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PostPosted: Sun Apr 10, 2005 1:32 pm

Oil, it's gone up more than 25% in less than three months and fifty per cent over the last year; 400% since 1999. CIBC says that by 2010 100$ or more for a barrel of oil is likely and Goldman Sachs: Oil Could Spike to $105.

I see prices of everything moving up quite steeply. I put gas in my car, pay attention to the real estate section of the newspaper, go the doctor, buy all the stuff that everyone else does; I swear that prices have been rising across the board; and rising much higher than 3 percent. But I am told inflation is under control.

In the US earler this year, the Office of Federal Housing Enterprise Oversight reported that home prices rose 13 percent in 2004, almost 5 percent of that in the final quarter. That is a very large increase by historical standards. Nonetheless, some areas have seen much bigger jumps as noted above. Over the last five years, prices are up 107 percent in the District of Columbia, vs. 48 percent nationally.

Buying a home is the largest purchase any consumer makes and the numbers do not lie, new home price inflation has run at about a 10 percent annual rate for the past 5 years. In 2000 a barrel of crude oil cost $30 dollars, in recent months the price has hovered around $50. That is about a 65% increase or roughly a 12% annual rise over the 2000 level. The average price of a gallon of gas was $1.46 in April 2000 and $2.30 in April 2005. Not surprisingly, those numbers too reflect a little more than a 12% annual rate of increase.

If we turn to basic commodities what do we find? The price for an ounce of gold in 2002 was about $300, we would have to pay $420 today. Once again, annualized, instead of a mere 3%, we find a 10% rate of increase. Silver was about $5 an oz. in April 2000 and about $7 in April 2005, about an 8% per year rise. The prices of industrial metals have risen just as sharply, in fact copper was up similarly and steel prices rose sharply from 2003 to 2005.

To this point, we have tallied a roughly 10% annual rate of increase for home prices, gasoline, and metals. Another basic expense is energy for home heating. We find that home heating oil was $1.20 in January 2000 and $1.97 in January 2005. Once again we discover a yearly rise of above 10 percent when we average the 67-cent jump to annual rate of increase. Just stop for a moment and consider whether your utility and phone bills have gone up or down over past 2, 3 and 5 years.

This reminds me more of the game Infaltion/deflation than it does the reality we are being told.

Well, live the experience with InflationDeflation . Where Monopoly® was created just after the Crash of '29 and reflects the unchanging Depression years, InflationDeflation gives the game an unsettlingly modern flavor. There are good times and bad times. InflationDeflation cycles you through 5 Economic Climates:

1. Deep Deep Depression
2. Just Depressed
3. Recovering
4. Boom Time!
5. Runaway Inflation! - and then back again.

It's an easy ride from Deep Deep Depression through to Runaway Inflation! But watch out going from Runaway Inflation! back to Deep Deep Depression. The inflationary bubble bursts, and the government is forced to issue a new more stable currency at a 90% devaluation of your old currency. Ouch! Major bummer! You just lost 90% of everything you had!

Right now I would say we are leaving Boom time and are in the runaway phase of the game.

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PostPosted: Sun Apr 10, 2005 9:22 pm

Glad to see people joining the harrowing fun! ^_^

Just to update the situation with the commodity prices in question:

As of Sunday, April 10, 2005:

Gold: $426.50USD p/toz
Silver: $7.14USD p/toz
Platinum: $856.00USD p/toz
Copper: $1.56USD p/lb (wow!!)
Nickel: $7.43USD p/lb
Aluminum: $0.89USD p/lb
Zinc: $0.61USD p/lb
Light Sweet Crude Oil: $52.93USD p/barrel

Probably best to keep tabs of this and other commodity prices within the next few months.

I find this boom-bust viscious cycle to be the result of governments screwing around with the money supply. Would such artifical growth and catastrophic corrections be possible under an enforced bimetallic standard (for example)?

Also, I too have noted prices rising across the board for many adjusted goods and services (unadjusted = not outsourced or imported from a cheaper source) here from my neck of the woods. However, I often find it difficult to distinguish price increases as being the result of inflation or opportunism. Will my coworkers pay more for MTA subway fares in New York City (even while cutting services at the same time) due to inflation or greed, or a little bit of both? '_'

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