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Post by jeffolie on Dec 14, 2007 12:57:12 GMT -6
Ouch! December 14th, 2007 CPI numbers are just out. With the caveat that CPI numbers are fudged beyond all reality, they're still huge: U.S. consumer prices rose more than forecast in November, driven by a jump in energy costs that may raise concern inflation hasn't been tamed. The consumer price index increased 0.8 percent, the most since September 2005, after a 0.3 percent gain in October, the Labor Department said today in Washington. Prices excluding food and energy, known as the core rate, climbed 0.3 percent, also more than anticipated. Not that it's a huge surprise in light of the PPI numbers yesterday. What did surprise some people was that the retail sales numbers have held up as well as they have. But as Dean Baker points out, all is not as it seems: First, more than half the gain in reported sales was due to higher gas sales. This was due to higher gas prices, not a rush to the pumps. Pulling out the surge in gas sales, retail sales were up by just under 0.6 percent. This is still a decent pace, except that we don't yet know how much of this was due to higher prices, as opposed to greater sales volume. If the price of retail goods and services other than gas rose by 0.3 percent, than we are looking at a rather modest real growth rate in the 0.2 to 0.3 percent range. Since this follows a month of essentially no growth, that doesn't look particularly strong. This is especially the case, since the earlier than usual Thanksgiving undoubtedly shifted some holiday shopping forward into November. Sure is starting to look like 70s-style stagflation, with the Fed trying to press the gas and the brake at the same time. www.dailyreckoning.us/blog/?p=648Stagflation is my flavor of the month.
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Post by jeffolie on Dec 14, 2007 13:51:52 GMT -6
Stagflation Good morning. Much like yesterday, we're set for a weak open following the higher than expected CPI. Consumer prices rose +0.8% in November the fastest pace for more than two years. To make matters worse, we have a report from ComScore that hints toward a disappointing online retail sales, Greenspan issuing a warning that the risk of a recession is increasing, and news that Citigroup (C) plans to bail out some SIVs. Like yesterday, most overseas markets are lower. Today will provide us with some sense on how motivated the sellers are amid signs of stagflation. www.thekirkreport.com/Another vote for Stagflation.
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Post by jeffolie on Dec 15, 2007 13:27:25 GMT -6
But the truth is more complex than that. The difference between "stagflation" and "depression" are one of degree, but not substance. In both cases real borrowing costs go to the moon, goods you need become more expensive (as a percentage of income) to buy and goods that are discretionary or "large capital expenditures" tend to become very cheap due to surplus beyond purchasing capability. Both are marked by tightness in credit and a huge slowdown in production, but there is a difference in degree. So which are we headed for? Does it matter? Its going to suck either way. market-ticker.denninger.net/
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Post by jeffolie on Dec 16, 2007 11:37:39 GMT -6
Greenspan sees early signs of U.S. stagflation Sun Dec 16, 2007 WASHINGTON (Reuters) - The U.S. economy is showing early signs of stagflation as growth threatens to stall while food and energy prices soar, former U.S. Federal Reserve Chairman Alan Greenspan said on Sunday. In an interview on ABC's "This Week with George Stephanopoulos," Greenspan said low inflation was a major contributor to economic growth and prices must be held in check. "We are beginning to get not stagflation, but the early symptoms of it," Greenspan said. www.reuters.com/article/businessNews/idUSN1636789220071216
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Post by jeffolie on Dec 16, 2007 12:37:37 GMT -6
Next Stop Inflation or Deflation? Where is the country headed? We seem to be on the Sword of Damocles. Is it inflation or deflation? Where to from here? In an inflationary scenario, debtors would benefit, it would be easier to pay back money borrowed. Those with savings would feel the tax of inflation. Each dollar would buy less than it use to (what’s new about that). Those on a fixed retirement income would suffer the most. Inflation is a way government can tax everyone. The neat thing is that there is no need for a tax collector. Plus you can’t cheat on your taxes. So when the government prints money, it’s kind of like taking a half bottle of whisky and topping it off with water to make a full quart. The buyer ends up with half the buzz at twice the price. Basically government is taxing one dollar and spending two. Deflation on the other hand is a rough buggy ride for everyone. It tends to feed on itself and get worse (with government help). The economy slows down unemployment increases, bankruptcies and foreclosures increase. Prices drop and money buys more than it use to. Debts become harder to pay off when jobs are scarce. During the great depression, government services suffered greatly. Teachers, firemen, police and other services were cut severely. Congress could have a very serious problem if revenues from taxes collected decrease dramatically. On the front page of today’s paper, San Diego readers saw a headline “Governor Schwartznegger set to declare fiscal emergency.” The State has a 14 billion dollar budget shortfall. That and all of the foreclosures suggest deflation is the current direction of travel. There is just one fine wrinkle. Notice how government tax receipts are decreasing? There are a lot of fixed costs to be paid out, Social Security, Medicare and Medicaid. Uncle Sam has been spending the Social Security taxes as well as the regular taxes and even the gas tax on the yearly budget. When FDR wanted to stimulate the economy in the 1930’s with government spending, none of these liabilities were hanging around the government’s neck. The economy went to full power when Japan “remodeled” Pearl Harbor. Today's fixed costs for government entitlements, may force the government to print the funds necessary. That sort of inflation can spiral out of control. Congress seems to think that spending is good, worry about the bill later. As government receipts decrease notice how the fixed costs consume a larger part of the pie. It’s a little like the foreclosure mess. Congress can barely pay the bills now, what happens when deflation takes hold? The expression “Between a Rock and a Hard place," comes to mind. Will they turn the dollar into Monopoly Money? Abu Dhabi just bought Baltic Avenue (Citigroup). Bye Bye worthless Dollar, Buy Buy our assets (a pun or two). greatdepression2006.blogspot.com/We are going to get both deflation and inflation at the same time. It is called stagflation. The economy will deflate with bankruptcies, foreclosure and declining consumer spending while the government inflates the currency.
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Post by jeffolie on Dec 16, 2007 13:01:17 GMT -6
WASHINGTON (MarketWatch) -- Investors! Please return to your seats and make sure your seatbelts are securely fastened: The economic outlook is going to get bumpy. Economists are increasing the odds of a recession next year, at the same time inflation is looking downright scary. So make sure you are seated before peeking at the data. "The economy is weakening rapidly," said Kurt Karl, chief U.S. economist for Swiss Re. "I'm at 45% probability of recession and it is rising." "It is going to be a bumpy landing. Whether it is a hard landing or a soft landing depends on what seat you are in," said David Wyss, chief economist at Standard & Poor's. www.marketwatch.com/news/story/story.aspx?guid=%7bD5C71ECA-40F2-4217-A903-DD43B1581D84%7d&siteid=bondheads
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Post by unlawflcombatnt on Dec 17, 2007 4:10:02 GMT -6
This article is a good overview of the current situation. One passage caught my attention more than others: Today's fixed costs for government entitlements, may force the government to print the funds necessary. That sort of inflation can spiral out of control.... How about if government rolled back Bush's tax cuts on those who make the most, a need tax cuts the least? How about if we started taxing (over-)investment income at the same rate as wages? How about if we stopped giving taxpayer-funded handouts to the richest and most profitable Corporations? And, as the author implied, how about if we stopped compensating for the under-taxation of the rich, with the retirement funds of working Americans (i.e., Social Security).
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Post by jeffolie on Dec 17, 2007 12:45:53 GMT -6
Stagflation May Return as Price, Credit Risks Meet (Update1) By Rich Miller Dec. 17 (Bloomberg) -- The world economy is facing the risk of both recession and faster inflation. Global growth this quarter and next may be the slowest in four years, while inflation might be the fastest in a decade, say economists at JPMorgan Chase & Co. The worst U.S. housing slump in 16 years, coupled with a tightening of credit by banks, has brought the world's largest economy ``close to stall speed,'' according to former Federal Reserve Chairman Alan Greenspan. At the same time, rapid growth in China and other emerging markets is driving energy and food prices higher worldwide. ``What lies ahead is a period of stagflation -- slow or no growth combined with rising inflation -- in the advanced economies,'' says Joachim Fels, co-chief global economist at Morgan Stanley in London. Harvard University economist Martin Feldstein is among those who say it would be just a mild case of what the world endured in the 1970s and early 1980s, when a 10-fold increase in oil prices drove both unemployment and inflation above 10 percent. Still, it poses a dilemma for the Fed and other central banks as they struggle to decide which problem they should tackle first. How they respond will go a long way in determining which danger proves to be the biggest: a slumping global economy or rising prices worldwide. www.bloomberg.com/apps/news?pid=20601109&sid=anXKbWHsXtHc&refer=home
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Post by jeffolie on Dec 17, 2007 13:39:42 GMT -6
Another wave of food price inflation is on the way Submitted by cpowell on Mon, 2007-12-17 02:55. Section: Daily Dispatches World Food Price Rises Set to Hit Consumers By Javier Blas, Chris Giles, and Hal Weitzman Financial Times, London Sunday, December 16, 2007 www.ft.com/cms/s/0/03de75c4-ac22-11dc-82f0-0000779fd2ac.htmlGlobal food prices will come under further pressure on Monday as benchmark prices for cereals at much higher levels come into operation, making it almost inevitable that a second wave of food price inflation will hit the world's leading economies. In Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time record, soyabean prices are at a 34-year high, and corn prices at an 11-year peak. Knock-on price rises are set to hit consumers in coming months, raising inflationary pressure and constraining the ability of central banks to mitigate the slowdown in their economies. A first wave of surging cereal prices hit the wholesale market during the summer and has fed through the supply chain and contributed to rising inflation. The increase of eurozone food price inflation to 4.3 per cent in November was one of the main reasons for the jump in the zone's annual inflation rate from 2.6 per cent in October to 3.1 per cent, the highest in six years. In the US, annual food price inflation of 4.8 per cent in November contributed to a rise in the inflation rate to 4.3 per cent. In the UK, food inflation was already running at an annual 5.1 per cent in October and analysts expect higher food prices to push overall inflation up in November. The UK figures are due to be published tomorrow. In trading on Friday, the new benchmark price of wheat for March delivery rose 26 cents to $9.795 a bushel, more than 4 per cent higher than the expiring December contract of $9.39. Benchmark prices for corn are also more than 4 per cent higher than previously. The benchmark prices for soyabeans delivered in January rose on Friday to a 34-year high of $11.64 a bushel. Rice, also for January, has jumped to an all-time high of $13.310 a hundredweight. Bill Lapp, analyst at US consultancy Advanced Economic Solutions, said: "We've already seen food prices increase this year at their fastest pace since the early 1980s, but the full brunt of those increases will begin in earnest in 2008." The agricultural commodities price rises are the result of high demand, poor harvests and low stockpiles of food. Emerging economies, where rising incomes are boosting consumption of meat and dairy products, have added to pressures already generated by the biofuel industry. Cereal supply was this season lower than expected as several countries suffered weather-related losses. Jean Bourlot, head of agriculture commodities at Morgan Stanley in London, said: "High cereals prices are here to stay." The US Department of Agriculture has predicted that global corn stocks will fall to a 33-year low of just 7.5 weeks of consumption, while global wheat stocks will plunge to their lowest level in at least 47 years at 9.3 weeks. www.gata.org/node/5849
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Post by jeffolie on Dec 17, 2007 18:30:08 GMT -6
Wall Street stumbles on stagflation fears By Ellis Mnyandu NEW YORK (Reuters) - Stocks tumbled on Monday on concerns that a persistent housing slump, combined with surging prices, posed the threat of 1970s-style stagflation. Government reports last week showed rising price pressures in November, while concern about the housing slump intensified after news that sentiment among U.S. home builders held at a record low for a third consecutive month in December. "The stagflation word is being thrown around," said Frederic Dickson, senior vice president and market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. Stagflation, which refers to when prices rise and growth stagnates, was last seen in the late 1970s. Stagflation could pose a dilemma for the U.S. Federal Reserve as policies aimed at boosting economic growth may fuel runaway inflation, while policies used to fight inflation could hobble an economy already grappling with fallout from the housing slump. Investors worry that menacing inflation would tie the hands of Fed Chairman Ben Bernanke, keeping policy-makers from cutting rates to avoid a recession. news.yahoo.com/s/nm/20071217/bs_nm/markets_stocks_dc;_ylt=AmCyYyHrIss2eHpu1ixyom2s0NUE
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Post by jeffolie on Dec 18, 2007 16:40:24 GMT -6
Wheat hits record as global demand depletes supply WASHINGTON — Wheat prices hit a record $10 a bushel Monday as traders worried about tight world supplies and the United Nations called for urgent steps to aid poor nations that are being pummeled by shrinking food stockpiles and historic cost run-ups. Wheat prices are jumping for a number of reasons, including bad weather in such exporting nations as Australia. Demand is rising in rapidly developing economies such as India and China. The picture is further complicated by the fact that a growing share of U.S. cropland is being devoted to corn for ethanol. Though there are a number of factors, "All of these markets are moving higher based on the growth in biofuels, which is made economical due to the high prices for energy," says David Lehman, director of commodity research and product development for the CME Group, which owns the Chicago Board of Trade. "While corn is the commodity that's used directly, corn, wheat and soybeans all compete to some degree for the same acreage," Lehman says. He notes that current prices are not the highest in inflation-adjusted terms. The Agriculture Department recently forecast that U.S. wheat stocks this year would fall to a six-decade low. World grain stocks are the tightest in three decades. www.usatoday.com/money/industries/food/2007-12-17-wheat_N.htm?loc=interstitialskip
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Post by jeffolie on Dec 18, 2007 16:49:38 GMT -6
World Food Supply Is Shrinking, U.N. Agency Warns By ELISABETH ROSENTHAL Published: December 18, 2007 ROME — In an “unforeseen and unprecedented” shift, the world food supply is dwindling rapidly and food prices are soaring to historic levels, the United Nations’ top food and agriculture official warned Monday. The changes created “a very serious risk that fewer people will be able to get food,” particularly in the developing world, said Jacques Diouf, head of the United Nations Food and Agriculture Organization. The agency’s food price index rose by more than 40 percent this year, compared with 9 percent the year before. To make matters worse, high oil prices have doubled shipping costs in the last year. www.nytimes.com/2007/12/18/business/worldbusiness/18supply.html?_r=1&ref=business&oref=slogin
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