Inflation – Has it arrived?

[CA renter]

[quote=urbanrealtor][quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.[/quote]

We’re not a nation of savers specifically because of what you pointed out above — normally prudent people have been forced to gamble and speculate because we’re afraid of losing purchasing power. This is exactly what I’d like to see reversed. Personally, I’m opposed to a debt-based monetary system that is controlled by those who benefit by creating debt slaves.

You hit the nail on the head. This is why deflation would reverse the wealth disparity and bring things back to a stable base (much lower than today, admittedly). I think it’s going to happen one way or another — by deflation or hyperinflation. You essentially get the same end result (massive poverty and civil unrest), but with deflation, the most prudent are rewarded while with inflation, the biggest speculators are rewarded. It’s a matter of choice which group we’d prefer to reward…I prefer to reward the more prudent and conservative people who can help us build a more stable foundation upon which we can grow a sustainable economy that is not so reliant upon debt.

[CA renter]

[quote=GH]Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?[/quote]

Agreed. I see no wage inflation in our future (not for many, many, many years to come, if then).

[CA renter]

[quote=GH]Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?[/quote]

Agreed. I see no wage inflation in our future (not for many, many, many years to come, if then).

[CA renter]

[quote=GH]Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?[/quote]

Agreed. I see no wage inflation in our future (not for many, many, many years to come, if then).

[CA renter]

[quote=GH]Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?[/quote]

Agreed. I see no wage inflation in our future (not for many, many, many years to come, if then).

[CA renter]

[quote=GH]Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?[/quote]

Agreed. I see no wage inflation in our future (not for many, many, many years to come, if then).

[Rich Toscano]

[quote=urbanrealtor]Do you see an example of this in the developed world in a relatively contemporary setting that we should look to?[/quote]

Unfortunately there is no prologue to our current situation in modern history. That would make it a whole lot easier to figure out what’s going to happen…

[Rich Toscano]

[quote=urbanrealtor]Do you see an example of this in the developed world in a relatively contemporary setting that we should look to?[/quote]

Unfortunately there is no prologue to our current situation in modern history. That would make it a whole lot easier to figure out what’s going to happen…

[Rich Toscano]

[quote=urbanrealtor]Do you see an example of this in the developed world in a relatively contemporary setting that we should look to?[/quote]

Unfortunately there is no prologue to our current situation in modern history. That would make it a whole lot easier to figure out what’s going to happen…

[Rich Toscano]

[quote=urbanrealtor]Do you see an example of this in the developed world in a relatively contemporary setting that we should look to?[/quote]

Unfortunately there is no prologue to our current situation in modern history. That would make it a whole lot easier to figure out what’s going to happen…

[Rich Toscano]

[quote=urbanrealtor]Do you see an example of this in the developed world in a relatively contemporary setting that we should look to?[/quote]

Unfortunately there is no prologue to our current situation in modern history. That would make it a whole lot easier to figure out what’s going to happen…

[raty4R]

cereal boxes getting smaller and even the bag inside is smaller, yet the price is higher. 2.50+ for a roll of paper towels wth?? Last year Bud 18 packs were $12.99 now $18.99(yeah I know buy on “sale”) etc.
Take a look at the commodities futures and decide if there is inflation coming or not.
http://finviz.com/futures_charts.ashx?p=w1

Paraphrased from another blog, but I agree.
“Overpriced assets continue to fall (homes, cars, durbable goods, etc.). Relatively undervalued assets that saw little price appreciation from 1980-2002 such as commodities continue to rise. These cycles come and go. Interest rates have been hopelessly skewed (or screwed) by $213 TRILL in US bank otc interest rate swaps created over the past 20 yrs. This has caused massive malinvestment in things that should never have been….and a lack of investment in things that should have been. If you’re waiting for higher interest rates to tell you there is inflation in commodity prices, it might be a long wait. Don’t count on China and Asia in general to continue to allow our inflation to be exported to them. That worked in the 1980’s and 90’s just fine. But as Asia continues to grow their industrial base expect them to continue to require a much higher percentage of their goods and services to stay home. And as this growth occurs, so do wages and cost of living which means cheaper exports for the US becoming a thing of the past, hence higher priced imports, especially if tariffs are added.”

[raty4R]

cereal boxes getting smaller and even the bag inside is smaller, yet the price is higher. 2.50+ for a roll of paper towels wth?? Last year Bud 18 packs were $12.99 now $18.99(yeah I know buy on “sale”) etc.
Take a look at the commodities futures and decide if there is inflation coming or not.
http://finviz.com/futures_charts.ashx?p=w1

Paraphrased from another blog, but I agree.
“Overpriced assets continue to fall (homes, cars, durbable goods, etc.). Relatively undervalued assets that saw little price appreciation from 1980-2002 such as commodities continue to rise. These cycles come and go. Interest rates have been hopelessly skewed (or screwed) by $213 TRILL in US bank otc interest rate swaps created over the past 20 yrs. This has caused massive malinvestment in things that should never have been….and a lack of investment in things that should have been. If you’re waiting for higher interest rates to tell you there is inflation in commodity prices, it might be a long wait. Don’t count on China and Asia in general to continue to allow our inflation to be exported to them. That worked in the 1980’s and 90’s just fine. But as Asia continues to grow their industrial base expect them to continue to require a much higher percentage of their goods and services to stay home. And as this growth occurs, so do wages and cost of living which means cheaper exports for the US becoming a thing of the past, hence higher priced imports, especially if tariffs are added.”

[raty4R]

cereal boxes getting smaller and even the bag inside is smaller, yet the price is higher. 2.50+ for a roll of paper towels wth?? Last year Bud 18 packs were $12.99 now $18.99(yeah I know buy on “sale”) etc.
Take a look at the commodities futures and decide if there is inflation coming or not.
http://finviz.com/futures_charts.ashx?p=w1

Paraphrased from another blog, but I agree.
“Overpriced assets continue to fall (homes, cars, durbable goods, etc.). Relatively undervalued assets that saw little price appreciation from 1980-2002 such as commodities continue to rise. These cycles come and go. Interest rates have been hopelessly skewed (or screwed) by $213 TRILL in US bank otc interest rate swaps created over the past 20 yrs. This has caused massive malinvestment in things that should never have been….and a lack of investment in things that should have been. If you’re waiting for higher interest rates to tell you there is inflation in commodity prices, it might be a long wait. Don’t count on China and Asia in general to continue to allow our inflation to be exported to them. That worked in the 1980’s and 90’s just fine. But as Asia continues to grow their industrial base expect them to continue to require a much higher percentage of their goods and services to stay home. And as this growth occurs, so do wages and cost of living which means cheaper exports for the US becoming a thing of the past, hence higher priced imports, especially if tariffs are added.”

[raty4R]

cereal boxes getting smaller and even the bag inside is smaller, yet the price is higher. 2.50+ for a roll of paper towels wth?? Last year Bud 18 packs were $12.99 now $18.99(yeah I know buy on “sale”) etc.
Take a look at the commodities futures and decide if there is inflation coming or not.
http://finviz.com/futures_charts.ashx?p=w1

Paraphrased from another blog, but I agree.
“Overpriced assets continue to fall (homes, cars, durbable goods, etc.). Relatively undervalued assets that saw little price appreciation from 1980-2002 such as commodities continue to rise. These cycles come and go. Interest rates have been hopelessly skewed (or screwed) by $213 TRILL in US bank otc interest rate swaps created over the past 20 yrs. This has caused massive malinvestment in things that should never have been….and a lack of investment in things that should have been. If you’re waiting for higher interest rates to tell you there is inflation in commodity prices, it might be a long wait. Don’t count on China and Asia in general to continue to allow our inflation to be exported to them. That worked in the 1980’s and 90’s just fine. But as Asia continues to grow their industrial base expect them to continue to require a much higher percentage of their goods and services to stay home. And as this growth occurs, so do wages and cost of living which means cheaper exports for the US becoming a thing of the past, hence higher priced imports, especially if tariffs are added.”

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