rise of currencies. Policy makers across the world will focus their shift to combat rising prices, which will become the predominant concern at some point moving forward, and monetary policy will change to a more hawkish stance, and then we will see both interest rates and currencies trend higher which will lead to the end of the commodity rise and flushing out of inflation.

Edited February 8, 2013 by Magox

[TakeYouToTasker]

To quote Ronald Reagan, "Well, there you go again..."

You continue to try to attribute things to me that YOU make up. If you want to find posts that back up your creations, please do. I'll be happy to debate them. Otherwise, STFU.

Oh, Jesus Christ. Knock it off.

 

You are the only person in this thread who mentioned ridgid curves, so stop feigning indignation.

 

If you don't like getting your bull **** strawmen burned down, then stop making them.

[TPS]

Oh, Jesus Christ. Knock it off.

 

You are the only person in this thread who mentioned ridgid curves, so stop feigning indignation.

 

If you don't like getting your bull **** strawmen burned down, then stop making them.

You guys understand the concept of "baselines" right?

 

The way I see it is that a result of ongoing loose monetary policy, the baseline for the price of oil is continuously rising. Having said that, that baseline or trend doesn't always move up or down in a consistent linear fashion. Think of it in a prism of a long-term chart. Of course there are plenty of fluctuations and volatility in the price of oil, but when you look at the charts there are other factors that affect the price of oil, such as supply, supply disruptions, demand, geopolitical risks etc.

 

http://futures.tradi....com/chart/CO/M

 

(I tried to paste image but was unable to)

 

 

 

If you see, the trend for the past years has been rising. You can imagine drawing a line right through the trend line. If you see, with the exception of the big crash of 08/09, the lows are consistently getting higher. That's the baseline.

 

There are two main factors that drive these markets, or for that matter in this case inflation, which is growth and currency. There are some years that growth/demand is the primary driver of the market and other years it's currency devaluation. In the earlier to mid to mid late part of the last decade, we had both growth and Dollar depreciation occurring which led to an explosive rise in commodities. Then of course we had the crash, which led to a significant drop off in demand and a run to safety to the dollar which led to its precipitous fall.

 

In the beginning of the global "recovery", there was significant action from both the Fed with QE, which led to the erosion of the value of the dollar and we had lots of global stimulus in China, India and the US, which led to a increase in growth and demand, so we had both engines temporarily working again which led to a rapid rise in prices.

 

Once stimulus wore off, growth world wide began to decline.

 

So now, we have one of the two main engines that has broken down, which is growth. Since there isn't much of an appetite for more "stimulus" from governments across the world, actions from governments through out the world have relied on their central banks to try to help stimulate their own economies. The actions taken have been to further erode the value of their currencies in order to make their own goods cheaper and more competitive for exports to their global partners. In essence a currency race to the bottom.

 

So we do have ongoing currency devaluation through out the world, which means we have one of the two engines that are operational.

 

Growth: No

 

Currency devaluation: Yes

 

So even without growth, we still have prices that are slightly rising. Reason being is not because of a refinery shut down, or supply disruption or seasonality, those are just the day to day reasons why the markets move, the reason why the baseline is continuously and steadily rising is because of global monetary policy.

 

If the world were to begin growing again at a normal healthy growth rate, then we would be seeing significantly higher prices. At least $120 a barrel Domestic oil and $135 Brent Crude.

 

 

What will make this "bubble" end for the long-term, which is the term that TPS incorrectly likes to use will be the rise of currencies. Policy makers across the world will focus their shift to combat rising prices, which will become the predominant concern at some point moving forward, and monetary policy will change to a more hawkish stance, and then we will see both interest rates and currencies trend higher which will lead to the end of the commodity rise and flushing out of inflation.

I agree with much of what you wrote. What is the transmission mechansim in which currency devaluation changes the price of oil?

 

You know a liberal is in trouble when they start quoting Ronald Reagan.

Ronnie is now considered a liberal given the swing to the right by the right!

 

Oh, Jesus Christ. Knock it off.

 

You are the only person in this thread who mentioned ridgid curves, so stop feigning indignation.

 

If you don't like getting your bull **** strawmen burned down, then stop making them.

Says the guy who can't explain why commodity prices are lower today than they were 2 years ago, even though QE is ongoing. Maybe you can point me to a wiki you wrote where you explain it?

[TakeYouToTasker]

Commodities are volitile, but have trended significantly upwards since QE began. We've had this conversation before. The problem is that you only want to examine the data from a fixed point which benefits your position, rather than from the beginning of the QE timeline.

 

In other words, you're choosing to make an intellectually dishonest argument.

Edited February 8, 2013 by TakeYouToTasker

[Magox]

I agree with much of what you wrote. What is the transmission mechansim in which currency devaluation changes the price of oil?

 

 

Are you talking about interest rates?

[TPS]

Commodities are volitile, but have trended significantly upwards since QE began. We've had this conversation before. The problem is that you only want to examine the data from a fixed point which benefits your position, rather than from the beginning of the QE timeline.

 

In other words, you're choosing to make an intellectually dishonest argument.

And I say look in the mirror. You want to start from a point when the Great Recession caused prices to collapse, so of course you'll get a big % jump from a depressed level--you are the intellectual fraud pal. My point is that QE was ratcheted up several times since commodity prices came back from the crisis-induced lows. Seriously, you don't get that? You don't get it because it doesn't fit your theory. The Fed has pumped in an additional trillion dollars going back to late 2010, but prices are lower today. All you can say is, "well they are higher than their depressed levels." Any good theory would explain why additional rounds of QE have not caused commodity prices to maintain the trajectory they were on from late 2008 to 2010.

 

Are you talking about interest rates?

No, as I wrote, how does the currency devaluation lead to higher prices of commodities? What is the mechanism where the additional money injected into the economy gets translated into higher commodity prices? The Fed doesn't hand people money, so how does it happen? Edited February 8, 2013 by TPS

[Magox]

No, as I wrote, how does the currency devaluation lead to higher prices of commodities? What is the mechanism where the additional money injected into the economy gets translated into higher commodity prices? The Fed doesn't hand people money, so how does it happen?

 

 

Allow me to answer you in this way. Remember, the goods of this world for the most part are traded in a market. Whether it's regulated or not, a market is a market, which means prices are determined by individuals and entities who willingly accept the underlying purchase and sale price. So, when you have monetary policy that is loose, in this particular instance QE, which is the printing of money, then there is first and foremost an impact on the currency itself. Market participants in most cases will reach an outcome of a lower value of that particular currency, simply because there is more of that currency available. General rule of thumb in most markets is that the more there is available of any underlying product, the lower the price that it will be. Same goes for the inverse.

 

So now that we've established that the value of X currency is lower, how does that translate into higher commodity prices? So if you have an individual or entity that has a lower valued currency purchasing the same underlying product vs. a relatively higher valued currency, the individual or entity making that purchase of that product will pay more for the price because it takes more of that currency to purchase the same amount of that particular product than the person who has the higher valued currency.

 

That's the main reason. Now of course there are collateral impacts to currency devaluation. Why do some central banks believe that devaluing their currency will stimulate their economies? There is an argument that can be made that these actions do stimulate the economies in the short-term, that produce more overall demand in those economies for virtually all goods, which leads to higher prices.

 

But that's not the main reason why prices go higher due to currency devaluation.

Edited February 8, 2013 by Magox

[....lybob]

If a tree falls in a forest and no one is around to hear it, does it make a sound? If a trillion dollars is created but doesn't find it's way into circulation, does it cause inflation? if the fundamentals of my currency are ugly but not as ugly as all the other currencies, does it get devalued? IF the QE money is mostly sitting in the big financial institutions making them look more secure than they deserve to look with the rest stopping asset class investments from plummeting, is that a bad thing? personally I'd rather the money spent on infrastructure, job training and energy efficiency but Obama is a Wall street shill so this is what you get.