patrick.net

Let there no longer be any doubt - it's here. Did you see the interview with the CEO of Wal-Mart discussing across-the-board price hikes (double-digit) on most goods? Wholesale food distributors stating double-digit staples increases? Car increases have already been announced by GE and Toyota (these were small - under 1% to about 2.3%), clothes increases have already been formally announced, ditto with appliances (10%!). Margins have been forced to compress for a while now, but companies can't hold back the increases for much longer.

A few anecdotes from the grocery store (SuperTarget):

Ben & Jerry's ice cream was 2.54 this past summer per pint. Current price? 3.29

What's the increase? Do the math - it's a lot more than the official rate, that's for certain.

Organic tortilla chips were 2.69 for 16 ounces last year at this time. Current price? 2.99 on sale for 14 ounces (size reduction)

I can't think of a single grocery item that has only moved up 2-3% or so from year-ago levels which means real interest rates are firmly negative (ie. savings are losing value, pure and simple).

You focus on food price. If everyone goes on a spree trading plots of farmland like they used to housing securities, what is the effect? When the cost of gasoline goes from $1 to $4 how much do those out-of-state tomatoes cost? The mechanisms by which we arrive at inflation in certain things, may have little to do with "organic inflation" if you follow my drift here.

Ben opened up his credit window and handed out markers to lots of people. He had little control over what those balance sheet buoy would do, he just HOPED it would result in loosening up credit. My argument is the people accepting all this help, never had any goal of helping anyone but themselves. As always they want to turn $100 into $200 and don't care how they get there, and are as willing to inject it into profitable commodities now as they once were into housing. My favorite story of all this excess was how John Mack's wife got $220 million in TALF loans:

The Real Housewives Of Wall Street: Christy Mack And Susan Karches Took TALF Loans

When you say staples, let's talk real staples. Go look at the charts for corn or wheat and tell me it's inexorable inflation. Looks far too blippy to me for that.

Your logic is flawed. If real wages fall 1%, it doesn't mean nominal house prices will fall. It just means they won't keep up with inflation.

Yep, like I've been saying for a long time. Higher commodity prices. No increase in wages.

Blame the Fed if you like, but really you should be blaming the Chinese, the Brazilians, the Indians, etc. who want their share of the oil, and grain-fed livestock, iron, and every other commodity, when supplies have not nearly increased in proportion to the demand.

It will be a while, but people will eventually wake up to the fact that the "industrial revolution" and the "green revolution" were little more than the exploitation of increasingly high quality fossil fuels. As those supplies fail to grow exponentially along with the economies on which they are based, all that is tangible will become more expensive (except land) in real terms, "inflation" or not.

tatupu70 says

If real wages fall 1%, it doesn’t mean nominal house prices will fall. It just means they won’t keep up with inflation.

If other expenses get bigger, housing has to get smaller, since we don't really make anything inflationary here like food or oil that would redirect this cost inflation back into our wage base to any great extent.

MarkInSF says

As those supplies fail to grow exponentially along with the economies on which they are based, all that is tangible will become more expensive (except land) in real terms, “inflation” or not.

Interesting point.

Troy says

tatupu70 says

If real wages fall 1%, it doesn’t mean nominal house prices will fall. It just means they won’t keep up with inflation.

If other expenses get bigger, housing has to get smaller, since we don’t really make anything inflationary here like food or oil that would redirect this cost inflation back into our wage base to any great extent.
“Nessuna soluzione . . . nessun problema!„

We don't make food here?

We are a major ag producer; the problem is, the tiny 2-4% of the population employed in the sector (directly and indirectly) is meaningless in the grand scope of consumer potency to the overall economy. In my hometown in the center of Minnesota's corn and dairy nexus, the increased commodity prices paid to farmers are being to a large degree nullified by input cost inflation. Ben is rapidly learning that you can't print wealth/prosperity.

Artificial fertilizer and pesticides have dependencies on oil byproducts. Tractors need fuel. Trucks delivering all that produce from one corporate farm to another state for processing, a 3rd state for packaging, then a 4th state for distribution and sale. American corporate farming is deeply dependent on cheap oil.

Regardless of what Ben Bernanke says at his first quarterly media briefing Wednesday, the markets are convinced the Fed chairman will lay out policies that will keep the stock market rallying and the dollar in decline.

http://www.cnbc.com/id/42780522

tatupu70 says

We don’t make food here?

"Here" being the bay area, not any more.

Yesterday my Chipotle burrito/chips/drink was $10.01. This might be the first time I've spent more than $9.99 for fast food ever.

I also think I won't be eating at Chipotle much.

Troy, don't be silly - you know darn well that $10 is the new $7.

Your lunch costs are merely "transitory." Just ask Ben.

@Troy

I can get a good Nepalese lunch here for cheaper than that (and probably healthier too!)

Mir-Mire in Ikebukuro...Â¥650.

Vicente says

My argument is the people accepting all this help, never had any goal of helping anyone but themselves. As always they want to turn $100 into $200 and don’t care how they get there, and are as willing to inject it into profitable commodities now as they once were into housing.

This should be the quote of the year.

As far as prices going up... it's limited by the buying power. Often we see just basic price point test and conclude it as inflation, when reality is not so and simply choosing to shop at a cheaper competitor brings the price back down. Thats what capitalism is about.

Any business will raise the price to maximize ROI, therefore consumers have to consider competitive alternatives as there is a lot of competition. When shoppers mindlessly suck up the price, like a bunch of clueless socialists, and cry about it, thats when high prices stick around.

Where's the Duck? I fondly remember him stating over and over again the huge benefits of inflation. If you are out there Larry, please respond. How's that inflation working so far?

An Obama long form with every fillup though.