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You can forget deflation


By iwog   Follow   Mon, 11 Oct 2010, 5:56pm PDT   1,266 views   10 comments
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Inflation is coming fast and hard. A friend of mine called me up today and said "how about those futures prices?" I've been so focused on gold lately that I haven't been keeping up with the action on everything else. Here's a brief rundown of wholesale prices coming to a grocery store near you that I stole off a gold bug article:

Year over year agricultural Raw Materials are up 24%, The Mineral Index is up 25%, The Metals Price Index is up 26%, Coffee is up 45%, Barley is up 32%, Oranges are up 35%, Beef is up 23%, Pork is up 68%, Salmon is up 30%, Sugar is up 24%, Wool is up 30%, Cotton is up 40%, Palm oil is up 26%, Hides is up 25%, Rubber is up 62%, Iron Ore up 103%

Corn is flying:
Wheat is flying: http://futures.tradingcharts.com/chart/CW/W

Pretty much everything on the entire commodities board has soared recently. Either the recovery is in full swing, or something else nasty is coming up. It's almost Halloween so doomsters are welcome to post!

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globe33   Mon, 11 Oct 2010, 11:30pm PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 1

That's what caught my eye in an article Patrick linked to: http://www.zerohedge.com/article/three-horrifying-facts-about-us-debt-%E2%80%9Csituation%E2%80%9D?source=patrick.net#inner-content

… either that or experience hyperinflation. There is simply no other option. We can NEVER pay off our debts. To do so would require every US family to pay $31,000 a year for 75 years.

RE @ 4.5% is looking good right now. It is an asset that will grow inflation-indexed.

Patrick   Tue, 12 Oct 2010, 1:20am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 2

I think the "something else nasty" explanation is correct, because salaries are not rising.

mthom   Tue, 12 Oct 2010, 1:34am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 3

Iwog, you posted something similar back in 2007/2008 saying raw materials are up. I think the Dow was around 12k at the time. Since then, the Dow went down to ~6600 and has come back a bit. Based on recent history, these raw materials prices are not a good indicator of much.

EBGuy   Tue, 12 Oct 2010, 3:25am PDT   Share   Quote   Permalink   Like   Dislike     Comment 4

Deflation Nation:
The government is expected to announce this week that more than 58 million Social Security recipients will go through a second straight year without an increase in monthly benefits. This year was the first without an increase since automatic adjustments for inflation started in 1975.

RayAmerica   Tue, 12 Oct 2010, 3:35am PDT   Share   Quote   Permalink   Like   Dislike     Comment 5

"something nasty" translates to me as stagflation. Google is planning on releasing another index that is more in line with inflation statistics. That should be interesting being that, IMO, statistics provided by the government are almost always tainted.

Ptipking222   Tue, 12 Oct 2010, 3:35am PDT   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 6

How about biflation: http://en.wikipedia.org/wiki/Biflation

Patrick   Tue, 12 Oct 2010, 3:59am PDT   Share   Quote   Permalink   Like   Dislike     Comment 7

Yes, that Wikipedia description of "biflation" seems to apply to the current situation.

iwog   Tue, 12 Oct 2010, 4:10am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 8

mthom says

Iwog, you posted something similar back in 2007/2008 saying raw materials are up. I think the Dow was around 12k at the time. Since then, the Dow went down to ~6600 and has come back a bit. Based on recent history, these raw materials prices are not a good indicator of much.

More than a bit I think.

2008 saw the peak of the oil bubble and a spike in corn prices due to a stupid energy bill. Therefore most of the high commodities prices were either tied to high oil or ethanol. Furthermore prices spiked early in 2008 and crashed along with the start of the Great Recession and the collapse of oil prices.

This time it is a much more broad based increase affecting nearly every commodity and doesn't seem to be tied to oil or legislation. It's either tied to a recovery, or something else like inflation fears.

Kevin   Tue, 12 Oct 2010, 7:02am PDT   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 9

Wage inflation is inevitable. It won't track price inflation, but it'll be there. Just wait.

schmitz_kris   Wed, 13 Oct 2010, 6:00am PDT   Share   Quote   Permalink   Like   Dislike     Comment 10

It isn't tied to any "recovery." That's nonsense. A clear look at the graphs indicates this most recent meteoric rise began in August/September after the Fed had indicated that a second round of quantitative easing may be required to prop up the impotent "recovery." That moved speculators into hard assets, ag commodities, gold and silver, copper, etc. It's just inflationary positioning - perfectly logical.

Price increases at the gas station and grocery store will just weaken the economy that much further. This is DEFLATIONARY for housing, especially in suburban areas where the cost of oil has a significant impact on family budgets.

Since we've been talking about Argentina lately, let's examine what happened to their real estate market upon devaluation of the peso argentino.

IT COLLAPSED. All bank lending completely seized (nobody is going to loan money that, once paid back in the future, is worth significantly less).

Real estate prices in Argentina (as well as Iceland where another devaluation just happened a couple of years ago during the bust) are still FAR BELOW their pre-devaluation levels.

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