Higher Oil Prices Weren't Caused By Supply & Demand

Forbes ^ | November 10, 2008 | Steve Forbes

[ari-freedom]

If most of the price movement of oil was a result of supply and demand then there would be no reason why it would be so close to gold's price movement.

Gold is the only private sector money and we can use it to compare other currency with it. As you can see, there was inflation in both $ and € in the last few years

[ari-freedom]

Those same evil countries were still there in the 90’s when oil was $10 a barrel and everyone was driving gas guzzling SUV’s.

[ari-freedom]

it’s part of his main article about the whole financial crisis

http://www.forbes.com/intelligentinvesting/forbes/2008/1110/018.html
It’s 3 pages. From page 2:
In 2004 the Federal Reserve made a fateful miscalculation. It thought the U.S. economy was much weaker than it was and therefore pumped out excessive liquidity and kept interest rates artificially low. When too much money is printed, the first area to feel it is commodities. Thus the Fed begat a global commodities boom. The price of oil, copper, steel, international shipping—even mud—shot up. The price of gold roared above its average of the previous 12 years. For nearly 4 years the dollar sank against the euro, yen and pound. Domestically the already booming housing market went on steroids. Housing was experiencing above-average price rises because of a favorable change in the tax law in 1998 that virtually eliminated capital gains taxes on the sale of most primary residences. Now with money easy, a bubble mentality took hold. The reasoning was that housing prices always go up; therefore, lending standards could be safely lowered. If a dodgy borrower defaulted, it didn’t matter—the value of the house would always be higher. Wall Street’s appetite for these fee-generating packages of subprime mortgages became gluttonous. Rating agencies also drank the Kool-Aid and gave AAA ratings to this stuff, which, thanks to securitization, was spread all around the world. The Fed and other bank regulators stood by as the bubble ballooned.

Why didn’t the Treasury Department—behind the scenes—tell the Fed to strengthen the enfeebled greenback? Because the Bush Administration likes a weak dollar, feeling that it will improve our trade balance by artificially making our exports cheaper. Not since Jimmy Carter has the U.S. had such a weak-dollar Administration. This mania would never have reached the proportions it did had the Fed and Treasury had a strong-dollar policy.

[GOP_Party_Animal]

I highly doubt that your fellow FReepers are as stupid and apathetic as you portray them. When one makes an aside that gold has an artificial value placed on it, berating them that they do not understand basic facts does not make you look any more intelligent.

And who or what is "Francis"?

A character in a comedy. Judging by your comments, I'm guessing you don't see many of these.

[mad_as_he$$]

I am glad to see that Steve now realizes what I and many other FReepers have been saying for over a year. Welcome to the party Steve. i guess all that money slowed you down.

[ari-freedom]

what, he’s been saying this for years. If he was president in 1996, we wouldn’t be in the mess we’re in today. He was talking about gold during a time when prices were pretty stable. of course nobody listened to him then.

[muawiyah]

Only a Monitarist or a Mercantilist still thinks of price as being something that's "set" by money alone.

I don't believe either economic theory is sufficient to the task of understanding what really happens in market economies

[muawiyah]

It's not like gold just sits there ~ it does, but its ownership changes reqularly. The chart covers a period when most of the oil revenues have gone into the hands of folks who like to buy gold feeling that it's "secure" if nothing (e.g. Arab sheikhs and their counterparts in third-world oil producing coungtries).

Obviously gold is going to track the flow of dollars/euros.

Make that stuff radioactive and the same people would continue buying it.

Frankly I think the whole utility of gold is shortly going to go into the dumper with developments in the new scientific field of "super atoms".

[ari-freedom]

super atoms? why would someone waste $ trying to make more gold out of thin air when gold doesn’t do anything useful except compare prices as Wanniski explains here:
http://www.polyconomics.com/ssu/ssu-041002.htm

[muawiyah]

If the Monetarists who post here had a hair they'd admit that anything that can satisfactorily "pass for gold" that can be easily and cheaply manufactured (out of thin air perhaps) will allow gold, per unit, fall into the value dumper with a speed approaching that of a proton in a working super collider.

Alas, the Monetarists have no real confidence in their own theories and just don't want to face the fact it's going to shortly (in a historical sense) be as common as dirt.

[muawiyah]

BTW, using "labor" as the source of a fundamental unit of measure for money definitely would cause some serious problems in a totally roboticized society ~ that is, the one we are heading into at all deliberate speed.

We'd have the same difficulties with the "labor" based unit as we had with gold in an earlier time when the supply of gold was simply not adequate to support the currency needs of industrialization.

[AmericanVictory]

So if we had the leadership to drive the price of oil down swiftly and dramatically further than its now falling despite anything attempted by OPEC and Putin and their pals and keep it there, and eliminate quickly our need for foreign oil at the same time, we could create an economic “surge”. The inflation can be traced back to OPEC’s 1973 embargo and its aftermath. The dollar’s primacy could be restored along with our economy.

[AmericanVictory]

Well, actually it has a lot of uses as it has some unique qualities, but you’re right, oil does not have the same functionality as a storer of wealth and medium of exchange that oil does.