OPEC Raises the Price

Kevin Williamson in National Review Online notes that OPEC is not bailing out the world economy:

Good news for Generic Republican, who already has established himself as a legitimate contender for the White House in 2012: OPEC is not bailing us out. The oil cartel is making it known that it is cool with $100 oil and will not act unless prices move significantly higher and stay there. Oil, like most commodities, has been rising steadily as governments around the world keep their printing presses running to dump new money into the global economy.

I don't buy the idea that OPEC controls oil prices. Sure, they manipulate it at the margins, but they don't control the oil market to the extent that De Beers controls the diamond market. The reason for that is simple: each OPEC member is an independent entity. They might agree to fix the price at $100/barrel, but since they are independent actors they can get away with selling for $99/barrel. Whoever's selling for $99 will make up in volume what they lose on margin.

All of that is to say that I think the rising oil price is an indicator of inflation.

Related articles

• "OPEC ministers say world can handle $100 oil" and related posts (musingsofavastright-winger.blogspot.com)
• Thanks Barack, Thanks Dems... Oil Set to Reach $100 a Barrel (gatewaypundit.rightnetwork.com)
• Oil prices surge after Alaska pipeline shuts down (stltoday.com)

Walmart Survey Shows Inflation Already Here

CNBC reports on a secret Walmart survey that shows inflation is already here:

A new pricing survey of products sold at the world’s largest retailer showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate.

The “inaugural price survey shows a small, but meaningful increase on an 86-item grocery basket,” said Patrick McKeever, MKM Partners analyst, in a note. Most of the items McKeever chose to track were every day items like food and detergent and made by national brands.

Helicopter Ben Bernake to the Rescue

The Financial Times reports that Wall Street was reassured by Ben Bernake's remarks that the Fed stands by to boost US growth:

Treasury yields rose after Mr Bernanke spoke, as the market had expected an indication of more bond buying or quantitative easing by the central bank.

Richard Volpe, co-head of interest rates at RBS Securities, said: “The chairman has raised the bar for the market, as we can expect more QE only if the economy deteriorates significantly.”"

While Wall Street is comforted by this news, others are worrying about hyperinflation.

Saddling Middle America

Tyler Cowen wonders Why hasn't the Fed been targeting two or three percent inflation? and doesn't like the implications:

I also regard this as a somewhat gruesome hypothesis. It means that "Main Street" is paying for "Wall Street" (forgive me the use of those awful terms) in at least two ways: high unemployment and inability to earn much on one's savings.

Forever Stamps

If you're a survivalist or just worried about inflation, you'll want a shoebox full of Forever Stamps next to your toilet paper, canned goods, shotgun shells, and gold coins. From the link:

As the name suggests, Forever Stamps can be used to mail a one-ounce letter regardless of when the stamps are purchased or used and no matter how prices may change in the future.

So the Forever Stamps that you buy today for $0.42 each can be used to mail a 1oz letter after Obama leaves office despite the first-class rate having risen to $4.20 then. Yeah, the last inflation resistant government fiat currency is being printed by the USPS!

BTW, the price is going up on May 11th. Plan accordingly.

Update: Since there are no carbon taxes today and likely will be in the future, Forever Stamps are a hedge against those.

Robert Stacy McCain has a post about the dangers of the Fed buying treasuries. The currency numbers out of the Fed have been signaling problems since last fall. Perhaps he'll establish a position in Forever Stamps to mitigate his inflation exposure!

FWIW, if you're taking my investment advice to go long Forever Stamps, then you've obviously got serious issues that go beyond poor judgment.