Inflation and raising interest rates

[TimberWolf]

It's the same issue now.

Why do you think raw material prices are rising? Cheap money that has been flooded into the hands of large investment banks which is now finding its way into commodities.

This cheap money is the result of banks being able to borrow from central governments almost at zero cost.

Raising interest rates makes money worth more (increases its value) and reduces the flows of easy money into almost every asset class.

So, yes, raising interest rates sharply will cause oil and other raw materials to fall in price.

HTH BIDI.

Likewise the Pound falling off a cliff didn't do much to make the oil we buy any cheaper. We are doomed.

But the best bit is that it hasn't kicked off yet, as we're still borrowing like mad borrowing things.

[scooterscot]

Maybe a war with Scotland.

Think you'll find you're outnumbered @ 1:2

[Freamon]

Why do you think raw material prices are rising? Cheap money that has been flooded into the hands of large investment banks which is now finding its way into commodities.

Really? Nothing to do with geopolitical issues or the fact that the world oil supply flow rate is peaking?

If there's so much money around, how do you explain the fact that the money supply has been flat or falling for the last few years, whereas when it was increasing at 14% p.a. a few years ago, oil prices were much more subdued?

[TestMangler]

Maybe a war with Scotland. Then our formidable CUK military men can put their money where their mouths are.

Want to be the first to cross the line c**t-o ?

[DimPrawn]

Really? Nothing to do with geopolitical issues or the fact that the world oil supply flow rate is peaking?

If there's so much money around, how do you explain the fact that the money supply has been flat or falling for the last few years, whereas when it was increasing at 14% p.a. a few years ago, oil prices were much more subdued?

Yes of course, there are geopolitical issues and supply and demand issues, all of which have upward pressure on the price of oil.

Oil is going to naturally rise over time anyway.

But consider this, in the middle of 2008 oil was not far off $140 a barrel.

At the end of 2008 it was near $40 a barrel.

No big change in supply or demand, no massive geopolitical issues.

Simply cheap speculative money being pulled from the market. $140 to $40 in few months.

Same thing has happened, cheap central bank money is flooding into oil futures.

[AtW]

But consider this, in the middle of 2008 oil was not far off $140 a barrel.

At the end of 2008 it was near $40 a barrel.

In 1998 it was around $10 per barrel, still making cool $8 to places like Saudi Arabia.

Sadly the reason oil and other material assets are so high is due to money printing and rampart dirty spekulation in relevant markets.

[Freamon]

But consider this, in the middle of 2008 oil was not far off $140 a barrel.

At the end of 2008 it was near $40 a barrel.

No big change in supply or demand

Apart from most major economies shutting down most of their manufacturing?

For example, most of the car factories in the UK put their workforce on short hours...

Takes quite a bit of oil to power all that machinery.

[DimPrawn]

Apart from most major economies shutting down most of their manufacturing?

For example, most of the car factories in the UK put their workforce on short hours...

Takes quite a bit of oil to power all that machinery.

Demand for oil dropped about 10% globally during the short crash period at the end of 2008.

But if you believe oil demand fell 70% globally, then, hey, yeah it's all driven by a few car factories having a month off.

[milanbenes]

and another I don't understand


all this money which is being printed and quantatively eased,why isn't it being used for infrastructure projects and creating employment and getting into the hands of the ones who drive the economy ?


Milan.

[Churchill]

and another I don't understand


all this money which is being printed and quantatively eased,why isn't it being used for infrastructure projects and creating employment and getting into the hands of the ones who drive the economy ?


Milan.

Because that wouldn't stop faith in the global banking system being eroded.