Crude Oil Price Skyrockets to New High!

[Daniel_Plainview]

EDIT: BTW, according to that graph, and using your own criteria, the 1950's must have been some sort of economic basket case because, after all, interest rates were extremely low!

Umm, the Fed didn't invoke ZIRP during the 1950's. By "ZIRP" I mean that the Fed has intentionally set a zero-interest rate policy.

From Wiki:

The zero interest rate policy is a macroeconomic concept describing conditions with a very low nominal interest rate, such as those in contemporary Japan and, since December 16, 2008, in the United States. It can be associated with slow economic growth.

Under ZIRP, the central bank maintains a 0% nominal interest rate. The ZIRP is an important milestone in monetary policy because the central bank is no longer able to reduce nominal interest rates. Monetary policy is at its maximum potential to drive growth under ZIRP, because the central bank has no more tools left to stimulate borrowing. ZIRP is very closely related to the problem of a liquidity trap, where nominal interest rates cannot adjust downward at a time when the loanable funds market has not cleared.

When monetary policy is already used to maximum effect, to create further jobs, governments must use fiscal policy. The fiscal multiplier of government spending is expected to be larger when nominal interest rates are zero than they would be when nominal interest rates are above zero. ...

[OilFinder2]

Completely non-responsive! You simply regurgitated your previous reply and failed to address any of the pertinent points I brought up!

I repeat: If zero interest rates are indicative of a recession or depression, then the opposite of that must be indicative of an economic boom. Correct? Then tell me that you believe the years 1980-82 featured the greatest economic boom in history, because that is when interest rates were the highest in history!

Now ... answer the question.

And the higher the rate, the bigger the boom. Correct?

Absolutely not correct.

Historically, ZIRP has been invoked only amid depressed economies. That's a fact.

The reality is that the US has been in a depressed state since 2008, requiring ongoing ZIRP and fiscal / monetary stimulus of UNPRECEDENTED magnitudes. That's a fact.

We never left the 2008 Depression, and now we're entering the second leg of a dying economy, where even the price of the most sought-after commodity in world history -- OIL -- is falling.

It's obvious that Obama has an extraordinarily high motivation to "tweak" ("fudge") the official data to paint as positive a picture as possible, so he can get re-elected. Just because the govt's "official story" is that we're not in a depression doesn't mean it's true.

BTW, according to your logic, the Eurozone must be, like, booming compared to the US, because the ECB's rate is 1% while the US's is 0%. I'd also like to hear you tell me the economy of the Eurozone is better than the US's!

[Daniel_Plainview]

Completely non-responsive! You simply regurgitated your previous reply and failed to address any of the pertinent points I brought up!

I repeat: If zero interest rates are indicative of a recession or depression, then the opposite of that must be indicative of an economic boom. Correct? Then tell me that you believe the years 1980-82 featured the greatest economic boom in history, because that is when interest rates were the highest in history!

Now ... answer the question.

And the higher the rate, the bigger the boom. Correct?

Absolutely not correct.

Historically, ZIRP has been invoked only amid depressed economies. That's a fact.

The reality is that the US has been in a depressed state since 2008, requiring ongoing ZIRP and fiscal / monetary stimulus of UNPRECEDENTED magnitudes. That's a fact.

We never left the 2008 Depression, and now we're entering the second leg of a dying economy, where even the price of the most sought-after commodity in world history -- OIL -- is falling.

It's obvious that Obama has an extraordinarily high motivation to "tweak" ("fudge") the official data to paint as positive a picture as possible, so he can get re-elected. Just because the govt's "official story" is that we're not in a depression doesn't mean it's true.

BTW, according to your logic, the Eurozone must be, like, booming compared to the US, because the ECB's rate is 1% while the US's is 0%. I'd also like to hear you tell me the economy of the Eurozone is better than the US's!

Ugh ... sigh ...

First, you need to distinguish between real and nominal interest rates. In the early 1980's, under Volcker (Fed Chairman from 1979-87), inflation was over 13% and soaring higher (inflation was a paramount concern in the early 1980's, and higher interest rates were therefore compelled); the "real" interest rate was therefore modest ... probably between 4% and 6%. In the US today, "real" interest rates are NEGATIVE, and the moribund economy is still in the dumpster despite these unheard of NEGATIVE real interest rates.

Second, under Volcker, there were several exogenous events that compelled a higher interest rate (in addition to the need to combat inflation), such as the 1979 energy crisis. There was also the perception that govt spending and the US deficit were out of control, compelling higher interest rates (that was the "perception", lol). Reagan, of course, changed that perception by his second term.

Then tell me that you believe the years 1980-82 featured the greatest economic boom in history, because that is when interest rates were the highest in history!

Ronald Reagan, baby!

[OilFinder2]

First, you need to distinguish between real and nominal interest rates. In the early 1980's, under Volcker (Fed Chairman from 1979-87), inflation was over 13% and soaring higher (inflation was a paramount concern in the early 1980's, and higher interest rates were therefore compelled); the "real" interest rate was therefore modest ... probably between 4% and 6%. In the US today, "real" interest rates are NEGATIVE...

Good, now I've got you thinking.

Next ... what would happen if Bernanke raised the Federal Funds rate to, say, 2%? Or 3%?

[OilFinder2]

For example, can you name one instance where there's been a real, sustained recovery amid ZIRP?

And BTW, I'm also getting at this question.

[Daniel_Plainview]

Next ... what would happen if Bernanke raised the Federal Funds rate to, say, 2%? Or 3%?

To paraphrase: "Next ... what would happen if a critically ill patient were taken off life support, and her feeding tubes were removed, and a plastic bag were placed over her head ? ..."

If Bernake raised the FFR to 3%, the "fantasy economy" would implode, the stock market would collapse, real estate values would plummet, virtually every bank would need a bailout, unemployment would skyrocket, food-stamp use would skyrocket, the deficit would skyrocket, interest expenses on the national debt would displace funds available for needed social programs. In short, there would be a total, absolute collapse of the US economy.

OMG ... OMG ...

[OilFinder2]

Next ... what would happen if Bernanke raised the Federal Funds rate to, say, 2%? Or 3%?

To paraphrase: "Next ... what would happen if a critically ill patient were taken off life support, and her feeding tubes were removed, and a plastic bag were placed over her head ? ..."

If Bernake raised the FFR to 3%, the "fantasy economy" would implode, the stock market would collapse, real estate values would plummet, virtually every bank would need a bailout, unemployment would skyrocket, food-stamp use would skyrocket, the deficit would skyrocket, interest expenses on the national debt would displace funds available for needed social programs. In short, there would be a total, absolute collapse of the US economy.

OMG ... OMG ...

As usual, you resort to dramatics and ideological hyperbole, but in your own sick way, you did answer the question. Basically, bad things would happen.

Next question: Why would this happen if Bernanke raised the FFR to 3%?

[OilFinder2]

One other thing ... You're confusing the concept of real interest rates with the concept of the natural interest rate, which is a pretty important distinction, but we'll put that aside for now.