Let me repeat that: Oil Keeping Inflation Down? Yup, that’s what I am going to suggest. I think before I get to the oil impact, it’s important to discuss the word inflation. I recall in grad school courses defining inflation as “too much money chasing too few goods.” By that measure, do you observe that the multitudes’ pockets are swelling with cash? I don’t. No bubble forming in the stock market, no solid bottom in the housing market. And wages are barely keeping up with inflation, if at all. This leads me to ask, do the higher gas prices represent inflation or something else? Now, we know the fed was busy pumping billions trillions into the system, but those dollars seem to be sitting in bank vaults somewhere, I sure don’t see them in my pocket.
Which gets me to the punchline. I was watching CNBC this past weekend and saw that Walmart was concerned about their sales forecast, specifically citing that high gas prices would keep their customers from driving over. This is something to ponder a moment. I can’t imagine The Bernanke telling the commodities market to bid oil higher if he needed to head off inflation, but Walmart’s sales forecast really got my attention. Is inflation dead? Not at all, not by a longshot. It’s just not here yet, and higher prices for gold and oil are doing more to damper inflation than exacerbate it.