Post by jeffolie on Nov 9, 2007 18:16:55 GMT -6
Our economy is in big trouble folks.
Really, really big trouble.
Today import prices came in with more than a double-digit increase year/over/year, and 1.8% up on the month.
Uh, guys. Psst - INFLATION.
The Fed cannot cut into this data. No frapping way.
What's far worse is the data out of China on imports. Up until May, it was deflationary (that is, import prices paid from China were trending down.) In May that reversed and since then has been accelerating precipitously. Why? Primarily because all those people who make 20 cents an hour over there want to make 30, so they can buy some Nikes. This upward pressure inevitably leads to higher unit labor costs which is then forced through the pipeline. We have a long way to go in this regard; the era of our inflation being held down by cheap imports is over, and from here things only get worse.
No matter what Bernanke does going forward, he (and the market, and our economy) loses.
Bernanke was clearly unhappy being in front of Congress yesterday. He was stuttering and fidgeting - and dissembling. He got nailed severely with his claim that "inflation is not affected by a weaker dollar", and its going to get very, very difficult for him politically if he tries to cut into the current import prices-paid data. This isn't a couple of month thing any more - it is clearly a trend; six months worth now with respect to China - and at an accelerating pace!
Rising real rates and rising inflation pressures into an overleveraged economy is very bad news.
market-ticker.denninger.net/
Really, really big trouble.
Today import prices came in with more than a double-digit increase year/over/year, and 1.8% up on the month.
Uh, guys. Psst - INFLATION.
The Fed cannot cut into this data. No frapping way.
What's far worse is the data out of China on imports. Up until May, it was deflationary (that is, import prices paid from China were trending down.) In May that reversed and since then has been accelerating precipitously. Why? Primarily because all those people who make 20 cents an hour over there want to make 30, so they can buy some Nikes. This upward pressure inevitably leads to higher unit labor costs which is then forced through the pipeline. We have a long way to go in this regard; the era of our inflation being held down by cheap imports is over, and from here things only get worse.
No matter what Bernanke does going forward, he (and the market, and our economy) loses.
Bernanke was clearly unhappy being in front of Congress yesterday. He was stuttering and fidgeting - and dissembling. He got nailed severely with his claim that "inflation is not affected by a weaker dollar", and its going to get very, very difficult for him politically if he tries to cut into the current import prices-paid data. This isn't a couple of month thing any more - it is clearly a trend; six months worth now with respect to China - and at an accelerating pace!
Rising real rates and rising inflation pressures into an overleveraged economy is very bad news.
market-ticker.denninger.net/