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Thursday, January 05, 2012

Oil Above $103 Per Barrel

Oil is a very important factor when it comes to real core price inflation.

As I have stated many times, oil is a key factor for consumers and also in the capital goods sector. This is important to understand in terms of Austrian business cycle theory, since ABCT teaches that central bank money printing directs money to the capital goods sector.

When the money falls into the hands of the capital goods sector, those operators then start bidding oil (and gasoline) away from consumer uses. It's a real bidding war. An operator in the capital goods sector is not going to be bidding directly from consumers for, say, cement, but he is going to be doing so for oil. That's why oil tends to lead price inflation.

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1 comment:

Anonymous said...

Why do you think Obama wants Iran to close off the oil port??? To raise gas to $6.00-$10.00 a gallon as he promised it would be while he was in office.

Are you now glad you voted for this as$$ole?