The View From 1776

When Will Inflation Really Hit Us?

Read Terry Coxon’s editorial on the Financial Sense website.

Posted by .(JavaScript must be enabled to view this email address) on 10/24 at 03:31 PM
  1. There are 2.5 billion people that control 2/3 of the global economy. When they start spending more, our prices will go up too, as we import much of what we need. So far, they haven't driven prices up that much.

    The rise in oil and commodities is mainly from people fleeing the dollar and the big banks using the FED money to make money in the markets to build up their balance sheets.

    The real inflation will come, even if we are in a depression, when the global economy takes off. Currently, all the talk about the global recovery is just that, talk. The 2.5 billion haven't started spending that much and much of China's growth is not consumer driven. 1/2 of the oil demand increase China had last year went into storage and other commodities were stockpiled.

    Many of the vehicle purchases were from government agencies and are not being used much if at all in some cases. Fuel demand for all the vehicle sales, should have gone up but, it hasn't really. They are growing internal consumption but, not as fast as it would appear from their numbers.

    Thus, we many only have food prices rise due to some crop issues in the Midwest and other nations reducing supplies (this is a story in progress and not fully clear as to impact yet). Oil and other commodities may even correct if the global economy falters in its growth or is shown to be an illusion.

    There are two economies, ours and the global one. We will from now on, be more affected by the global one than our own.
    Posted by JanPBurr  on  10/25  at  10:35 AM
  2. The inflation in America that was predicted during the Depression never materialized. Nor will it this time because the demand that induces it will never be reached for years.

    There is still to much slack in the economy for inflation to be an issue.

    I wish Milton Friedman was still alive to see this and comment on it.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/25  at  03:02 PM
  3. This is not the same economy as the depression era US economy. If Milton Friedman were alive he'd probably repeat his belief that inflation is everywhere and always a monetary phenomenon. Inflation, in terms of the money supply, is occuring now. Asset prices, particularly commodity, stock and bond prices are rising. Money has to go somewhere, particularly free money in the hands of banks and primary dealers (got to keep their stock prices up). Overseas bond buyers are already pulling back from further purchases. Across the board increases in day to day items will come. It's not a question of if, only when. The FED is in a box with real unemployment in the 20% range. The federal governmnet is killing the domestic economy.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/25  at  06:02 PM
  4. David, you may want to view this chart on inflation in the Great Depression in which FDR ended deflation and replaced it with inflation in 1933 by increasing the money supply through the revaluation of the dollar to gold.

    http://www.financialsense.com/fsu/editorials/amerman/2009/images/0212.h1.gif

    Again the U.S. won't be who determines inflation. It will be the 2.5 billion consumers we are part of and it will the nations with trillions of dollars to spend on wheat, corn, oil, copper, etc.

    Only because those 2.5 billion consumers haven't been spending more have we only seen low CPI of around 5% if you calculate it the same way we always did before we started manipulating it to keep cost of living increases lower and GDP higher.

    Here is what CPI is when using the same methods we used before that manipulation began

    http://www.shadowstats.com/alternate_data

    I am getting more and more reports from consumers that the packages are smaller in the stores and contain less but, have the same price or only slightly lower price. I am sure you have seen the large dimples in the bottom of peanut butter jars now and the lower number of ounces in them.

    The other day, my wife used a coupon for a small back of onion chips and 75% of the bag was air and the cost with a $1 coupon $2. What about the price of fuel going up or health care costs like medicare premiums going up? What about higher taxes? Yes, taxes come from people's income and is an "expense" that when it goes up, reduces the buying power of a paycheck. It is just as deadly as a rise in the price of milk or gasoline or a trip to the local clinic.

    While the government talks about zero rise in CPI, the citizens are paying real world prices. They don't buy homes everyday but, they do buy all the other things and once that mortgage is locked in, it doesn't go up or down if it is fixed rate and so a falling home price doesn't help any homeowner with inflation that has a fixed rate mortgage.

    Most rents don't go down that much or very often. Only in times like this do renters get a break and while that helps, there aren't enough of those cases to really help the general economy. One reason is that the owners of the rental property are seeing their property taxes go up in many cities and they have to pass that on to the renter either as additional rent or by not cutting the rent as they might otherwise.
    Posted by JanPBurr  on  10/25  at  08:57 PM
  5. So, Jan, since this inflation you fear is inevitable and unstoppable, do you have any recommendations about what I should do with my retirement money?

    Where can I park it so that it is not devoured by inflation?
    Posted by .(JavaScript must be enabled to view this email address)  on  11/01  at  08:55 PM
  6. Just what the experts recommend. But, remember it may be months to a couple years before we have inflation and it won't come like we normally see it.

    Most recommend, of course, commodities but, they can may have a major correction first.

    I like food items due to the growing global population.

    Right now, I am almost 100% cash
    Posted by JanPBurr  on  11/01  at  11:19 PM
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