This page has been archived and commenting is disabled.

Russia Imposes Inflation-Driven Price Controls: Will Use Price Caps On "Socially Important" Commodities

Tyler Durden's picture




 

Russia has just announced it would proceed with price caps on a variety of foodstuffs, from buckwheat, to potatoes, assorted fruits and vegetables and all other commodities it deems "socially important" accoding to Russian newspaper gazeta.ru. And so the big margin crunch goes up several orders of magnitude, as companies, desperate to pass through surging input costs, but prohibited from raising selling prices, are forced to eliminate any and all overhead, most certainly including such trivialities as labor, in order to stay in business. More importantly, experts now predict that full year inflation in Russia will hit double digits. Just in the first 17 days of January, inflation hit 1.4%, or 9% annualized (according to gazeta... our calculation indicates a notably higher number but readers get the idea). Luckily, Russia does realize just how futile this task of price controls is: "as soon as we introduce price controls, once a deficit, the product disappears from the market, followed by an even higher rise in prices on the shadow, not covered by official supervision, market." And so a vicious circle in which high prices beget even higher prices begins. But don't worry - this could never happen in the US: see Americans only eat gold and their iPods. There is therefore massive slack in the food vertical, and, furthermore, as Steve Liesman explains so well today, a 100% rise in the price of wheat would only translate to a 10% hike in the price of bread. What happens to the other 90% (which incidentally annihilates the producer's margin but Steve didn't get to page two in that particular Inflation for Dummies book), is apparently unclear to the CNBC head economist.

From Gazeta.ru, google translated:

Government has the right to limit the price for a period not exceeding 90 days. It's allowed to do in the event that within one month increase in retail prices for these products is 30% or more in one or more regions.

Relevant amendments have been adopted into law on trafficking in the past year, but authorities have never exercised their right. Although, for example, buckwheat because of the drought has risen over the past year 3 times. " It was inappropriate to "impose price caps on buckwheat in the autumn, when the harvest had not yet been finalized, said the official. " In addition, it was expected that the situation with buckwheat will be more favorable in view of admission of the Siberian harvest. But manufacturers and trade recorded a high level of prices, since many farms lost to the drought, the fall harvest - and wanted to compensate, where possible, "- noted the deputy minister.

A marked increase in the prices of foodstuffs began in the second half of last year, and to stop it have not yet succeeded. " the risk of significant price increases this spring and the grain - and, hence, the bread and meat for the group behind him, "- admitted Klepac.

As a result, inflation is once again at risk to go beyond the framework outlined by the Government. In 2010 it was 8,8% in the original forecast of 6-7%.

Inflation forecast for 2011 - 7%. But in January it can perform almost a third of the annual plan. According to the Ministry of Economic Development, which sounded at the end of last week, the head of department Nabiullina, consumer price inflation for the first month is 2,1-2,3%. According to the Federal State Statistics Service, from 1 to 17 January, inflation reached 1.4% ( in annual terms - 9%).

The Central Bank is also concerned about the acceleration of inflation. " I feel that in the first quarter we will see an acceleration of inflation. Perhaps the situation will change in the second quarter, I hope so "- said the first deputy chairman of the Central Bank Alexey Ulyukayev, speaking at a conference at Deutsche Bank in London on 21 January.

By mid-year inflation could reach double digits on an annualized basis, said Ulyukaev.

Double-digit inflation for the year - it's real, I agree the head of department of strategic analysis FBK Igor Nikolaev. " Our forecast for 2011 - 9% "- said the head of the Center for Macroeconomic Research of BDO in Russia Elena Matrosov. " My prediction is within 11% "- said Professor of Economics, New Economic School (NES) Konstantin Styrin.

Methods of fighting inflation are well known: not to increase the money supply, to limit profitability of financial investment, slow growth in demand, transfer the practice leader goskonsaltinga Alexei Kalinin. And besides, to restrict the growth rates, enhance and stimulate product offering and is not strongly restrict imports, adds Matrosov.

But in the current selection of tools is limited.

Sterilization of money to which the government actively resorted to crisis, to fight inflation, now threatens to undermine economic growth, which is already weak.

" Sterilize the money supply, as was done in the 2000's, is problematic. First, the deficit budget for 2011 has already been approved. Secondly, the surplus could be achieved either by raising taxes or reducing spending. And one, and another would reduce aggregate demand and would have slowed the recovery growth ", - said Styrin.

Involved will be primarily monetary policy: inflation will hamper the efforts of the Central Bank on monetary and foreign exchange markets, said Kalinin.

But this method of inflation control as the introduction of maximum prices for food, experts estimate unambiguously negative: it could lead to shortages or poor quality goods.

' Not only is the practice of the Soviet Union, with its empty shelves, but some experiments governors early 1990-ies have shown: "as soon as we introduce price controls, once a deficit, the product disappears from the market, followed by an even higher rise in prices on the shadow, not covered by official supervision of the market " Reminds Kalinin. More sensitive measure would subsidize producers and sellers, adds Styrin. But the practical implementation of such decisions in the Russian context is problematic, experts say.

"Do not limit price, and nurturing a competitive environment, elimination of administrative barriers to business - that's the best solution to the problem "- reminds Matrosov. But such work should be conducted regularly, experts say, but not when prices are getting out of control.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 01/24/2011 - 20:54 | 900897 EscapeKey
EscapeKey's picture

Nothing that can't be solved by printing a few hundred billion US Dollars, and fortunately, I know just the man for the job.

/Price controls?? We're so fucked.

Mon, 01/24/2011 - 21:06 | 900952 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Edit:

Nothing that can't be solved by printing a few hundred trillion US Dollars[.]

Tue, 01/25/2011 - 01:02 | 901677 flacon
flacon's picture

The World Economic Forum suggests printing at least ONE HUNDRED THOUSAND BILLION DOLLARS to keep the world afloat. Of course they refer to this as "CREDIT" but in common peasant-language it is called "DEBT". 

 

Listen to Jim Rickards:

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/1/22_Jim_Rickards:.html

 

Tue, 01/25/2011 - 01:03 | 901685 asdasmos
asdasmos's picture

Yeah, it is pretty scary.

 

That was a great interview

Tue, 01/25/2011 - 01:06 | 901687 flacon
flacon's picture

+++ That's 0.1 MILLION BILLION DOLLARS! Sounds like I'm talking gibberish with those sorts of numbers. But that is $100,000,000,000,000.00! And HOW LONG does it take for ME to earn that much? Holy crikey!

Tue, 01/25/2011 - 01:15 | 901698 Malcolm Tucker
Malcolm Tucker's picture

Algeria might be the next domino to fall because of Bernanke and company. Here are videos of the riots and even the hacking group Anonymous is getting in on the action!

http://fedupmontrealer.blogspot.com/2011/01/algeria-next.html

 

Tue, 01/25/2011 - 09:37 | 902188 ElvisDog
ElvisDog's picture

I disagree. When it gets up to 100,000 billion, it reaches the level of absurdity. The absurd is funny rather than scary.

Tue, 01/25/2011 - 01:03 | 901686 flacon
flacon's picture

I'm considering doubling my food supply to one decade's worth of food to feed my entire family. 

Tue, 01/25/2011 - 04:25 | 901858 Seer
Seer's picture

Excellent interview!

I'd caution people, however, to not go overboard with the "global governance" angle.  What we're seeing now is a breakdown of governments because there is insufficient resources; creating MORE govt isn't going to solve this issue.  Again, this is my "bad systems can NOT propagate [because, well, because they are bad!]" point of reasoning.  And... BIG = FAIL  BIG & BAD = DOUBLE FAIL!

Interesting to note that the extraction rate of gold is pretty much in balance with population growth.  What happens when population growth falls off?  It's not a matter of IF, but When.  Can anyone speculate as to what would happen vis a vis gold valuation?

Tue, 01/25/2011 - 07:45 | 901979 redline
redline's picture

With large global systems, we have perfected fragility.  It takes a lot of energy and effort to keep it running.

Tue, 01/25/2011 - 01:01 | 901679 Rusty Shorts
Rusty Shorts's picture

O/T, but I think I just felt a tremor, New Madrid.

Tue, 01/25/2011 - 17:05 | 903976 andybev01
andybev01's picture

+ (14 zeros)

Mon, 01/24/2011 - 21:07 | 900974 DoChenRollingBearing
DoChenRollingBearing's picture

Yeah, well, we will see how well price controls work for Russia.

Last time we tried that it did not work out very well for us.

Mon, 01/24/2011 - 21:32 | 901040 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Any nation state not grasping at straws?

Mon, 01/24/2011 - 21:49 | 901145 almost_have_a_name
almost_have_a_name's picture

Somewhere in Russia:

A man asks the meat department manager "how come you don't have any fish"

The manager replies "the seafood department is where they don't have any fish"

 

Tue, 01/25/2011 - 06:39 | 901939 Treason Season
Treason Season's picture

Perastroika-era story told in Poland

Man complains there is no meat. Soldier reminds man he should be grateful because now he has the freedom to complain.

When man goes home wife asks if there was meat today. Man replies that not only was there no meat but the army was out of bullets!

Tue, 01/25/2011 - 00:57 | 901664 LowProfile
LowProfile's picture

I predict they will work just as well as the last XX,XXX times they tried it when they were called the USSR.

Shortages & renewed black market coming to Russia.

Despite it all Ivan is still a dumb sack of fucks.

Mon, 01/24/2011 - 23:59 | 901565 In Fed We Trust
In Fed We Trust's picture

as Steve Liesman explains so well today, a 100% rise in the price of wheat would only translate to a 10% hike in the price of bread. What happens to the other 90% (which incidentally annihilates the producer's margin but Steve didn't get to page two in that particular Inflation for Dummies book), is apparently unclear to the CNBC head economtake ist.

 

Thats easy man. That because they take all lt the wheat out of the bread and sell it else where. That's why where malnourished, man!

Tue, 01/25/2011 - 00:04 | 901580 Ahmeexnal
Ahmeexnal's picture

Melamine instead of wheat in your bread.

Tue, 01/25/2011 - 01:27 | 901716 RockyRacoon
RockyRacoon's picture

I actually found myself despising the blatant diversionary tactic that Liesman was laying out today.  They ran that piece several times and I got angrier every time.  His explanation that the price of bread goes up only 10 cents for every 50% rise in wheat was a crock.   Not about the bread.  I could see the UN trucks unloading sacks of grain from the backs of trucks being overrun by starving people.  That was not piping hot bread on a set in the CNBC studios.  It was RAW wheat that the people had to process to make something edible.  The cost to them was 50% higher -- not 10%.  Frackin' freaks at CNBC told only 1/3 of the story.

Tue, 01/25/2011 - 03:23 | 901816 StychoKiller
StychoKiller's picture

Apparently, there's a lot of inflation in the LIES market(s) too!

Tue, 01/25/2011 - 06:42 | 901943 EscapeKey
EscapeKey's picture

It's the same old tactics of progressive admission. Deny absolutely everything that isn't in stone cold facts, and then only agree with it when it is, despite it having been obvious the entire time. Bernanke's often used this.

Same argumentation technique certain radical elements on this website use.

Tue, 01/25/2011 - 00:30 | 901627 Hammer Down
Hammer Down's picture

Word.  It was inevitable though.  Piss poor monetary policy ->  Inflation - > uniformed public outrage -> capitalism vilified -> govt to the rescue with price controls -> shortages -> higher prices -> outrage...  rinse, repeat

Tue, 01/25/2011 - 04:31 | 901866 Seer
Seer's picture

All a distracting sub-plot...

Perpetual growth on a finite planet -> Collapse

Any System that promotes infinite growth on a finite planet is, in the final analysis, BAD (FAIL!).

Tue, 01/25/2011 - 03:26 | 901821 bigelkhorn
bigelkhorn's picture

Yes you got it right! We are very Effed!

I subscribe to the guy from australia and his FFT economic newsletter at http://www.forecastfortomorrow.com  that guy has called many big events before they have happend, including the stock market crash in 2008 and the current financial collapse of the US. (currently happening) I found him from a friend last year, and he has some uncanny accurate stuff. Well worth a look....

He had it right when he said there was a time where the US could back track and could undo the damage...but that time has now passed....and financial armageddeon is coming. I am scared!!! Everyone else awake and in tune to what is going on is scared too. 

 

Tue, 01/25/2011 - 03:39 | 901827 Weisbrot
Weisbrot's picture

a refernece through a post a few weeks back seemd to get it right. "cognitive dissonance"

Tue, 01/25/2011 - 15:26 | 903563 tjunkie
tjunkie's picture

lets not get all hysterical here ...
fine lets get hysterical, but there are enough real reasons out there,
just not this. Ok?
Lets instead title the post accurately.
First line in the original article(http://gazeta.ru/financial/2011/01/24/3502942.shtml), and I quote:

<<????????????????? ?? ?????????, ??? ? 2011 ???? ????? ???? ???????????? ??????????? ?? ???????????? ?????????? ??? ?? ????????? ???? ????????????????? ???????>>
In english :
<<ministry of econ. development DOES NOT exclude the possibility that in 2011 it may use tools for setting price limits on some types of food ...>>

 

the translation is mine and is nearly literal.

So no price controls yet.

As much as I love this place... this is just silly.

 

PS : not sure if cyrillic text will work here

Mon, 01/24/2011 - 20:57 | 900911 Alcoholic Nativ...
Alcoholic Native American's picture

Bend and cough bitches.

Mon, 01/24/2011 - 23:40 | 901504 A Nanny Moose
A Nanny Moose's picture

Fermented grain bitchez.

 

Mon, 01/24/2011 - 20:58 | 900914 Dr. Engali
Dr. Engali's picture

It's working it's way up the food chain. It's just a matter of time before we all feel inflation's crushing grip.

Mon, 01/24/2011 - 20:59 | 900921 Alcoholic Nativ...
Alcoholic Native American's picture

I'm hedged with my EBT card.

Mon, 01/24/2011 - 20:59 | 900922 RobotTrader
RobotTrader's picture

Gold just "Flash Crashed" down to $1,300.

Some big institutions must be dumping.

http://quotes.ino.com/chart/?s=FOREX_XAUUSDO&v=w

Mon, 01/24/2011 - 21:01 | 900933 Spalding_Smailes
Spalding_Smailes's picture

Martin Armstrong like waterfall looming .... Wooooooooooooooosh --- 1,320 -- Woooooooooooooosssssshhhhh

Mon, 01/24/2011 - 21:30 | 901066 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Platinum bounced off of support at the all important $1800 level.  Watch platinum to know what happens next.  I bet the next move starts with platinum moving to $1900.  Of course mnay will probably miss it because they are watching gold and silver.  Soon it will be platinum's time to shine.

Mon, 01/24/2011 - 21:32 | 901073 topcallingtroll
topcallingtroll's picture

Platinum might just run for a while. We shall see.

Tue, 01/25/2011 - 01:26 | 901712 flacon
flacon's picture

Let's not forget THE Flash Crash! I already forgot what gold did during those harrowing 15 minutes..... oh yeah.... I remember now.... 

 

Sneak Preview: Market Crash

http://www.youtube.com/watch?v=WmpNTtQu8E4

Mon, 01/24/2011 - 21:05 | 900955 nmewn
nmewn's picture

All my dreams are coming true.

Mon, 01/24/2011 - 21:39 | 901102 Temporalist
Temporalist's picture

You crack me up

Mon, 01/24/2011 - 22:04 | 901195 nmewn
nmewn's picture

;-)

When fiat price is of no concern to the underlying value it's pretty easy.

Good to see you again.

Mon, 01/24/2011 - 23:47 | 901534 Oh regional Indian
Oh regional Indian's picture

The lack of concern re. fiat price is going to get tested more and more NM. These guys know how roller coasters work! :-)

And Russia is familiar with how price controls work. Russians are familiar with how "Control" works. Same with China. When push comes to shove, the "Socialists" will be okay, it's the west, with it's false sense of security and lack of familiarity with control that is going to be hard to swallow.

ORI

http://aadivaahan.wordpress.com/2011/01/21/accidental-lives/

Tue, 01/25/2011 - 01:37 | 901719 flacon
flacon's picture

"We-re Amerikah! Were Americkah! Where Amreikah! U-S-A! U-S-A! U-S-A! U-S-A!

Tue, 01/25/2011 - 08:15 | 902011 nmewn
nmewn's picture

"When push comes to shove, the "Socialists" will be okay, it's the west, with it's false sense of security and lack of familiarity with control that is going to be hard to swallow."

History says otherwise.

It's replete with examples of a yearning to be free from control...dictatorial, passive, monarchical or otherwise...the human spirit is always pushing against control, stretching the boundaries of it until it breaks, violently or peacefully, but it always breaks, and then the pieces are picked up to form the control pattern again by appointed or self-appointed leaders.

Who will be eventually corrupted by ego or greed or power or mystic self importance for they, once attaining this status, believe that they, and only they, have the answer to mans wants and desires.

But they don't.

They will shave, shower, scheme, quarrel, fight. They will put their pants on just like I will do now, and go to work. They're nothing special. 

Ying & yang? ;-)

SeeYa

Tue, 01/25/2011 - 09:33 | 902177 snowball777
snowball777's picture

I think his point is that we haven't rehearsed our "Kent State" routine as recently as some other parts of the globe.

Tue, 01/25/2011 - 09:47 | 902210 Oh regional Indian
Oh regional Indian's picture

Thanks snowball. That is what I was alluding to.

NM, I'd highly recommend Dimitry Orlov. Funny, sharp and spot on. :-)

ORI

Tue, 01/25/2011 - 19:24 | 904346 nmewn
nmewn's picture

Oh, well...never mind (Gildna Radner) ;-)

Mon, 01/24/2011 - 21:05 | 900962 SheepDog-One
SheepDog-One's picture

So RainbowRader when did YOU sell your gold then? Thursday you were saying you were all long! 

Mon, 01/24/2011 - 21:08 | 900977 Spalding_Smailes
Spalding_Smailes's picture



Mozilo reached out to borrowers as part of a "little experiment" to understand the reasoning behind making only minimum payments on so-called pay-option loans, a practice that boosts the total amount due, the 67-year-old CEO told investors Wednesday in New York.

"What we're finding out is that they're pretty smart," Mozilo said. "It's like voters: Individually they're sort of idiots, but collectively they seem to make the right decisions."

 

"CEO Makes Call on Pay-Option Loans: It's Risky", from Bloomberg News.

Having depleted their savings to pay for this, they've had to seriously cut back on spending. They went without air conditioning this past summer, despite sweltering heat and the fact that Judy was eight months pregnant.

They've also put off fixing the brakes of their second car, which the mechanic says should be replaced soon. "We don't spend money on anything that isn't critical," says Judy. "Everything goes toward the mortgages."

 

"Slow-market crisis: Stuck with two homes", in Money

When buying, Miller also likes to strike quickly and he expects the same when he's selling. "I don't haggle much over the price," he admits. "I don't beat the owner up over one of the stove elements or something when I'm trying to buy a property. I'm trying to sell a condominium right now that will make me a $200,000 gain in 11 months and this buyer is dinking me around 'cause he thinks the roof might have to be replaced in a couple years. So he's gonna lose a fair deal there in the Village. Do you think I'm gonna replace the roof? If we were in a depressed market, maybe, but [I'm thinking] 'next!'"

 

"Un-Real Estate" by Jake Nichols, on Planet Jackson Hole.

 

 

Mon, 01/24/2011 - 21:12 | 900992 El Hosel
El Hosel's picture

 

"Gold just "Flash Crashed" down to $1,300.

Some big institutions must be dumping".

 

 Yes.... Those would be the same institutions that are pumping the "recovery", the "change", the "growth" and the mole on the Bernank's ass.

     Bring on the gold correction, it been a long time coming.

Mon, 01/24/2011 - 21:13 | 900999 SheepDog-One
SheepDog-One's picture

Personally I still say the real precious metals to own are in the form of ammunition.

Mon, 01/24/2011 - 21:45 | 901125 Johnny G.
Johnny G.'s picture

Just bought another 1,000 rounds of .223 at cheaperthandirt.com.  It came in 4 days.  This internet thing might just pan out.

Mon, 01/24/2011 - 21:54 | 901159 ShankyS
ShankyS's picture

If you pay cash for it they will not know you have it. Then they can't show up at your door to take it when they come to confiscate all the gold you bought on your CC as well. That is my thought process. Ammo may actually be worth more than gold one day if we go where I think we're going.

Mon, 01/24/2011 - 22:01 | 901184 Johnny G.
Johnny G.'s picture

In Cali, they take your drivers license number and log it (cash or not).   Plus, if it ever comes down to someone coming to my door - then it's a world I don't want to live in anymore.  And I'm not going alone.

Mon, 01/24/2011 - 22:02 | 901187 hannah
hannah's picture

i feel like a lagard...i only bought 100 rounds of 9mmx19mm today.....

Mon, 01/24/2011 - 22:53 | 901367 Captain Benny
Captain Benny's picture

Don't worry,  If you're my neighbor, I'll trade you my ammo for your silver... I've got more than enough ammo to go around.  And for some reason, I keep buying more...  

Mon, 01/24/2011 - 23:45 | 901526 Founders Keeper
Founders Keeper's picture

[Don't worry,  If you're my neighbor, I'll trade you my ammo for your silver... I've got more than enough ammo to go around.  And for some reason, I keep buying more...]---Captain Benny

Now, that's the spirit!

 

Tue, 01/25/2011 - 00:34 | 901637 Hammer Down
Hammer Down's picture

Silver bullets - versatility.  Hard to find outside of .32

Tue, 01/25/2011 - 00:23 | 901609 iDealMeat
iDealMeat's picture

Save all your old dead batteries.. SLA = Sealed, Lead, Acid  ;-)

Sure you could find some good ways to use those parts.

just sayin.

Mon, 01/24/2011 - 23:04 | 901396 A Nanny Moose
A Nanny Moose's picture

If I could just get my Pizza emailed to me, I will be all set.

Mon, 01/24/2011 - 23:16 | 901434 Atlas Shrugging
Atlas Shrugging's picture

A Dillon 650 reloader is your friend :)

Tue, 01/25/2011 - 00:38 | 901644 Hammer Down
Hammer Down's picture

Dillon has good calendars too - just sayin'

Tue, 01/25/2011 - 08:02 | 901992 Marge N Call
Marge N Call's picture

http://www.gunbroker.com

Best deals I can find.

Tue, 01/25/2011 - 01:31 | 901026 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

PMs drop@ Asia for the first time in months, and you think it is trouble?  I wonder who is buying the f'n flash crash dip?

Mon, 01/24/2011 - 21:23 | 901043 Thomas
Tue, 01/25/2011 - 00:15 | 901597 In Fed We Trust
In Fed We Trust's picture

Ah yes, so Russia was bluffing after all!

Tue, 01/25/2011 - 01:31 | 901720 RockyRacoon
RockyRacoon's picture

Yeah, RobotTrader, this graph looks terrible:

http://finviz.com/futures_charts.ashx?t=GC&p=w1

'Scuse me, I gotta go rummage a few garbage cans.

Tue, 01/25/2011 - 04:42 | 901873 Seer
Seer's picture

Yeah, absolutely terrible... <grin>  I've NOT lost 69% value; AND, I've not contributed to the institutional/corporate raping (no equities).

Tue, 01/25/2011 - 02:11 | 901767 flaunt
flaunt's picture

More likely a "glitch" indicating the next "target."

Mon, 01/24/2011 - 20:59 | 900923 PPMazzini
PPMazzini's picture

Price controls are a means to allocate the negative effects of inflation to a particular group in society.  In this case, the merchants are bearing the brunt of the impact.  Keep in mind, however, that price controls are an exercise of executive authority, and in determining which societal cohort is most likely to allocated the inflation pain, it would be constructive to consider which societal group is most influential with the executive in your particular jurisdiction.  In the US it would be hard to believe that inflationary impacts would be allocated to any commercial enterprise, since their ability to influence policy is so well established.  That leaves Joe Sixpack.  Once again, it is going to suck to be him.

PPM

semperparatusinc.blogspot.com

Mon, 01/24/2011 - 21:12 | 900994 SheepDog-One
SheepDog-One's picture

Stores with 1 loaf of bread and hard salami, Russians will wait for hours for a slice of each. 'Price controls', meanwhile Bernank stokes the inflation fires raging around the world by adding a 'X-infinity' to every printing operation, its just sick. 

Mon, 01/24/2011 - 21:26 | 901054 cxl9
cxl9's picture

I would assume that price controls in the United States will be implemented in such a fashion as to place the burden on small business and out-of-favor large businesses. Mom-and-pop firms will get squeezed hard, further eroding whatever price-competitiveness they might still enjoy. Politically-connected firms will get waivers and government largesse, of course. Health care prices won't be capped, accelerating the flight of consumers into the warm, waiting embrace of government (as I experienced today with the 11% annual increase in my Kaiser premium).

Mon, 01/24/2011 - 21:30 | 901065 SheepDog-One
SheepDog-One's picture

WOW just like Soviet Russia in the 60's! 

Mon, 01/24/2011 - 21:59 | 901180 e_goldstein
e_goldstein's picture

it's like deja vu all over again.

Mon, 01/24/2011 - 21:01 | 900929 Johnny Lawrence
Johnny Lawrence's picture

The power that Bernanke has to affect markets around the world is beyond comprehension.

 

And speaking of Russia, emerging equity markets are showing signs of cracking.

 

Shanghai down 15% in the last 3 months

India down 10% year-to-date

Brazil showing cracks too, down 2% year to date

 

Mon, 01/24/2011 - 21:53 | 901127 King_of_simpletons
King_of_simpletons's picture

Co-incidentally all of these countries are raising interest rates to combat inflation. What are we doing about it ? Mikey D's has said they are going to raise prices... Does Bernanke have a plan ?

Mon, 01/24/2011 - 22:06 | 901203 KickIce
KickIce's picture

All potential problems lead to the "Print more Money" box on Ben's flowchart.

Mon, 01/24/2011 - 23:09 | 901412 A Nanny Moose
A Nanny Moose's picture

Print De Money?

Its De Monet!!!

Tue, 01/25/2011 - 04:45 | 901877 Seer
Seer's picture

The plan is to export inflation.  Until it no longer works...

Mon, 01/24/2011 - 22:35 | 901297 sabra1
sabra1's picture

USA IS............................

Mon, 01/24/2011 - 21:01 | 900935 strannick
strannick's picture

What did Friedman say regarding price controls? Roofs, or price ceilings?

Looks like commodities are going to apeshite.

Mon, 01/24/2011 - 21:04 | 900954 Alcoholic Nativ...
Alcoholic Native American's picture

I'll take POS McMansions in the middle of nowhere for..........Alex.

Mon, 01/24/2011 - 21:03 | 900944 Dr. Porkchop
Dr. Porkchop's picture

That should totally work.

 

I thought the USSR collapsed.

Mon, 01/24/2011 - 21:03 | 900945 nmewn
nmewn's picture

They always pick on Buckwheat, never Alfalfa ;-)

Mon, 01/24/2011 - 21:15 | 901009 hedgeless_horseman
hedgeless_horseman's picture

O' tay!

Mon, 01/24/2011 - 22:06 | 901202 nmewn
nmewn's picture

LOL...our age is showing.

Mon, 01/24/2011 - 21:05 | 900956 TooBearish
TooBearish's picture

Worked so well for Nixon - 40 years later its a slam dunk it'll work now

Mon, 01/24/2011 - 21:06 | 900964 Mike2756
Mon, 01/24/2011 - 21:08 | 900978 SheepDog-One
SheepDog-One's picture

Yesterday Russia announces another year ban on wheat exports thru 2011, today price controls are in...that 'world economic recovery' looking VERY skittish! And not a damn thing The Bernank can do about a world short of food.

Mon, 01/24/2011 - 22:09 | 901208 KickIce
KickIce's picture

Looks like the farmer will take the brunt of this policy.

Tue, 01/25/2011 - 02:36 | 901791 sushi
sushi's picture

But can a world short of food do something about The BernanK?

What is better? Waiting for the mob to show up at the castle gates speaking Tunisian and brandishing pitchforks or thinking up a way to get The Chairbeast to bend over and ram some ideological sense into him?

My bet is on #2. He might learn to enjoy it.

Tue, 01/25/2011 - 04:53 | 901883 Seer
Seer's picture

The bottom line is that physical resources are needed.  And these resources just happen to be food.  No matter what "policy" is applied, the world can only produce so much food.

As food gets tighter more and more people will be spending more time in pursuit of food.  This means less time dedicated to TPTB's System, which will result in their demise.  Remember Kissinger's restort: Control the food and you control the people.  Yes, eventually the starving masses will storm the gates... (just as any penned animal that is lacking food will find a way out of any pen).

Mon, 01/24/2011 - 21:15 | 900996 Dr. Porkchop
Dr. Porkchop's picture

I found this bit of insanity the other day:

http://transitionvoice.com/2011/01/if-britain-starts-fuel-rationing-could-us-be-next/

An idea to ration petrol in Britain. Instead of letting the price rise to limit use, which they say is inherently unfair to the poor, they would set up TEQ (tradable energy quota) accounts.

How exactly this would encourage investment in finding alternatives or encourage people to make tradeoffs is beyond me. All it would do is encourage people to continue to consume petrol, ignoring the dwindling supply at an artificially low price.

I guess it's based on the faulty idea that driving a car is some kind of natural right.

Mon, 01/24/2011 - 21:16 | 901013 SheepDog-One
SheepDog-One's picture

'Driving a car is some kind of natural right'...well we do live in a country where vehicles are used for work, deliveries, shipping...its not just people driving about like in a 40's movie in their jalopies out for a joy ride. Fuel raises and gets rationed in this country, the economy overall takes a HELL of a huge hit.

Mon, 01/24/2011 - 21:20 | 901027 Dr. Porkchop
Dr. Porkchop's picture

I don't disagree that, in North America in particular, the choice was made a long time ago to base everything around cheap gas and driving. A place like Britain might have an easier time of it.

On the other hand, the US did have an impressive system of rail and transit systems at one time. It's not going to be easy or painless, but if you accept the idea of fuel supply problems in the future, then at some point it has to be faced. Price controls would seem to be another way of kicking the can down the road.

Mon, 01/24/2011 - 21:23 | 901044 SheepDog-One
SheepDog-One's picture

With any of it, the little guy definitely ends up getting screwed. Technically they SHOULD let prices rise to reduce consuption, I dont really agree with anyone controlling usage however price controls are the worst way to go. How they can even consider price controls is stunning. But then again no one learned any lessons about money printing from Germany or Zimbabwe either, so everyone put on your hockey helmets, we're goin FULL RETARD!

Mon, 01/24/2011 - 21:30 | 901068 topcallingtroll
topcallingtroll's picture

All you austrians should be against price caps. It sends the wrong signals to the economy resulting in misallocation of capital which ultimately reduces economic efficiency harming all of us.

Mon, 01/24/2011 - 21:48 | 901142 Dr. Porkchop
Dr. Porkchop's picture

It's not that I don't believe in the concept of the commons. Something like clean water, a basic need for survival, should be available for people to use. Water is a whole other topic.. I believe we are incredibly wasteful with it.

Gasoline isn't really necessary to survive. Yes, in the North American built environment, it's very difficult not to drive, I understand that viewpoint. There are other ways to do things though.

The problem with North America is that we've built such a car dependent society that the landing is going to be bad. No leader wants to come out and say that things are going to be really bad for most of you because we refused to make the hard choices.

Mon, 01/24/2011 - 22:14 | 901222 KickIce
KickIce's picture

"Gasoline isn't really necessary to survive"

Yeah, let's see what happens when farmers can't plant or we lose or distribution chain that gets that food to the grocery store.

Mon, 01/24/2011 - 22:41 | 901323 Dr. Porkchop
Dr. Porkchop's picture

That's what I mean. The whole infrastructure is built around cheap energy, but that's not to say that there aren't other ways to do it. There are, but at this point, I think we've waited too long to make the transition a nice one. It's going to be tough on a lot of people because we didn't make hard choices. That doesn't change the fact that eventually, the party is over.

Ostensibly, price controls or rationing would be sold as a temporary measure until we find the solution, but we won't find the solution, because we'll quickly settle into complacency around the rationing infrastructure, and a crooked business, with all the usual corruption and special interests would arise and ensure that it was permanent. Until all hell finally breaks loose.

I just think that at this point, all choices will result in pain, but rationing might result in more pain when we can't kick the can further down the road yet no effort is made to solve anything. 

You can grow food and live without oil. They did it before. It just means that it will be much more local. Goods will still come from distant places, but it will be more expensive.  

Mon, 01/24/2011 - 23:37 | 901497 KickIce
KickIce's picture

agreed, and just think of the prices if we have to allocate fuel to certain industries.  If there were any jobs left at that point, how to afford the food?

And just wait to a food spike / or distribution chain gets halted going into the inner cities.

Tue, 01/25/2011 - 01:36 | 901725 RockyRacoon
RockyRacoon's picture

You saying we should go long buggy whips, hemp rope, farrier supplies, and sealing wax?

Mon, 01/24/2011 - 23:26 | 901472 A Nanny Moose
A Nanny Moose's picture

It's going to hurt, but it's coming either way. At some point this means, the cheap labor from south of the border wont be enough to pick your lettuce.

Tue, 01/25/2011 - 00:49 | 901658 Calmyourself
Calmyourself's picture

Wasteful with water, I always laugh when I read that..  It goes at some point either to an aquifer for reuse or to the ocean where it evaporates into a cloud and then it comes back to you. Just wait you'll get your wasted water right back.. At least I don't know of a conspiracy to destroy any water permanent like..

Tue, 01/25/2011 - 05:31 | 901903 1984
1984's picture

OK fucktard.  What if the cloud doesn't rain it back to you, but to your neighbor who already has too much of it? 

Just ask the Russians, Australians, the Africans, and Chinese how they're doing with their clouds.

While you're at it, why don't you read some books on run-offs and how the underground aquifers are not being replenished quickly enough.

Tue, 01/25/2011 - 08:12 | 902004 Marge N Call
Marge N Call's picture

WRONG. First of all, do you realize how long it takes for an aquifer to replenish itself? If we are depleting the Ogallala Aquifer faster than it can replenish itself (which we are), then how will it ever get back to anywhere near full? It won't. Period. It will dry up.

And, in this sense, the US is FAR better of than a lot of Asian nations, especially China, who will definitely run out of clean water sometime this century. Believe me they realize this and they will buy or take-over with force what they need when the time comes.

Not to mention pollution, which will ruin most of the clean water in developing nations anyway, so lots of aquifers will be useless anyway.

Wake up! Wars will soon be fought over clean water. Guaranteed.

 

Mon, 01/24/2011 - 21:58 | 901174 Pants McPants
Pants McPants's picture

Not only were no lessons learned from Zimbabwe etc., but perhaps the wrong lessons were learned.

The short-tempered, where's-my-footballs population will likely repeat this pattern...what with no shortage of scapegoats from which to choose and everything.  Who will it be?  My money is on the brown people - speculators is just too vague.

Tue, 01/25/2011 - 02:11 | 901769 minus dog
minus dog's picture

"I don't disagree that, in North America in particular, the choice was made a long time ago to base everything around cheap gas and driving."

Dude.  Do you have any idea how large this nation is?  Go look at our population density, both average and by region, and then go compare it to places with "impressive rail systems".  

Even with an "impressive rail system", half the population is still shit out of luck in terms of getting anywhere unless they do it themselves due to simple geography, and the rest can't rely on trains and buses unless they're willing to sign on to a hapless urbanite existence.

People seem to forget that we had automobiles before we had internal combustion and large scale gas/diesel infrastructure.  It was like that way for a reason - the train goes where the train goes, and after that you're riding an animal or walking.  If the need arises, we'll switch (back) to some other form of power for our vehicles.

Wed, 01/26/2011 - 05:12 | 905534 Lord Koos
Lord Koos's picture

Before cars, the trains used to go to a whole lot of places that they don't go now. Even tiny little towns were connected.

Tue, 01/25/2011 - 04:59 | 901886 Seer
Seer's picture

Transportation is TPTB's means of control.  Historically this has been true.  As such, I would profer that all those POVs are really only a subsidy to the commerical transportation industry so that they can continue to control the food lines (thereby controlling the populace).

It's all about conservation of energy.  That's how nature works.

Mon, 01/24/2011 - 21:22 | 901038 EscapeKey
EscapeKey's picture

They are closing refineries over here in Europe. First in France, then in the UK. You do the math.

Tue, 01/25/2011 - 05:00 | 901887 Seer
Seer's picture

Must be because of the environmentalists, yeah, that's who is to blame!

Wed, 01/26/2011 - 05:10 | 905530 Lord Koos
Lord Koos's picture

Gas was rationed in the late 70s... it was inconvenient as hell but it wasn't the end of the world.  

Mon, 01/24/2011 - 21:13 | 901002 Yancey Ward
Yancey Ward's picture

This is deflationary, right?

Mon, 01/24/2011 - 23:29 | 901478 A Nanny Moose
A Nanny Moose's picture

Ooo. A pratical application question. I like these.

Russia stops all wheat exports to stem the rising prices, thus reducing supply world-wide...so...no?

Did I pass?

Tue, 01/25/2011 - 05:06 | 901888 Seer
Seer's picture

The production of wheat has gone down, which, I believe, means production has been deflated!

But seriously, that would map to the Austrian theory of economics in that inflation/deflation is all about a supply in circulation...

Mon, 01/24/2011 - 21:19 | 901020 carbon based unit
carbon based unit's picture

if one didn't know better one might suspect the bernank of clandestinely blackmailing the rest of the world to compel them to pressure china to unpeg.

 

that's if one didn't know better, of course.

Mon, 01/24/2011 - 21:26 | 901055 topcallingtroll
topcallingtroll's picture

That has been my soapbox for a while. All peggers should either die or end their pegs so our accounts can naturally return to balance without a big crash. We are not starving the world. Pegging.governments are starving the world. Name one.fully floating convertible currency where people are going hungry due to food inflation. It is their own damn fault trying to steal our capital base.

Mon, 01/24/2011 - 21:51 | 901151 Johnny G.
Johnny G.'s picture

Zimbabwe has a floating currency where people are going hungry (also read about elderly Japanese people eating cat food and dying of malnutrition).

 

And it's our own damn fault for continually voting for the incumbent attorney/CFR socialist.

Mon, 01/24/2011 - 21:59 | 901177 topcallingtroll
topcallingtroll's picture

Im pretty sure zimbabwe maintained official.and laughable.pegs all thru their inflation. It was not freely convertible. There are no food.riots in japan, but japan has managed their currency with peg like targets but have magnanimously taken a.big fx hit for us. For that we should be thankful. A true ally in asia.

Tue, 01/25/2011 - 08:09 | 901999 johan404
johan404's picture

Below is a partial list. Zimbabwe only had the first dollar pegged to the USD, but the second, third and fourth dollars were not.

http://en.wikipedia.org/wiki/List_of_countries_with_floating_currencies

Mon, 01/24/2011 - 21:20 | 901029 dark pools of soros
dark pools of soros's picture

inflation doesn't include food or energy right??  redo your math!

Mon, 01/24/2011 - 21:26 | 901056 SheepDog-One
SheepDog-One's picture

Starving peasants in Russia waiting in line for a slice of bread aren't included in official Dept of Lies and Fraud inflation calculations either.

Mon, 01/24/2011 - 21:21 | 901031 topcallingtroll
topcallingtroll's picture

Russia in various comments has been trying to push gold up and food commodities down. In either case they are positioned against what many believe to be the prevailing trends. If we are lucky these emerging economies revert back to their command and control histories and america gets another 50 year run. Before anyone.suggests we are a command and control economy it is not nearly as harsh and primitive as old style totalitarian central planning. Why would russia try to fight the prevailing trends? Its far better to do the hard work of controling systemic corruption and focusing on economic inefficiencies not that we do.a great deal better.

Tue, 01/25/2011 - 05:09 | 901893 Seer
Seer's picture

America doesn't have a command and control system?  Funny, it sure the hell has every appearance of just that!

Without energy (and the, remember?, massive debt load) the US ain't going to be doing any rising.

Tue, 01/25/2011 - 08:23 | 902019 johan404
johan404's picture

Nobody will have another 50 year run. Not Russia, China or the US. There isn't enough affordable energy, especially liquid fuels, left for that. In fact net economic growth itself might soon be a thing of the past.

Mon, 01/24/2011 - 21:28 | 901060 trav7777
trav7777's picture

gold, oil, silver, all blowtorched...no recognition of the inflation there

Mon, 01/24/2011 - 21:32 | 901075 SheepDog-One
SheepDog-One's picture

Really? Top food makers here all just announced price increases.

Mon, 01/24/2011 - 21:42 | 901114 topcallingtroll
topcallingtroll's picture

Food inflation will run for a while but it is a relatively small.amount of total expenditures in america. Pound china harder with your big black strapon Ben! The one that says qe2 all over it. Surely.sheepdog you are tired of china.stealing our jobs and capital base with an artificially low peg?

Mon, 01/24/2011 - 21:52 | 901154 topcallingtroll
topcallingtroll's picture

Surely sheepdog you are tired of seeing.china steal our jobs and capital base with an artificially.low peg that they end at their convenience when they have everything they want? We are.in a.trade war whether we choose to fight or not. I say fight.

Mon, 01/24/2011 - 22:14 | 901223 nmewn
nmewn's picture

"Really? Top food makers here all just announced price increases."

Along with corresponding packaging reductions of product...well, they didn't actually "announce" it, the packages just showed up on the shelves smaller for the same price..the trick never seems to grow old with them.

Groupus Thinkus Hahvadus.

Mon, 01/24/2011 - 23:38 | 901500 A Nanny Moose
A Nanny Moose's picture

Alchohol = store of value in food form. Liquid bread.

Tue, 01/25/2011 - 01:02 | 901680 samsara
samsara's picture

You are both right, in that Food price increases are because of real cost of business increases or shortages(ie price inflation),

Trav is right because the PMs and Commodities are reflecting a Monetary Deflation.

The Deflation Force is like a black hole, and Paper Money has already gone past the event horizon.

That's why the Deficit for example has to go parabolic, But Gravity(money being written off, either in real terms or virtually like the curve on the cone thingys you put a penny for charity in restaurants.)  The Speed(ie Money printing) approaches the Speed of light.(or Speed of Print). But to Nought.

StoneLeigh over at AutomaticEarth Does a real good explanation.

http://www.youtube.com/watch?v=nvoFJsqF1wQ&feature=player_embedded 

http://theautomaticearth.blogspot.com

Tue, 01/25/2011 - 05:13 | 901894 Seer
Seer's picture

Peak Everything!  We're just now starting down the long decline...

Mon, 01/24/2011 - 21:38 | 901100 topcallingtroll
topcallingtroll's picture

Maybe the markets are right for now about serious inflation. Ive been saying its about time for deflationary winds to blow again. I break even around 25 on silver and get a little bit ahead if i get to buy in lower. China has been a fair contrary indicator in their commodity contracts. How stupid to sell us their silver around 16 and now be a net buyer.

Mon, 01/24/2011 - 21:33 | 901077 SouthHedge
SouthHedge's picture

Gold, oil, silver?

Leverage up and buy hard assets?

Mon, 01/24/2011 - 21:33 | 901081 buzzsaw99
buzzsaw99's picture

china will gladly trade melamine milk for oil when tshtf.

Mon, 01/24/2011 - 21:39 | 901103 red2893
Mon, 01/24/2011 - 21:43 | 901115 SMG
SMG's picture

So If I were an oligarch, and I wanted rape the peasants even more:

Why not drain their resources with some high necessity inflation for a while, and then cause a massive deflation after that and deflate everything for a time so they have to sell whatever meager assets they have left for next to nothing.

Then I can destroy everything with hyperinflation, because now I have even more real assets and more power and assets in the system that comes next.

Don't know if that's the plan cause I'm not an oligarch, but on it's own it's not a bad evil plan.

 

Mon, 01/24/2011 - 21:48 | 901141 topcallingtroll
topcallingtroll's picture

Damn....you figured out our plan.

Tue, 01/25/2011 - 05:21 | 901897 Seer
Seer's picture

I'm about as cynical (according to many) as they come, but I very much doubt that the End Game of TPTB is to fuck everyone.  Going down That path would only result in pure instability, and, frankly, TPTB can only really operate in a very stable environment (yeah, things might look rough, but the undercurrents are still basically flowing in the same direction, same volume, and same speed).

TPTB are generations passed down of people who believe that they are in control of the controllable.  Their System has one fundamental flaw that they are blind to- it cannot operate without growth. TPTB have no training in dealing with non-growth situations.  Destabilizing things will ONLY reduce growth, which therefore would ONLY reduce their ability to control.

Mon, 01/24/2011 - 21:43 | 901117 CB
CB's picture

I smell socially important commodity supply fail in Russia.

Mon, 01/24/2011 - 21:44 | 901121 redarrow
redarrow's picture

<sarcasm:on>

Folks there is nothing to worry about. The Feds monk-ey is 100% certain that inflation can be controlled. Who cares?...as long as the fat cat bankers get fatter by trading the common mans assets like rice, sugar, wheat, and other essentials. As long as Joey gets a second bike and daddy John gets to take Sarah to buy a second iPad for her, its all gonna be fine the citizens of the world could go screw themselves. The chairman can raise the rates in 15 minutes if inflation hits here, i.e. when the price of the iPad goes out of reach of the unemployed.

<sarcasm:off>

Mon, 01/24/2011 - 21:55 | 901166 Dr. Porkchop
Dr. Porkchop's picture

Uncle Ben's 15 minute rice.. er rates!

Mon, 01/24/2011 - 22:38 | 901301 topcallingtroll
topcallingtroll's picture

I think if the ipad gets too expensive we will have it manufactured first in vietnam then bangladesh then upper elbonia in africa by nose pierced tribesman in reed huts. We are going to attack china from both ends, inflation and competition from pre emerging economies. China has a rapidly aging population. I smell margin squeeze. Couldnt happen to a more deserving country.

Tue, 01/25/2011 - 00:59 | 901669 DoChenRollingBearing
DoChenRollingBearing's picture

Nailed it, top.  Great reply.

Tue, 01/25/2011 - 05:26 | 901902 Seer
Seer's picture

I'm amazed at how much energy people can devote to bashing a given country.  Reminds me of the olden times where "Communism is going to take over the world" mentatlity ruled.  I mean, why the fuck bother worrying about it if it's as bad as you say (and I agree that it's fucked up, but then again I think ALL govts that tout growth are fucked up).

The US is also demographically challenged.  And I'd say that it's worse than with China, as the US's population, long exposed to toxins and crappy food, is totally hooked on VERY expensive medical industry.  The US's food production is also heading toward melt-down as energy costs go up.

Moral of story: don't laugh at others too loudly.

Tue, 01/25/2011 - 10:01 | 902241 trav7777
trav7777's picture

our demographic challenges aren't coming from aged people, they come from the 25% of the nation that is of 3rd world stock.  Seriously, this segment alone commits 85-90% of the crime, drags down the average education level, forces the expenditure of ridiculous funds on schools, policing, health care, etc.

As for comparisons to China...China has 1.2 BILLION people.  They have too many people and they've smartly polluted their entire national watershed.  You want to talk toxin exposure, comparing to CHINA???

China is an example of what happens when you care about nothing other than growth.  China is Easter Island in the modern age.

Wed, 01/26/2011 - 05:18 | 905536 Lord Koos
Lord Koos's picture

It'd be amazing if you could support your racist claims about that "3rd world stock"commit 85% of the crime.

In terms of dollars and damage, white collar white guys commit about 99% of the crime.

Do NOT follow this link or you will be banned from the site!