Federal Reserve Chairman Ben Bernanke offered a fairly upbeat assessment of the economy on Tuesday, saying the recent surge in oil prices is unlikely to have a major effect on growth or inflation as long as higher prices do not become sustained.
Bernanke told the Senate Banking Committee he saw increasing evidence that the economic recovery has enough momentum to become self-supporting. But job growth remains far too anemic, he said...
... "We do see some grounds for optimism about the job market over the next few quarters," Bernanke said, citing a steep recent decline in the jobless rate among other factors.
Bernanke said downside risks to growth had diminished and, for the first time, stated that the risk of deflation was now "negligible." The threat of deflation, a downward spiral in wages and prices that could derail the economy, was a key justification for the Fed's bond-buying spree...
... [Bernanke] reiterated a warning that a failure by Congress to raise the government's debt ceiling could lead to a debt default that would have dire consequences for the economy.
"It would be extremely dangerous and very likely a recovery-ending event," he said.
You're kidding me, right? Rising oil prices won't have an effect on the economy? And, just at this moment, oil passed $100/barrel. The only things not in inflation mode are housing (because that bogus bubble burst, and the stale air from that false inflation is still deflating), and wages (how many of you who had wages cut in recent years have gotten any of that back - even partially?). Unemployment has not really recovered. And raising the debt ceiling - AGAIN - would be a friggin' disaster.
No, Bernanke, we are NOT in a deflationary mode, nor were we threatened to be getting into one. INflation and HYPER-inflation, quite likely. Almost certainly STAGflation, with wages and unemployment stuck, and fuel/energy and food prices skyrocketing.
Let's read the definition of Stagflation on WikiPedia, shall we?:
Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when the productive capacity of an economy is reduced by an unfavorable supply shock, such as an increase in the price of oil for an oil importing country. Such an unfavorable supply shock tends to raise prices at the same time that it slows the economy by making production more costly and less profitable.
Second, both stagnation and inflation can result from inappropriate macroeconomic policies. For example, central banks can cause inflation by permitting excessive growth of the money supply, and the government can cause stagnation by excessive regulation of goods markets and labor markets, Either of these factors can cause stagflation. Excessive growth of the money supply taken to such an extreme that it must be reversed abruptly can clearly be a cause. Both types of explanations are offered in analyses of the global stagflation of the 1970s: it began with a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to counteract the resulting recession, causing a runaway wage-price spiral.
Just keep printing more dollars, Benji. That, plus more federal regulations, and rising oil prices will do the trick... make everything all hunky-dorey. Nothing to see behind the curtain... look away, look away.
Yep! Just as I had expected. Jimmy Carter 2.0.