McDonald's and Wal Mart Warn of Inflation Because Big Banks Use Trillions of Taxpayer Money as Gambling Chips for Speculative Commodities Plays

George Washington's picture

The signs for inflation in food and basic consumer goods are widespread.

McDonald's is warning of inflation in food prices:

Corp forecast higher prices for beef, dairy and other items and said it
would cautiously raise prices to keep attracting diners, who are
grappling with higher grocery and gas bills.


and other restaurant operators are getting squeezed by accelerating
food costs and must figure out how to raise prices without scaring away
already skittish diners.

Similarly, the American head of Wal Mart - the world's biggest retailer - is warning of price hikes across the board:

consumers face "serious" inflation in the months ahead for clothing,
food and other products, the head of Wal-Mart's U.S. operations warned


Inflation is "going to be serious,"
Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's
editorial board. "We're seeing cost increases starting to come through
at a pretty rapid rate."

CNBC reported yesterday:


combination of rising gasoline prices and the steepest increase in the
cost of food in a generation is threatening to push the US economy
into a recession, according to Craig Johnson, president of Customer
Growth Partners.


Of course, at lower income levels,
these percentages are much higher. One sign of the stress some
consumers are already feeling is that some AAA offices have already
seen an increase in out-of-gas service calls, as motorists try to put
off filling their tanks or drive around trying to seek out the gas
station with the least expensive price.

And as the New York Times notes, food producers are selling smaller portions for the same price, due to cost - push inflation:

prices for energy and for raw materials like corn, cotton and sugar
creeping up and expected to surge later this year, companies are barely
bothering to cover up the shrinking packs.

While it's tempting to say we've got inflation, things are not so black-and-white.

As I wrote in January:

Debates about inflation and deflation paint with too broad a brush, or too narrow a focus ...


broad a brush because the economy is not a monolith ... different
asset classes can move in different directions at the same time.


Too narrow a focus because you can't analyze what's happening in the U.S. in a vacuum in a highly global economy.




As I noted in 2008:

Some people think that some prices will go up at the same time that others go down.

For example, Dominic Frisby writes:

we going to see rising prices or falling prices? Of course, it
depends on the asset class – and in what currency you are measuring.



prices in assets associated with debt [like houses]
and rising prices in things which you buy with cash – food, energy
and some imported goods.

Adam Hamilton of Zeal LLC agrees:

typically financed by debt is likely to see its prices plunge
dramatically, like houses and cars, as the ongoing Great Bear bust
continues to destroy the gross excesses of debt via higher long rates.
Conversely, anything not typically ‘paid for’ with debt, including
groceries and general living expenses, is almost certain to rise in the
coming years. We are staring down a brutal environment of widespread
inflation marked by various sectors witnessing falling prices as debt
leverage implodes.

So we may very well experience both inflation and deflation.

I wrote in July 2009:

know from experience that when you're in a national park, movie
theater or some other contained place, prices are higher than


Basically, the stores in such places know you
can't go somewhere else, so they can charge you what I call "got you"
prices. In other words, you're a captive buyer, and they've "got you".


I've noticed the same thing with health care costs. My family's health care premiums increased 6% last year - on top of the 6% increase the year before.


is "got you" prices. The health care industry knows that Americans
are desperate for health care, and that if they raise prices, people
will pay.


I've previously pointed out that inflation versus
deflation is not necessarily an all-or-nothing proposition: we can have
inflation in some asset classes and deflation in others.


my current theory is that we will have deflation for some time in
most asset classes, but inflation in the "got you" classes of basic
necessities that everyone needs - food, energy, and health care.


In a tough economy, companies that can squeeze broke consumers for more money will do so

I reported in September 2009:

Jeffrey Saut - Chief Investment Strategist and Managing Director of Equity Research at Raymond James - is now confirming that theory:

or deflation, the argument rages; yet on CNBC last Thursday I opined
that we are currently experiencing both... It appears to me that the
country’s top quintile of wage-earners (the folks with the most assets)
are experiencing deflation as their home prices have collapsed, their
401K’s are substantially below where they were in October 2007, their
bonuses have been “whacked,” and the list goes on.

Meanwhile, the
lower-income households are experiencing inflation with their heath
care costs rising, food prices escalating, insurance premiums
climbing, etc.

Saut thinks inflation will eventually win out:

“bet” is that the inflationary forces will eventually win out because
that’s the way it has always played since the Great Depression.

that is not controversial. Indeed, even the greatest advocates of
the deflation theory say we may eventually get inflation. For
example, David Rosenberg says that deflationary periods can last years before inflation kicks in.

Well-known financial analyst Dian L. Chu wrote in June 2010:

the seemingly tame headline inflation numbers, consumers never seem
to see price declines in certain categories like education and health.
For instance, prescription drug inflation escalated to 5% from less
than 3% in 2007 and 2008.

So, it is pretty obvious what we have here--biflation--instead of deflation. Biflation is a state of the economy where inflation and deflation occur simultaneously.


price increase of commodities is caused by the increased money flow
(via loose monetary policy) chasing them. On the other hand, the growth
of economy is tempered with high unemployment and decreasing
purchasing power. This has resulted in a greater amount of money
directed toward essential items (inflation) and away from
non-essential items and things required credit to buy such as house
and cars (deflation).


While all of that money Federal
Reserve pumped into the system could in theory cause inflation ...
weak banks and slack in the economy would weigh against that. Indeed,
it is likely that crude material price increases could begin to move
down the supply chain; however, end markets are still too weak to
allow a full price increase.

So, in the near term, biflation
could be around through possibly 2012 with pockets of inflation seen
in certain sectors such as energy and feedstock chemicals, and
deflation/low inflation in other sectors, netted to a moderate
headline inflation number.

[We've got] rising food, commodity, energy and healthcare costs. But housing is double-dipping, and wages are declining. And see this.

So despite what die-hard inflationists or deflationists might say (and I respect both camps), things are actually mixed.

Moreover, as I pointed out last year:

Given that speculators drove up the price of oil last year,
it is possible that - especially in a stagnant economy - speculators
could drive up the prices of some asset classes and drive others down.

And see this.

And this.

Of course, instead of directly helping the American people, the government threw trillions at the giant banks (including foreign banks; and see this)
. The big banks have - in turn - used a lot of that money to speculate
in commodities, including food and other items which are now driving up
the price of consumer necessities. Instead of using the money to hire
Americans, they're hiring abroad (and getting tax refunds from the government).

Ironically, the financial system is in worse shape than it was in 2008, according to Standard and Poors:

fiscal risks we see for the U.S. include the potential for further
extraordinary official assistance to large players in the U.S.
financial or other sectors, along with outlays related to various
federal credit programs. We estimate that it could cost the U.S.
government as much as 3.5% of GDP to appropriately capitalize and
relaunch Fannie Mae and Freddie Mac, two financial institutions now
under federal control, in addition to the 1% of GDP already invested
(see "U.S. Government Cost To Resolve And Relaunch Fannie Mae And
Freddie Mac Could Approach $700 Billion," Nov. 4, 2010, RatingsDirect).
The potential for losses on federal direct and guaranteed loans
(such as student loans) is another material fiscal risk, in our view.
Most importantly, we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008 ....

In other words, the government has thrown trillions at the big banks,
but instead of using those funds to shore up their balance sheets and
return to prudent banking practices, the big boys have used the money as
new gambling chips for speculative commodities plays ... which are
hosing the American consumer at the grocery store, Wal Mart and the

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Diogenes's picture

The government deliberately forced inflation starting in the early 90s if not earlier. The housing market felt it first, and absorbed the excess money. Then the housing inflation collapsed, they pumped the inflation pump even harder we got stock market inflation. Then commodity inflation and finally inflation is making it to the local stores.

Don't think inflation is just starting, or that houses are deflating while other things are inflating. No, housing got its inflation first and got pumped up till the bubble blew, then the stock market, now commodities and everyday goods.

Why am I the only one to see the big picture?

pokrd's picture

Collapse is coming soon or later




cranky-old-geezer's picture

No donation to ZH tiil TD gets rid of CNN-wanabe clowns like GW.

nah's picture

we are running out of money... we made a promice to buy shit we probably shouldnt to our selves... even if our children have to finish paying off the bills to walk in our shoes


to walk in our shoes man... to be lucky

Mr Lennon Hendrix's picture

The main reason food prices are soaring is because of peak oil, unless the food happens to be organic, and still due to transportation costs, it will continue to rise.  The best and cheapest way to farm is now locally and organically, thank goodness.  Long corn, fish, and crab meal and bat guano.

Sunshine n Lollipops's picture

McFlation, bitchez. How ya like that Happy Meal?

Coldfire's picture

Kleptonomia: n., theft by inflation of fiat money supply. Cf. Keynesian praxis, kleptonomics, kleptonomist, kleptonomy.


AldousHuxley's picture

McDonald's = Government meal plan

Walmart = Government goods distribution/warehouse system


As always government does not provide the highest quality.


Mr Lennon Hendrix's picture

And Whole Foods will provide for the upper-middle/upper classes.

RockyRacoon's picture

The Fed is not paying an "interest rate".  It's a bribe to keep the money out of the natural economy!  Imagine the hell that would be paid if the vig stopped.

Racer's picture

But but but the Chair Satan said it would only take 15 minutes... 

minutes? , sorry you said ... he meant years.....



Bob's picture

In defense of the banksters, I suppose, they are willing to use the money they don't pay on taxes to buy treasuries, i.e., loan it to us with interest.  Hey, if we don't borrow it from them we don't have it to "save" them with . . . which would seriously impact earnings, eliminate bonuses and just blow the wonder of the Wealth Effect to Hell. 

geno-econ's picture

I paid into my SS but it was raided by politicians. Medicare is health insurance program going bankrupt due to corruption and more expensive in private sector due to quest for profit---both suck. But there is need for catastrophic health insurance.  Human condition is to take from one another and that is why we need laws based on social norms. Not sure who will take your house with a gun if you pay your property tax and mortgage. However if your short on cash its your fault, or the economic system especially if your job in US has been outsourced overseas on a mass scale. Not sure of your point , but seem to be blaming unequel application of law and mans inability to understand his political envirionment---cant argue with that. Also detect your discontent which is good but get the reason and blame right

tellsometruth's picture

George Washington,

Good post

Waterfallsparkles's picture

I have not had "Health Care Insurance" for probably 15 years.  I pay out of pocket for any costs that may arise.  Usually only about $500. a year.

Why are people so fixated on paying for "Health Care Insurance"?  When you pay for it yourself without insurance you negotiate the price with the provider.  With Health Care insurance you do not.  That is why the costs are so high.  Providers charge what they want because "Insurance" pays the bill.

So, what happens if I really have a huge Medical Bill?  I will pay them $25. per month, maybe forever.  As long as I pay them they cannot begin collection proceedings. 

But, how much have I saved over 15 years by not paying?  Tons and tons of Money.  I am not suggesting you do the same but maybe you should look into a Catastrophic policy with a $10,000. deductible. 

Why is everyone so afraid of being uninsured?  The only people that are insured are the sick people.  That is why Insurance is so high.

DraginDickHedge's picture


You have been fortunate, thankfully.  My dad never had a sick day in his life until he was 66 and his aorta burst at his abdomen.  (AAA).  The first 31 days in TICU cost US $1.2 million.  The next 5 months in a special hospital spent trying to wean him off his ventilator cost over US $1 million. The next 2 months at a brain injury place ( brain was injured as the body sent all blood to critical survival areas) cost (I can't remember).  He lived at home a further 6 years at a cost over 1.4 million with a 24/7 RN, wages, placement fees as nurses came and went, plus all fees an employer pays.  He had nursing home insurance, but wanted to be in his home and hey, it was his $$.  I agree with part of your thrust that that for the most part people should expect to pay all their medical costs; yet all should have insurance to cover a catastrophic event, IMHO and experience.  I think catastrophic-only insurance for all US citizens is plausible and could be cost effective if not government run.  While dad was in the TICU, there were car accident victims who stayed longer and spent more.  As we cannot plan for every moment of tragedy, at least one may opt for catastrophic health coverage.  Disagree? 

Milestones's picture

The whole underlying premise of insurance is: You insure for a loss that you cannot can not sustain yourself. Not in the business now but was many years ago.       Milestones

Milestones's picture

The whole underlying premise of insurance is: You insure for a loss that you cannot can not sustain yourself. Not in the business now but was many years ago.       Milestones

Sathington Willougby's picture

Inflation, deflation who cares.  Symptoms.


Man, the disease. 

Can't stop trying to enslave other men.

Laws that appy to some but not others aren't really laws now are they? 


Innovation is gone with incentives being replaced by thieving to pay entitlements.  The zombies and their parties march on, distracted by platitudes and shallow issues.  They make easy marks and are essentially slaves.


There's only one way to do things right, but billions or trillions [more appropriate] of ways to get it wrong.



geno-econ's picture

America is getting what it deserves because we gave up on self reliance and national social justice and fairness for a blind faith in a capitalistic free wheeling global economy seeking cheapest labor at any subsequent consequence. When system froze up due to effort to keep Joe six-pack happy by shoving mortgages down his throat, banks were rewarded, instead of going out of business. Now we are pretending there is a recovery, when actually we have bankrupted entire system threatening reserve currency status with no possilbe way to repay mushrooming debt or  engendering real national growth. Currently witnessing a mad scramble to hold anything of value but it will not save situation because  entire system flawed . Changing system impossible without complete collapse and thats when all suffer including bankers and multinationals.

Bob Sacamano's picture

No one was forcing mortgages down anyone's throat.  Borrowers share the blame in borrowing more money than they should to buy bigger houses than they should -- because borrowers are generally as greedy as the lender. 

Not a banker. But few on this site see the borrowers as greedy and reckless in their borrowing. Borrowers are responsible for themselves. 

Diogenes's picture

Are you kidding? Don't you remember the way they advertised? And once they got you in the office they would do everything to put the deal over including encouraging the borrower to commit fraud and committing fraud themselves.

The suckers never stood a chance.

I watched the whole process from a distance. My first thought was, this is crazy. This whole thing can only end in disaster. My second thought was, well, are the borrowers crazy? Are the banks crazy? Is the government crazy? Or am I crazy? There must be something there I am not seeing.

It turned out there was plenty nobody was seeing but the point is, I am a fairly sophisticated real estate investor and I would have been sucked in. So what chance did the average borrower have? And let's not forget, half the people in the country are below average.

RockyRacoon's picture

Actually, Bob, the ratio runs about 50/50 per my seat-of-the-pants statistical analysis.   Oddly enough, it seems to be those who don't have an underwater mortgage who see borrowers as losers, and those who felt shafted by a banker or mortgage loan officer who see it the other way.   Funny that, eh?   In actuality, mortgages were marketed and promoted as a way to get a 4-wheeler, new car, vacation, or other amenity my milking your home mortgage.   That puts much of the blame in the laps of the loan-makers.   Securitization (a wholly Wall Street concoction) laid the foundation for the misdirection and skulduggery that did happen to some borrowers.   The Fed had full authority to put a stop to all the foolishness, but they never raised a hand.  In fact, if you recall, the Maestro praised the glory of it all.   How does a regular J6P have defense against such formidable odds?

sun tzu's picture

If there's capitalistic free wheeling and no regulation, why do we have 2,500,000 federal bureaucrats? What are they doing?

Sathington Willougby's picture

Your retarded social justice and fairness is stealing property at gunpoint.


You espouse thievery.  You are a pile.

Bob Sacamano's picture

"the financial system is in worse shape than it was in 2008, according to Standard and Poors"  is not what this says: "we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008 ...."

Words matter.  The phrase "than we considered them to be" changes the meaning considerably. 

They are saying they are more worried today than in 2007.  But recall they were not particularly worried at all in 2007 and missed the coming financial system dangers of 2008-09. They are finally waking up to the degree of risk out there, but it is unclear from the quote provided whether they see the actual risks today worse than 2007.

AldousHuxley's picture

Banks now are just hedging rationally. But look behind the bankers to see WHY they make the bets. They are not making bets to lose money. They bet because inflation has been created by FED BAILOUTS.


Only solution is bonus clawback and wall st. gains vs. income.


Buck Johnson's picture

It's inflation (actually Hyperinflation but they won't say that until it's to late), and McDonalds and Walmart is telling the truth.  I shop at Walmart and they where already making packages smaller and giving less for the same item a few months ago you would have gotten more back in early 2009.  But this time it's exponentially going up and service is getting reduced.  As an example I bought off and on precooked Tony Romas 24oz ribs, but now they have cut the package down to 3 servings (8oz's) per pack and costs 1 dollar less than the 24oz one that they don't carry anymore.  This isn't inflation, it's hyperinflation and it's showing up slowly but surely.

RockyRacoon's picture

You can rest assured that Walmart is making their money while they can.  Package size, in-store promotions, and other marketing schemes will let them make money all the way down (up?).   Walmart is not run by a bunch of dummies; they have the long-term mentality of the Chinese.  Innovation and mechanization of the entire store operations have given them the ability to make money on very slim margins.   Walmart is like the proverbial cockroach:  They will survive the Kondratieff winter.

Diogenes's picture

Walmart prices aren't even low anymore. Food prices are higher than at local supermarkets and prices of other things in line with other retailers. Apart from a few heavily advertised cheap items.

Lord Peter Pipsqueak's picture

Just calm the f**k down,it's all temporary,prices can't continue to go up since wages are not going up.

So speaketh the word of the Bernanke.But what if the rises are permanent,continuous, and wages do not catch up,welcome to hell,Fed style bitchez?.

BigDuke6's picture

In the UK this change is permanent with a few upswings on a downward trajectory.

While there is such a culture of dependency fostering subclasses such as...whole communities with generations of unemployables, rich kids who hate whatever it is the uk stands for, apologist race relations with islam beginning to encourage 'patriotic' groups.

We can all stay calm but in the uk u better start shitting it and listening to some of the guns n ammo guys around here.

Djirk's picture

but Big Ben is hitting his inflation targets....just move into a cheaper house and you ll be good

Sudden Debt's picture


the holocaust, this crisis, The fraud... it will all make sense...


Mr Lennon Hendrix's picture

You will ask the gods while they circle a pipe and they will say, "Yeah, you humans totally fucked up."

Sathington Willougby's picture


What's the big fucking mystery?

Man seeks to enslave other men. 


mt paul's picture

has any body checked the price 

of good delivery bars

at walmart lately...... 


Paul Bogdanich's picture

And exactly what else is new?  President Obama is an empty suit corporatist.  Corporate profits are way up on the assumption that this would lead to recovery.  It did not because the beneficiary corporations did not hire or expand they merely paid out larger bonsuses.  Nevertheless this fact will not change policy because at the end of the day the President never had an original idea in his life.  He has no center.  He does what his corporate masters ask or more properly cadjole him to do.  And with his huge want for election funds if you think anything is going to change you are in denial.  

TBT or not TBT's picture

Erm, no, private business is to him just another tool for getting more power, to create more crisis, to get more power.   He taught a course for ACORN on how to agitate to get ever more power, hung out with types at Columbia who dreamt of crashing the system by overloading it, went to an anti-american "church" for twenty years of rants against the american dream, was raised by anti-american nut jobs, launched his political career at a meeting at the home of an avowed terrorist, married a privileged woman who believes "America is a downright mean country" and on and on.   

So, no, this guy is not an empty suit.   He has an agenda.  The agenda is right on track.   A pro-american president would have vetoed the shit out of Congress' obviously irresponsible "spend till you puke" train wreck of a legislative agenda that started early in 2007.

granolageek's picture

Speaking of spend till you puke, I'm pretty sure the Iraq war started in 2003. If the government really really insists on wasting an extra hundred billion a year, I'll choose welfare for Americans instead of killing people overseas any day of the week. And last I checked Tarp was rammed through by a Republican president. Or has Dubya retroactively changed parties?

All Risk No Reward's picture

the two party mental slave plantation is kabuki theater.  both establishment candidates are owned by the same corporate interests.

study their continuity of agenda and you will identify what is important to their corporate masters.

Tracerfan's picture

This is impossible.

I (Obama) and my faithful cohorts (Timmy and Bubbles) have told you, and we repeat now, there is NO INFLATION in America.

Everything is under control and going according to plan.

I am Jobe's picture

And pigs can fly. So Obama said before, jobs jobs jobs is his priority. WTF. Could have had a teleprompter as a president.

weinerdog43's picture

Thank goodness we have the Republican House working day and night on a jobs bill.

sun tzu's picture

Yes, we need another government jobs bill because 2,500,000 federal bureacrats aren't enough.

All Risk No Reward's picture

$200 million an HOUR is stolen from jobs producing small businesses by globalist mega corporations.  the money is LEGALLY MANDATED to go to american small businesses and they just steal it.

they don't want to create jobs, they want to STEAL.