Follow us:

Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

February 23, 2011 at 10:00 AM

Whatever Geithner thinks, rising oil prices are a danger to the economy

I’m not especially worried by the stock market’s fall over the past two days. Animal spirits and greed are typically clueless to gathering dangers, whether it be the Great Panic of 2008 or the risks to oil and gas supplies from the spreading Middle Eastern upheaval. I was made more anxious by Treasury Secretary Tim Geithner’s comments this morning during a Bloomberg Breakfast event.

“Central banks have a lot of experience in managing these things,” he said. “These things” being rising prices as the result of an oil shock. Oh, yeah, just ask G. William Miller or Arthur Burns, the Federal Reserve chairmen who were knocked sideways by the 1970s oil shocks and resulting inflation.

To be sure, political leaders then were unwilling to support the nasty measures needed to rein in rising price levels — they feared the effect on employment. And now that we face terrible unemployment, both the Fed and political leaders would face an even greater conundrum, whatever Ben Bernanke’s bold talk about being be able to turn on a dime to fight an inflation outbreak.

Even without inflation, however, it’s worth remembering that most of the recent economic downturns have been associated with oil shocks. And the recovery remains extremely fragile for most Americans. But Geithner says, “The economy is in a much stronger position to handle” increasing oil prices. As the blogger Tyler Durden quipped on Zero Hedge blog, “We are, all of us, now doomed.”

Today’s Econ Haiku:

Tanker finale

Will Airbus really win this?

Or, “It ain’t over…”

Comments | More in Energy, Federal Reserve, Global economy, Recovery, Stock market

COMMENTS

No personal attacks or insults, no hate speech, no profanity. Please keep the conversation civil and help us moderate this thread by reporting any abuse. See our Commenting FAQ.



The opinions expressed in reader comments are those of the author only, and do not reflect the opinions of The Seattle Times.


The Seattle Times

The door is closed, but it's not locked.

Take a minute to subscribe and continue to enjoy The Seattle Times for as little as 99 cents a week.

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Subscriber login ►
The Seattle Times

To keep reading, you need a subscription upgrade.

We hope you have enjoyed your complimentary access. For unlimited seattletimes.com access, please upgrade your digital subscription.

Call customer service at 1.800.542.0820 for assistance with your upgrade or questions about your subscriber status.

The Seattle Times

To keep reading, you need a subscription.

We hope you have enjoyed your complimentary access. Subscribe now for unlimited access!

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Activate Subscriber Account ►