Understanding $5 gasoline

[rbarn]

Hey guys,

We had so much fun on the last monetary thread I thought I would give yall another piece of meat to chew on. Hmmm brain food.

1. Stocks, gasoline and gold are all going up for the same reason. Money printing. The central banks of the world are flooding the monetary system with fresh money to prop up the banking system and support government deficit spending. All of them. U.S., Europe, Japan, China .... everyone.

What this does is supplies vast amounts of new money into the system. This goes out into the system chasing after things to be "invested" in. This is where you here people talking about kick starting the economy. The problem is they dont admit to the unintended consequence of inflation this causes through monetary debasement.

Think of it this way. Say we are in a row boat. Lost at sea. There is one orange "for sale" in the boat and five people. Each person has $20 to spend. What's the price of the orange ? .... $20. ...... Now let's give everyone in the boat $40 spend because the boats economy has hit a snag we need to kick start it. What's the price of the orange now ? ..... $40.

Nothing changed about the orange. The demand and supply chasing the orange is the same. The only thing that changed was the amount of money in the boat chasing the orange. This is monetary inflation. This is what is driving up the cost of gasoline, food, clothing, gold, silver, stocks ........ you name it.

Normally this is controlled at pace with the growth of the economy, but in order to prop up the debt implosion from everything from houses to greek bonds they are flooding the "row boat" with extra cash. INSANE amounts of extra cash.

Do not be surprised in the least to see gasoline pushing $6, DOW at 14,000 and gold over $2000 this year. And it will get worse before it gets better.
Gasoline consumption is at multi decade lows, and yet prices are spiking ?!?!?

Below is a graph on the amount of money created by world central banks in the last few years. They are flooding the boat with so much money it's about to sink the boat. You will see central planners and politicians blame anything and everything over the coming months, except for themselves .........

You can not increase your money supply by 400% in less than 10 years and not have serious problems. And these clowns are just getting started.

[Skip]

yuck.. politics..

[rbarn]

yuck.. politics..

No it's not. ......... Economics. No opinions. It just is what it is. Most people just dont understand it from lack of knowledge.

It's not like the central banks have any other "political" choices. It's print or die. Took decades of personal and government over spending across every political and social barrier there is. It's just the road we find ourselves on. You will notice I did not go into the "fixes" ...... which are political and arguable from all kinds of perspectives, many of them as equally conflicting as they are valid.

You just will not hear this explanation on the nightly news as they spout off about surging fuel prices, and I thought it a good idea to give people a little more broad picture of whats really driving inflation right now.

[Skip]

i should have just not commented.. i am in another forum that has this type of posts all day long.. in a Immigration VISA forum.. drives me nuts.. have a good day..

[cjr8420]

inflation is the reason alot of things are growing in price but gas is not one of them.its has its own economics.if banks have money gas is expensive if banks are broke its cheap.im in chicagoland always top 5 in usa for most expensive.when bush was leaving office and obama was coming in the banks where broke and gas here was $1.75 a gal then the bailout happened banks got money again and bam $3.00 +.they are able to create a fake demand that sets the price.and they pocket billoins and billions.and its all legal

[rbarn]

inflation is the reason alot of things are growing in price but gas is not one of them.its has its own economics.if banks have money gas is expensive if banks are broke its cheap.im in chicagoland always top 5 in usa for most expensive.when bush was leaving office and obama was coming in the banks where broke and gas here was $1.75 a gal then the bailout happened banks got money again and bam $3.00 +.they are able to create a fake demand that sets the price.and they pocket billoins and billions.and its all legal

You are right except for the source of money you are blaming for the inflation. It's not the bailout money going to the banks. That was only $700 billion. It's the Federal Reserve Quantitative Easing money going to the banks giving them extra money to speculate. The QE funds and low interest loans total in the trillions upon trillions. The ECB is about release another $1 trillion in low interest loans in their LTRO2 operation. You cant really point the blame at "the banks" either. While I'm no friend of the rampant corruption and manipulation in the banking system, the problem is more wide spread and organic than that.

It's not "fake demand". The demand is real. It's what is driving the demand. The driving force is the easy money coming the Federal Reserve trying prime the pump of the economy. The problems is they cant control how that money flows out into the system and where it goes. Blaming the banks and speculators is like blaming a sneeze(speculating) for your head cold(easy money). Instead of blaming a head cold for your sneeze which is what is really happening. Easy money causes over speculation. This is why we had a housing bubble as well. Too much low interest money chasing the same supply causing prices to soar.

The politicians of both parties will try and spin this any number of ways blaming "evil speculators" and "banks" ....... but you have to understand what is behind the speculators in the first place. And that is easy 0% interest money flooding into the system looking for somewhere to go.

Gas is going up because of inflation. It is not "fake demand" - its monetary demand.......... while real demand in gasoline consumption in the U.S. is multi-decade lows. We haven't seen usage levels this low since the early 1990's. This is the text book definition of monetary inflation.




Think of it this way as well. The price of gasoline is not really going up. What is happening is the purchasing power of your dollars is going down due to them being diluted by new money creation. This requires more and more dollars to buy the same thing. A dollar is not a "thing". It's a unit of measure. Like an inch is unit of measure. As they flood the system with more dollars, it's like trying to shove more inches on to a ruler. The inches get smaller and smaller the more of them you try to cram into the same physical space of the ruler, requiring more "inches" to equal the same physical length. THIS is what is happening. As they shove more dollars into the same physical space of "the economy" their purchasing power gets less and less, requiring more "dollars" to equal the same things to buy.

It's important we as a society understand this concept. We are mislead and misinformed by pretty much everyone involved because they dont want us to understand that they are the ones that are truly to blame. This is what Ron Paul is talking about when he talks about "sound money". He's talking about locking in the value of dollar so that like inch is always an inch, a dollars purchasing power is always a dollar ....... i.e. representing a consistent unit of measure.

[rbarn]

Explains it perfectly. Must read
http://www.zerohedge.com/news/200-oi...go-ctrlp-happy

[terps]

The link explains why we have higher fuel and food costs.

http://online.wsj.com/article/SB1000...pinion_LEADTop

Hopey-Changey has been an epic disaster.

http://thestir.cafemom.com/in_the_ne...home_multiline

[Samsmobb]

college student here, studying my first class of economics so this is an interesting topic =)
isnt it also that oil is going up again considerably driving up Pretty much ALL other goods since practically everyting uses oil at some point or another?

[rbarn]

isnt it also that oil is going up again considerably driving up Pretty much ALL other goods since practically everyting uses oil at some point or another?

That is one side effect but takes longer to manifest in pricing. Mostly what it does is causes companies operating cost to soar, killing their profit margins. The airlines are especially prone to this.

[DiscusLoverJeff]

There will always be a threat in the Middle East to cause a "sudden" rise in oil prices. This one just happens to be Iran which by the way has nothing to do with the US economy at the present moment.

Oil and Gold will always be a hot commodity and nothing can be done about either unless we find a way to make the US self sufficent I believe.

Did you know that one of the most "exported" items from the US is in fact gasoline? Shortage? NOPE!

[rbarn]

There will always be a threat in the Middle East to cause a "sudden" rise in oil prices. This one just happens to be Iran which by the way has nothing to do with the US economy at the present moment.

Oil and Gold will always be a hot commodity and nothing can be done about either unless we find a way to make the US self sufficent I believe.

Did you know that one of the most "exported" items from the US is in fact gasoline? Shortage? NOPE!

1. Gasoline prices rising have nothing to do with current mid-east tensions. Zero.

2. Oil and gold are not always hot commodities. Oil is the most widely used in different application substance on the face of the planet, so it always has high demand
Gold is only hot because people in the know understand what I am trying to explain in this thread and are getting their wealth out of assets denominated in rapidly debasing currencies.

3. The U.S. has always been a major exporter of refined petrochemicals. It's one of our few strong multi-decade exports. That and food. And commercial aircraft.
There is no shortage of gasoline, but usage rates have fallen in the U.S. to levels not seen since the early 1990's. Only thing keeping U.S. refineries busy is global demand for our refined fuels and chemicals. No one else has the refining capacity we do and you cant just snap your fingers and build more. They take a decade to construct and get up and running

Like I said, ...... gold, gas, stocks and food are NOT going up in price. The value of your money is going DOWN. When you increase the supply of anything by 400% in 3 years, it's "value" decreases due to excess supply. That is what is happening to money. A dollar doesnt always equal a dollar ..... it changes. Its a very hard concept to make your mind grasp.

[rbarn]

Teddy Bears get it ------

[terps]

So gas prices have never been higher. But that's what Obama wanted.

http://www.zerohedge.com/news/day-hi...er-been-higher

I guess you hope you have change after you fill up your gas tank.

https://www.sodahead.com/united-stat...stion-2475837/

[DerekFF]

Any predictions that all these people investing in gold are going to have a fall out? Seems to me gold has been so artificially inflated that its going to fall out like the housing market

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