Global Monetary Breakdown: Part I

[FRED]

Re: Global Monetary Breakdown: Part I

One of my points is that inflation can't hold if people don't have money to spend and therefore don't spend. With a global slowdown in progress, that's what's going to happen.

Instead of the profits flowing into the coffers of the 1%, businessmen will have to decide whether to accept lower profits or go out of business. I think they will choose to stay in business, so I think prices will go down.

Now, if the government somehow can get money into the hands of the people, that situation will reverse and we would see inflation, but so far that's not happening.

The current rise in prices is only temporary . . . KA is coming. Whether POOM ever comes depends on politics . . . .

After endless delays, a gigantic, boil the ocean iTulip article is published tomorrow, with a wart or two, but we got to get it out. It's driving us crazy!

Relevant to this topic:

As the chart below shows, a two year, 7% of GDP output gap has not kept inflation from rising beyond the Fed's 3% comfort zone.


Output Gap + Inflation = Stagflation

Across the board, including traditionally low inflation items, we found inflation. For example, apparel.

Auto consumer price index jumps more than at any point during The Great Inflation of 1975 to 1980.

Is wage price inflation keeping up with food, apparel, cars, and other goods price inflation? Nominal wages cannot rise with an output gap stuck at 7%. Due to rising inflation, they are falling rapidly in real terms.

The only sector where wage inflation is keeping up with goods price inflation is, ironically, in the manufacturing sector.

Final push to birth this bad boy tomorrow AM!

[jtabeb]

Re: Global Monetary Breakdown: Part I

FRED, It's AM already (in this part of the world) and I (we) are Jonesing for a FIX! (Esp. with the CB Coordinated Pre-Emptive Global Liquidity pump this morning).

Two questions I hope you can address in the analysis.

1. Is pre-emption the new CB policy norm? ( NO MORE KA, as CB policy?)
2. Is this a "WE ARE SCARED SH1TLESS" reaction for CB's, that will in the end not be able to prevent another 2008 type of event? Or is it choice #1, where they simply will not allow another downleg (and all the printing that that entails).

We are all dying to know!

[globaleconomicollaps]

Re: Global Monetary Breakdown: Part I

Final push to birth this bad boy tomorrow AM!

Have you tried Lamaze? Remember to breath!

[Chomsky]

Re: Global Monetary Breakdown: Part I

FRED, It's AM already (in this part of the world) and I (we) are Jonesing for a FIX! (Esp. with the CB Coordinated Pre-Emptive Global Liquidity pump this morning).

Two questions I hope you can address in the analysis.

1. Is pre-emption the new CB policy norm? ( NO MORE KA, as CB policy?)
2. Is this a "WE ARE SCARED SH1TLESS" reaction for CB's, that will in the end not be able to prevent another 2008 type of event? Or is it choice #1, where they simply will not allow another downleg (and all the printing that that entails).

We are all dying to know!

+1

[jpatter666]

Re: Global Monetary Breakdown: Part I

I expect things may be delayed somewhat due to exactly the questions above.

Besides, it's the holidays, a time of tradition -- and tradition is iTulip *never* posts on time. ;-) ;-)

Guess we've got 18 minutes (EST) to see!

[thriftyandboringinohio]

Re: Global Monetary Breakdown: Part I

.. tradition is iTulip *never* posts on time. ;-) ;-)..

Soon they'll forget it was late, but they'll never forgive you if it's bad...

[jiimbergin]

Re: Global Monetary Breakdown: Part I

I expect things may be delayed somewhat due to exactly the questions above.

Besides, it's the holidays, a time of tradition -- and tradition is iTulip *never* posts on time. ;-) ;-)

Guess we've got 18 minutes (EST) to see!

Well I guess you were right. I was gone for a while and unless I missed it we are still waiting.

[jpatter666]

Re: Global Monetary Breakdown: Part I

Well I guess you were right. I was gone for a while and unless I missed it we are still waiting.

About the only slam-dunk I see these days, although now that I've shot my mouth off, FRED is doubtless going to be keeping a eye on my posts just to prove me wrong next time!

Hey, anything to get my tulip-fix earlier.... ;-)

[raja]

Re: Global Monetary Breakdown: Part I

You are assuming that businesses have the capability to drop prices without going out of business - i.e. that profits are still quite high.

Let's say businesses can't raise prices because profits are not high. So they go out of business.
All the employees are now unemployed as well as the boss. What are they going to use for money that will result in rising prices?
Perhaps you believe input costs will rise, which will keep prices high. But commodity prices will go down due to less demand due to unemployment. Input costs will be lower, then businesses can lower prices.

You are also assuming that businesses need to sell to everyone. As we're seeing right now, the businesses selling to the 1% are doing fine

I'm guessing the number of business that cater to the 1% is quite small.

everyone else is just surviving. And they're surviving by passing increasing costs due to commodity prices, health care, energy, and so forth onwards.

"Commodity prices, health care, energy, and so forth" will go down. Doctors will have to live on $60,000 a year instead of $250,000 a year if they want to continue to be doctors. If they keep prices high, who can pay them?

Yes, government can "print", but so far they aren't getting the money to the people. How will that change?

Deflationary spirals can only occur under a gold standard with government complicity - and we have neither.

I think deflationary spirals can occur if the government doesn't get the money in the hands of the 99%. So far, they haven't.

[c1ue]

Re: Global Monetary Breakdown: Part I

Let's say businesses can't raise prices because profits are not high. So they go out of business.
All the employees are now unemployed as well as the boss. What are they going to use for money that will result in rising prices?
Perhaps you believe input costs will rise, which will keep prices high. But commodity prices will go down due to less demand due to unemployment. Input costs will be lower, then businesses can lower prices.

Employees or unemployed still need stuff to survive.

Whether it is via unemployment, salary, savings, or whatever, much consumption still occurs irregardless of specific businesses failing or not.

Secondly you're still leaving out the denominator. Even if the commodity demand is falling as you purport - and which is untrue BTW as the 2nd and 3rd world is still growing - the ongoing devaluation of all currencies itself lends a boost to prices. And while commodities may be down now vs. their pre-GFC 2008 highs, commodity prices are still well above the curve in the 10 year scale.

I'm guessing the number of business that cater to the 1% is quite small.

I'd say almost every major corporation caters to the 1% - even if it isn't their only business, I guarantee you that whatever business is transacted by a given corporation to the 1% is its most profitable.

"Commodity prices, health care, energy, and so forth" will go down. Doctors will have to live on $60,000 a year instead of $250,000 a year if they want to continue to be doctors. If they keep prices high, who can pay them?

Yes, government can "print", but so far they aren't getting the money to the people. How will that change?

Sorry, but you're still behind the learning curve. You personally don't pay your doctor's salary; it is paid for by the insurance company. So long as the insurance company can keep increasing prices - as has been the case for as long as I can remember, and accelerating - then the deflationista dream of $60K salaried doctors is going to continue to be a dream.

I think deflationary spirals can occur if the government doesn't get the money in the hands of the 99%. So far, they haven't.

I have no idea what you are talking about.

In Zimbabwe - we have a clear example of money printing overcoming any and every other obstacle on its way to creating inflation.

So why it is somehow that only a literal Bernanke Heli-Money drop is necessary to have inflation?

[erwinky]

Re: Global Monetary Breakdown: Part I

Here's some interesting data regarding the used car market from Manheim Consulting: http://www.manheim.com/products/consulting

In their monthly index for October (where they analyze a database of used vehicle transactions) they find that:

--Used vehicle prices are high, but have dropped slightly (I'm not quite sure how to interpret this as an economic indicator. What's interesting is the first figure, charting the index over time, shows a big drop in 2008 when the financial crisis hit. Then there is a rapid increase to today's levels. This is attributed to strong demand and restricted supplies. Does this mean that people are both increasingly buying (demand) and hanging on to the cars they already own longer (restricted supply) for economic reasons?

--The rate of new vehicle sales increased
--The price of new vehicle increased (as shown in the CPI in the above posts)

--The second figure is very interesting:
I would like to see this data graphed for the past several years as well as the averages, but this may indicate a shift in purchasing ability due to economic conditions. When people have less $$$ it seems they would migrate to cheap and economical vehicles. This may be indicated by the increase in prices for compact and midsize cars. However, luxury cars and SUVs (higher cost and less economical) both had price declines which I would think reflects decreased demand due to economic conditions.