{"id":65257,"date":"2023-04-10T05:29:13","date_gmt":"2023-04-10T10:29:13","guid":{"rendered":"https:\/\/olduvai.ca\/?p=65257"},"modified":"2023-04-10T05:29:13","modified_gmt":"2023-04-10T10:29:13","slug":"the-fed-cannot-fix-todays-energy-inflation-problem","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=65257","title":{"rendered":"The Fed Cannot Fix Today\u2019s Energy Inflation Problem"},"content":{"rendered":"

The Fed Cannot Fix Today\u2019s Energy Inflation Problem<\/a><\/h3>\n
\n

There is a reason for raising interest rates to try to fight inflation. This approach tends to squeeze out the most marginal players in the economy. Such businesses and governments tend to collapse, as interest rates rise, leaving less \u201cdemand\u201d for oil and other energy products. The institutions that are squeezed out range from small businesses to financial institutions to governmental organizations. The lower demand tends to reduce inflationary pressure.<\/p>\n

The amount of goods and services that the world\u2019s economy can produce is largely determined by fossil fuel supplies, plus our ability to use \u201ccomplexity\u201d in many forms to produce the items that the world\u2019s growing population requires. Adding debt helps add complexity of various types, such as more international trade, more advanced education, and more specialized tools. For a while, the combination of growing energy supplies and growing complexity have helped pull economies along.<\/p>\n

Unfortunately, the world\u2019s oil supply is no longer growing. Without an adequate oil supply, it becomes difficult to maintain complexity because complex solutions, such as international trade, require adequate oil supplies. Inasmuch as we seem to be reaching energy and complexity limits, nothing the regulators try to do to change the debt and money supplies\u2013even reeling them back in\u2013can fix the underlying oil (and total energy) problem.<\/p>\n

I expect that the rich parts of the world, including the US, Europe, and Japan, are in line to be adversely affected by high interest rates this time. With their high levels of complexity, they are among the most vulnerable to disruption when there is not enough oil to go around.<\/p>\n

\n
\"\"<\/a>
Figure 1. World oil consumption divided into consuming areas, based on data of BP\u2019s\u00a02022 Statistical Review of World Energy<\/em>. Europe excludes Estonia, Latvia, Lithuania, and Ukraine.<\/figcaption><\/figure>\n<\/div>\n

\u2026click on the above link to read the rest\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Fed Cannot Fix Today\u2019s Energy Inflation Problem There is a reason for raising interest rates to try to fight inflation. This approach tends to squeeze out the most marginal players in the economy. Such businesses and governments tend to collapse, as interest rates rise, leaving less \u201cdemand\u201d for oil and other energy products. The […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[63,124,265,303,1233,426,588,1232,13351,3650],"class_list":["post-65257","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-banks","tag-central-banks","tag-energy-crisis","tag-fed","tag-gail-tverberg","tag-inflation","tag-oil","tag-our-finite-world","tag-price-inflation","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/65257","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=65257"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/65257\/revisions"}],"predecessor-version":[{"id":65258,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/65257\/revisions\/65258"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=65257"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=65257"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=65257"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}