Tweet
Re: food riots and the schiff scenario
Fred - I looked through the referenced Macro Man web page. He writes:
<< More fundamentally, if the commodity meltdown continues, then the inflation problem that Macro Man has worried about for the past couple of years may need to be shelved temporarily.... >>
Ehm ... is it possible he's missing one or two inflationary symptoms, as we traverse the present banking crisis? He's using the price action in commodities as a functional 'equivalent' to inflation?
It's not clear (to me) that commodity price action is a direct equivalent to inflation, and at least some other observers (Gary Dorsch below) are noting a significant 'pump' of liquidity in progress which Macro Man seems to decline mentioning as relevant? Instead he's scrutinising short term commodity price behavior (scary gold price plunge) for 'clues' as to what's happening inflation-wise and coming to what appear some vacillating conclusions instead. Macro Man seems (in the linked page at any rate) a bit fuzzy about the primary inflation indicators, at least as E.J. has always advised us to read them - always at the source?
He concludes that because commodities have steeply corrected their manic run since last August, this is equivalent to a significant bearish turn in the commodities fundamentally - which seems not more than a conjecture. Maybe it's even just "market noise" in the commodities complex, where "noise" tends to be amplified. If he were reading a little Ty Andros he'd have noted "Dr. Copper" (the barometer for the entire industrial complex) is busting out of a long consolidation, and also shows a scant 2 days global supply to meet current consumption.
Why is he not spotting this datum?
His conclusion " the inflation problem worried about for the past couple of years may need to be shelved " reveals some uncertainty about what to scrutnise, (at least in this one article), compared to the likes of Ty Andros who homes in on the 'firehoses of liquidity' as the real story to watch. Some question marks on Macro Guy's method are popping up.
This chart is from a recent Gary Dorsch article. Macro Man writes: "The inflation problem may need to be shelved temporarily"? Question: how do you ignore an MZM like this in that hesitant prognosis?
gary_dorsch_MZM_chart_2008.jpg
QUOTES FROM THE GARY DORSCH ARTICLE:
( full article here : http://www.financialsense.com/Market...2008/0403.html )
__________
And on currencies:
JPY - TEMPTED TO USE A STRONGER CURRENCY TO CONTAIN COMMODITIES INFLATION (Quote from Dorsch article)
" Signaling a historic shift in Tokyo’s foreign exchange policy,former Bank of Japan chief Toshihiko Fukui said on March 7th, “A stronger yen will ease the negative effect from rising costs of crude oil and commodities.” Finance chief Nukaga agrees and told the parliament on March 27th, “If the yen rises, goods will be coming into the country cheaply and could turn the economy for the better while benefiting Japanese consumers. I think it would be good in the medium to long run,” he said. "
EUR - TEMPTED TO USE A STRONGER CURRENCY TO CONTAIN COMMODITIES INFLATION (Quote from Dorsch article)
" Much like the Bank of Japan and the Swiss National Bank, the ECB is utilizing a stronger currency to fend off inflationary pressures from soaring commodity prices. But the rise in the Euro/US$ exchange rate has still lagged behind the increase in food and energy prices. As a result, inflation in the 15 countries using the Euro accelerated to 3.5% in March, a 16-year high, and even further above the ECB’s long ignored inflation target of 2 percent. "
USD - ODD MAN OUT
Hawkish US rate "strong dollar" policy to control commodities inflation is out of the question, due to plunging domestic asset prices. Imagine the carnage in 2008 or 2009 if the US raised rates. It's just not a viable option. Compared to other currencies this forecasts at a minimum a comparatively weak USD interest rate continuing vs. JPY and EUR. So you have soaring baseline inflation in commodities worldwide, at least relatively hawkish interest rates to contain commodities inflation from JPY and EUR - which all combined suggests US import costs are set to skyrocket. Adding fuel to the fire is the fact that in the US the MZM is trending at 16%+.
We are to imagine inflationary pressures in the US are abating, because gold and the commodities complex corrected sharply?
__________
__________
This is not "DEFLATION". It would appear to be a common "PRICE CORRECTION". Underlying inflation at the source at least in the US, appears to be "spring-loaded" to kick in a fresh wave of new inflation from the MZM alone, and certainly appears to be further "spring-loaded" in commodities prices across the entire world. Think of copper - at a mere 2 day's supply vs. global consumption.
gold-forecast-3-4-08.gif
__________
And look what's happening in food!!
Symptoms of food inflation around the world - complete the raging inflation occurring across the board in the entire CRB. Corrections are mere noise in the trend.
<< In the past year, riots broke out in 12 different countries. Street protests occurred in Jakarta. Strikes in Italy. Unprecedented government controls in 20 different countries. Over what? Oppressive government? Long work hours? No. They're rioting and protesting because they can no longer afford to eat with these skyrocketing food costs.
In the last six months alone, the basics people live on have surged dramatically in price. Corn prices have jumped 51%. Barley has soared 38%. Oats, 53%. Wheat, 56%. And rice - the mainstay of diets in emerging countries home to over 3 billion - shot up a devastating 67%. You may not have heard the hungry protesters or seen the riots - yet - but I'm guessing you've felt this uncomfortable inflationary squeeze in your grocery bills.
In just the last year…Pork prices leapt over 63% in China…Tortilla prices up 51% in Mexico…Bread prices up 35% in Egypt…Rice prices doubled in Philippines…Soybean prices jumped in Argentina, leading to riots…Here in the U.S., you now have to fork over another 32% more for a loaf of bread than you did just three years ago. A carton of eggs costs you 50% more since this time last year. And overall your food bills have climbed 5% since 2007, according to the U.S. Department of Agriculture. >>
From China to Argentina…from the Philippines to Mexico…street protests, food strikes and riots are breaking out. It evidences all the signs of the beginning of a global food crisis.
Fred - I looked through the referenced Macro Man web page. He writes:
<< More fundamentally, if the commodity meltdown continues, then the inflation problem that Macro Man has worried about for the past couple of years may need to be shelved temporarily.... >>
Ehm ... is it possible he's missing one or two inflationary symptoms, as we traverse the present banking crisis? He's using the price action in commodities as a functional 'equivalent' to inflation?
It's not clear (to me) that commodity price action is a direct equivalent to inflation, and at least some other observers (Gary Dorsch below) are noting a significant 'pump' of liquidity in progress which Macro Man seems to decline mentioning as relevant? Instead he's scrutinising short term commodity price behavior (scary gold price plunge) for 'clues' as to what's happening inflation-wise and coming to what appear some vacillating conclusions instead. Macro Man seems (in the linked page at any rate) a bit fuzzy about the primary inflation indicators, at least as E.J. has always advised us to read them - always at the source?
He concludes that because commodities have steeply corrected their manic run since last August, this is equivalent to a significant bearish turn in the commodities fundamentally - which seems not more than a conjecture. Maybe it's even just "market noise" in the commodities complex, where "noise" tends to be amplified. If he were reading a little Ty Andros he'd have noted "Dr. Copper" (the barometer for the entire industrial complex) is busting out of a long consolidation, and also shows a scant 2 days global supply to meet current consumption.
Why is he not spotting this datum?
His conclusion " the inflation problem worried about for the past couple of years may need to be shelved " reveals some uncertainty about what to scrutnise, (at least in this one article), compared to the likes of Ty Andros who homes in on the 'firehoses of liquidity' as the real story to watch. Some question marks on Macro Guy's method are popping up.
This chart is from a recent Gary Dorsch article. Macro Man writes: "The inflation problem may need to be shelved temporarily"? Question: how do you ignore an MZM like this in that hesitant prognosis?
gary_dorsch_MZM_chart_2008.jpg
QUOTES FROM THE GARY DORSCH ARTICLE:
( full article here : http://www.financialsense.com/Market...2008/0403.html )
__________
<< Expectations that the Fed’s rate cutting campaign is nearing an end has stabilized the US dollar, with the greenback’s strongest gains seen against the Japanese yen, which offers negative rates of interest after adjusting for inflation, and the British pound in anticipation of gradual rate cuts by the Bank of England. The Bank of Canada is expected to match any residual Fed rate cut in this cycle.
The Gold market was rattled after its historic rally fizzled out above the psychological $1,000/oz level, and surprising moves by the Federal Reserve to drain some excess cash out of the US banking system after the rescue of Bear Stearns. But Mr. Bernanke and his radical band of inflationists at the Fed have expanded the MZM money supply by 16.8% from a year ago, which could ignite hyper-inflation in the US economy once the monetary stimulus in the pipeline starts to take effect. >>
__________
And on currencies:
JPY - TEMPTED TO USE A STRONGER CURRENCY TO CONTAIN COMMODITIES INFLATION (Quote from Dorsch article)
" Signaling a historic shift in Tokyo’s foreign exchange policy,former Bank of Japan chief Toshihiko Fukui said on March 7th, “A stronger yen will ease the negative effect from rising costs of crude oil and commodities.” Finance chief Nukaga agrees and told the parliament on March 27th, “If the yen rises, goods will be coming into the country cheaply and could turn the economy for the better while benefiting Japanese consumers. I think it would be good in the medium to long run,” he said. "
EUR - TEMPTED TO USE A STRONGER CURRENCY TO CONTAIN COMMODITIES INFLATION (Quote from Dorsch article)
" Much like the Bank of Japan and the Swiss National Bank, the ECB is utilizing a stronger currency to fend off inflationary pressures from soaring commodity prices. But the rise in the Euro/US$ exchange rate has still lagged behind the increase in food and energy prices. As a result, inflation in the 15 countries using the Euro accelerated to 3.5% in March, a 16-year high, and even further above the ECB’s long ignored inflation target of 2 percent. "
USD - ODD MAN OUT
Hawkish US rate "strong dollar" policy to control commodities inflation is out of the question, due to plunging domestic asset prices. Imagine the carnage in 2008 or 2009 if the US raised rates. It's just not a viable option. Compared to other currencies this forecasts at a minimum a comparatively weak USD interest rate continuing vs. JPY and EUR. So you have soaring baseline inflation in commodities worldwide, at least relatively hawkish interest rates to contain commodities inflation from JPY and EUR - which all combined suggests US import costs are set to skyrocket. Adding fuel to the fire is the fact that in the US the MZM is trending at 16%+.
We are to imagine inflationary pressures in the US are abating, because gold and the commodities complex corrected sharply?
__________
Originally posted by FRED
View Post
This is not "DEFLATION". It would appear to be a common "PRICE CORRECTION". Underlying inflation at the source at least in the US, appears to be "spring-loaded" to kick in a fresh wave of new inflation from the MZM alone, and certainly appears to be further "spring-loaded" in commodities prices across the entire world. Think of copper - at a mere 2 day's supply vs. global consumption.
gold-forecast-3-4-08.gif
__________
And look what's happening in food!!
Symptoms of food inflation around the world - complete the raging inflation occurring across the board in the entire CRB. Corrections are mere noise in the trend.
<< In the past year, riots broke out in 12 different countries. Street protests occurred in Jakarta. Strikes in Italy. Unprecedented government controls in 20 different countries. Over what? Oppressive government? Long work hours? No. They're rioting and protesting because they can no longer afford to eat with these skyrocketing food costs.
In the last six months alone, the basics people live on have surged dramatically in price. Corn prices have jumped 51%. Barley has soared 38%. Oats, 53%. Wheat, 56%. And rice - the mainstay of diets in emerging countries home to over 3 billion - shot up a devastating 67%. You may not have heard the hungry protesters or seen the riots - yet - but I'm guessing you've felt this uncomfortable inflationary squeeze in your grocery bills.
In just the last year…Pork prices leapt over 63% in China…Tortilla prices up 51% in Mexico…Bread prices up 35% in Egypt…Rice prices doubled in Philippines…Soybean prices jumped in Argentina, leading to riots…Here in the U.S., you now have to fork over another 32% more for a loaf of bread than you did just three years ago. A carton of eggs costs you 50% more since this time last year. And overall your food bills have climbed 5% since 2007, according to the U.S. Department of Agriculture. >>
From China to Argentina…from the Philippines to Mexico…street protests, food strikes and riots are breaking out. It evidences all the signs of the beginning of a global food crisis.
Comment