Inflation: Continued and various and sundry observations

[grapejelly]

Re: Inflation: Continued and various and sundry observations

1. The debt deflation is occurring at a very rapid pace, forcing this disinflation [ok, deflation if one prefers] phase to be compressed into an extraordinarily short period of time. When this unwind ends, the risk of inflation will be elevated...and this debt deflation unwind is not going to drag on for years and years, like it did in the 1930s or Japan.

How do you know it's so fast? There is a great deal of stickiness in the present deflation. It might go on for years and years.

Banks are hiding their bad assets. The whole CB bailouts are all about providing them with money so they can hold onto their bad assets without trying to sell them.

[GRG55]

Re: Inflation: Continued and various and sundry observations

How do you know it's so fast? There is a great deal of stickiness in the present deflation. It might go on for years and years.

Banks are hiding their bad assets. The whole CB bailouts are all about providing them with money so they can hold onto their bad assets without trying to sell them.

Apparently things North of Nirvana must be a good deal more pleasant, and slower paced, than they are on the rest of planet Earth...


Have a look at the charts [there's plenty being posted by EJ and FRED]; watch the unprecedented bludgeoning of interest rates by Central Banks [no sophisticated scalpels, slicing them slowly now] as they all race to the Zero Bound holding hands [has there ever been anything like it anytime in history?]; have we ever seen oil prices go from $145 to $45 with such unseemly haste?; has there ever been so much bank capital wiped out simultaneously across the globe?; have we ever seen so many 100+ year old firms enter bankrupcy in such a compressed time frame?; and on and on...

There is no bloody stickyness in the current debt deflation, despite the best efforts of Hank and Ben and all their friends to create some. This mother is coming apart at the seams, as it plunges straight down the fall line, and the best anyone can hope for right now is an oversold bounce in the equity markets extended by an Obama honeymoon early next year. When that's over, look out below.

When I was younger, and my knees were better, I used to ski avalanche chutes in the Rockies on winter weekends just for fun. Most of the charts I look at now remind me of those days...

[grapejelly]

Re: Inflation: Continued and various and sundry observations

Apparently things North of Nirvana must be a good deal more pleasant, and slower paced, than they are on the rest of planet Earth...


Have a look at the charts [there's plenty being posted by EJ and FRED]; watch the unprecedented bludgeoning of interest rates by Central Banks [no sophisticated scalpels, slicing them slowly now] as they all race to the Zero Bound holding hands [has there ever been anything like it anytime in history?]; have we ever seen oil prices go from $145 to $45 with such unseemly haste?; has there ever been so much bank capital wiped out simultaneously across the globe?; have we ever seen so many 100+ year old firms enter bankrupcy in such a compressed time frame?; and on and on...

There is no bloody stickyness in the current debt deflation, despite the best efforts of Hank and Ben and all their friends to create some. This mother is coming apart at the seams, and the best anyone can hope for right now is an oversold bounce in the equity markets extended by an Obama honeymoon early next year. When that's over, look out below.

I would like to learn something here. So please bear with me (there is a bear with me and he's making me type this.)

1. The trouble with falling asset values is that lenders need to sell the assets to pay back loans.

2. Call these margin calls -- and I include hedge funds having to meet redemption requests, people liquidating mutual funds, etc.

3. Everyone needs to sell at the same time and nobody wants to buy.

4. So that is pretty much the end of finance as we know it.

5. But, in order to PREVENT this, the CBs lend trillions into existence.

6. These trillions go to the banks and get used to buy up assets, or to shore up equity, or to lend on doubtful collateral, so that the forced sales do NOT have to happen.

7. This prevents the massive sales of loans, mortgages, CP, etc., with no buyers. The CBs will be the buyers if necessary, but really, they prefer to lend the money to those holding those doubtful assets, so that they can meet margin calls without selling.

8. That is why the unwinding is going to go REALLY SLOW.

That is not to say that the crash hasn't been big, fast, incredibly devastating.

But the de-leveraging is on hold...it is slow...and that is why I say this depression will last MANY YEARS. The gubmint is not letting the unwinding happen quickly. The opposite in fact.

[GRG55]

Re: Inflation: Continued and various and sundry observations

I would like to learn something here. So please bear with me (there is a bear with me and he's making me type this.)

1. The trouble with falling asset values is that lenders need to sell the assets to pay back loans.

2. Call these margin calls -- and I include hedge funds having to meet redemption requests, people liquidating mutual funds, etc.

3. Everyone needs to sell at the same time and nobody wants to buy.

4. So that is pretty much the end of finance as we know it.

5. But, in order to PREVENT this, the CBs lend trillions into existence.

6. These trillions go to the banks and get used to buy up assets, or to shore up equity, or to lend on doubtful collateral, so that the forced sales do NOT have to happen.

7. This prevents the massive sales of loans, mortgages, CP, etc., with no buyers. The CBs will be the buyers if necessary, but really, they prefer to lend the money to those holding those doubtful assets, so that they can meet margin calls without selling.

8. That is why the unwinding is going to go REALLY SLOW.

That is not to say that the crash hasn't been big, fast, incredibly devastating.

But the de-leveraging is on hold...it is slow...and that is why I say this depression will last MANY YEARS. The gubmint is not letting the unwinding happen quickly. The opposite in fact.

But the forced sales [liquidations] ARE happening. Is your bank using any of its trillions to buy up your rapidly discounting assets? Mine isn't either.

I don't buy your argument for the following reason: The debt is backed by the "assets", be that housing, automobiles, purchases made with credit cards, stocks, bonds, commodities, or anything else that was able to be levered in the FIRE economy years [it would be easier to make a list of things that couldn't be levered :rolleyes: ]. As the assets fall in price, the debt is getting liquidated, and new credit is no longer being created to replace it. This is now surfacing all over the globe in every sector of the so-called "real" economy. Read the latest from Meredith Whitney, who anticipates a large clawback of credit card lines from consumers next. Hence the layoffs, plant closures, bankrupcies, civil disturbances, government "infrastructure" packages, direct mailing of cheques to citizens [first the USA, now Australia, who's next?], etc.

The Central Bank's injections of capital into the banking system certainly haven't made things worse, but just as they were unable to keep things "contained" to subprime, their current efforts, including purchases of agency debt and long-dated Treasuries to lower mortgage rates, are only marginally effective. The unwinding is severe, and it's happening very, very quickly. And that is why it won't go on for years and years.

Edit added: I think EJ's latest post here is indicative of what I was trying to describe, especially the comment about the October 2008 inflection.

[Slimprofits]

Re: Inflation: Continued and various and sundry observations

Some of these rising prices are lagging indicators and some are not.

Cox Cable plans price hikes in 2009

Prices are expected to go up in 2009, Lana Ong, the media representative with Cox’s Orange County division, said Friday.

Cox already raised its video prices last March, and upped its Internet service by $2 in October.

With the economy still in sad shape, TV companies are moving ahead with plans to squeeze more money from their customers. Time Warner Cable and AT&T U-verse both plan 2009 rate increases (Read “Time Warner Cable raising prices in 2009 ” and “AT&T U-verse raising TV prices.”)

*****

2008 Food Inflation Highest Since 1980, With More Hikes On Way

Some relief -- for shoppers and food makers -- is on the way. Corn, wheat and energy prices have tumbled since last summer, leading research analysts to believe price inflation will ease this year. Evidence of that has surfaced in recent months. Price inflation at the grocery store has been inching down since prices peaked in September, according to Labor Dept. data.

Still, Kellogg Co., maker of cereals Frosted Flakes and Rice Krispies, plans to lift prices Jan. 18 in the "low-to-mid single digit" range to help cover commodity costs for its cereal brands. It won't increase prices for its All-Bran and Special K brands.

It also will boost the price for a box of Pop-Tarts.

Kellogg (K: 44.2, -0.75, -1.67%) explained that it is raising prices because it sets pricing behind increases or decreases in the value of the commodities it uses. A spokeswoman said a 2008 price hike didn't help the company recover all its manufacturing costs.

In a research note, analyst David Palmer at UBS said Kellogg's price hike will likely be matched by competitors and private-label cereal manufacturers.

*****

BMW raising prices 0.7% in 2009

BMW of North America said 2009 model vehicles sold here will cost 0.7 percent more beginning Jan. 1.

The increase is due to the "ongoing structural and economical changes in the marketplace," BMW officials said, adding that "it will ensure revenue generation for the company's U.S. operations as well as help protect the quality of business."

*****

Comcast raising prices in Feb.

Comcast cable TV rates will go up between 4.9 percent and 6.9 percent in most areas of the Front Range in February.

But Comcast Colorado spokeswoman Cindy Parsons said the average bill will increase 3.2 percent, based on all of the packages that Comcast offers, including bundles with phone and high- speed Internet. That's down slightly from 4 percent last year.

"Price adjustments are a necessity in view of the increased cost of doing business in this challenging economic environment," Parsons said.

She cited increased costs for programming and employee health care, as well as the cost of technology and service improvements.

*****

Nikon raising prices on lenses; buy before Groundhog Day

Looks like we’re going to be seeing price increases of about 10% on Nikon glass come February 1st. Although a reason was not really given (it’s not even confirmed by Nikon yet), it makes sense after prices were raised in other countries.

*****

Sirius XM raising costs? Vive le monopoly!

Jan 21, 2009

Some six months after last summer's merger between Sirius Satellite Radio and rival XM Radio, we're now seeing reports that the new Sirius XM is raising prices starting March 11, charging $2 more per month for additional subscriptions, and $2.99 a month for online streaming (formerly part of the base package).

*****

Vending machine prices see rise

Two vending machine companies serving Schuylkill County are in the process of upping their prices after holding out through the gas guzzling $4-a-gallon summer.

“We had no choice,” Gabe Horvath, owner of Hazleton-based Rex Vending, said of his company’s across-the-board 13 percent vending machine price increases. “The cost of the products themselves is up, there’s the cost of paying the people who go out and fill the machines, there’s the wear and tear on the vehicle, the gas prices, insurance, the pay roll.

“Everything adds up.”

*****

US rail shipments continue to tumble

Major railroads have offset low volume by raising prices and cutting costs among other things.

*****

Lower Food, Labor Costs May Help Texas Roadhouse

While some costs come down, Texas Roadhouse isn't cutting prices. Instead, it's raising prices slightly next month, suggesting that competitors like Outback Steakhouse aren't taking market share from its value and combo offerings, the firm wrote.

*****

Samsung Mulls DRAM Contract Price Hike For Early Jan- Source


*****

Slowing port traffic worldwide signals bleak 2010

Trade credit insurance, which protects sellers against losses and typically covers as much as 40% of trade in Europe and 5% in the United States, is also harder to get.

Atradius NV, an Amsterdam-based insurer that covers about a third of global trade receivables, is raising prices by as much as 50% and reducing coverage on thousands of companies.

That includes 12,000 in Britain and all the suppliers to the biggest U.S. automakers -- General Motors Corp., Ford Motor Co. and Chrysler LLC.

[metalman]

Re: Inflation: Continued and various and sundry observations

a fine collection of evidence... here comes itulip's & grg's supply crash... and early.

more...

Rise in gasoline prices puzzles drivers
The Southern, IL - 19 hours ago
So it's not surprising that motorists were bewildered as they watched the gasoline prices climb to near $1.70 a gallon. The average price of regular ...

that one could read... 'rise in gasoline prices puzzles pea brained deflationistas'... and...

WATER RATES: Consumption down, forcing prices to go up
Atlanta Journal Constitution, USA - 17 hours ago
Last year, the county also passed an 8.4 percent sewer rate increase. The increases added about $3.50 to the average residential bill, said Pete Frank, ...

Five factors key to horse feed price increase
Farm Forum, SD - Jan 23, 2009
If you've paid careful attention to your receipts from the feed store, you certainly have noticed that the price of horse feed has increased. ...

New policies for US Postal Service are now in affect
North Fort Myers Neighbor, FL - Jan 22, 2009
The price increase for mailing services will be announced in February and will take effect in May. The January implementation for shipping services prices ...

Railroads Run on Higher Prices
Wall Street Journal - Jan 22, 2009
Critics of price increases argue that railroads hold monopoly-like powers over some customers who can't ship their freight any other way. ...

Gun show business booming
Daily Citizen, GA - 20 hours ago
“There’s definitely an increase of people here today,” said Ron Thompson of Dalton, who attends gun shows regularly. “Ammo has doubled in price, ...

Brace yourself, homeowners: Tax values will rise as home prices shrink
MLive.com, MI - 14 hours ago
Your eyes will quickly focus on the 4.4 percent increase at the line for "taxable property value." That's the biggest jump since the state's Proposal A tax ...

The Myth of Demon Deflation
Hawaii Reporter, HI - Jan 24, 2009
If the quantity of money increases faster than increases in the quantity of products, we experience rising prices. This general rise in prices is inflation. ...

[Slimprofits]

Re: Inflation: Continued and various and sundry observations

a fine collection of evidence... here comes itulip's & grg's supply crash... and early.

Bits of news such as these two and everything on GRG55's supply destruction thread will prove to be very telling:

Railroads Run on Higher Prices
Wall Street Journal - Jan 22, 2009
Critics of price increases argue that railroads hold monopoly-like powers over some customers who can't ship their freight any other way. ...

[..]

Atradius NV, an Amsterdam-based insurer that covers about a third of global trade receivables, is raising prices by as much as 50% and reducing coverage on thousands of companies.

I mean shit, if Atradius is rising prices by as much as 50% right now, what does that mean for the cost of trade credit when the global recession turns around? Maybe I'm not interpreting this correctly. Do trade credit insurance outfits drop prices during boom times?

[tsetsefly]

Re: Inflation: Continued and various and sundry observations

*****

Sirius XM raising costs? Vive le monopoly!

Jan 21, 2009

Some six months after last summer's merger between Sirius Satellite Radio and rival XM Radio, we're now seeing reports that the new Sirius XM is raising prices starting March 11, charging $2 more per month for additional subscriptions, and $2.99 a month for online streaming (formerly part of the base package).

*****

good info... I will focus on this dumb article:

I've personally never been a Howard Stern fan (seems every day there's fewer of those around), and at home, I plug my Internet-connected laptop into the stereo to listen to various online radio as well as my MP3 collection. That means the only place I really listen to satellite radio is my car or at work via the Internet...
itch the satellite radio rather than pay an extra 3 bucks a month just to listen at work. Yes, it's about saving cash. But it's also about saying screw you to this monopoly before it bites me in the behind.

This is from someone who just clearly does not understand basic economic principles or even business 101...
the two companies merged because they would go under if they didn't the cant keep up with their debt or cost so would obviously have to raise some prices.

That is the first argument, second is off course in tougher economic times once the inventory cleaning out is done you have to raise prices to survive since you are selling less...

[Slimprofits]

Re: Inflation: Continued and various and sundry observations

good info... I will focus on this dumb article:


This is from someone who just clearly does not understand basic economic principles or even business 101...
the two companies merged because they would go under if they didn't the cant keep up with their debt or cost so would obviously have to raise some prices.

That is the first argument, second is off course in tougher economic times once the inventory cleaning out is done you have to raise prices to survive since you are selling less...

I locked in with XM for two years when the finalization was announced (patting self on back).

[Slimprofits]

Re: Inflation: Continued and various and sundry observations

this is interesting:

Corinne Alexander, a professor of agricultural economics at Purdue University, says that energy costs make up only 15 cents of the typical grocery dollar and more than 38 cents goes toward labor costs.

*****

Does anyone in this community know how much of a affect the production of ethanol has on corn prices?

the corn price chart, source: tradingcharts.com



Demand for Corn for corn for food products and ethanol is said to be down.

[flintlock]

Re: Inflation: Continued and various and sundry observations

Yep, its the land values in particular that are really taking a hit. Simply because there is almost no demand for land to build on.

My brother is a home builder. About 3 years ago he paid approximately $200,000 each for two one acre lots. I doubt he could get much over $50k each for them now. Unfortunately he built a large spec house on one of the lots. It is unsold of course and has been completed for over a year now. He can still probably sell the house for close to his cost of construction + lot cost. But he'll be out the carrying costs of course( interest, utilities, taxes, etc) . The other lot that is not built on will probably be an almost total loss.