As Natural Gas Rises, So Do The Fed’s Problems

By Douglas A. McIntyre Published Apr 18, 5:15AM EDT

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The Wall Street Journal was good enough to point out that the price of natural gas in the US is up 93% since last August. Part of the reason is international demand. The paper reports that "power-hungry nations like South Korea and Japan compete in a global natural-gas market that scarcely existed a half-decade ago."

Most of the "green" advocates of a cleaner Earth don’t want companies to burn coal, and natural gas is a natural alternative.

However, natural gas is used to heat about half of the homes in the US. Some could convert to oil, but the price of that commodity is going up as well.

All of this makes life more difficult for the Fed and Treasury. Keeping rates where they are to fight inflation brought on by rising food and gas prices might make the credit crisis more severe taking GDP growth to negative numbers. Lowering rates might make consumers and businesses spend more, driving inflation up.

Fortunately for the Fed, banks are not passing lower interest rates on to businesses and individuals. The financial firms are hoarding money to improve their balance sheets. Their customers are getting nothing.

With high natural gas prices homes may be a little colder next year. The cost of energy will be high and money won’t be available to afford buying it at its newly inflated prices.

The Fed can’t solve that.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.