Economics Questions

Re: MV = PY question....and question regarding GDP and prices of oil

JeffB — Fri, 15 Jan 2010 02:01:35 GMT

We used to be the world's largest exporter, but oil production peaked in the 1970s and consumption has been growing ever since, other than a couple of instances, such as last year. Even Texas and Oklahoma are now net importers of energy.

According to the U.S. Energy Information Administration we are pretty large importers and have been for some time now:

U.S. Petroleum Consumption 19,498,000 barrels/day

U.S. Total Petroleum Exports 1,802,000 barrels/day

U.S. Net Petroleum Imports 11,114,000 barrels/day

Dependence on Net Petroleum Imports 57%

I've read before that virtually every major oil shock is followed by a recession.

Re: MV = PY question....and question regarding GDP and prices of oil

Jonathan M. F. Catalán — Thu, 14 Jan 2010 19:52:30 GMT

Jeremiah Dyke:

1) Poast mentions an inverse relationship between crude oil prices and GDP. His data is only through 1999...would you say this relationship still holds? It strikes me as odd given that the U.S. is the second largest exporter of oil.

So, when oil prices increase GDP decreases? I'm sure that that didn't hold true even within his data set. Maybe during recessions, but in general we've had an increasing GDP. Or, is it oil prices and change in GDP?

2) What is your opinion of MV = PY?

Although this is avoiding answering the question direcly, I think you would be better served by reading Benjamin Anderson's Value of Money and/or Ludwig von Mises' The Theory of Credit and Money. Jesús Huerta de Soto also criticizes the equation in Money, Bank Credit and Economic Cycles, although his criticism is less extensive than the former two (it amounts, basically, that the equation does not take into consideration inflation of some goods relative others; namely, capital-goods relative to consumer-goods).

MV = PY question....and question regarding GDP and prices of oil

Jeremiah Dyke — Thu, 14 Jan 2010 19:47:12 GMT

Browsing through an economic textbook titled The Economics of War (Paul Poast) i see a lot of the same trends as intro macro books (broken windows, broken windows, broken windows!). Nevertheless, two questions.

1) Poast mentions an inverse relationship between crude oil prices and GDP. His data is only through 1999...would you say this relationship still holds? It strikes me as odd given that the U.S. is the second largest exporter of oil.

2) What is your opinion of MV = PY?