Cholesterol, eggs, oil and other inflation-fighting ingredients

Posted by Tracy Alloway on Jun 24 16:19.

Here’s a thought after the International Energy Association’s oil price-crushing decision.

The Wall Street Journal reports that the IEA has been working on the plan for months. Suddenly all those recent speeches by Federal Reserve chairman Ben Bernanke on ‘imported’ inflation through high oil prices, and the inability (or inappropriateness) of the US central bank to deal with it look very apt. The IEA’s move not only impacts oil prices by hitting supply, but also sends a signal to speculators.

In that sense it’s just a very creative form of inflation targeting on the part of the US government.

It isn’t, however, its most creative.

Peter Atwater points us to this 1960s relic from US president Lyndon B Johnson’s own battle with inflation, as recounted on page 96 of Robert Samuelson’s The Great Inflation and its Aftermath:

Shoe prices went up, so [president] LBJ slapped export controls on hides to increase the supply of leather. Reports that color television sets would sell at high prices came across the wire. Johnson told me to ask RCA’s David Sarnoff [RCA was then a major TV manufacturer] to hold them down. Domestic lamb prices rose. LBJ directed [Defense Secretary Robert] McNamara to buy cheaper lamb from New Zealand for the troops in Vietnam. The President told CEA [Council of Economic Advisers] and me to move on household appliances, paper cartons, news­ print, men’s underwear, women’s hosiery, glass containers, cel- lulose, [and] air conditioners. … When egg prices rose in the spring of 1966 and Agriculture Secretary Orville Freeman told him that not much could be done, Johnson had the Surgeon General issue alerts as to the hazards of cholesterol in eggs.

Inflation-targeting, hard-boiled.

(Photo by Suat Eman via Free Digital Photos)

Related links:
The SPQR – FT Alphaville
Help! We’re all being financially repressed! – FT Alphaville
Two views on QEased commodities prices – FT Alphaville

This entry was posted by Tracy Alloway on Friday, June 24th, 2011 at 16:19 and is filed under Capital markets, Commodities. Tagged with , , , , , , .

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