Volatility in energy prices can be due to ineffective policy from an out-of-touch celebrity politician like Mitt Romney or Barack Obama
Inflation may not be so subdued after all.
Barack Obama’s weak-dollar policy virtually guarantees that prices for imported oil and gas will be volatile compared to American money, as Forbes explained:
The danger of a weak dollar policy is in the total incoherence between its objective – to make Americans more prosperous – and its prescription – to make Americans poorer by increasing the price of our imports while reducing the value of what we sell in exchange.
That’s why looking back, yesterday’s statement from the Federal Reserve may have been of interest to anybody worried about the higher cost of living under Obama.
“Higher prices for energy and food put upward pressure on headline inflation,” said the Fed. “But measures of core inflation remained subdued” (Figure 1).
The conflicting data show how Obama’s economic policy can be misleading with core inflation as its measure for the cost of living, as explained in The Wall Street Journal:
Core inflation for years had been considered to be a better predictor of overall price trends not because consumers don’t pay for food and energy, but because food and energy prices were thought to be so volatile that they obscure the trend. But a group of economists in research released by the Federal Reserve Bank of Philadelphia knocks down the view.
The economists said, “Core inflation is not necessarily the best predictor of total inflation.”
Although the economists also said much volatility in headline inflation can be caused by energy, feckless economic policy from Obama’s administration is also reducing the supply of oil and gas imports, thus putting upward pressure on prices (Figure 2).
In other words, a global climate with strong American leadership is more likely to calm the proverbial but volatile animal spirits that drive the economy.
We need an administration that understands how economic policy can mislead the less informed to believe inflationary pressure on gas and oil prices are subdued when they may in fact be contributing a higher cost of living.
Our campaign aims to overcome such disappointing change by adapting and improving on the best of America’s proven tradition.
We can’t afford four more years of a misleading celebrity like Obama or Mitt Romney, saying and spending anything to get elected but out of touch with the typical needs of a middle-class family that may be living paycheck-to-paycheck at best.
Not only are we going to monitor the right economic elements most likely to effect greater safety and happiness for Americans, we’ll also recommend policy that guarantees greater incentive compatibility in accordance with American interests.
But we have not yet begun to succeed — join me
Graham Bannock, R. E. Baxter, and Evan Davis, The Economist: Dictionary of Economics (New York: Wiley & Sons, 1998).
N. Gregory Mankiw, Principles of Economics, 3rd ed. (Mason: Thomson, 2004).