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Guest Post: When Will Inflation Really Hit Us?

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Submitted by Terry Coxon of The Case Report

 

 

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Fri, 10/23/2009 - 16:23 | 108583 Hondo
Hondo's picture

Hard to inflate when the economy is deflating.  Domestic goods and economy deflating.....foreign goods inflating due to deflating $$........net result...lower standard of living for Americans.

Fri, 10/23/2009 - 18:30 | 108771 msorense
msorense's picture

Inflation will strike like lightening if the Fed continues with QE.  I'm not talking about house price inflation, I'm talking about commodity and import inflation.  See the article below:

http://jsmineset.com/2009/08/19/the-countdown-to-the-implosion-of-the-dollar/

The Chinese, Russians, and others are looking for verification from Bernanke the QE is done in early November.  If not, better buy your rice and beans fast!  I'm betting that the author is wrong and that Bernanke is not stupid enough to continue - the implications would be totally disasterous for the economy, the bond market and the stock market.  Giving up on QE just takes out the stock market and hurts the bond market but doesn't destroy it.  Pick your poison - there is no free lunch.  I believe the market is topping out if it hasn't already and will tank imminently.

Sun, 10/25/2009 - 04:26 | 109906 Anonymous
Anonymous's picture

With respect Sinclair has not been wrong so far and Bernanke is in the pocket of the socialist Obama - he has no choice to continue or face the outright implosion of the US not just the $. The breakdown of the 28 year uptrend in the 30 year bond is the canary that will drop from its perch in the second week of November.

Fri, 10/23/2009 - 19:14 | 108857 Clancy
Clancy's picture

M3 supply is deleveraging.  M2 supply (printed) is going up.  So deflation in the short term, inflation in the long.  Or maybe they'll just cancel each other out creating some weird eye-of-the-hurricaine like stability.

Sat, 10/24/2009 - 03:12 | 109246 Anonymous
Anonymous's picture

Isn't that the central idea of a bailout. The other side effect is wealth redistribution. Rich get the M2 money. Middle class deleverage the M3 supply.

Fri, 10/23/2009 - 16:31 | 108595 asdf
asdf's picture

no inflation until deleveraging stops. That will take years.

 

http://www.bloomberg.com/apps/news?pid=20601068&sid=a5682ThUSwY4

Fri, 10/23/2009 - 16:35 | 108599 Prophet of Wise
Prophet of Wise's picture

Tyler, as your previous post verifies. Today's "inflation" is not quantified in the fraudulent CPI calculations but rather in destroying the underlying value of the coin of the realm. We're only doubling down on history:

http://static.seekingalpha.com/uploads/2009/5/8/saupload_purchasing_power.png

Fri, 10/23/2009 - 16:36 | 108602 geopol
geopol's picture

Inflation is already out there,, it's looking for a place to settle. It's already hit in segments. oil,food,stocks... But just begining.. Hyper inflationary depression over the horizon..Get out of dollar denominated anything.

Fri, 10/23/2009 - 16:48 | 108619 Internet Tough Guy
Internet Tough Guy's picture

Agreed. These things take years, even the Weimar inflation got a slow start. Once started though, impossible to stop, and we have started.

Watch the big money move out of the country, government impose soft and hard currency controls, people begin to cast about everywhere for a place to save their wealth. The bubbles in stocks and real estate show this; ever more sudden, sharp rallies in asset prices for no discernable reason as the circle gets smaller and smaller.

After that there is only the sudden stop.

 

Fri, 10/23/2009 - 16:57 | 108642 chumbawamba
chumbawamba's picture

The current stock bubble is inflation.  Weimar was hyperinflationary.  Please note the crucial difference between the two.

Inflation is the effect of printing money.  More money = more supply = falling demand = falling value of currency = debasement.

Hyperinflation is the effect of a loss of confidence in that currency.  No confidence = increasing velocity of money = falling value of currency + feedback loop = expired currency.

Two different concepts.

I am Chumbawamba.

Fri, 10/23/2009 - 17:00 | 108647 chumbawamba
chumbawamba's picture

The stock market is currently up because of all the money printing.  More money in equities means more dollars in circulation.

Weimar happened because of a loss of confidence in the currency.  The same as happened in Zimbabwe.  Nobody wanted a note that was backed by nothing that the government kept printing more of.

I am Chumbawamba.

Fri, 10/23/2009 - 17:05 | 108660 Anonymous
Anonymous's picture

Except isn't the money that is being printed going back into deposits at the Fed, i.e. the money is not leaving the banking system?

There can be no inflation due to printing until the money leaves the banks.

Fri, 10/23/2009 - 18:55 | 108822 chumbawamba
chumbawamba's picture

How about all the hundreds of billions/trillions that went overseas?  The winners of the OTC derivatives?  Etc?  The money is out there.  Maybe not the trillions printed, but inflation has occured.

I am Chumbawamba.

Sat, 10/24/2009 - 15:18 | 109541 sgt_doom
sgt_doom's picture

All your points are excellent, of course, and spot on, but, I'm wondering if we can draw at least some parallels between the future several years in the American economy and what transpired in the Hong Kong economy back in the '90s, after China took it over, and HK experienced hyperinflation, with deflation (if I'm recalling correctly) due to China's offshoring HK jobs to their mainland, while folding the HK dollar into China's currency?

Fri, 10/23/2009 - 17:01 | 108655 Internet Tough Guy
Internet Tough Guy's picture

Thanks for the tip, chimichanga, but the Weimar stock market was initially just like ours; it had a positive real return over certain periods. Eventually everthing became consumed in hyperinflation.

 

p.s. Mexican food gives me ignitable gas.

Sat, 10/24/2009 - 19:10 | 109710 Anonymous
Anonymous's picture

I don't think neither Zimbabwe nor the Weimar Republic are good analogies. These were isolated nations and versus the rest of the world, their currencies collapsed.

All currencies of the world are collapsing at a somewhat equal rate. And all are in trouble and exposed.

A collapse of the American system will ensure a collapse of all systems.

There is no hiding. At all. In the entire world.

They all know this.

Fri, 10/23/2009 - 16:42 | 108610 MsCreant
MsCreant's picture

New Gold bug shopping for an opinion.

I have been offered 17 1/10 fractionals @ $125 each. Never done fractionals before. Spot is now 1053.50.

Fri, 10/23/2009 - 16:47 | 108617 geopol
geopol's picture

Are you talking American eagles??? I'll take all of them,,,@that price.

 

B.T.Y.  Fractional's demand higher premiums. as they are more easily bartered..

Sat, 10/24/2009 - 10:33 | 109379 NumisEX
NumisEX's picture

Screw the premiums on fractionals. Stick to 1oz  or greater with gold. Silver is the fractional.

Fri, 10/23/2009 - 16:48 | 108621 chumbawamba
chumbawamba's picture

Hi MsCreant.

That's not a terrible price.  You're basically looking at a premium of $20 per coin.  For denominations of that size, it's not out of the question.  I was paying $30-50 over spot on 1ozt coins (Maple Leafs, American Eagles, etc.) over the past year at varying times in varying economic conditions, so you could do worse than $20 per coin over spot.

I say buy.

Yours, Chumbawamba.

Fri, 10/23/2009 - 17:06 | 108658 Internet Tough Guy
Internet Tough Guy's picture

Brilliant, pay $200 per ounce in premium as oppsed to $30-50. I have some fractionals to sell you.

Fri, 10/23/2009 - 18:53 | 108815 chumbawamba
chumbawamba's picture

You pay for the fungibility.  These are easily tradable, and will only go up anyway.  Based on what others have said, it seems she's getting a deal anyway, so go drink a six pack and punch yourself in the face.

I am Chumbawamba.

Fri, 10/23/2009 - 20:21 | 108969 Marge N Call
Marge N Call's picture

"so go drink a six pack and punch yourself in the face."

LMAO. Holy shit that was funny. I want to have your baby.

 

Sat, 10/24/2009 - 15:26 | 109550 Unscarred
Unscarred's picture

Chubby, you fucking rule, dude!

That was tha shiiiiiiiiiiiiit !!!

 

http://www.youtube.com/watch?v=-Q1G76_ysNo

Sat, 10/24/2009 - 15:33 | 109555 Unscarred
Unscarred's picture

Dude, you just got served by someone's chubby!

http://www.youtube.com/view_play_list?p=563C6C7DB3F8E846&search_query=cr...

All kidding aside, Internet Tough Guy, you completely lived up to your name, to which I say, "BRAVO!"

Authenticity is it's own reward.

Fri, 10/23/2009 - 16:49 | 108627 Internet Tough Guy
Internet Tough Guy's picture

Skip the high premiums and buy ounces. If you are worried about divisibity buy silver.

Gold is for wealth storage, silver is for spending, IMO.

 

Fri, 10/23/2009 - 17:31 | 108685 starfish
starfish's picture

Ah Hah...i think i learned something...

Fri, 10/23/2009 - 16:51 | 108631 geopol
geopol's picture

So you don't get kiled, if they are American Eagles, they are at +premium $142.34 Kitco @16:51:00

Fri, 10/23/2009 - 17:02 | 108651 Miles Kendig
Miles Kendig's picture

You're great MsCreant.  You have an answer to last evenings ?

ATB

Fri, 10/23/2009 - 17:30 | 108683 MsCreant
MsCreant's picture

Yes, I checked back a few times on that one. I would say you are doing very well! :-) Wish a nice fat dooby was legal, I'd surely buy, roll, and share!!

Fri, 10/23/2009 - 17:39 | 108701 Miles Kendig
Miles Kendig's picture

And compare some notes on how to spoil a kid that is responsible and respectful.  I would love some additional insights. Lord how I wish it were here as well. I am considering going back to Cali after graduation in May just because. When it is we will.

Fri, 10/23/2009 - 17:27 | 108679 Gunther
Gunther's picture

Always something to learn…
Small coins are good to buy something if no other money is available.
As long as you think there will be paper as medium of exchange in the future question is if you want to pay the markup.
On that thought, offer bullion price; that is what the dealer would pay the seller.

Some prices:

Kitco: 0.1 oz Eagle $142.52
https://online.kitco.com/bullion/completelist.html

An usually expensive German coin dealer:
83.50 Euro (=126.25 US$) for 0.1 oz Nugget (other 0.1 oz coins sold out)
http://proaurum.de/edelmetallshop/gold/muenzen_anlage.jsp?action=showPro...

To compare: 1oz maple

Kitco 1140.16$
proaurum 752.5 Eu= 1129.65 $

Fri, 10/23/2009 - 17:37 | 108697 MsCreant
MsCreant's picture

Thanks to all for your answers. All your opinions were helpful. Everyone. I lost out on one Krug and 16 Eagles because I was too slow. I learned a lot from this experience and your input and feel like I will be ready to pull the trigger when it is right next time.

That was cool having all that support so fast. Thanks again.

Fri, 10/23/2009 - 19:00 | 108830 chumbawamba
chumbawamba's picture

Oh well, take the money and go out and find some nice Pamp Suisse or Credit Suisse 1ozt bars.  You'll pay a much smaller premium (in line with the deal you just passed up) and you'll have metal in hand now, which is crucial.  It may not be available in another few weeks.

I am Chumbawamba.

Fri, 10/23/2009 - 21:52 | 109059 Anonymous
Anonymous's picture

Those of you hoarding bullion might as well just leave the country. I don't say this to be rude, just practical. There are a handful of countries which will be much better off in the "Mad Max" scenarios you all are predicting: Chile, New Zealand, Canada, Australia, Norway, and Ireland come to mind.

Instead of bartering silver bullion for a loaf of bead, just get out of dodge - or at least sell your property, rent for as long as you can, and get your money out of the country now. Bartering gold coins for sacks of rice doesn't seem to be a very civilized way to live.

Fri, 10/23/2009 - 20:57 | 109000 Anonymous
Anonymous's picture

A principal reason the fractionals are more expensive per unit weight is, you still have to pay the manufacturing cost of the coin. That is not negligible.

The difference in manufacturing cost for a 1/10 oz. coin versus a 1 oz. coin is not much. Hence, as a proportion of the smaller coin's overall price, the manufacturing cost is a much higher percentage than it is for the 1 oz. coin.

Yes, the "fungibility" argument also comes into play.

If you are planning to buy and hold, I'd say you stand a pretty good chance at recouping the delta based on spot.

Sat, 10/24/2009 - 06:50 | 109272 Anonymous
Anonymous's picture

buy Silver instead, the premium is lower

Sat, 10/24/2009 - 13:18 | 109475 Bam_Man
Bam_Man's picture

MsCreant-

APMEX almost always has better prices than Kitco and they frequently offer fractional Maple Leafs that have "abrasions" (lightly scratched, not "mint condition -- who cares?) at an even lower preimum.

Fri, 10/23/2009 - 16:44 | 108612 curbyourrisk
curbyourrisk's picture

Round 2 of deflation about to happend.  Dollar time to rally!

Fri, 10/23/2009 - 16:50 | 108630 californiagirl
californiagirl's picture

Couldn't part of the increase in M1 be due to money coming out of the M3 category? Since M3 is no longer reported? How do we know?  Not being an expert or a Wall Street finance wizard, any insight would be welcome.

Fri, 10/23/2009 - 16:51 | 108632 Anonymous
Anonymous's picture

i love this game. No one knows what the hell they are talking about regardless of who you are. Yet, we all keep proclaiming our opinion hoping to be correct. Inflation can become relevant if the dollar continues to tank or if all this money begins to go to work, or any combination thereof. This, along with geopolitical influences create a most unpredictable environment (like we could even guess when it was more predictable). So here is my guess, the gov'ts of the world are all in this together. The G20 is buying our dollars while they are down ( a double down or so)so that when it springs back some, they will have recovered. This is a calculated plan. QE keeps the rates low while the Asian lenders of our country double down allowing us to finance our big spending spree. How's that for a guess?

Sat, 10/24/2009 - 15:21 | 109546 sgt_doom
sgt_doom's picture

Of course no one knows what will happen - obviously this is completely new territory, with over 3,000 categories of credit derivatives and untold layers and levels of securitization, one can only surmise that deleveraging will take ten, twenty, thirty plus years.

It require complete transparency, several miles of supercomputers and some fairly intelligent analysts to deduce even a modicum of guesswork.

Fri, 10/23/2009 - 16:51 | 108633 Anonymous
Anonymous's picture

The melt-up is set to start April-ish 2010.

Fri, 10/23/2009 - 16:52 | 108635 chumbawamba
chumbawamba's picture

My opinion is that inflation is already here in the form of equities.  The rise in the Dow just happens to coincide with "Quantitative Easing" (how come that term conjures up intimations of anal sex?  maybe it's just me...)

I believe SOME of the rise in basic commodities (particularly the metals) is the inflationary effect of all this money printing.

I think the post just below this one where Tyler says "Either this is another headfake, this time without a Dick Bove scapegoat, or a dollar renaissance could finally be in the making, with a subsequent drubbing of all dollar-denominated assets" is another clue that the wheels are starting to fall off.  But that's a hyperinflationary indicator.  Because this time, when the shit hits the fan, it's not going to be a repeat of Fall 08.

I am Chumbawamba.

Fri, 10/23/2009 - 16:52 | 108636 vreporter
vreporter's picture

The deleveraging that has taken place - and continues - is in a way, the saving grace here. Because of this phenomena, it's very difficult to convert all that printed money into spendable or loanable money; all this while credit standards have been permanently adjusted. Commodities, real estate, art and other "hard" assets have more room to drop. Inflation has many fights to go before it can even win one round!

Fri, 10/23/2009 - 16:59 | 108645 Printfaster
Printfaster's picture

The Chinese control inflation in the USA.  When they dump their Ts, inflation begins

Until thin, inflation is theoretical concept.

Fri, 10/23/2009 - 17:06 | 108661 asdf
asdf's picture

and China can't dump their treasuries because 

- it would kill their savings

- it would kill their export oriented economy and trigger a chinese depression

 

therefore, inflation is a theoretical concept.

Fri, 10/23/2009 - 17:25 | 108677 rek
rek's picture

They don't even need to "dump" their treasuries all they have to do is not buy as many new ones as we need. In this way our economy is a lot like a ponzi scheme: we rely on constant new investment to pay off the old investment because in reality we can't afford to do anything else. While I agree that our economy and currency collapsing is clearly not in the best interest of China, that doesn't mean it cannot happen.

At the rate we are racking up debt it's highly likely that China and other foreign countries will not be able to afford to support our debt - even if they want to. Even if everything goes according to the governments best case scenerio plans we're going to rack up trillions more in debt over the next decade. Right now China holds "only" about 800 billion. They have their own economic problems to deal with, think they can really afford to double, triple, quadruple, or more? Not for long.

Exponential growth, in anything, is simply unsustainable. We'll find that out eventually.

Fri, 10/23/2009 - 17:37 | 108695 geopol
geopol's picture

I think the chinese have a very interesting plan for the U.S.. It goes like this... We no longer need your market Yankee dog. Our currencies are going to rise....we buy own stuff.we have 1.2 billion consumers who are now able to by our own washing machines..get it, we no longer need Yankee dog....

 

P.S. Walmart in drastic price reductions for the holidays... =blood bath

 

BTW Where is Walmart going to get it's inventory... not the Chinese anymore....hummm

Fri, 10/23/2009 - 17:28 | 108680 Printfaster
Printfaster's picture

Not necessarily.  If payments for resources or food come due, then the dollar goes.  Basically the buck is OK unless the Chinese cannot drive a sufficient export economy.  The Chinese are trying to hedge that by buying foreign productive assets.

 

 

Fri, 10/23/2009 - 17:08 | 108663 ChickenTeriyakiBoy
ChickenTeriyakiBoy's picture

as cashin reminded this morning, mind velocity. $800+ billion excess reserves. yikes

Fri, 10/23/2009 - 17:15 | 108667 Biff Malibu
Biff Malibu's picture

One thing I've noticed is that Dow Transports have gotten totally uber pwnaged that last few days.  Sign of things to come?

 

Fri, 10/23/2009 - 17:26 | 108678 waterdog
waterdog's picture

Not bad for a link into an investment product-short and smooth. Appears to be in line with J. S. Kim's investment strategy. Not sure though, clicked on the link but got nowhere.

Waiting 36 months to start making some real money still bums me out. Like old Ian says, life is a long song, but the tune ends to soon for us all.

If it was not for all the criminals being rooted out of their snake holes by the weasels, there would be no reason to blog for another 3 years.

And while we are on the subject of making money, I want to ask you guys to stop making fun of us little guys who buy on the dips. Believe it or not, some of us are not independently wealthy. We attempt to make costs by working for low wages because or skills are no longer needed. We race home each night hoping we have not been stopped out of our AUY 100 shares.

I need these guys to keep buying and selling. I have resold and repurchased seven times the same five stocks I bought in May. The paltry amount (as weighted by the effluent members of this blog) I have made during this time has, carpeted my living room, replaced my tires, bought a root canal and cap and, paid for my girl friend to never come back.

I have property taxes, homeowner’s insurance and flood insurance due in 90 days. If you cause these hard working slow grasping friends of mine to stop purchasing hope, then I will have to go to the pound and get a sickly puppy, rent a wheel chair, put on nasty looking clothes, paint a sign that reads, homeless vet, any help would be appreciated, sit at a major corner, and stare blankly at the poor people in the car.

Do you want that on your conscience? I hope not- but I bet Cheeky does.

Fri, 10/23/2009 - 17:33 | 108688 Biff Malibu
Biff Malibu's picture

Waterdog, I thought I was reading my own profile.  I think there's more of "us" here than you think.

Fri, 10/23/2009 - 17:43 | 108703 geopol
geopol's picture

paid for my girl friend to never come back

 

Ah shit, and you said you weren't making any money. The above had to cost you the price of a Buick..

 

Priceless

Sat, 10/24/2009 - 15:47 | 109564 Unscarred
Unscarred's picture

Q- Why does a divorce cost so much?

A- Because it's worth it.

Fri, 10/23/2009 - 17:34 | 108694 Anonymous
Anonymous's picture

milk this time last year= 4.39 per gallon. now 1.49. bread last year= 2.59 per loaf. now .99. gas last year =4.19. now 2.59. whatevers happnin, bring it on...

Fri, 10/23/2009 - 21:01 | 109006 Anonymous
Anonymous's picture

Those are temporary specials/loss leaders. The prices you listed look like 1-week specials and/or generic house brand deals. In Cali, gas is around $3-something, btw.

Food prices are down temporarily because of last years soft commodity bubble pop and also, because food retailers are trying to shake each other out. Check their margins and you'll likely find -x.xx% to +0.xx% profits for an extended period of time.

*** This always happens when the economy suffers because customers will change their buying habits to save money, which might be permanent! ***

So a food retailer can lose serious market share in today's environment if they don't bite the bullet by operating at or near cost.

A retailer's biggest nightmare (what they're trying to avoid) is:

a) Shoppers permanently reducing their consumption

b) Shoppers permanently buying cheaper foods/changing diets (though consumption may stay the same)

c) Shoppers switching to a competitor (this is the worse one and it can be a permanent change, loss of market share)

It's a shake out. When they run out of air (cash) they WILL raise prices. Trust me, I know. I used to set prices and went through this ordeal in the 90's recession. Once the recession ended everyone raised prices and we were finally able to make money! Btw, we came very close to closing our doors, but we managed to survive.

Sat, 10/24/2009 - 10:10 | 109358 Anonymous
Anonymous's picture

No jobs = no money = price deflation. Quite simple really.

Sat, 10/24/2009 - 13:35 | 109488 Oxytan
Oxytan's picture

Simple, really?

Ask the good Dr. G. Gono if no jobs means price deflation!  Deflation alright, but for you're refering to the currency!  Got 100 Trillion Z$ framed to prove you WRONG!

 

Sat, 10/24/2009 - 15:25 | 109548 sgt_doom
sgt_doom's picture

Well...yes and no.  Figure into the equation that the dollar is being moved away from its reserve currency status, they hyperinflation sets in on a number of items - leading to a mix of hyperinflation with deflation.

Curiouser and curiouser.....

Sat, 10/24/2009 - 16:08 | 109574 Unscarred
Unscarred's picture

I believe that the future of our economy is best explained by using the Teller-Ulam theory:

http://en.wikipedia.org/wiki/Teller%E2%80%93Ulam_design

Hyper-inflation doesn't just spontaneous occur- sort of like nuclear fusion.  BUT, a deflationary cycle to jump-start a macroeconomic revolution (dollar loses reserve status, etc.), like using a  fission detonator to establish the critical mass for a fusion reaction, and you have this:

http://www.youtube.com/watch?v=WwlNPhn64TA&NR=1

Have a nice day.

 

Fri, 10/23/2009 - 21:03 | 109008 Anonymous
Anonymous's picture

Those are temporary specials/loss leaders. The prices you listed look like 1-week specials and/or generic house brand deals. In Cali, gas is around $3-something, btw.

Food prices are down temporarily because of last years soft commodity bubble pop and also, because food retailers are trying to shake each other out. Check their margins and you'll likely find -x.xx% to +0.xx% profits for an extended period of time.

*** This always happens when the economy suffers because customers will change their buying habits to save money, which might be permanent! ***

So a food retailer can lose serious market share in today's environment if they don't bite the bullet by operating at or near cost.

A retailer's biggest nightmare (what they're trying to avoid) is:

a) Shoppers permanently reducing their consumption

b) Shoppers permanently buying cheaper foods/changing diets (though consumption may stay the same)

c) Shoppers switching to a competitor (this is the worse one and it can be a permanent change, loss of market share)

It's a shake out. When they run out of air (cash) they WILL raise prices. Trust me, I know. I used to set prices and went through this ordeal in the 90's recession. Once the recession ended everyone raised prices and we were finally able to make money! Btw, we came very close to closing our doors, but we managed to survive.

Fri, 10/23/2009 - 17:48 | 108709 Apocalypse Now
Apocalypse Now's picture

Interesting that nobody ever talks about the trillions in derivatives - nobody knows the details of these, and if they start to lose value through deleveraging I believe deflation can last a long time.  I still believe a GDII or Japanese scenario is the most likely.

What is the jobs outlook?  Until you can even begin answering that question in the positive, the inflation already occured (prior bubbles) and we are still in deflation.

I agree with the 50/50 allocation and like pre-1922 swiss francs for collectors.

Fri, 10/23/2009 - 17:53 | 108716 geopol
geopol's picture

Glad you brought that up.. I thinks it's at $650,000,000,000.000.00, It looks to me like jubilee time.

 

Sat, 10/24/2009 - 00:29 | 109199 Assetman
Assetman's picture

Excellent observation, Mr Brando...

As amazing as $800 billlion in reserves are, it's even more amazing to be that there is a heavy incentives for banks to be hoarding them.

Sure some of the reason is bad debt-- but for the 5 largest banks-- it's those finanical weapons of mass destruction.  People just do not appreciate how concentrated and massive even these net exposures are...

Now that being said, the Fed was testing the waters for the reverse repo for a reason... and it wasn't deflation.

Fri, 10/23/2009 - 18:19 | 108749 PAPA ROACH
PAPA ROACH's picture

I vote deflation in the near future. The trouble with stats like M1 is they do not tell you who sits on that, in this case mostly the upper 1% of the population, meanwhile the real consumer is not fattening his checkbook by 17%+; job losses continue etc etc. If Bill Gates gets 5% more cash, it creates no velocity and no inflation.

I think we are on the cusp of this inflation bandwagon and all the long gold/commodities/equities trades going south in a mass game of musical chairs, with only a small fraction of chairs vs. players. As they say in Vegas, "good luck sir".

Fri, 10/23/2009 - 18:22 | 108756 Anonymous
Anonymous's picture

casey reserch talking about inflation for years
two years ago the recommended short ED future
if you follow this advice you be broke.
even a broken clock is right twice a day.
for realy deep thought i recommend HOISINGTON 3Q review.
there is no way but the distraction off the ponzi finance
and only then we can talk about inflation.

investment
long bond
long $
long vix
short grain
short XRT,IYR

Fri, 10/23/2009 - 20:45 | 108853 Renfield
Renfield's picture

SO weird reading about 'dee...fla...shun'. What is this word you speak of?

Here in Aus, our family food shopping budget is about double what it was three years ago; our petrol prices are the highest in the world; house prices and rents are stagnating at their bubble highs; what else is there? Oh yes, stock market has enjoyed a 60% rally (thanks USA) and our government is passing out 'cash for clunker homes' stimulus packages like it's going out of style. Ever-increasing commodities prices will pay for all this dontcha know.

Our central bank just raised rates and seems set to consecutive rate rises through July:

"Markets now predict that the Reserve board will raise rates at seven consecutive meetings, lifting its cash rate from 3 per cent 10 days ago to 4.75 per cent by May and 5 per cent by July."

http://www.theage.com.au/business/seven-rate-rises-in-a-row-tipped-20091015-gz64.html

Credit card rates meanwhile hover between 15% and 30% depending on how compliant a debtor you are, and oh yeah, let's not forget the paucity of interest rates on CITIZEN SAVINGS accounts (yes, in many accounts at 0.01% here too). Wages are stagnant, but not cut (yet) and even if they are, those aren't prices are they?

Deflation in what? Flat-screen TVs and Christmas shopping? Or does deflation/inflation pertain now only to global credit markets and doctored CPI?

Fri, 10/23/2009 - 19:15 | 108859 Hammer59
Hammer59's picture

The Fed wanted to monetize the debt, forced to by Bush-league malfeasence and two expensive quagmires we will never win. Try as he might, try as he may, The three stooges have done everything to make us pay. (For the sins of Greenspan/Bush/Paulson/GOP).  Yes, some stimulus has driven equities, but look at the earnings. This American Economy is headed for the Great Depression that the fools have claimed we will avoid. Japan ala 1989. They thought the bailouts and stimuli would bring back the economy, but banks and consumers are shell shocked, hoarding, grabbing Gold/Silver. Housing, labor, energy, food, employment--and soon comodities, all going down hard all over the world.

Fri, 10/23/2009 - 21:00 | 109003 Anonymous
Anonymous's picture

Scribd? How about just posting it normally? It's easier to ignore when you make it more difficult to access.

Sun, 10/25/2009 - 01:12 | 109876 Anonymous
Anonymous's picture

No kidding. What a huge pile of stinking dog crap is scribd. The annoyance is not worth anything that might be in the articles.

Fri, 10/23/2009 - 21:03 | 109009 Anonymous
Anonymous's picture

"milk this time last year= 4.39 per gallon. now 1.49. bread last year= 2.59 per loaf. now .99. gas last year =4.19. now 2.59. whatevers happnin, bring it on..."

Those are temporary specials/loss leaders. The prices you listed look like 1-week specials and/or generic house brand deals. In Cali, gas is around $3-something, btw.

Food prices are down temporarily because of last years soft commodity bubble pop and also, because food retailers are trying to shake each other out. Check their margins and you'll likely find -x.xx% to +0.xx% profits for an extended period of time.

*** This always happens when the economy suffers because customers will change their buying habits to save money, which might be permanent! ***

So a food retailer can lose serious market share in today's environment if they don't bite the bullet by operating at or near cost.

A retailer's biggest nightmare (what they're trying to avoid) is:

a) Shoppers permanently reducing their consumption

b) Shoppers permanently buying cheaper foods/changing diets (though consumption may stay the same)

c) Shoppers switching to a competitor (this is the worse one and it can be a permanent change, loss of market share)

It's a shake out. When they run out of air (cash) they WILL raise prices. Trust me, I know. I used to set prices and went through this ordeal in the 90's recession. Once the recession ended everyone raised prices and we were finally able to make money! Btw, we came very close to closing our doors, but we managed to survive.

Fri, 10/23/2009 - 21:21 | 109026 Anonymous
Anonymous's picture

If you want to believe the statistics provided by the BLS for CPI, please see this page:

http://www.bls.gov/news.release/cpi.nr0.htm

Row 8 column 1 basically shows prices are flat YoY, not adjusted for inflation, which we know the Fed has got the printing presses on full-auto.

Checking the gas price in column 8, one thing I can say for certain, gasoline is not -30% YoY in my neck of the woods.

Oct 20, 2008 308.9 (cents/gal.)
Oct 19, 2009 275.1

http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_hi...

(download a spreadsheet and check out your area)

More like 11%. Your results may differ, of course.

I think the inflation/deflation is going to vary by item and by region. But that's just the ruminations of a numbers guy.

(Can someone please tell me how to make these URL links hot, or do I have to be logged in for that to occur?)

Fri, 10/23/2009 - 21:56 | 109063 Anonymous
Anonymous's picture

Column 8 row 1 for paragraph 3. (My kingdom for a sense of order.)

#109026

Sat, 10/24/2009 - 06:08 | 109269 Hunch Trader
Hunch Trader's picture

By the time inflation starts to happen, the market will have priced it in already. I believe the current rally to be a combination of that, dollar debasement and search for interest yield. 'Investing' is dead, it's all a speculative gamble now, and this has fooled many who believe in fundamentals. Yes they're important, but by the time fundamentals turn, casino gamblers will have reaped most of the benefits... I do not like this setup, however that's the way it is.

Besides I have this funny feeling in my tummy that an important part of the inflation has already happened, and the stock market did *not* keep up with that momentum; it's called the $5 coffee.

 

Discl: long SPY, not because I like it, but because I have to.

 

Sat, 10/24/2009 - 08:35 | 109305 Anonymous
Anonymous's picture

if the dollar does not recover on the next few months, we will see inflation beginning mid-10. check out the last bit of q&a in bg's conf call the other day. in short, if the dollar does not recover and push the real down, brazilian farmer's will either not plant or will increase prices.

i am a believer in one last push up by the dollar. it is hard for me to believe we don't get some recovery over the coming months. whatever, with new treasury issuance on deck, that recovery is not happening anytime soon. don't expect the dollar to get strong and push this market down until this last gasp of issuance is finished.

Sat, 10/24/2009 - 11:43 | 109426 Anonymous
Anonymous's picture

End of QE will slow descent of $, push long end of treasury curve up hard, further stress banks forcing eventually a capitulation in some TBTFs.

Continuing QE will lead to erosions of confidence in $.

Not continuing will cause rising interest rates, equity collapse, further severe defaults and bankruptcies, dislocations.

The only way they can steer this baby now is by monetization. There can be no return to any form of austerity.

Choice (1) collapse dollar but keep control

Choice (2) Stop support, lose control, lose banks, bonds, equities, businesses.

Which do you think they will pick?

And it will be very, very inflationary. Starting now.

Sat, 10/24/2009 - 13:01 | 109466 Anonymous
Anonymous's picture

we live is a bit different times. valuations of everything were out of touch with reality, especially stocks. then they plunged by half. for the past 6 months, stock have been rising on low volume (no one wants to sell at a still substantial loss), only cornered umeployed are offloading their portfolio holdings. from that perspective, one cannot realistically expect inflation when people have been buying the S&P500 at 1300 and now sell at 1000 to see inflationary pressures. with treasury bonds the picture is entirely different: the feds are issuing so much, that they overwhelm any willing sellers.
we are left only with commodities. they are steadily rising, but one shall not expect a rapid appreciation due to some political favors owed by banks to the government and lower leverage to commodity traders. higher prices trickle down toend consumers. if you bother to look at the PCE, it is about 3% above the CPI. the cost of maintaining a caveman living standard nowadays may be declining, but the cost of maintaining yesterday's living standard is still rising.

Sat, 10/24/2009 - 14:37 | 109513 Lexington Duffet
Lexington Duffet's picture

If we define inflation as the value of the $ to a basket of foods, talking just about the money supply neglects an important point:  the velocity (celerity) of money, defined as  speed at which money is being used.

For example, if we have $1000 stuffed in one matress, that has less actual effect on inflation then $10 being circulated quickly through the economy--something zero as compared $10 to the restaurant at 8 am, $10 to the food supplier at 10 am, $10 to the accountant at 12 am, $10 to the accountant's bookkeeper at 4 pm, bookkeeper to the bookstore at 9 pm. In this example, $1000 has a total net effect of zero while the ten dollars has a net effect of $50 because its used five times.  

In a large example, I'd bet big $ the velocity of money measures are way down, which adds to how deleveraging should cause deflation in the current cycle.  And I think the fact velocity basically dropped to zero as the financial markets seized up caused Bernancke's freak out from fear and  his subsequent committment to showering $ into the market place.  B seems to me a pretty calm man but he physically shaking as he testified before Congress begging for $.  (not saying he used it all wisely, if anyone could)

Of course, the market disagrees with me as it has risen apace so let us see what occurs. 

Don't see how one can argue with the fact that the price DROPS show we are in a deflationary period even with the Fed and Gov pouring $ into the economy. 

Notice International Paper had another set of plant closures and layoffs.  There is a lot of pain out there at the moment.

 

Sun, 10/25/2009 - 03:20 | 109892 Anonymous
Anonymous's picture

I've long wondered if we've become so fixated on classic definitions of inflation and deflation that we've lose sight ofthe fact that these are in fact continuum processes, and ones that could in fact happen simultaneously in the market.

Velocity of money has dropped dramatically - that's essentially what a credit crisis looks like: people become fearful about spending money, banks become fearful about lending money. businesses become fearful about reinvesting money back into the business in the form of wages or capital expenditures.

It doesn't matter what happens at the printing press end in this regard - the velocity of money has plummeted, and we have a game of chicken going on with several million participants as to who will be the first to start spending dramatically in order for that process to begin again.

At the same time, the subtle currency devaluation is increasing the cost of volatile goods from food to oil, not only directly (and yes, the price of most such volatile goods, while having dropped some early this year, are now rising again).

Given that real wages are now falling dramatically (between layoffs and reductions of work force work hours) the inflation that's happening now is already beginning to gain steam, but it's not wage inflation. Perhaps a better indication of inflation is tied into the velocity of money in the denominator of such equations.

Sat, 10/24/2009 - 16:32 | 109592 Anonymous
Anonymous's picture

Will insert new $ via:

Transfer payments
Welfare & public retirement
government salaries
military
public works
PD liquidity driven equities & commodities
war materiel

Since the tax base cannot support even modest services and debt service, the overage shall be paid with overt debt and monetization.

It will prove inflationary

Sat, 10/24/2009 - 19:02 | 109705 time123
time123's picture

I believe inflation has been hitting us for a decades now, it is just that it has been a slow process and that is why it has not been very noticeable. 

What we have been experiencing over the last couple of years is a short term reversal in this long term inflation process. It will likely resume as soon as the economy starts growing again in any significant way.

 

time123

at http://invetrics.com

Sun, 10/25/2009 - 00:39 | 109856 Anonymous
Anonymous's picture

This paper assumes that the 17+% of the money supply has resulted in consumption. As Art Cashin said, if he drops a helecopter of money over Bob Pisani's house and Bob doesn't spend it, there is no inflation. So if all of these dollars aren't trickling down to consumption, then we simply have an enormous fucking debt burden with no inflation. The enormous fucking debt burden (EFDB) compromises the value of the US Dollar, which THEN causes inflation via devaluation. That is, if China wants to lose their biggest customer.

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