from the Wall Street Journal yesterday. The piece describes in some
detail how US companies are buying up raw materials in anticipation of
prices rises in the immediate future.
Some bits from the WSJ:
McCormick
bolstered its purchases as spice prices spiraled upward. Dehydrated
garlic powder more than tripled and black pepper more than doubled since
March 2009.
John
Anton, Anton Sport's founder, saw the price of cotton shooting up, and
decided to act. Mr. Anton typically has about 30 boxes of shirts on hand
at one time, but now has more than 2,500."It just kind of clicked that I can borrow at 2.45%, and if cotton
is going to go up between 10% and 12%, why wouldn't I do this?"
There are more examples provided in the article. You get the drift.
Companies are stockpiling stuff because they think prices are going to
rise. Not surprising at all. Cheap money is the fuel for commodity price
increases. This is what the Fed has said time and again that they want
to see happen. Bernanke is delighted to read that some guy is stocking
up on shirts with ZIRP financing. It “proves” that his policy is working. It also proves that his policy is stoking food/commodity inflation. That crosses a very big line when countries are falling.
The article drifted from just the facts to some editorial connections
between the Fed and inflation. The author made reference to a recent WSJ
interview with J-C Trichet who made a thinly veiled threat to “central bankers” who are pursing monetary policies that have “second-round effects" on domestic prices. That arrow was a clear shot in the direction of Ben Bernanke.
The WSJ has been over the top in its support of Bernanke and QE. I
think the paper let itself be used by the Fed on numerous occasions in
the past half year. A significant part of the Fed’s QE2 propaganda sell
job was delivered through the pages of the WSJ. But now the WSJ is
publishing a steady stream of news how inflation/inflationary
expectations are rising fast. And the pain/turmoil that this is causing.
The Editors of the paper are not dopes, and they read their own
newspaper. The dots between ZIRP/QE and global commodity inflation are
firmly in ink. I wonder when the editorial page will pose the question: “Is QE backfiring? Should the Fed continue?
I doubt that the Journal will be the first MSM to criticize Fed policy.
That editorial will come from either the NYT or the WAPO. The WSJ can’t
be too far behind. After all, as of today the editors are as aware as
Bernanke and the other Fed members that QE was a poorly timed/executed
policy. One that could now bring devastating consequences.
Note: An interesting interview today with Jim Rogers and the Swiss newspaper NZZ.
Jim does connect the dots and blames Bernanke for food inflation. This
is no surprise. What is surprising is that NZZ is asking the questions.
It is just a matter of time before all of the press starting asking
this question.
companies stocking up because it's a investment...
Because they are consumer goods, the competion will do the same but not because the profits will be higher but also to kick the competion.
They buy "low" and sell "low" +30 margin. Cheaper then the competion that will buy higher.
Thus competition that buys higher can not afford high margins and will bleed untill the otherone his stock is depleted.
It's a very common trick to smuther the competion in retail. Why do you think volume discounts are so important?
This is how Hyperinflation comes to being, people/firms hoarding anything they can hoard and not willing to part with it for any amount of cash, we're months away from systemic seizure
" we're months away from systemic seizure"
According to my calculations, we're weeks away.
Buy silver. Protect yourself.
I paid $3.99 for a loaf of Pepperidge Farms bread yesterday. Don't know what it 'used' to cost but I'm paying more attention know. $4 for a loaf of bread does seem high.
Pepperidge Farm is premium bread, even amongst premium breads. Often, the store brands are pretty good too. Four bucks isn't outrageous for Pepperidge Farm but if you're buying it on a regular basis, you're not watching your money very carefully.
:D
Yogurt has gone up from 40 cents to 60 cents at the supermarkets in my area over the last couple of years.
I know that a bag of coffee I used to buy at costco (the slightly better than house brand) was up $12 to $17 over roughly a year. 42%
I bought the house blend which they hadn't yet jacked up. But don't know how long they can hold out. Should have bought some more bags. I think i just might make it to costco this weekend.
I am posting this again. What does the USA and Myanmar (Burma) have in common?
the answer is: The only two countries that have not converted to the metric system.
Now the average housewife, blonde or otherwise, must make three calculations to find out if there is a difference in the coffee price, rather than move decimal points.
here you have it.
Oracle!
Did you get my email re Peru / Gold? Please let me know if you want IN in our group.
Grocery stores used to sell pre-packaged coffee beans in 1lb bags. Then, they reduced the size to 12ozs. Recently, I have seen the size reduced again to 11ozs. Am I the only one noticing?
Dunkin Donuts coffee beans cost the same but it now the coffee we make is horribly bitter. So they've lowered their quality rather than raise prices. Prob it will cost 50% more to buy a decent bag of beans.
Figure it's up one third. My pita bread (4 pieces to the pack) was 2.10 last year, now 3.10. No major difference in weight or ingredients. Just whole wheat flour, salt.
But I've been paying attention because I buy wheat and rice futures and therefore willl try and stay way ahead of the 'game'.
You can win if you have the time to pay attention to the rise in the raw materials.
One year ago the average national price of a loaf of bread was $2.88 if I remember correctly. If I find some info to back that claim up I'll post it here.
If it is so, then its a 40% increase... think about it.
In the US that insignificant but to the other 5.5 billion people of the earth that's the difference bwteen a meal and no meal. Buy silver. Protect yourself.
Do not confuse Pepperidge Farm with the average loaf of bread.
I recall the story last year about the WSJ running their story by the Fed for approval before they published it. I haven't read an article in that newspaper since.
The media, whether print, cable, or the alphabet soup, all must adhere to the daily talking points memos; the propaganda and indoctrination must be blatantly obvious by now to the few that are discerning, but not to the sheeple.
I know this gets bandied about a bit, but it really is a national security issue. Consider the censorship & media controls enacted immediately after the declarations of wars for both WWI & WWII. I wouldn't be surprised if there wasn't some kind of secret EO issued at the outset of this crisis. In fact, revelation of the EO would in itself by a violation of the order.
The wonderful Ponzi world constructed by banksters, which rewarded both them & established political/bureaucratic orders (including the MIC), died in 2008. Our national "leaders" are really fighting for their own very survival. The true extent of this crisis will continue to unfold until all is revealed. Recall the dissolution of the USSR; one day the PTB were in charge, the next 'poof' as the mask of deception fell away.
+ a million. Or a billion.
Great work Bruce, once agian. Do you think the FED is doing this on purpose to get all these emerging countries, whose curriencies are pegged to the dollar to readjust. The people there use a alot more of disposable income on food?
Just my 2 cents.
Very good question to ask.
I think the Fed is stoking commodity inflation to get the Chinese to remove their peg to the dollar-- and have somehow concluded that they could accept any collateral damage from 3rd world food riots.
Of course the main reason the Fed is pedal to the metal ZIRP and QE is that they've shaped the yield curve perfectly to suit the banking sector for a "no loan growth" environment, so the wealth transfer can happen for as long as entirely possible. Gotta keep those banks healthy, you know?
I think Genocide Ben expected the hoarding effect for intermediate goods companies-- I don't think he expected the ramp up in raw material prices to come as quickly as it has to date.
It's interesting, in a sort of twisted way, to see the dominoes fall from the policy move. And if the Fed still stays balls to the way in liquidity, you can expect more of those dominoes to topple. But from what we've seen with Egypt, regime change can be complicated-- and costly.
torching other countries is a big risk, especially when the torching is in/near the ME. The US can take some hits but the killer is spiking energy prices due to free money speculators and geo-political shenanigans.
This would make for a great TV show with so many disaster options and cliffhangers....except this is for real.
all of this is great except for the inflation. commodities are a great hedge.
http://covert2.wordpress.com
What good is 2 Trillion in liquidity when no1 is willing to sell you anything ?
But with QE III it will be different. Just because.
...After all, Hilsenrath is the thirteenth shadow member of the FOMC.