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Rising oil price causes inflation!

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cr113 posted on Mon, May 9 2011 5:58 PM

It's depressing how few people understand inflation and why prices are rising. Check out this article on Investopedia, there's no mention of printing money causing rising prices.

http://www.investopedia.com/ask/answers/06/oilpricesinflation.asp

Also a few weeks ago I heard an "expert" economist talking about the possibility of QE3. He said the fed wouldn't launch QE3 unless oil prices got up to $140 a barrel. He said if oil prices got that high the economy would weaken and the fed would need to begin QE3. Duh. Oil prices are high BECAUSE of QE. Amazing ...

 

 

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z1235 replied on Tue, May 10 2011 9:38 AM

Neodoxy:

"An increase in any category of costs will tend to shift the aggregate supply curve upwards. This might include costs of raw materials, transportation or energy costs, labor costs, or even business taxes."

This upwards increase in the short run aggregate supply curve will move the curve towards a higher price level. And as I have already cited numerous times an increase in the price level or overall prices, is called inflation.

Yes, a higher price of oil applies upward pressure on other prices. However, all prices -- including the price of oil -- go higher for another more fundamentally powerful reason altogether: printing money like there's no tomorrow. Saying that the price of oil is the reason for higher prices is like saying that the bullett is the reason for the victim's death.

The ignorance exposed by the OP has nothing whatsoever to do with the differing definitions of inflation. 

 

 

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