Tuesday, August 30, 2011

Real Oil vs. Real Yields (Musical Trubute)

In the chart that follows I am comparing the average inflation adjusted price of oil over the previous 5 years to the inflation adjusted returns of 3 month treasury bills over the previous 5 years.

Click to enlarge.

Just look at all that circle turning.

August 30, 2011
Fed Chairman Bernanke Encountered Dissent, Minutes Reveal

But three Fed members opposed any steps to tackle the slowdown, citing fears of sparking inflation, the minutes show. The resulting vote was 7-3, with the three dissenting votes based on the inflation fear. It was the first time in 20 years that many members have dissented.

70% don't seem to mind rising oil prices. 30% would prefer turning circles. Who really thinks the Fed can save us?

I'm turning circles, so stay away
We've all got somethin' wrong to say

Source Data:
St. Louis Fed: Spot Oil Price: WTI
St. Louis Fed: 3-Month Treasury Bill
St. Louis Fed: CPI


Stagflationary Mark said...

If one was to think of oil prices as an airplane, then I think it is quite possible that we hit stall speed at $100 per barrel. That was actually something I predicted in November 2009.

That doesn't mean that I think oil can't make it to $100. Who knows? I don't think it will stay there if it does though, any more than it could stay at $140 the last time.

That said, if oil does make it back to $100 and continues higher then won't that be something (unpleasant).

Troy said...

We can get used to $100, $200, or $500 oil.

It'll come out of rents and land values in the end.

That's my thesis and I'm sticking to it : )

Stagflationary Mark said...


Think of the money/gasoline we'll save sitting at home watching the economic apocalypse on the humungous deflationary 3D TVs of the future instead of visiting the movie theaters near our local malls. So lifelike, you'll think you were there!

Prices have dropped by so much we have to sell three times as many TVs to get the same revenue.

Virtual prosperity baby, that's what I'm talking about.

Audrey said...

I'm getting dizzy...

Stagflationary Mark said...


I'm not a doctor but...

"Pop" two of these and call me in the morning, lol.

Stagflationary Mark said...

Alternative titles for this post:

M3 Cyclone
Hurricane Ben's Ground Up Chopper
Death Spiral 2000

Stagflationary Mark said...

I should mention that the reference points in the chart (1951, 1961, ...) are for January of that year.

We are currently not negotiating the clockwise spiral but are instead heading up and to the left.

Brace for sarcasm. Here it comes.

Everything should be fine. The Fed assures us that it is actively seeking to encourage risk taking and increase inflation to save us from a deflationary spiral.

The Fed is not responsible for rising commodity prices (inflation) and/or commodity speculation (risk taking) though. That's just a coincidence.

Audrey said...

Ha, ha, ha.