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Just a thought on Spud’s inflation insistence

We keep being told that this past year’s inflation has been a result of a one time change in the price of energy. Once that drops out of the inflation stats then it will all be over – new permanent high of price levels but no continuance.

Umm, yeah. That is the way the 1970s went with the oil price shock, isn’t it.

11 thoughts on “Just a thought on Spud’s inflation insistence”

  1. Yeah. But the the West has imposed sanctions on Russia, instead of buying all the energy the Russkies’d sell them.

    The UK’s also banned fracking, and is pissing away its money on windmills. The only sensible decision that comes to mind is the Germans reopening that coal mine.

    If all the net zero nonsense was given the flick and Western governments concentrated on increasing the fossil fuel supply by fracking, the problem could be quickly solved.

    But instead they’re working hard to make things worse.

  2. Well, he is actually right. Last January leccy was 5p per unit; last February it was 45p per unit; this January it is still 45 per unit, so January’s inflation is x9. February is forecast to be 45p per unit, so February’s inflation is going to be zero.

    (numbers approximate)

  3. The 1970s inflation started because the U.S. printed too much money to fund the Vietnam war. The gold window was closed in 1971, and Bretton Woods was dead by 1973. Then the Arabs understandably got upset with their devalued dollars, so they hiked the price of oil.

    Fast-forward to the present and Covid-19 is our Vietnam: billions spent to no productive end. Unlike Spud, I think it’ll take a while for this one-off rise in energy prices to work its way through the system, so we could yet have another 12 months of high inflation. Beyond that I don’t see any other reason for prices to keep rising as much.

  4. I can see the high energy price still knocking on to other retail prices that haven’t changed yet, and the wage inflation isn’t going to help.

    Inflation may well fall from double digit but it ain’t going away soon.

  5. Why did the US print trillions more as oil prices crashed?

    Why does AndrewFemme’s tall little tale leave out Israel’s wars?

    Why did Reagan run budget deficits that averaged four times Carter’s, as inflation fell?

    What if the US simply printed all the money Saudi Arabia demanded for oil in the 1970s?

    Was there actually an oil scarcity in the 1970s or was it just knowledge lacking since the US has always had plenty of oil as evidenced by its oil exporter status?

    Why do old wives’ tales about inflation still circulate?

  6. Fair point, the Israel wars upset OPEC too.

    You’re mistaken about U.S. oil production though. Nixon tried to fix the oil price in a vain attempt to control inflation; unsurprisingly, production fell. This pushed up dependence on imported oil, the bulk of which came from the Middle East.

    Reagan’s deficits were offset by Volcker’s monetary tightening and massive economic growth. That’s well-establish.

  7. Obama, did Reagan just start high and stay high?

    《the theory of capital as power is decidedly non-mainstream. (It’s about as far from neoclassical economics as you can get.) Whereas mainstream economists look at capitalist society and see ‘productivity’ everywhere, Nitzan and Bichler see business ‘sabotage’.》

    《inflation through enforced scarcity.
    The ‘enforced’ part is key. Yes, we live in a world in which resources are finite, and hence ‘scarce’. But regardless of a resources’ innate abundance, maintaining high prices requires restriction.》

    Why does it not surprise me that you econ squares are not yet hip to Blair Fix’s blog?

  8. 《inflation through enforced scarcity.
    The ‘enforced’ part is key. Yes, we live in a world in which resources are finite, and hence ‘scarce’. But regardless of a resources’ innate abundance, maintaining high prices requires restriction.》

    Well done ! Exactly what Opec did after the Yom Kippur War and exactly what the West is doing now by preventing new gas fields to open or nukes to be built.
    And yet… We still know that governments have been overprinting money and stoking the inflation furnace.

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