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Friday, August 15, 2008

High-Priced Oil, Inflation, and Dangerous Security Spillovers

Here is the first of many linked buggy posts to come . . . this one at Carpe Diem, the thread started pm August 14, 2008, by Prof Mark Perry, and on the subject of inflationary pressures in the US economy, as reported by the Consumer Price Index (CPI).  This initiated a lively exchange of views, among them (at length and several times) prof bug's.  And as usual, his buggy stuff ranging widely --- not least, onto the role of volatile energy prices in the CPI (but not core CPI, which the Federal Reserve tracks). 

What it does, the core CPI, is eliminate volatile energy and food prices in order to gauge more accurately the underlying inflationary pressures that might require a rise in interest rates now or in the near future.  And starting from there, prof bug moves on to the various dangers in our being dependent on oil imports (60% of the 10 million barrels daily streaming into the US from OPEC countries) from gangster-authoritarian states like Russia, Iran, the radical Saudi Wahhabi Islamist zealots, and so on . . . the whole of Central Asia, the Caucasus region, and the Middle East full of vulnerable and frequently hostile states.