More Mea Culping

I'll admit that I've been wrong several times now on my specific oil predictions, but I'm sticking by my guns on the general principals. When a barrel of oil jumps $3 a barrel in one day because U.S. ships fire in the direction of an Iranian speedboat, as happened a few weeks ago, speculation is over heated. Additionally, a lot of the "analysts" who we see quoted about the ever increasing ceiling on oil prices have a vested interest in those increased prices, and their predictions are like the wind that forces the forest fire forward.

I was reading an article about inflation at Market Watch this morning, and in that article they raise the specter of a possible needle to this bubble:

The next step, of course, would be for the central bank to actually raise rates. Coming at a time when the economy is still weak and housing is falling, this would shock the markets - especially oil and other commodities where prices have jumped sky-high.

Higher interest rates and fewer dollars in circulation could very well pop these bubbles. More important, they would also get inflation expectations back to their mooring.

Of course, higher interest rates would not be economically neutral. It would certainly have a negative affect on the stock market and the housing market. We are facing multiple negative economic factors right now, though, and it is high time that we decide which are going to have the biggest impact on the national economy. I'd put inflation and commodity prices near the top. My guess is that the Fed is fearful of multiple burst bubbles right now and will resist raising rates, however, allowing the current bubble more elasticity.