Tuesday, September 23, 2008

The Week in Oil

Source: Financial Times

The $600 billion that the world's Central Banks last week integrated into the world's economy promises to bring with it inflationary effects. The first evidence of this inflation came yesterday with a record one-day increase in the price of oil. I am not saying the Fed and other banks shouldn't have added to the money supply in the way they did. Let me be clear: The depth of the financial collapse calls for strong action, and Mr. Paulson and Mr. Bernanke are more experienced than I am and have access to far more data than I do. But even if the reasons for the type of acts they did last week are good and sound, we must prepare for all of the effects of the added liquidity, not just the good -- that is, intended -- consequences. The point is that after a small downturn in inflation last month, we should prepare for another up-tick in the months ahead.

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