dtblount

Inflation Concerns Are Premature

Excellent article...along the lines of what I've been telling people since the "great fear of inflation" came about.

Home prices have yet to find a bottom, unemployment continues to climb (albeit, at a slower pace, but climbing nonetheless...leading to lower wages), and a dropping capacity utilization figure...combined with anemic growth in nearly every other region of the world...makes the inflation argument quite weak. Granted, yes, the monetary base has increased drastically (and somewhat irresponsibly, in my view...), but the excess liquidity is mostly sitting idly at banks. The Fed can adjust rates to sop up much of the liquidity once lending resumes and money velocity ticks upwards again.

Simply announcing that inflation is upon us because oil prices are rising is ridiculous. While oil is dollar-denominated, many other factors play into spot crude prices...as goes with every other commodity.

How to Profit from Possible U.S. Credit Downgrade

The opening paragraph was enough for me to stop there...First off, UK debt was not downgraded last week...S&P revised the OUTLOOK from "stable" to "negative." This is very different from a credit downgrade. Also, saying that the US and UK have "similar policies" because you feel they are "spending too much money" is very shallow-minded.

Ben Bernanke Will Bring Back the 70s Inflationary Economy

Inflation will come, but it surely won't rise to the levels of hyperinflation. The majority of the new $ in the system is sitting at banks...waiting to be lended out. Inflation CANNOT pick up until lending/spending (money velocity) increases. Once this starts to take hold, the Fed can hike discount window rates (which would have almost an immediate effect) to push $ back to the Fed. At the same time, Fed funds rates can be hiked as needed, but with slightly lagging results.

Right now, we are more in a period of deflation than inflation - so inflation will come...but it will be needed and will be the result of a recovery. Either way, hard assets should rise...especially in light of a weaker USD.

Just How Correlated Are Oil and Equities?

...very interesting article and some great comments!

Arsuron brings up a great point. While the S&P500 does constitute an appropriate benchmark, the names are changed periodically to specifically reduce volatility and attempting to mirror the current state of the US economy in terms of aggregate business performance.

Also, while no experiment or analysis of correlation can be perfect, I would argue that a single correlation figure is irrelevant when examining the price of oil and its affect on the broad US economy. about 3/4 of oil's demand in the US comes from gasoline, which - at the retail level - does not move as freely as oil. Rising oil prices lead to rising gasoline prices at a slightly-lagging pace; however, falling oil leads to falling gasoline prices at a much slower pace. I don't have any specific data for this, but it would be very interesting to see.

Logically, more money spent on oil means higher expenses for most US businesses and less disposable income for US consumers. Both of these things will absolutely lead to a worse economy, ceteris paribus.


Cheers

The Economic Cost of the Military Industrial Complex

"Speak softly and carry a big stick." Theodore Roosevelt had it right...we already have the biggest stick in the world, but now we just need to work on speaking a bit more softly.

While the US expenditures on DoD might be massive, nothing is more important than having a strong defense to protect citizens, domestically and abroad, as well as to defend certain ideals around the world. Without paving way for further argument from those on this board who seemingly post only for the sake of argument, I feel that "American must remain good to remain great." While I will never support the US allowing its military to become less of a global force, I do think that more humanitarian work could be done. The US does a lot right now, but more can always be done.

Additionally, more technological advances have come from DARPA and even NASA than we could even fathom...not just missiles, tanks, etc...but surgical techniques, transportation, and synthetic materials. Without healthy funding, many of these advances would not exist.


Cheers