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Fed Fischer's Complete & Bizarre Nonsense: Oil Price Collapse "Making Everybody Better Off"
"I'm not very worried," explains Fed Vice Chairman Stan Fischer in a very Bernanke-"contained"-like nonchalence about the total collapse of oil prices (and US oil producer stocks). Sharply lower oil prices will boost spending and aid U.S. growth, Fischer stated in a mind-blowingly naive speech for the 2nd-most-important-monetary-policy-maker-in-the-world, adding that lower oil prices were "a phenomenon that’s making everybody better off."
We don’t understand his ignorance: as Raul Ilargi Meijer noted earlier, Fischer is talking about money that would otherwise also have been spent, only on gas. There is no additional money, so where’s the boost? This is just complete and bizarre nonsense.
Sharply lower oil prices will boost spending and aid U.S. growth, said two of the Federal Reserve’s most influential officials, playing down the risk that plunging energy costs could push inflation further below the Fed’s goal.
Fed Vice Chairman Stanley Fischer and New York Fed President William C. Dudley, speaking at separate events yesterday in New York, both stressed the positive economic impact from the steepest decline in oil prices for five years.
“I’m not very worried,” Fischer told an audience at the Council on Foreign Relations. “The lower inflation that we’ll get from the lower price of oil is going to be temporary.”
He also said lower oil prices were “a phenomenon that’s making everybody better off.”
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Perhaps Mr. Fischer should ask the owners of oil producer and servicer stocks, the workers in Texas and North Dakota, as well permits collapse..
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Here's some 1st grade math...
- Money people have to spend (which is the number that is US CONSUMPTION) = X
- Money people have to spend on Gas = GAS
- Money people have to spend on everything else = EVERYTHINGELSE
Therefore: X = GAS + EVERYTHINGELSE
Now if Gas becomes cheaper by 30%... the savings are merely spent on more of everything else OR 'saved' - there is not boost in US consumption...
How does it make X any bigger?
How does that make anyone better off?
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Here's STA Wealth's Lance Roberts clearing up a couple of myths...
Clearing Up A Couple Of Myths
It is important to remember that while the mainstream media keeps touting the "benefit to the consumer" from a decline in energy prices, it is not a tangible one. Think about it this way. When I receive a "true" tax credit from filing my taxes, I receive an actual check from the Treasury Department. For many individuals, they look forward to their "refund" to fund purchases of a television or take a family trip. However, when an individual fills up their automobile, there is not an extra $10 bill that shows up in their wallet, therefore, the incentive to spend really is not recognized and the "savings" get washed within already tight consumer budgets.
As I showed recently, lower gasoline prices do not equate to higher consumption.
Also, there is little evidence that lower energy prices equates to higher levels of economic growth. In fact, as shown below, sharp declines in energy prices has actually been coincident with lower economic growth rates.
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Just don't tell Fischer, Dudley, or anyone on CNBC this!!!
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.........never mind
If I can buy the same abount of GAS with 30% less currency then I can use the extra currency to buy more of EVERYTHING ELSE, or as pointed out I can SAVE. Either choice means my standard of living has improved. Either case the economy has been stimulated by the extra spending on EVERYTHING ELSE or via SAVINGS.
Fischer may be wrong about a lot of things but in this case at least as far as the drop in oil price, it is in fact a big plus for most people.
It seems to me your perspective is too limited. Your spending is certainy important to you (and to "most people"), but it is not "the economy." If you spend less on gas, that part of the economy isn't stimulated is it? The "extra" spending or saving you do elsewhere with your gas savings is less spending or saving by oil workers and others in that industry. How much less? Exactly the same amount less. Hence, on net, your "extra spending" is not extra in the economy as a whole. It's a wash.
"two-three years back when the stories arose, “the U.S. was going to become energy independent”. What the stories forgot to include is the fact that shale production has a very high cost to breakeven. The current estimates for breakeven are $75 per barrel or higher."
The oil price collapse is just plain old market economics, demand has fallen at a time production, high cost production was in a boom. A decline helps average non-energy sector workers. It helped me to fill up for much less today, that money now goes for the savings fund. Those tied deeply into the USA energy boom of shale are right now pissing their pants. The girl who makes 60K a year driving a water truck to rigs is now sweating blood over her job. It is the market, some win, some lose. I contend that Oil Frackers are in danger of a real depression in their industry. Those big money oil patch jobs are under threat.
Demand has fallen, true.
The "traders" have their marching orders from the bankster elite to starve The Beast Putin, true.
Full blown economic warfare against Russia by the U.S and its puppets. Exactly what we did to Japan before WWII. The House of Saud, the U.S. cabin boy, is doing our bidding in exchange for protection:
“…details are emerging of a new secret and quite stupid Saudi-US deal on Syria and the so-called IS. It involves oil and gas control of the entire region and the weakening of Russia and Iran by Saudi Arabian flooding the world market with cheap oil. ….
"On September 11, US Secretary of State Kerry met Saudi King Abdullah at his palace on the Red Sea. The King invited former head of Saudi intelligence, Prince Bandar to attend. There a deal was hammered out which saw Saudi support for the Syrian airstrikes against ISIS on condition Washington backed the Saudis in toppling Assad, a firm ally of Russia and de facto of Iran and an obstacle to Saudi and UAE plans to control the emerging EU natural gas market and destroy Russia’s lucrative EU trade. A report in the Wall Street Journal noted there had been “months of behind-the-scenes work by the US and Arab leaders, who agreed on the need to cooperate against Islamic State, but not how or when."
The process gave the Saudis leverage to extract a fresh US commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority.”
(The Secret Stupid Saudi-US Deal on Syria, F. William Engdahl, BFP)
"The Obama team managed to persuade our good buddies the Saudis to flood the market with oil, drive down prices, and put the Russian economy into a nosedive. At the same time, the US has intensified its economic sanctions, done everything in its power to sabotage Gazprom’s South Stream pipeline (that would bypass Ukraine and deliver natural gas to Europe via a southern route), and cajole the Ukrainian parliament into auctioning off 49 percent of the leasing rights and underground storage facilities to privately-owned foreign corporations.
How do you like that? So the US has launched a full-blown economic war against Russia that’s been completely omitted in the western media. Are you surprised?"
So the wars in Ukraine and Syria are not really separate conflicts at all. They’re both part of the same global resource war the US has been prosecuting for the last decade and a half. The US plans to cut off the flow of Russian gas and replace it with gas from Qatar which will flow through Syria and onto the EU market after Assad is toppled.
http://www.informationclearinghouse.info/article40357.htm
South Stream is now officially dead. Bulgaria caved into demands backed by laws from the Brussels EU government.
I am looking into the Saudi/USA oil price war against Russia. I remain on the sidelines as to what is happening. If the economic war on oil is all about Russia, then I expect counter moves in the works by Russia and Iran and other oil producers. If Obama signed off on the plan, he sighned the death warrent to a 100,000 high paying US jobs minimum in Fracking.
Can Russia be held down by oil prices based on Sauid production? That remains to be seen. But it is clear Saudi is Russia's prime enemy in the world, more so than the USA even. So, I would expect Russia to take off the gloves when it comes to the large Saudi hate inside parts of the Muslim world.
But yes, this mirrors the USA oil embargo on Japan which was the exact cause of Pearl Harbor. The moment that law was passed, Japan's high command set a clock ticking a clock that timmed Japanese oil reserves. Was was declared inside the High Command within an hour of the congress passing the oil embargo.
Putin now knows the USA has declared open, no holds barred, war. So the Russians will react, we must wait to see how they play their hand.
Enjoy reading your posts Jack. I am also on the sidelines with regard to the US/KSA trade war deal. Now that QE has ended i believe the financial market is now starting to detach from the goods and services market, global growth is down period, the demand for dollar exchange for oil is down period.
Interesting article
http://www.whatdoesitmean.com/index1822.htm
Plain old market economics? Hardly. ZIRP and QE malinvestment. If those oil workers understood this, they would've told the family to stay home while they rode the bull for what it was worth.
I don't understand this article. As an individual (who doesn't own oil wells) if I have to spend less on gas, I can spend more money on other things (or increase my savings). GDP is a joke anyway, and consumption/spending doesn't grow the economy. Capital investment and increased productivity are what grow an economy.
Yes, for oil producers you would probably want higher prices (although it still depends on what point in the price/demand curve would maximize profits). It could be good for gasoline producers/transporters, because lower prices equal higher demand all else equal. So ExxonMobil will sell more gasoline, albeit at a lower price, but if you are selling widgets that cost you $1 to make you would rather sell 10 widgets at $2 each ($10 profit) than 4 widgets at $3 each ($8 profit).
I would rather get free gas and be able to invest the money saved or spend it on something else.
not sure, but my recollection is that macro demand for oil/gas is relatively inelastic.
cheap gas is great if you still have a car.
i miss eating steak. remember steak? mmmmmmmmmmmmmmm.... why doesn't obama want america eating steak?
Caus Barry wants ya'll to be zombies, keep eating the gmo!
no steak for you!!
Fischer the dualie could have said that falling oil and gasoline prices would increase consumers "discretionary" income (under the assumption that gas and oil prices are non discretionary items for most people = heating and gas for auto commuting to work).
Discretionary income / spending could possibly spur demand for non oil and gas items. That is the salient message. However these false Profits of Debt continually lie and obfuscate in order to keep their positions of power, while destroying the middle class's income and influence in their process.
They must be held accountable within the next 2 to 4 years.
Lunatic posts starting to appear on ZH.
Yeah, lets spend all our income on oil. Same spending, so we are just fine???
TOTALLY CLUELESS ARTICLE.
How old is this guy? Like 200??
"However, when an individual fills up their automobile, there is not an extra $10 bill that shows up in their wallet, therefore, the incentive to spend really is not recognized and the "savings" get washed within already tight consumer budgets."
The author obviously has more money in his wallet than most people. Since the $10 never left the wallet, he's assuming people don't notice it's there. This is so not true. For most struggling people, like my 27 year old daughter, she doesn't notice the extra $10 because its not truly "extra" in the sense of surplus. It is a desperately needed $10 that immediately gets applied to other expenses...like food, heating bills, clothing, etc. I concur it doesn't get set aside for a large purchase, but to think it doesn't get channeled back into the economy immediately is truly out of touch thinking.
this article is misleading bullshit.
its surprising to see a degenerate like fischer say what hes saying, one can only imagine his motivations, but this article is fucking ridiculous.
" In fact, as shown below, sharp declines in energy prices has actually been coincident with lower economic growth rates."
Holy shit. The author can't seem to interpret his own data. Look at the second graph. Oil price and real GDP look like they're more or less inversely related.
About 3-5 bucks a tank eh. i'm shouting the blow! lets party we're going to be so much better off.
Maybe i don't care about the oil producers. Maybe i'm smart enough to know that these "low" gas prices will last as long as the stink from my last fart.
Poor poor oil propucers. :( Who TF are you kidding.
What this article should emphasize, but doesn't, is that extreme inflation or extreme deflation in the price of any of the major inputs (e.g. energy, capital, labor, forex) used to produce real wealth provides large distributional benefits to some and large distributional costs to others. The volatility makes it increasingly difficult for businessmen to plan, which does affect future growth negatively. In addition, in a hyper-leveraged world it virtually guarantees accelerated bankruptcies of the losers in the new distribution, and associated government bailouts of the connected losers, with the costs borne by the unconnected hapless citizens.
These guys know exactly what they are doing. They all laugh and joke behind the scenes on how much bullshit they can spin through the media to the masses.
Everyone sits there and nods while eating a tub of Ben and Jerrys, getting prepped for the latest orgy of Kardashian bullshit.
It is only us, who use our time and our ability to criticially think on the shit that we have been told that is astounded by the bullshit being spewed all over us.
You have to remember the sheeple are fucking clueless to these things and the physcopaths behind the scene are having a ball at there expense.
Sad but very true. On the plus side the awakening gains momentum.
Tyler it would be useful to know how popular this website is becoming and whether the trend is our friend....
Its simple to say there is only X money available, but what a lower gas price offers us sheeple is simply more choice. I now have the ability to spend X elsewhere, whereas with $120/bbl oil, there is much less choice. Its gotta go in the tank.