Double digit inflation in 2008?

Oil just hit $100+ again I heard in the news. The last time oil hit this high in real terms (as opposed to nominal), the costs were passed on to goods produced in our economy, causing double digit inflation (around 1980.)

Last time I checked, prices are going up. I%26#039;m spending at least 10% more on my everyday expenses compared to last year (and I%26#039;m being even more careful with my spendings now.) Inflation in 2007 was around 2-3% excluding core items.

If we include food, gas, everyday expenses, etc. in the calculation of the inflation rate, can we expect it to be around 10 - 15% for 2007? Food and gas has seem to gone up far more than that lately.

Double digit inflation in 2008?

The inflation number include all your expenditures, not just food and gas which have been going up faster than most items.The price of electronics, and clothes are down and in most places rent is only up with the CPI.

Oil is only about 15% of GDP so a price increase in oil of as much as 50% would only produce 6.5% inflation. The high inflation rates in the 70%26#039;s was due to loose monetary policy trying to prevent a recession due to a much more sudden and larger oil shock.

Note: The price of food in up because the US government enacted a program that diverted a large fraction of the corn crop to bifuels, and food prices should fall as the world%26#039;s agriculture adjusts.

Double digit inflation in 2008?

It could be ... but I have a bit more faith in the Fed than perhaps you do.

Recall that the %26quot;science%26quot; of controlling interest rates was not as well known then.

Alan Greenspan has definitely contributed to the body of knowledge of the Government dampening the effect of economic strife.