ghassan karam

A Balanced View of Oil Prices, The Economy and Speculation

If one is to suggest that the major factor behind the increase in the price of oil is the dficit in demand then there is no basis to suggest that the deficit could have been bridged by increased production from OPEC.
The fact of the matter is that the most important reason for the increase in the price of oil is a scarcity in supplies but that shortage is not an artificial one. The world is at Peak Oil and just cannot increase production beyond the 86 million barrels a day. That is why the oil price crisi will be revisited as soon as the world economies resume their growth.


On Apr 05 09:02 AM Ferdinand E. Banks wrote:

> I have no problem at all believing that speculation did not cause
> the oil price run-up. Demand outran supply because the suppliers
> - especially OPEC - are not going to put the welfare of motorists
> in the oil importing countries ahead of the welfare of their own
> citizens. If you want to explain what happened that is quite enough.
>
>
> Algebraically it can be easily shown that in a linear difference
> or differential equation system - constructed from supply-demand
> equations - we can get a rising or falling trend, with oscillations
> around the trend. It is easily to choose parameters so that the oscillations
> are explosive, but to get this result easier still work with non-linear
> demand and/or supply equations.
>
> But yes, speculation make it worse, but it did not have to enter
> the picture. Even if speculators were banished to Devil's Island,
> when the global macroeconomy recovers, the oil price is going to
> rise. Just hope that it does not rise too fast..

Defining Deflation

The Fed stopped reporting M3 as of March 23, 2006 but there is nothing to prevent you from computing it since all the missing aggregates for all the additional variables can be computed individually. It is one thing to hypothesize that the GDP is no longer as closely correlated to a monetary aggregate but it is a completely different thing to just make the absurd statement that deflation is correlated to a decrease in money supply. (Go and tell that to the Japanese!!!!).

Defining Deflation

So which of the components ot either M1, M2 or M3 do you feel is not being reported accurately?


On Dec 07 05:17 PM pgvinter wrote:

> I would appreciate actual constructive criticism of the points made
> rather than a blanket rejection with absolutely no alternative point.
> It is this kind of behavior that takes value away from a forum such
> as seeking alpha. My point is that the money supply statistics no
> longer accurately represent real amount of money available in either
> the US economy. The increased use of securitization and the variable
> reserve requirements imposed on lending institutions which are effected
> as much by the ratings of assets held as by deposit volume has taken
> many of the actual sources of money out of the transactions which
> compose the data points used for calculating real money supply. I
> am very interested in hearing a counter point to this contention
> but do not think that simply saying "you don't know what you are
> talking about" and putting previously posted information in quotation
> marks suffices to offer a counterpoint.

Defining Deflation

Your attempt to defend your lack of understanding of what is money supply proves the accuracy of the initial accusation. It appears that you have no idea of what is meant by money supply or what are its components. It would be so much better not to pass judgment , especially on relatively serious forums, on things that you do not understand clearly.


On Dec 07 12:29 PM pgvinter wrote:

> I believe that it would be rude to suggest that my disagreement with
> the calculations of money supply inherently imply a lack of understanding
> of the term money supply. Money supply is a statistical measure meant
> to show the total amount of money circulating in the economy. I feel
> that the statistics can be misleading because there exists a tremendous
> amount of discretion in determining how any securitized debt plays
> into the formulas. Combined with variable reserve requirements placed
> on financial institutions who hold securitized debt bought with borrowed
> funds and reserved against with customer deposits can skew the real
> amount of money flowing through the economy. In short I feel that
> real money supply is an extremely important component of the economy
> but that the current methods used for calculating it are highly flawed
> and extremely inaccurate.

Defining Deflation

It might be true that individuals are entitled to their point of view but it is equally true that a "publisher" has the responsibility that readers are not subjected to inane explanations of important and complex issues.
You have done your readers a great disservice by allowing such meaningless gibberish to be presented as thoughtful and reasoned commentary. Why oh why do people insist on writing about something that they know nothing about???
Would it be rude to suggest that it is clear that Mr. Gvinter has no idea what the term money supply means.