Oil

[sunpak]

Schweser says that:
A significant decline in oil prices will lead to overheated economy and high inflation? How is that possible when lower oil prices is deflationary in nature?
Thanks!

 

[S2000magician]

When oil’s cheap people buy new cars, and borrow money to do so. Increased demand is inflationary.

 

[sunpak]

in the long run, yes

 

[Galli]

The theory is that there will be more income available to spend on items which increases demand/prices of the rest of the economy.
It’s a pretty faulty idea IMO.

 

[itera]

I’d agree in the LR, and i agree it’s a misleading statement