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Simon Black On The Growing Phenomenon Of Shadow Inflation: "Value Deflation"

Tyler Durden's picture


Some sobering observations by Simon Black, a/k/a Sovereign Man, whose Notes from the Field today comes from Pattaya, Thailand, where he discusses the ever growing threat of "shadow inflation", aka providing smaller portions, fewer services, and generally less bang for the buck: a process Black calls "value deflation." This is something we discussed a few weeks back when observing how Wal-Mart is masking inflation in coffee purchases. Something tells us the WSJ, which argues there is no real inflation currently, and pretty much everyone else, have missed this development.

Sovereign Man, Notes from the Field

Date: November 10, 2010
Reporting From: Pattaya, Thailand

I stared at the sign for a full 30 seconds to make sure I was reading it correctly.

"Dear valued members: Due to rising prices, we are no longer able to provide free water at this facility. We regret any inconvenience caused. Management."

The gym in Pattaya that I always patronize is cutting costs-- and the first thing on the chopping block was the water dispenser. Apparently the second thing on the chopping block was the air conditioning... because they seem to have shut that off as well (without the apologetic note, though).

I've been experiencing this sort of thing a lot lately-- restaurants have reduced their portions, hotels have curtailed their cleaning and concierge services, and of course, the gym. These are all products or services that used to be included in the price but have since been eliminated. 

Simply put, this is just another form of price inflation-- in fact, I call it value deflation. Due to rising input costs and an overall higher cost of doing business, managers have had to find way maintain their profit margins. Rather than risk customers' ire by raising prices, they make small reductions to value-- what you get for the price paid.

In other words, customers aren't necessarily paying more (price inflation), but they're getting less for their money (value deflation). These are essentially the same, and they arise from the same cause: rapidly expanding money supplies, particularly in the US.

Ben Bernanke has printed an incomprehensible amount of money over the last few years, and one of the results of quantitative easing is that hundreds of billions of dollars have fled the US economy; money managers are looking for something of value other than USD, and this has sparked a rise in both commodities and emerging market assets.

Export-dependent developing economies have had to fight tooth and nail to keep their currencies from strengthening too quickly against the dollar; one of the more common tactics has been to keep interest rates artificially depressed, generally reducing the currency's appeal in terms of risk-adjusted yield.

By keeping their own interest rates low, though, developing economies' currencies are losing ground against commodities. Let me paint a clearer picture:

Devoid of meddling bureaucrats, the Sri Lankan rupee should rise against the US dollar similar to the dollar's losses against major commodities. Because the Sri Lankan central bank intervenes in the currency markets, though, the rupee has stayed at a constant value against the dollar, and hence lost value against commodities.

This helps explain why prices of certain agricultural staples in Sri Lanka have risen 30% in just two months... and why my gym management had to shut off the A/C and get rid of the water coolers. It's not due to lack of customers-- business is brisk. It's due to rising prices.

If you notice, though, newspaper headlines don't say too much about inflation-- that's because at the retail level, value deflation is the bigger trend over price inflation... and CPI numbers don't track eroding value. This gives western bureaucrats plenty of room to argue that inflation is not a concern at the moment, which they often do.

In fact, every time you hear a central banker telling you that he's more concerned about deflation, it's time to pause, check your portfolio, and ensure that your wealth isn't being eroded by their incompetence.

I've argued strongly in the past (and will continue to do so) for agricultural property, both as a productive asset and a major inflation hedge. Certain equities can provide similar benefit, especially those that are in the resource sector.

Naturally, physical gold also provides a sound store of value and may some day become a widespread medium of exchange again. I have major reservations about exchange-traded funds, though; they may be useful for speculating on gold prices, but they do nothing for you as a long-term store of value.

SPDR Gold Trust (GLD), for example, is 100% dependent on the whims of the US government, and it's really questionable how much gold (and what quality) is actually held in custody on behalf of the trust. Read the prospectus and 10-K to see for yourself.

Holding physical gold is a much better inflation hedge than the ETFs, and if you own a lot of it, it certainly makes sense to plant multiple flags and secure a portion of your gold in a private vault overseas.

I'm discussing some updated methods for moving and storing physical gold overseas in this month's upcoming Sovereign Man: Confidential, and we'll also have some private vault proprietors at our offshore workshop this coming February in Panama.

On that note, I'm planning on holding a teleconference next Tuesday November 16th at 11am Eastern Time (yep, that's midnight where I'll be...) to give you more details and answer your questions about our offshore workshop.


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Wed, 11/10/2010 - 13:44 | 716878 redpill
redpill's picture

Notes from the Field is an excellent newsletter, I read it daily.  Sometimes even BEFORE checking Zero Hedge.

Wed, 11/10/2010 - 14:30 | 717037 Ripped Chunk
Ripped Chunk's picture

Oh no!

Wed, 11/10/2010 - 21:15 | 718375 Caged Monkey
Caged Monkey's picture


Wed, 11/10/2010 - 13:44 | 716879 goldmiddelfinger
goldmiddelfinger's picture

Pattaya, Thailand

The Tigris and Euphrates of massage parlors

Wed, 11/10/2010 - 14:48 | 717100 packman
packman's picture

The Tigris and Euphrates of massage parlors

So along those lines, are you saying due to value deflation we're now in for "Eh, Can't Complain" Endings?



Wed, 11/10/2010 - 15:04 | 717166 Whizbang
Whizbang's picture


Wed, 11/10/2010 - 15:22 | 717267 VegasBD
VegasBD's picture

Haaa Hilarious. Was trying to think of a similarly clever response. Nice one.

Wed, 11/10/2010 - 15:27 | 717293 goldsaver
goldsaver's picture

Too clever. Took me a second there. Good thing too. Tomato soup and keyboards dont mix well.

Wed, 11/10/2010 - 15:17 | 717228 Azannoth
Azannoth's picture

Wait until hookers start giving you 'half' a blow job, or half penetration than you'll notice a difference

or you start paying the same for a tity fuk as was full penetration or a hand job for the price of a blow job

Wed, 11/10/2010 - 15:37 | 717336 Walter_Sobchak
Walter_Sobchak's picture

before long they'll start taking cigs out of the pack and selling them for the same price, they've done it in germany for years

Wed, 11/10/2010 - 16:29 | 717514 Things that go bump
Things that go bump's picture

My granddaughter tells me there is a shop near where she lives, or at least a clerk or clerks there, who will sell a single cigarette for 75 cents, for an excellent roi and quite illegal, I am sure.  

Wed, 11/10/2010 - 20:49 | 718296 i-dog
i-dog's picture

Street vendors selling single cigarettes is very common in developing countries, a stage which the US is bypassing on its rapid fall to 3rd world banana republic status.

And how the fuck can it be illegal if the duty has already been paid on the original full packet? Freaking socialists controlling everything!!

Thu, 11/11/2010 - 01:28 | 718792 Non Passaran
Non Passaran's picture

I believe that is what "generally less bang for the buck" in TFA refers to.

Wed, 11/10/2010 - 13:45 | 716884 Hook Line and S...
Hook Line and Sphincter's picture

I'm experiencing value deflation in from my significant other. Any suggestions?

Wed, 11/10/2010 - 13:53 | 716914 kridkrid
kridkrid's picture

Find another other.

Wed, 11/10/2010 - 14:17 | 716990 Ripped Chunk
Ripped Chunk's picture

Shovel, trip to the country.

Wed, 11/10/2010 - 14:27 | 717020 DollarMenu
DollarMenu's picture

Would your SO be able to say the same of you?

Wed, 11/10/2010 - 14:29 | 717033 CPL
CPL's picture

Well if she is over 40, you can trade her in for two 20's.  But in inflationary measures, you'll eventually end up with two 40's again.

Wed, 11/10/2010 - 14:49 | 717102 Lucky Guesst
Lucky Guesst's picture

If the 40 has proven herself to retain value by taking excellent care of herself, I'd stick with her. Statistcly the 2 20's are probably going to be junk 2 decades from now.

Wed, 11/10/2010 - 15:18 | 717244 johnQpublic
johnQpublic's picture

mines been sufferinf from staggering inflation....wanna trade?

Wed, 11/10/2010 - 13:45 | 716889 rapacious rachel wants to know (not verified)
rapacious rachel wants to know's picture

just 50 second video from recent Jekyll Island conference

looks like Bombs Away Ben is flipping off Greenspew

22 second mark Bernanke stops flipping off Greenspan and attempts to swallow his nose

at least that's what it looks like to me:

Wed, 11/10/2010 - 13:46 | 716892 PlausibleDenial
PlausibleDenial's picture

If he is in Pattaya, I am sure he is experiencing more "Bang" for his buck.  I am sure he is getting more services there. :)

Wed, 11/10/2010 - 13:49 | 716902 HarryWanger
HarryWanger's picture

That's been going on in the US for a couple of years now. Cereal boxes contain less, hell, I've even seen 12-packs with 11oz bottles. I remember what a big deal everyone made of this "new packaging" by several manufacturers containing less product for the same or slightly higher price. It'll get worse but the sheeple won't care. They'll just buy bulk corn flakes from the big ugly plastic bins.

Wed, 11/10/2010 - 13:58 | 716927 cossack55
cossack55's picture

Who cares when you buy via SNAP cards and let the few remaining workers dumb enough to pay their taxes foot the bill.

Viva la Food Stamps

Wed, 11/10/2010 - 14:28 | 717025 Lucky Guesst
Lucky Guesst's picture

+ hmmmmm, I plus you a guest appearance on Supermarket Sweep and a brand new pair of running shoes!

Wed, 11/10/2010 - 14:32 | 717041 CPL
CPL's picture

I see you are familar with Canadian game shows and the grand prize of bumper stumpers.


and after three grueling weeks you've won a case of peanut butter, a 20 pound bag of flour and a travel mug

..and no I'm not kidding

Wed, 11/10/2010 - 14:07 | 716958 HarryHaller
HarryHaller's picture

What about that 'half gallon' of ice cream which is actually 1.5 quarts?  I'm sure it's 25% more tasty than what we got in the old packaging - so hey, no worrries!

Wed, 11/10/2010 - 15:29 | 717307 zot23
zot23's picture

And what, pray tell, would you have them do?  Stop eating cornflakes or drinking beer?  Have you?  I doubt the companies asked their consumers what they would prefer, last I checked it was bad form to try and haggle over the price of cornflakes with the cashier at Safeway or try to get gas cheaper by filling up 2 cars instead of one.


Wed, 11/10/2010 - 13:52 | 716912 His Dudeness
His Dudeness's picture

Reporting From: Pattaya, Thailand

Question: What is the most PAINFUL city in the world?



Answer: Bangkok!

Thank you! Try the veal!

Wed, 11/10/2010 - 14:58 | 717137 RichardENixon
RichardENixon's picture

Didn't I see you at the lounge at the  Airport Holiday Inn in Des Moines opening for Two Jacks and a Jill?

Wed, 11/10/2010 - 13:53 | 716913 CapTool
CapTool's picture

Actually look for a book by one of the most evil thinkers ever, its called fortune at the bottom of the pyramid, it explains the portion moves. Its not inflationary but it is predatory

Wed, 11/10/2010 - 13:59 | 716932 Cleanclog
Cleanclog's picture

In essence, biflation again.  

Doubt that WSJ missed it so much as don't want to report it.  Wall Street wants QE and biflation or value deflation isn't a good argument for QE.

Wed, 11/10/2010 - 14:21 | 717005 Samsonov
Samsonov's picture

You're wrong when you said that the "growing threat of...value something...the WSJ...have missed".  They have not missed it, they practice it.  30% less journalism, same price.

Wed, 11/10/2010 - 14:35 | 717049 Ripped Chunk
Ripped Chunk's picture

Brought to you by an Aussie national who bribed his way to citizenship and 8 FCC full power TV licenses. (Aliens are allowed to own a network because they do not actually broadcast)

America! What a country. Americans: What imbeciles!

Junk away uninformed ones.

Wed, 11/10/2010 - 19:45 | 718177 SHRAGS
SHRAGS's picture

We are happy for you to have him.  Reminds me of a quote from ex NZ prime Minister Robert "Piggy" Muldoon.

“New Zealanders who emigrate to Australia raise the IQ of both countries.”


Wed, 11/10/2010 - 14:37 | 717063 Lucky Guesst
Lucky Guesst's picture

Ha-Ha! That is so true. They spend half the program repeating the teaser of what is coming up and they video conference most the guests whose opinions/talking points are being sold as "news".

Wed, 11/10/2010 - 15:01 | 717148 DosZap
DosZap's picture

I love it when we make up new words for the SOS.

Less for same, is INFLATION.

Call it whatever you will, if your getting less, and paying the same, they (whoever they is) has inflated your price.

Wed, 11/10/2010 - 13:59 | 716933 Oh regional Indian
Oh regional Indian's picture

Too few people making too many things for inflated wants and derided needs.

Recipe for disaster and resulting in this value deflation type behaviour.

Anyways, soon enough, people will be glad to get what they can. These are still luxurious times. Will be remembered fondly for their excesses for some time to come.

Belt tightening by demand reduction, not starvation.


Wed, 11/10/2010 - 14:01 | 716937 Hook Line and S...
Hook Line and Sphincter's picture

Again, I must remind you all that inflation is like a really good personal trainer.

Soy - you shouldn't be eating this crap, it's an estrogen mimicker that will make you grow tits if your a man.

Ice cream- whaaaa, your ice cream costs more!

Coffee -  a non-necessity once you have weaned yourself.

Corn - Just what my GM craving body needs more of.

Oil - get a bike, lose some weight. Get a motorcycle and get there twice as fast.

Milk - for goodness sake, all mammals lactate. Get creative. Dogs, cats, even the wolverine can produce quality nutritious milk.

Wed, 11/10/2010 - 14:51 | 717112 Xedus129
Xedus129's picture


Wed, 11/10/2010 - 14:54 | 717119 RobD
RobD's picture

Milking a wolverine must take some talent, not sure I would go there. LOL

Wed, 11/10/2010 - 14:57 | 717130 RockyRacoon
RockyRacoon's picture

My dog is looking at me real funny like.  Can she read?

Coconuts, bitchez!

Wed, 11/10/2010 - 15:02 | 717154 Lucky Guesst
Lucky Guesst's picture

You obviously haven't noticed the price of pet food. Try a goat, don't they eat whatever?

Wed, 11/10/2010 - 15:35 | 717326 goldsaver
goldsaver's picture

Nah, misconception. Goats it brush, leaves and hay. My damn goats are even picky about what grass variety they eat. Pisses me off when I have to feed them straw but still mow the goat pen.

Sun, 11/14/2010 - 23:04 | 726855 Temporalist
Temporalist's picture

The Original Weed Eater: Coming to a Golf Course Near You? Kentucky

Portland, OR - Invasion of the goats, coming to a weed-choked lot near you

It’s finally happened. The job outsourcing phenomenon has moved to another level. Forget outsourcing jobs to other countries—now they’re being outsourced to other species.

Even Steven Colbert reported on goats stealing landscaping jobs in CA.  I think you are overfeeding them the good stuff.

Wed, 11/10/2010 - 15:04 | 717164 DosZap
DosZap's picture

Milk - for goodness sake, all mammals lactate. Get creative. Dogs, cats, even the wolverine can produce quality nutritious milk.


Yes, but your neighbors will have you least use farm animals.

Goats are good.

Wed, 11/10/2010 - 15:37 | 717338 Hook Line and S...
Hook Line and Sphincter's picture

Goats are good. In fact, I made good use of their udders in 10' squirts to nail my buds as a kid. College days were interesting as well, living in the suburbs I was too hormone laden to mow the backyard...ever. Thus, I took care of business with my Enduro and a goat I 'borrowed' from a girlfriend. This was an ace until it bleated all night and my Neeey-boars called the cops!

Wed, 11/10/2010 - 14:03 | 716940 Punderoso
Punderoso's picture

The box of cheerios costs the same but the number of cheerios they put in the box can decrease and they hope you don't notice. If you do notice and complain about that they can keep the number of cheerios the same but just make each cheerio smaller and they hope you don't notice. If you do notice and complain about it they can just switch to cheaper ingredients to make the cheerios and hope you don't notice.

All the time the government bureaucrats say: "move along there is no inflation here, the CPI says so!"

Wait I have seen this game before, isn't this done with currency every day.  Hell, the In the Roman empire they began shaving their gold coins or mixing in lesser metals and hope the citizens didn't notice.  Our Fed, debases the dollar and hopes you don't notice. Some scams never die.



Wed, 11/10/2010 - 14:58 | 717139 RockyRacoon
RockyRacoon's picture

They're making the holes bigger.  Used to be you could hardly see thru one.

Wed, 11/10/2010 - 14:14 | 716941 Waterfallsparkles
Waterfallsparkles's picture

I know this may be off topic but why are all of the Major Companies holding all of their Cash Overseas?  We saw the with Microsoft where they had to borrow money to pay a higher dividend.

On topic.  I often have wondered how the fed would value an 8 oz can of tuna that is now a 5oz can that is still priced the same just a smaller quanity. I also think that they are putting in more water than before so I am not sure how much of the 5oz is water.  Would they just compute that a can of tuna is the same?  Anyone know? 

Wed, 11/10/2010 - 14:55 | 717126 Xedus129
Xedus129's picture

Tuna is fucking gross I hope that it goes away forever

Wed, 11/10/2010 - 15:08 | 717186 DosZap
DosZap's picture

Try Albacore, 10x's better............Plus, the shelf life for Tuna is LONG< past 2yrs easy.

Wed, 11/10/2010 - 15:39 | 717344 goldsaver
goldsaver's picture

That is because foreign earned income that doesn't enter the US is not taxable. So GE can build a solar panel plant in China and sell the panels in Germany and as long as the profit are never in the US, no tax. Google is really good at this game. They keep billions overseas and never pay taxes on them.

Wed, 11/10/2010 - 14:04 | 716943 tahoebumsmith
tahoebumsmith's picture

The potato chip bag is starting to look like a birthday balloon and when you pop it and look inside there is only a few chips. Maybe Americans will wake up when the bag is the size of a pillow and when opened, one chip falls out. This is fraud in every sense of the word. Companies should have to announce on the packaging when the size is reduced. Nothing but a bunch of thieves covering up the inflation problem with a smaller portion for the same price. Can't wait for the day when coffee cups are 4 inches thick but 2 inches taller...Total bullshit!

Wed, 11/10/2010 - 14:54 | 717125 trav7777
trav7777's picture

well they did that with the big bags for a while.

Now the bags are again somewhat full but they cost $4.

The little .89 bags are almost all air...even my kids go WTF

Wed, 11/10/2010 - 14:56 | 717131 Lucky Guesst
Lucky Guesst's picture

The potato chip bag is starting to look like a birthday balloon

That's funny, sad and true.

Wed, 11/10/2010 - 14:04 | 716946 NERVEAGENTVX

no inflation? Been to the grocery store lately...god damn!

Oh wait, the grocery store and the gas pump are two things  curiously left out of the BLS's mathematical model when calculation inflation.


Wed, 11/10/2010 - 14:17 | 716964 Hook Line and S...
Hook Line and Sphincter's picture

Don't be discouraged. If they remove value from your cheese portions, then make your own.

How to Make Cheese from ANY Mammal

Making cheese surreptitiously while at work, at home, or in prison is a hobby that is interesting and fulfilling. Today’s sanitation workers, peep show operators, and administrative assistants can create the same delicacies that only vetted cheese makers of yesteryear once could. The very process of cheese making need not be discouraging. It should be considered just one more skill acquired on one’s life’s journey. While no more difficult than making bread, brewing your own beer, or harvesting your own opium poppies, the raw material and equipment are readily available in any kitchen, bathroom, or plumbing truck.

Recipe A. - Simple Dog Cheese

Without doubt, my initial cheese making experiment proved to be extremely simple. I produced a splendid version of Canis Familiaris (common house dog) cheese that had the consistency of ricotta and cottage. In this case I had access to a compound that bred the coveted Mexican hairless. In my estimation, the flavor is excellent and can be paired successfully with traditional Italian fare (or pasta dishes). Whether served as a filling for ravioli, or within the ever-satisfying layers of scrumptious lasagna, its soft, creamy texture is sure to satisfy.

Because I understand that your first experience with cheese making will undoubtedly bring friends and family running to you for samples, I have established the required ingredients at a level that won’t leave you short handed.


*      20 gallons of 2% fresh squeezed dog milk. Note: up to 30 dogs may be required to obtain this quantity.
10 cups vinegar
20 tsp salt

*      Heat dog milk to 190F and remove from the heat before it begins to boil. Add vinegar and allow to cool. Pour curds into a 9”x5” loaf pan as is commonly used to make that most popular treat, cat’s blood sausage and add salt. Mix well. Add cream (you know what kind) to enhance its already smooth and silky texture. 

Wed, 11/10/2010 - 14:19 | 716998 oddjob
oddjob's picture

Motel bathtubs make great cheese vats.

Wed, 11/10/2010 - 14:37 | 717062 Hook Line and S...
Hook Line and Sphincter's picture

Recipe B. Walrus Hard Cheese

Through my exhaustive and thorough methodology, after winnowing copious amounts of milk from the mammary glands of a walrus, I placed my spoils into a sanitized container, brought the walrus milk to a near boil and removed it from the heat. Then, having pasteurized the walrus milk, I waited until the receptacle was approximately 74 degrees F. Then, I added rennet, the yeast enzyme of choice, not from scratch, but store bought (sorry inmates and Zerohedgers stuck in the basement like me!) Because of the difficulty in acquiring enough milk from the walrus to create samples for my HFT club, I opted to save most of the walrus milk for other experiments, while allocating the following quantity to my cheese making endeavors.


*      1 gal walrus milk (Important: Do not milk a male walrus as this type of intimate contact will provoke him to quickly crush human bone)

*      1/4 renet tablet and 1/8 cup starter .

*      Pasteurize milk for 30-40 min at 150F and cool
Add starter and ripen for 1 hour at 90F
Add 1/2 rennet tab dissolved in 1/4 cup water, stir for one min then cover. Hold at 86F for 60 min

*      Cut the curd with a long knife (Note Eskimos: can be the same one you’ve used to slice blubber from a whale)

*      Heat slowly to 110F for one hour, stirring to evenly distribute heat, keep curds separated.

*      Pour into cheesecloth and drain for 1 hour, then return curds to kettle.
Sprinkle with 1 tbs of salt and place in any available receptacle lined with paper towel and air dry for 48 hours.

*      Pour curds into cheesecloth lined mold and fold excess cheese cloth over top. Press at 30lbs for 1 hour. Flip the cheese mold and press again for same period.

*      Remove walrus cheese from cheese cloth and dress it with a cheese cloth bandage. (Note Eskimo’s; you can also use walrus skin if you’ve killed the walrus)

*      Return the bandaged cheese to the press and press at 50 lbs for 2 days.

*      Remove from press, peel off cheesecloth and air dry until dry to the touch.

*      Wax and age at 55F for a min of 30 days.

Analysis: As an astute mulleted Zerohedger, I understand completely that my foray into cheese making also included what can be considered a short-cut. As illustrated, the vinegar acts as an acid, which forces the milk to curdle. However, any experienced cheese producer knows that a more superb methodology is available and is preferable. That said, with my confidence spilling over after my fist success, I dived into the real art and science of cheese production. Hence, I utilized the method where a culture of acid producing bacteria is utilized. True, it was more in-depth and time consuming, but here, I was able to produce a walrus cheese whose flavor improves and becomes more complex with age. 

Wed, 11/10/2010 - 14:35 | 717052 CPL
CPL's picture


"So what does a Bald Eagle taste like?"


"Like a cross between a spotted owl and a white rhino."

Wed, 11/10/2010 - 14:59 | 717142 JohnG
JohnG's picture

Borat?  Is that you?


Wed, 11/10/2010 - 15:59 | 717415 Hook Line and S...
Hook Line and Sphincter's picture

No, not Borat! 

Since I'm at it, did you happen to know...

  • Japanesaca - The smooth gouda-like cheese made from the pasteurized milk of Godzilla and Radon is a temping treat to the open mouthed, semen drinking Bukkake class (Naoto Kan just loves it)
  • BorneoCurd - In a misguided attempt to replicate the ever hip 'gusano' of Mexican cuisine, the indigenous peoples erroneously added guinea worm to their Madubagula cheese. Purchasers of such cheese rounds found their own bodies soon similar to that of Swiss (Gru·yère to be exact).
  • TasmanianFeta - Produced from the glands of the Tasmanian devil. Although a marsupial, milk can be extracted from its hidden (and often difficult to reach) nipples. Many a TazMilker has lost their finger milking these furry and ferocious culinary sources.
  • Zimbabwe Soft Mold (SOON AVAILABLE IN MARKETS THROUGHOUT THE U.S!!!) - A marvel from the cradle of mankind. Some say the swollen breasts of Click*^8Click Bomangani Nguro women were actually the initial source of the forbidden serpent’s soft-mold cheese of Eden.
  • Iraq Whey - once was known for having “Kurds” in its “whey”           


Wed, 11/10/2010 - 14:10 | 716972 badnews...buyspus
badnews...buyspus's picture

Wallymart isn't masking shit - they have raised prices 6% in July (see Reuters JPM Aug 10 piece). As long as housing is still 60%+ of CPI, there will be very little inflation according to Boobnanke. But when we are paying $4 a gal for gas, $4 for a loaf of bread, $4 a gal of milk, .....we (and more importantly, our kids) are so screwed.

Wed, 11/10/2010 - 18:03 | 717854 SoCalBusted
SoCalBusted's picture

Plus Wallymart beats the crap out of its vendors for the lowest possible costs.  Having Wallymart as a customer is worse than slavery.

Wed, 11/10/2010 - 14:11 | 716976 Clowns to the l...
Clowns to the left_ jokers to the right's picture

Harry, I agree. I first noticed it a couple of years ago and a website called The Consumerist has been tracking it for awhile. They call it The Grocery Shrink Ray.

Wed, 11/10/2010 - 14:29 | 717027 Hook Line and S...
Hook Line and Sphincter's picture

Steelers Wheel. Nice memory.

Wed, 11/10/2010 - 14:17 | 716992 Whats that smell
Whats that smell's picture

Pattaya best port of 1977 Westpac

Wed, 11/10/2010 - 14:17 | 716996 Manipulism
Manipulism's picture

Butbutbut......Mish say there is no inflation.Null,nada,zero.

And it is all the unions fault.Everything.Only the unions.

He is so smart.

Wed, 11/10/2010 - 14:54 | 717123 shortus cynicus
shortus cynicus's picture

The whole missconception about mish and defaltion comes from his definition of inflation as amount of money and credit marked to market. Example: who cares about milk prices when houses became cheeper 1000$ per month. So, in theory, if you are angry about high fule costs, just rent cheeper (and better) home ! But in practice, some countries still stay in huge denial mode about its real estate bubbles, so living cheeper in Australia or Canada is not possible yet, but sure in near future.

Wed, 11/10/2010 - 16:00 | 717424 GoinFawr
GoinFawr's picture

Actually, Mish is on record in an article right here on ZH saying that thanks to mark to skypie he doesn`t have a clue whether or not we are in deflation or inflation right now, using his very own definitions.



"Thus my model suggests 2007 to February 2009 were periods of deflation, March 2009 to May 2010 were periods of inflation, and now we are likely back in deflation but it is hard to say given institutions do not mark assets to market. Extend and pretend is massive."
 (emphasis mine)


Translation: You had your bout of deflation boys. Then we had inflation. Even Mish says so. Now, thanks to mark to skypie: who knows? Certainly not Mike Shedlock; once again it depends entirely on what scenario will maximize the blagging of any wealth you have left. Get ready!




Wed, 11/10/2010 - 15:11 | 717209 DosZap
DosZap's picture

Mish doesn't do the shopping.If he ever buys groceries.

Wed, 11/10/2010 - 14:28 | 717023 Tic tock
Tic tock's picture

Nature communes are called 'intentional organizations'!?


Wed, 11/10/2010 - 14:28 | 717024 chistletoe
chistletoe's picture

This has been going on forever.

However, at least at the grocery store, when the packages become sufficiently small, the vendor introduces a "new, improved!  Jumbo!" size and then discontinues the smallest size.


The US govt, however, continues to manufacture pennies even thougha stick of gum now costs about a quarter ....

Wed, 11/10/2010 - 14:44 | 717087 Waterfallsparkles
Waterfallsparkles's picture

They did that with the Frozen Hungry Man Dinner.  They went from 3 chicken patties to 2, cut out 1/2 the mashed potatoes and gave you a Brownie about 1 inch square.  Then when I think to many people called and complained they went to the Hungry Man XXX or something with 3 chicken patties and more mashed potatoes.  Now costs twice as much.

Wed, 11/10/2010 - 14:30 | 717038 bugs_
bugs_'s picture

Jeez I hope they won't turn off the A/C in the deflationist's lounge - lets not give them any ideas!

Wed, 11/10/2010 - 14:47 | 717099 DosZap
DosZap's picture

This has been going on for 2 yrs.

I am amazed folks are JUST now waking up to the facts.

This is 100% pure,unadulterated INFLATION.

The CPI(as usual) never includes the basics of life, in their #'s.(fuel/food)

Those of us who shop regularly, have seen this trend going for 2yrs,maybe longer.

You pick up a bag, and it's 10% less than it was, dude, you just raised the price 10%.

If that's not inflated, I'm a monkees unca.

Wed, 11/10/2010 - 15:02 | 717155 trav7777
trav7777's picture

Well, the Fed has hedonic adjustments that they apply.  When steak becomes too expensive, they consider it a hedonic adjustment that people go to ground beef, therefore there is no real inflation, it's just a preference choice.

Likewise, when people switch from Spam to dog food and then start choosing starvation instead of eating, hedonics will PROVE that the CPI is tame!

Wed, 11/10/2010 - 15:30 | 717305 Hook Line and S...
Hook Line and Sphincter's picture

Yes Trav, you're correct. But where do you draw the line in the hedonic adjustment?

Steak to spam is different than spam to Alpo. Starbucks to Folgers is not Maxwell OutHouse to Sewage. 

There still is a lot of choice available that allows us to side step the current iterations of inflation.

Thu, 11/11/2010 - 00:53 | 718750 GoinFawr
GoinFawr's picture

Entirely an aside: I am of the opinion that, in a pinch, Maxwell Haus can be coerced into making a far superior espresso when compared to the likes of ol' Folgers.

JMHO, natch.

Wed, 11/10/2010 - 15:30 | 717309 Captain Kink
Captain Kink's picture


Wed, 11/10/2010 - 15:10 | 717202 Clint Liquor
Clint Liquor's picture

It's not inflation until the Government says it is. Just asked those on Social Security who have not received a COLA in two years.

TIPS anyone?

Wed, 11/10/2010 - 15:47 | 717367 packman
packman's picture

TIPS anyone?

Those are based on government inflation numbers, aren't they?  No thanks.

(see above article)

Wed, 11/10/2010 - 15:41 | 717348 praps
praps's picture

Remember that if you 10% less for the same price it's actually inflation of 11.1%.

If you get 50% less for the same price it's 100% inflation.

Just another retailer math illusion.

Wed, 11/10/2010 - 15:54 | 717398 Hook Line and S...
Hook Line and Sphincter's picture

TIPS are a comedy gone bad.

Wed, 11/10/2010 - 15:51 | 717379 William F. Dulle
William F. Dulle's picture

Just got back from Costco, where I buy lamb chops. The employee who loads the cart asked me why the chops had circular holes in the bones. I didn't have a clue, but when I got home and started wrapping them up, I noticed that the circular holes are where there would normally be semi-circular grooves.

In other words, there was at least a 1/4 inch more bone in every chop. Pretty sneaky.

Wed, 11/10/2010 - 16:04 | 717433 ziggy59
ziggy59's picture

oj  and other 1/2 gallons of juice now 59oz.


pints of ice cream 14 oz..and some dont use real choc in their choc chip flavor.

1/2 gallon of ice cream now 48 oz.

tuna fish was 6 oz now 5..


coffee 16oz_---> 12, 13, 14, oz depending on brand.

dont even go there with potatoe chips...

a 4 oz bag is now 3.99?


its the Yogi Bera of economics..

theres no inflation; just everything costs more


Wed, 11/10/2010 - 16:09 | 717449 William F. Dulle
William F. Dulle's picture

We don't know where we're going but we're making really good time!

Wed, 11/10/2010 - 16:08 | 717440 -273
-273's picture

How can anybody say there is no inflation, oil just settled at it's highest for over 2 years! Its highest settlement since Oct.8, 2008 and well, we all know what happened 2 years ago...

Wed, 11/10/2010 - 16:12 | 717458 pazmaker
pazmaker's picture

Sure he wants me to store some of my gold overseas in Panama?   Then another Noriega comes to power and decides my gold is his gold.  Or the private vault proprietor is told by a military junta hand over or we kill your wife and kids....


No thank you! 

Wed, 11/10/2010 - 16:26 | 717501 arkady
arkady's picture

"Naturally, physical gold also provides a sound store of value and may some day become a widespread medium of exchange again." 


Wed, 11/10/2010 - 16:42 | 717533 SmittyinLA
SmittyinLA's picture

"Our chicken tenders are made of chicken breasts, our competitors chicken tenders are made of chicken parts glued together with spicy glop"

Is that burger that you're eating been ammoniated?

Compare today's ground beef grown from cattle fed a steady diet of hormones and a cowfeed made of "cow parts" and then mixed together with meat from several carcases and then "ammoniated" to kill germs with the ground beef we had in 1990 or 1980 or 1970 or 1960 which was pasture fed then fattened with oats & molassas of the good old days and was never ammoniated.

We now require all cattle be slaughtered at 9 months instead of 12 or 14 or whenever they reach the proper weight, to mitigate the mad cow feed exposure risk on the assumption that the disease wont develop and manifest before we eat it.

This is why the Japs curtailed US beef purchases, we have unsafe feed practices, the Japs are not superstitious uneducated people. 


Wed, 11/10/2010 - 17:05 | 717638 pazmaker
pazmaker's picture

That is why I eat the chickens I raise and the eggs they lay.  I feed a grain mix bought locally and grow most of my own veggies. Besides they like to free ranch and scratch up a lot of lil bugs and eat them too!   My hens egg shells are noticebly thicker then store bought ones and the meat taste better too.

Wed, 11/10/2010 - 17:59 | 717849 ArsoN
ArsoN's picture

This isn't a novel thing in any way.  For years (20+) we (US but Eurozone too) have endured an endless parade of foreign made substandard goods muscling out higher end producers.  Would have been a good thing if end consumer could properly evaluate what he/she was getting.  Unfortunately it just so happens that most of us can only appreciate the difference in the chow we stuff our plump sized butts with.  For years we've been getting equally screwed on construction materials, car parts etc.  Where's the CPI adjustment for that?   

Wed, 11/10/2010 - 18:48 | 718021 flrzero
flrzero's picture

Jesus, I wouldn't admit to anyone that I live in or frequent Pattaya. There is only one reason to live there and it's pretty ugly.....

Wed, 11/10/2010 - 20:32 | 718265 Zé Cacetudo
Zé Cacetudo's picture

Beware of Guinness cans: they're 14.9 ounces instead of the full pint (16 oz), but the price is the same. They nearly look the same too - I'd bet the cans are thicker.

Tetley's used to be available in pint cans too, but it disappeared for a while - now it's returned in 14.9 oz cans as well (for the same price).

With the cans at $2 (before tax) That's 13.4¢/oz vs 12.5¢/oz previously. Or nearly 7.4% inflation. And most people won't notice.

Boddington's is still available in $2 pint cans, however. Hope you like bitter.

Wed, 11/10/2010 - 20:49 | 718301 Aristarchan
Aristarchan's picture

Per all the Thailand comments, I live in Thailand six months out of the year (usually) on Phi Phi Island. I like the weather, the beach, the water and the (relatively) cheap prices.

But, per the main subject, which is creeping prices and value deflation...running a small business in the US, I have been seeing this happen for many months now. Of course the costs of freight has risen pretty dramatically - and for some reason (UPS anyway) used to make all of our deliveries before noon, now, most ground shipments come after 4:00 in the afternoon...not sure how this could cut their costs - but it hurts the hell out of me!

Our copper costs have risen signifigantly, and in order to keep our business with our customers, we have so far ate the costs of that one. I have also noticed parts suppliers seem to short you on count these days, not on large parts, just the small, high count parts.....but this could add up over a period of time and a large customer base. Even some of our customers are getting in the act, demanding parts be delivered on an expedited basis, but refusing to cover the cost of us expediting parts in. One of them even asked for a 10% price cut across the board!

Local government fees and taxes are also as we try to keep our costs down, and hold the line on our prices to our customers, we are getting squeezed by everyone....and this cannot go on forever. Right now, to bring our profit margins back to pre-2008, we would have to increase our prices by about 18%. We will of course, not do this. But if this underground pricing squeeze constinues, we will have to react, or go out of business....our controllable costs and inventory is cut to the bone. Maybe move the Phi Phi permanently.

Wed, 11/10/2010 - 21:33 | 718418 laosuwan
laosuwan's picture

are there many gold shops on Koh Phi Phi?

Wed, 11/10/2010 - 21:39 | 718435 laosuwan
laosuwan's picture

Value deflation is not a new term or concept; it has been going on forever. Value deflation is a major preocupation of food processors; for example ice cream manufacturers study how to increase the percentage of air in ice cream without changing the texture or taste (being noticeable). What we are seeing here in Thailand at least is value substituion, not value deflation. For example, substituting canned olives for kalamata olives. But this is not due to inflation, it is due to an increase in arrivals of price sensitive consumers who are only willing to pay less. So, what seems to be happening is a cost control response to deflation not a cheapening of quality to mask inflation. Personally, I would not take investment advice from foreigners who live in Pataya. Or Phi Phi. Because all the pee pee ends up in Pataya.

Wed, 11/10/2010 - 21:53 | 718469 Aristarchan
Aristarchan's picture

I am not offering investment advice...I do not invest. I am only relating my experiences for others to read and then think about or dismiss. You sound like the type who probably does offer investment advice.

Wed, 11/10/2010 - 22:24 | 718530 laosuwan
laosuwan's picture

I do not invest

Says it all

Wed, 11/10/2010 - 21:40 | 718437 Aristarchan
Aristarchan's picture

Several jewelry shops.

Wed, 11/10/2010 - 22:35 | 718549 FreedomGuy
FreedomGuy's picture

Actually, this article is not purely about inflation. It's about the transition from deflation to inflation. If we were in a purely inflationary environment like the early 80's then the hotels, gyms, food producers could raise prices routinely. Workers would expect and demand routine raises and businesses would factor both into their calculations. If inflation were routine, then they buyer would have ever larger sources of currency.

What we have here is an underlying inflation tryiing to overcome the current deflation. The fact that the gym or hotel cannot raise rates is evidence that buyers at least do not have more money( or currency) or are not willing to part with it. The market always determine the price of a product. Production costs do not.

So, as I see in many of the comments here and on other posts there is a vibrant argument on whether the current situation and near future is deflationary or inflationary. I think we have both simultaneously and it remains to be seen which trend wins out. 

Wed, 11/10/2010 - 23:38 | 718672 Buck Johnson
Buck Johnson's picture

It's been happening in the US also.  Many of my goods that I usually buy have been less in quantity or smaller bottles.  Also the cuts of meats have been thinner also.

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