The Return of Inflation?

An indecisive Fed risks repeating its previous blunder.

By Robert J. Samuelson | Newsweek Web Exclusive

Jun 24, 2008 | Updated: 11:18 a.m. ET Jun 24, 2008

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Discuss

Posted By: clikdawg @ 06/24/2008 5:51:53 PM

Comment: Um ... the whole point of the economic course being followed is, specifically, to break the economic (and thus political) power of the middle class; the outcome to be the long-desired return to the have/have-not system of the feudal era. Big-time benefits accrue to barons under that system (not the least of which is watching you and I knuckle our foreheads whenever they pass), and this time around the merchant class which gummed up the works last time around has been incorporated in the scheme -- their numbers being presently thinned to a manageable level even as we speak.

10%+ unemployment? A veritable Baron's Dream Come True!
Posted By: smokey_joe @ 06/24/2008 5:26:07 PM

Comment: The root of all the economic evils we are now seeing is the higher cost of energy which feeds into the price of every other product in one way or another. All the bad-mouthing comments on ethanol missed the point that ethanol is cheaper by the gallon, so if we consume more gallons of ethanol, its more than offset by the fact that ethanol is so much cheaper than gas and will become much cheaper as time goes by. Another sad note for our country and energy independence: One of the biggest sugar producers in the USA was defeated in court by the environmentalists and sugar cane fields in Florida will soon be returned to the crocs, gators and geckos. Sugar cane is much more cost-effective for producing ethanol, so naturally we have decided to kill it. Our enemies must be rolling on the ground with laughter. Soon oil slicks from the Chinese-Cuban oil wells in the Carribean will be washing into the everglades and giving the gators and crocs a good mouthwash.
Posted By: neophyte @ 06/24/2008 4:09:16 PM

Comment: Ithink what is driving inflation is too much money and we have to realize that lots of that money is not created by government, its created by lenders. Every time I get an offer for a new credit card some bank is creating money. When GMAC offers me a financing package on a new SUV they can't move otherwise it is creating money. The only way the Fed can control these activities is through increased reserve requirements or by increasing interest rates. The same excess money flows from bubble to bubble. Now its commodities. I think we need to start sucking up excess money from the economy or at least stop adding it and hope we can grow out of it. The real answer is to raise the tax on gasoline, not lower it, and create a disincentive to speculate. Use the revenue to retire debt rather than adopt new spending programs. If we have to give people a tax break then waive the tax on the first $10,000 interest received.
Posted By: hestia_m @ 06/24/2008 2:52:33 PM

Comment: The root cause of inflation is the same now as it was in the 60's: deficit spending. The Federal Reserve can only try to smooth out short term fluctuations, but really has no control over the long term. Also, as Mr. Samuelson points out, the linkage is broken in the US between prices and wages because so much of what we buy is imported. So, bottom line, Mr. Samuelson has the right facts, but the wrong conclusion. Stop blaming the fight and let's start pressuring Congress to control spending.
- Posted By: tc125231 @ 06/24/2008 6:17:06 PM
  
  Comment: This is correct. And the biggest contributors to defecit spending are (drum roll):
  
  1. Bush tax cuts
  2. Iraq War (supported by Samuelson) financed by IOUs
  3. The idiot prescription drug benefit (which outlaws price negotiation with the pharmaceuticals) used successfully to by the 2004 election.
  
  I don't remember any screams of outrage from Samuelson on these. Except for the third, he clearly supported them.
Posted By: Micky Marsh @ 06/24/2008 1:17:18 PM

Comment: 1.. INVEST
2...NOW
3...FOR
4...LATER
5...AND
6...TURN
7....IT
8...OFF
9...NOW
Posted By: Ted999 @ 06/24/2008 11:54:56 AM

Comment: Although oil appears to be a good hedge against inflation, a lower dollar and a low oil supply, in reality nothing could be farther from the truth. Our oil supply is becoming less of an issue because inflation is causing a surplus of gas. The main thing driving inflation is high oil prices and as inflation goes higher investors buy more oil driving inflation higher again. Some experts predict this will trigger the worldwide recession. This will result in lower gas consumption and it will free up more gas supplies.. I am no expert but even I can see the writing on the wall. Investors are going to loose their shirts on oil. We may be looking at another ENRON. Hedge funds will topple leaving old age pensioners with nothing. The government won't be able to bail them out this time because the cost would be far to great. The CFTC and FSA will be too slow to react to the cracks forming in commodities trading so the govenment will finally step in. By that time it will probably be too late. www.nbtv.ca
- Posted By: charlesthomascampbell @ 06/24/2008 3:53:33 PM
  
  Comment: Ted you are right on the money, the price of oil does not reflect supply and demand it reflects speculative buying by Investment banks commodity arms, Technology Burst, Housing Burst, Closed-end funds burst, Oil? it's coming!