Gas Pump Woes Posted on April 30, 2011 by Yves Smith Time for comic relief. Hat tip Tim Coldwell (click to enlarge): 10001120 Post navigation ← Join Us At FireDogLake’s Book Salon on Saturday to Discuss Treasure Islands by Nicholas Shaxson Arizona Representative Drops Chain of Title Notification Provision After Apparent Bribe by Servicer → Subscribe to Post Comments 33 comments attempter April 30, 2011 at 5:54 am I don’t understand. Krugman keeps telling me that only core* inflation matters, and that fuel and food stagflation are meaningless. My wallet seems to be saying something different, but who’s a peasant like me to question such an august and prize-winning mandarin? *Ya gotta love the Orwellianism of the terms. It’s just like with “structural” (inherent, intrinsic, inertial, unchosen) unemployment – “core” (meaningful, important, essential) inflation excludes trivial things like food and energy, that is precisely the inelastic things normal people actually need. How convenient. BTW, the greater volatility of these prices, also alleged to be a law of nature, is in fact nothing but an artificial, intentional political choice. The fraudulent inflation concepts and numbers are meant to help obscure this. DownSouth April 30, 2011 at 7:22 am [A]ll correspondence referring to the matter was subject to rigid “language rules,” and, except in the reports from the Einsatzgruppen, it is rare to find documents in which such bald words as “extermination,” “liquidation,” or “killing” occur. The prescribed code names for killing were “final solution,” “evacuation,” and “special treatment”; deportation—-unless it involved Jews directed to Theresienstadt, the “old people’s ghetto? for privileged Jews, in which case it was called “change of residence”—-received the names of “resettlement” and “labor in the East”, the point of these latter names being that Jews were indeed often temporarily resettled in ghettos and that a certain percentage of them were temporarily for labor… For whatever other reasons the language rules may have been devised, they proved of enormous help in the maintenance of order and sanity in the various widely diversified services whose cooperation was essential in this matter. Moreover, the very term “language rule” was itself a code name; it meant what in ordinary language would be called a lie… The net effect of this language system was not to keep these people ignorant of what they were doing, but to prevent them from equating it with their old, “normal” knowledge of murder and lies. Eichmann’s great susceptibility to catch words and stock phrases, combined with his incapacity for ordinary speech, made him, of course, an ideal subject for “language rules.” ▬Hannah Arendt, Eichmann in Jerusalem: A Report on the Banality of Evil Carol April 30, 2011 at 8:48 am Krugman doesn’t say that gas price inflation is meaningless. He says that it is volatile and that it isn’t traditionally computed in core inflation. attempter April 30, 2011 at 12:36 pm He says, albeit in a different context, that core inflation is the only important measure. Couple that with his insistence that food stagflation has nothing to do with speculation (rather, it’s another inscrutable “structural” problem) and his call for regressive taxation on food and fuel, and the intended crime is clear enough. Jojo April 30, 2011 at 1:29 pm It is not just Krugman. The same thing is being said by the Fed, the government and mainstream economists. The establishment is following their playbook to a “Tee”. If you repeat something often enough, eventually, the majority of people will come to accept it as truth, whether it actually is or not. Our entire economy and the stock market is underpinned by these manipulated (and somethings blatantly false) statistics that the government releases weekly, that mainstream economists embrace and that the MSM parrots. We live in an Alice In Wonderland world. attempter April 30, 2011 at 4:19 pm I just tend to emphasize Krugman because he continues to be a favorite “elite” even among lots of people who are otherwise starting to reject elites. His job is to try to keep them roped in. Anonymous Jones April 30, 2011 at 2:36 pm He does not say it is the only important measure. That’s just more inaccuracy and misdirection. He says that it is much more relevant for certain things, especially in trying to determine whether runaway inflation is around the corner. Labor is an enormous component in the general price level and without anything spurring a wage-price spiral, there is little fear of runaway inflation. In no way would he ever say that someone whose life was dependent upon, say, eggs wouldn’t find inflation in the price of eggs important. It’s so tiring to read this crap every day. You don’t have all the answers. You don’t know what is going on in everyone else’s mind. Neither do I. Get over yourself. skippy April 30, 2011 at 9:22 pm AJ, I’m finding it a bit troublesome these days with regards to classical observations of Labor in Inflation. The speed of the markets via computational power, globalization / interconnected, algo driven trading, to name a few, is a new paradigm. Woefully lacking in any critical observations for significant periods of time. Specialization in very narrow fields of application exacerbates this condition even further. Generalists like economists (Krugman et al) may find that degenerative eye disease has a nasty habit of sneaking up on the self assured (its hard yaka staying relevant when your mug is plastered all over the MSM). Observations in gross trends based on old metrics, in my book, creates huge blind spots. Skippy…how far can we see, how much warning do we have, before steering input must be applied to an exponentially growing mass. Personally I fear we are actually increasing the occurrence, mass and duration of fat tails. Having created warp speed and some individuals need to try out new toys, before long range scanners are invented, well we all were kids once…eh…how many broken bones or even death must occur before the pack gets the hint…sigh. F. Beard April 30, 2011 at 7:41 pm He says that it is volatile and that it isn’t traditionally computed in core inflation. Carol Meaning that if you have your own big gasoline storage tank then you can out wait the speculators? Gee wiz Paul Krugman, how many people have those? If gas prices truly were volatile would it not pay someone to build huge gasoline storage facilities to smooth out those prices? Goldman S***s April 30, 2011 at 9:13 am I believe we’ve been through this before. The conclusion at the end of it was that gas prices were being manipulated by you know who. Food prices too. Is there any reason to believe that this time it’s any different? gs_runsthiscountry April 30, 2011 at 2:06 pm Maybe it is not a matter of manipulation as you assert, it is money tring to find a home, a “store of value.” Is there any reason oil should be here at these price levels, no. However, in this market, whether it be a young retailer, retirees, hedge fund managers or even the Bill Gross’s of the world, where do you put your money now? Where do you find yield or something that isnt overpriced? where I ask? With no velocity, weakening dollar, ZIRP, in a toppy market, with margin compression on the horizon ( said input costs rising, no real revenue and can’t pump up earnings with layoffs, that’s already been done)…there is nowhere to with your dollars. Cheap money has to find a home somewhere; Bernanke is trying to get money moving again, but, instead, it is finding a home in OIL. required April 30, 2011 at 7:25 pm “Cheap money has to find a home somewhere; [the bernack] is trying to get money moving again, but, instead, it is finding a home in [FILL IN THE BLANK].” right, no manipulation. nothing to see here. move along. gs_runsthiscountry May 1, 2011 at 2:17 am First, don’t mistake my comments as an endorsement of Bernanke, or Greenspan, for that matter. Though, now I have a question….based on your response to my post. What do you propose should be done? What can be done from a monetary standpoint has been done. Seriously, if you don’t like fed policy…then call your sen and congressman. Tell them to get off their a** and get down to the business of fiscal policy. Because, right now our cowardly politicians are playing power grab, and having verbal jousts in the media on trivial, and not so trivial matters for another day. The focus is on everything BUT the economy. Brilliant how the fed chairmanship provides cover for 535 elected in this country is it not? I am beginning to think Chris Whalen is right, when he suggests raising rates and not raising the debt ceiling. Although, why not take that a step further. Not only should the Fed raise rates…they should do a full 100-150 basis points and announce they are selling 2-10yrs all at the same time. You want to light a fire under the a**es of our politicians….that would do it, and right quick! Dow 5000, SP-to-500 anyone? http://www.youtube.com/watch?v=1yeA_kHHLow Schofield April 30, 2011 at 11:52 am As we read yesterday in Naked Capitalism the Commodity Futures Trading Commission can limit the value of speculative oil contracts but won’t do so because it is dominated by Bush Republican appointees. Yet another everyday story of corruption by the “corporate little monarchs” of America. attempter April 30, 2011 at 12:39 pm Just to clarify: Obama and the Democrats have chosen to leave in place the domination of Bush Republican appointees because they agree with their crimes 100%. cashew May 3, 2011 at 4:07 pm Actually, of the 5 CFTC commissioners, 3 are Democrat commissioners and 2 are Republican. In attempting to implement Dodd-Frank rulemakings, including position limits – and they are gamely making the attempt – the CFTC is up against crushing opposition by industry and House Republicans. Watch some archived hearings on C-Span or the Ag and Banking committee websites, you can see for yourself. c. April 30, 2011 at 11:57 am The cartoon with the sheep is not a very good idea. Goats would be better – they’ll eat weeds, sheep are very picky eaters. gs_runsthiscountry April 30, 2011 at 12:36 pm The question becomes, how long can you sustain Brent/WTI at these levels, before you send the economy over the precipice? Another 1-2 months of crude at these levels, coupled with everything else hanging by a thread, and you can mark the peak of this current business cycle and print the expansion @ 24 months. Academics at NBER will tell us this 12 months from now right? http://www.nber.org/cycles.html frances snoot April 30, 2011 at 4:45 pm Gas prices track the euro. frances snoot April 30, 2011 at 4:46 pm Merely stating the obvious: as in, all Baptist preachers are charlatans. Hacksaw April 30, 2011 at 7:13 pm I contend that you sir don’t even know what a charlatan is. A doctor, a banker, an economist, a politician, and folks like you can be a charlatans, but it’s hard for a purveyor of faith to be a charlatan being as faith is based on belief instead of knowledge. World English Dictionary charlatan (ˈʃɑːlətən) [Click for IPA pronunciation guide] —n someone who professes knowledge or expertise, esp in medicine, that he or she does not have; quack required April 30, 2011 at 7:29 pm i’ll have to remember your “executive defense” next time i find myself in front of a judge/jury: “i believe i didn’t commit any crime, therefore i’m innocent.” frances snoot May 1, 2011 at 7:04 am No, but I do know what a charlatan ISN’T. Max424 April 30, 2011 at 5:58 pm Oil prices are volatile! Voll-eh-TILE! Can’t think straight with all this g+ddamn volatility going on! There was a time, when it wasn’t always such, known, as the Great Moderation (1986-2002). In those dreamy, halcyon days — when oil prices wafted, melodically along (flitting and floating always in the 20 to 40 dollar per barrel range) — an economist could wile away his unencumbered hours, tinkering, perhaps, with the margins of his models. Not any more. Times have changed, and my advice to economists: A viciously nasty and complex “new” economic paradigm has arisen, but don’t let the stress of thinking about it, eat you up. Ignore it. Simply pretend The New Nasty doesn’t exist, then go about your business — whatever your business happens to be.* *If your business entails making money peddling the same advice to others that I just peddled to you, then bravo, sir, you’ve figured it out, and I dare say, you will become, if you haven’t already, a well-to-do peddler indeed. Birch April 30, 2011 at 6:58 pm Gas in the U.S. is still cheap. Most ‘developed’ nations pay significantly more – often WAY more – for gas of all types, and they continue to function just fine. High gas prices may eventually force some semblance of efficiency that capitalism never bothered to get around to. It’s just a shame that we didn’t get around to that efficiency back when oil was still plentiful. Imagine how much oil would be left in Texas today if… required April 30, 2011 at 7:33 pm dude! it’s frickin relative! most ‘developed’ nations pay significantly LESS – often WAY less – for medical care of all types. are you that narrow minded that you take ONE commodity as a guage for a whole standard of living? Birch April 30, 2011 at 8:02 pm Cool, there’s lots of flexibility then. So what’s the problem? Oh yeah, that feline below with has delusions of primate-hood. Another important difference is the nature of urban planning: sprawling suburbs and big box stores or tight urban and rural communities where residences are near employment and commerce. Does a nation eat what it grows, or does it export it and import other food instead? I think there are plenty of factors more directly relavent to gas price dependency than health costs, but I get your point. Then there’s this sort of thing that fatcat will get a self-indulgent chuckle out of. http://www.bourke-engine.com/history/index.htm FatCat April 30, 2011 at 7:31 pm Fat Cat here, so listen up little chumps: You wanted to drive your fat asses in your gigantic 8 cylinder SUVs while blasting your air conditioner on maximum, you had better get ready to pay up what I demand for MY gasoline. $4 today, $5 next week, and $20 next year. You are a nation of entitled fat slobs addicted to luxury, and I will decide the price you may ME for providing that lifestyle. Is that clear?! Fat Kiddie Anonermous May 1, 2011 at 12:49 am You realize of course that if you hike it up too much then renewables will become cheaper than fossil fuels? Decisions, Decisions. FatCat May 1, 2011 at 3:07 am I own the solar panel factories in China and Japan too. I own the wind turbine plants too. So, in more enlightened nations, I earn a hefty profit from artificially inflating the prices of that technology. However, from this nation of illiterate, brainwashed, and easily-manipulated morons unable to think for themselves, I am going to squeeze the last fiat dollar from oil and gas. Of course, eventually I will offer MY renewable technology to the US as well, at which time I will allow MY senators and MY president to pass laws promoting it. Too bad by then this nation will be completely broke and hollowed out by ME and people like ME, and the dollar too worthless to be able to afford it. How ironic. A nation built entirely on greed will be taken down by ME, the greediest bastard around… LOL FatCat Richard May 1, 2011 at 1:29 am I am amazed that any commenter would so grossly misunderstand Krugman as to say that he thinks that the price of gasoline or groceries is “not important.” Such an oversimplification and distortion is so severe as to raise questions about the motive behind the statement. It is obvious to anyone who understands the current debate about Fed policy, the currency, and core inflation, that so-called “headline inflation” which includes the highly volatile items, need to be ignored when we consider what the Fed policy ought to be with regards to interest rates. Krugman argues, as do many economists, that core inflation is the important measure when it comes to considering Fed interest rate policy. And Krugman and other economists make a good point in this regard: if the Fed were to respond to “headline inflation” rather than to “core inflation” then the Fed would jerk this country’s monetary policy around and cause extreme and wild swings, plunging the nation into deep recessions, then goosing the economy wildly into hyperinflation. To say that Krugman therefore thinks that gas prices are not important to people reflects profound ignorance of the entire current monetary policy debate and is a complete and startling misreading of Krugman. attempter May 1, 2011 at 4:22 am You left out his apologetics for food speculators and call for a VAT (just to name the two examples I mentioned above). Inconvenient for your analysis? I place each data point within the context of the entire evidence record. Where it comes to Krugman, my analysis has been fully comprehensive. Go to my blog and click on the tag, “Krugman”. I mentioned that Krugman’s emphasis on core inflation was nominally in the context you describe. As I said, my analysis of anything goes beyond the proximate context. But taking that specific example, who would look at such a demented system where the prices of basic necessities are artificially rendered volatile and prone to inflate precisely at the times the non-rich are under the most economic pressure, and not see that as decisive evidence that the system is a failure and must be completely changed? (In particular, food markets are naturally centered on localities and regions; to force all food production and distribution into the strait jacket of globalized commodification has been a market insanity and a crime against humanity.) Similarly, if the system is set up to be gamed by the Fed, such that dissenters have to constantly and ineffectually lecture it on what kind of inflation is actually looming as a threat (as if the Fed doesn’t know that perfectly well; but we know its agenda is actually a criminal one), then how is that not dispositive evidence that the system doesn’t work, and only the latest, redundant evidence that we should do away with the Fed completely? These things are obvious to honest observers not beholden to kleptocracy. But Krugman never draws any such conclusions. On the contrary, he makes his anodyne criticisms but always comes down on the side of kleptocracy where it counts. As I said above, that’s his job: To keep the fraudulent cause of “reformism” alive among liberals so that they don’t become tempted to follow the evidence and reject the system completely. Solar1 May 1, 2011 at 4:51 am I don’t here it mentioned very often that as the dollar heads south nearly everyone in the world gets a raise and fuel becomes more affordable. So just because labor rates are stagnant in this country doesn’t mean we can’t get serious inflation, particularly in food and oil, two commodities people in developing nations want more of. Comments are closed.