<This is not about blowing smoke, even at the end, I don't thinkThe Oil Drum(Still) Waiting for the Crash in Commodities>
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252 comments on DrumBeat: May 16, 2006

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ET on May 16, 2006 - 11:48am Permalink | Subthread | Parent | Comments top
A couple of points:
  1. There is a time lag for lots of goods/services for prices to rise because of underlying costs. I've seen many articles citing retailers who were straining to 'hold the line' on prices. The dam will break at some point and everything will go up.
  2. Goods/services that stay relatively cheap will be those that have a high labor component. Labor is the essential ingredient that is getting cheaper. Look at the declining real median income in the US, not to mention all the outsourcing to foreign sweatshops.
  3. The real crunch will IMO not be high gasoline price but unavailability of gasoline with increasing numbers of spot shortages. (ok, so it was more than a couple...)
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BrianT on May 16, 2006 - 12:43pm Permalink | Subthread | Parent | Comments top
The relativity is the important thing. Even though people love to drive, they only have one dollar to spend and at a certain price level they will decide that driving just isn't worth it (I am simplifying to make a point). Good point about wages- they are definitely not going to keep up with energy costs.
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ET on May 16, 2006 - 1:57pm Permalink | Subthread | Parent | Comments top
Yeah, relative income/purchasing power is sometimes forgotten in our focus on prices. If the unemployment rate goes up and/or wages creep downward, the effect is higher price for gasoline, etc. even if nominal price stays the same. If unemployment goes up drastically, even $1.50/gal could be expensive gasoline.
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tate423 on May 16, 2006 - 2:07pm Permalink | Subthread | Parent | Comments top
It's called the Purchasing Power Parity and it is available @ http://en.wikipedia.org/wiki/Purchasing_power_parity.

If things continued in terms of economic growth, by 2030 or so many countries will have passed us in PPP.

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