Interesting comments on OIL/INFLATION from another poster....
"Higher oil prices are here to stay which elevates inflation. Inflation causes the Federal Reserve to raise interest rates in an attempt to control inflation. Higher rates reduce economic activity which will reduce energy demand (so called "demand destruction"). As energy demand comes into balance with energy supply, oil prices will come down.
The problem with this picture is that many believe we are near a peak in oil production, while nowhere near a peak in demand for energy products. Oil demand in the Asian Tiger economies (China, India, et. al.) is steadily increasing. A recession will slow Asian Tiger growth, but it will remain much higher than the developed countries of the West.
Here is the point: The Federal Reserve cannot change the longer term supply/demand imbalance of energy products, no matter how high they raise interest rates. Higher rates will choke the economies of the world, but it cannot control inflation that is induced by higher energy prices. The likely result is a period of stagflation, stagnant economies with relatively high rates of inflation. Not a pretty picture.
Inflation erodes the value of fiat currencies (i.e., paper money). Especially the elderly and those on fixed incomes will suffer, as their savings lose purchasing power. Social Security is already in dire straights as the baby boomer generation nears retirement, thus drawing down on the "trust fund" that doesn't exist except as an IOU of the US Government.
Sorry to be gloomy. I hope I'm wrong about this scenario."
Rogue
AI
