 | The Bullroarer - Friday 2 November 2007 | TOD: Australia/New Zealand | The Real ‘PPP’: Populism, Probity and Peak-oil in the River City’s Tunnel Deal |  |
67 comments on Part 2. The Future in Australia: The Next 13 years.
Comments can no longer be added to this story.
User login
Contact
- anz at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Archives
GAIA Host Collective
My wife thinks I'm crazy, but my kids think I'm the coolest dad on the block!
I would agree!
btw, why do you think PO will cause inflation? Milton Friedman said that inflation is always and everywhere a monetary phenomenon.
Inflation is simply defined as the overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. When fuel costs rise, anything dependent on fuel costs will rise. As I believe you would agree, many, many items are affected in this manner, from the food we eat, to the price we pay at the pump, to goods delivered by truck, etc. The Netherlands are one of the least oil-addicted developed nations, so you may not see as much inflation as the US. $100 in 2000 dollars is $121 in 2007 dollars.
Many economists project oil price hikes to result in inflation, Stephen Leeb being one.
Buying a large house means you will need to buy lots of furniture to fill it up, but more importantly, it if is like most large homes, it will need much more fossil fuel to heat it.
Of course, if most developed nations lived like the Dutch, peak oil would have come 20 years later...
Will,
I know your explanation of inflation, it is the standard econ 101.
Milton Friedman, who won the Nobel price, argued differently:
Total amount of money
----------------------- = Average price
Total amount of goods
So if PO decreases the total amount of goods, that would cause inflation, right?
Well, only if the total amount of money stays the same. To reduce the total amount of money, the FED, ECB, BoJ, PBC, etc can sell state bonds and thus reducing the amount of money (and raising the interest rate in the process)
This is a very potent mechanism. We have been doing this the last 30 years or so and it works remarkably well.
Why should it suddenly not work?
While you are free to embrace the economic model of your choice, I don't invariably accept Friedman's explanation.
There are so many factors in play, such as the prime interest rate, liquid cash holding, amount of debt (national and personal), GDP, etc, etc.
Offering state bonds also presumes that they would be sold easily. The money acquired through bonds usually goes into government spending of some sort (roads, buildings, education, etc), which enters right back into the economy.
I must note that I am a staunch admirer of the Dutch low-energy lifestyle, and the large number carfree areas in so many of your cities.
I think you give the Dutch too much credit. People look alike all over the world, the Dutch are no exeption.