Deflation anyone?

[LunarRay]

"The Fed's deflation dread
The Fed cuts rates to lower the cost of borrowing, pumping more money into the economy when it thinks activity is too slow. When inflation is a risk, the Fed raises rates.

The Fed has cut rates 13 times since the start of 2001, helping to fight off the effects of a recession, terrorist attacks, corporate scandals, war and more.

Most economists -- including Fed Chairman Alan Greenspan -- believe the economy will strengthen in the second half of the year. But some Fed officials have expressed concern that the economy might not grow fast enough to cause inflation to rise.

Though the Fed spent decades battling inflation, and falling prices are certainly good in the short run for consumers, further falling inflation -- or "disinflation," in Fed-speak -- could help set the stage for the nasty economic condition known as deflation.

Japan, the world's second-largest economy, has battled deflation for much of the past decade, with little success. Deflation is an unstoppable drop in prices that hurts corporate profits, leading to more layoffs, which saps demand, hurting prices even further. It's a grim scenario the Fed has said it will do everything in its power to avoid."

Link to the ho hum economic possibility.

Folks argue that it won't or can't happen... but, in Japan it did and is and it is nasty...

 

[dmcowen674]

Unless Gas prices go down I don't believe it. Not just gasoline either, Natural Gas has gone up 200% in 3 years.

 

[xxxxxJohnGaltxxxxx]

Originally posted by: dmcowen674
Unless Gas prices go down I don't believe it. Not just gasoline either, Natural Gas has gone up 200% in 3 years.

Are you going to go thread-to-thread ranting about gas prices and your lack of economic comprehension?

 

[dmcowen674]

Originally posted by: xxxxxJohnGaltxxxxx

Originally posted by: dmcowen674
Unless Gas prices go down I don't believe it. Not just gasoline either, Natural Gas has gone up 200% in 3 years.

Are you going to go thread-to-thread ranting about gas prices and your lack of economic comprehension?

Guess you are happy about Gas prices and how everything else is going right about now too? Well La Di Da for you.

 

[LunarRay]

Originally posted by: dmcowen674
Unless Gas prices go down I don't believe it. Not just gasoline either, Natural Gas has gone up 200% in 3 years.

Well.. deflation is numerically derived and includes the issues you state, however, if every thing is dis inflating but, gas etc. then the issue must be looked at sans the effect of the petro and nat gas mkt..

I can see that there is a growth that ought to cause a greater inflation rate than is occurring so can the Fed's economists. This is why I've been harping on disinflation for months. There ought to be a correlation between growth and its inherent inflation factor.. it models out this way and has for a long economic time... When the inflation rate is not up to its expected rate given the growth then folks worry. That is folks acutely aware of the effect of disinflation... It is possible although unlikely that we could get to a '29 - '39 type economic reality.

Look at what the Fed folks are saying and not saying... when they hint.. watch out..

 

[etech]

Originally posted by: dmcowen674

Originally posted by: xxxxxJohnGaltxxxxx

Originally posted by: dmcowen674
Unless Gas prices go down I don't believe it. Not just gasoline either, Natural Gas has gone up 200% in 3 years.

Are you going to go thread-to-thread ranting about gas prices and your lack of economic comprehension?

Guess you are happy about Gas prices and how everything else is going right about now too? Well La Di Da for you.

Read this please.


Networks Add Fuel to the Furor Over High Gas Prices

Friday, March 24, 2000
"...
From 1920 through 1992, the retail price of gas sold at the pump averaged $1.91 a gallon, adjusting for inflation. That dipped to an average of just $1.36 from 1993 to 1997, and slipped even further to a record low $1.16 per gallon in 1998. The price rebounded only slightly to $1.24 last year as OPEC began trimming its production, before finally surging to $1.57 in March of this year as the production cutbacks began to affect the market.

Those numbers help explain why the jump at the pump was such a shock -- the rate of this year?s increase was unusually steep, even though the price itself was hardly out of line with historic norms.
..."

Now what were you saying about how high gasoline is priced? The information is out there, all you have to do is spend a few minutes looking for it.

 

[LunarRay]

Funny thing about numbers ... they are truth tellers.. Today a $2.40 cent loaf of bread in constant 2000 dollars also must have had a similar ride along the inflation train.

 

[burnedout]

Originally posted by: LunarRay
Funny thing about numbers ... they are truth tellers.. Today a $2.40 cent loaf of bread in constant 2000 dollars also must have had a similar ride along the inflation train.

Dang Lunar Ray! Where are you purchasing your bread? Heck, I paid 89 cents for a loaf of whole wheat at Albertsons last week.

 

[LunarRay]

Originally posted by: burnedout

Originally posted by: LunarRay
Funny thing about numbers ... they are truth tellers.. Today a $2.40 cent loaf of bread in constant 2000 dollars also must have had a similar ride along the inflation train.

Dang Lunar Ray! Where are you purchasing your bread? Heck, I paid 89 cents for a loaf of whole wheat at Albertsons last week.

You'll don't shop at the same store... apparently. My Grandson works at Albertson's here in Del Mar and he said the Bread with the Balloons on it costs $2.40 .. Wonder bread... hmmm, now I wonder... hmmmm... He may be messing up my entire Economic model by charging me his procurement fee within the price of the bread..

 

[Zebo]

Blah...Orowheat Crcked Wheat/Oatnut 3 Seed bread is over $4.00 at albertsons. I don't eat processed junk. Another good bread is from california bread Co whole wheat.. sold at costco is about $3.00 a loaf.

 

[LunarRay]

Originally posted by: Zebo
Blah...Orowheat Crcked Wheat/Oatnut 3 Seed bread is over $4.00 at albertsons. I don't eat processed junk. Another good bread is from california bread Co whole wheat.. sold at costco is about $3.00 a loaf.

Well .. as long as we have Zebo's and folks willing to increase the amount they'll pay for stuff... I'll not worry about dis inflation
Food is meant to have all that processed stuff in it.. makes you stronger.. and you have all the built in chemicals to ward off mold and stuff.. I love hostess cupcakes...

 

[burnedout]

Originally posted by: LunarRay

Originally posted by: burnedout

Originally posted by: LunarRay
Funny thing about numbers ... they are truth tellers.. Today a $2.40 cent loaf of bread in constant 2000 dollars also must have had a similar ride along the inflation train.

Dang Lunar Ray! Where are you purchasing your bread? Heck, I paid 89 cents for a loaf of whole wheat at Albertsons last week.

You'll don't shop at the same store... apparently. My Grandson works at Albertson's here in Del Mar and he said the Bread with the Balloons on it costs $2.40 .. Wonder bread... hmmm, now I wonder... hmmmm... He may be messing up my entire Economic model by charging me his procurement fee within the price of the bread..

Wonder Bread is now $2.40? Wow. I'm not doubting your word. Just that I haven't shopped for Wonder Bread in a long time either. Usually, either hard rolls from the bakery (reminiscent of 'Rogenbrot' from Germany - no additives) or whole wheat suffices for my portable grain fix.

 

[Isla]

Originally posted by: Zebo
Blah...Orowheat Crcked Wheat/Oatnut 3 Seed bread is over $4.00 at albertsons. I don't eat processed junk. Another good bread is from california bread Co whole wheat.. sold at costco is about $3.00 a loaf.

<---pays 3.59 for a loaf of Ezekiel Bread at her local heath food store

 

[burnedout]

Back on topic. Now, I'm obviously no economist. Just a longtime investor. Anyway, here is my 2 cents on the deflation argument.

Yes, deflation is quite possible in this day and time. A considerable number of our senior citizens, who are not solely reliant upon SS and various pensions, have a relatively large amount of assets invested in conservative, fixed-income producing instruments. Instruments such as CDs, Govt. bonds and annuities. Since interest rates have been lowered extensively over the past 2.5 years, their available discretionary income has responded in kind.

In some respects, I see the quagmire of Japan calling, albeit remotely. A nation mired in low interest rates and little economic growth. If I'm not mistaken, most of our GDP increase during the previous quarter was because of defense spending. Quite naturally, this defense spending was mainly for the war that we so heatedly debate around here.

Yet, the lower interest rates have also sparked another round of debt refinance. This debt refinance has created underwriting opportunities (home mortgage refinancing, bond underwriting, etc.) and has therefore generated wealth. Additionally, more capital on behalf of the debtor becomes available due to the lowered borrowing costs on houses, corporate bonds, etc.

I'm not really too keen on the idea of so many service-sector jobs going overseas either. Yes, there are those who say that the additional profit will cause the corporations to follow one of three paths: 1.) invest in new internal operations, 2.) invest in another industry or 3.) spend the extra profit. Still, the exportation of roughly $136 Billion per year in domestic wealth, to me, is indeed a frightening prospect, regardless of the economic theories.

My conclusion: Stagnant GDP and growth most certainly remains a possiblity, as does deflation. Understandably, without defense spending, our GDP gains last quarter would have been minimal, if I'm not mistaken. What we require, in my opinion, is somehow a lessening of this terror threat, concluding the war in Iraq ASAP and developing more inovative business strategies to address the lack of jobs.

 

[LunarRay]

Originally posted by: burnedout
Back on topic. Now, I'm obviously no economist. Just a longtime investor. Anyway, here is my 2 cents on the deflation argument.

Yes, deflation is quite possible in this day and time. A considerable number of our senior citizens, who are not solely reliant upon SS and various pensions, have a relatively large amount of assets invested in conservative, fixed-income producing instruments. Instruments such as CDs, Govt. bonds and annuities. Since interest rates have been lowered extensively over the past 2.5 years, their available discretionary income has responded in kind.

In some respects, I see the quagmire of Japan calling, albeit remotely. A nation mired in low interest rates and little economic growth. If I'm not mistaken, most of our GDP increase during the previous quarter was because of defense spending. Quite naturally, this defense spending was mainly for the war that we so heatedly debate around here.

Yet, the lower interest rates have also sparked another round of debt refinance. This debt refinance has created underwriting opportunities (home mortgage refinancing, bond underwriting, etc.) and has therefore generated wealth. Additionally, more capital on behalf of the debtor becomes available due to the lowered borrowing costs on houses, corporate bonds, etc.

I'm not really too keen on the idea of so many service-sector jobs going overseas either. Yes, there are those who say that the additional profit will cause the corporations to follow one of three paths: 1.) invest in new internal operations, 2.) invest in another industry or 3.) spend the extra profit. Still, the exportation of roughly $136 Billion per year in domestic wealth, to me, is indeed a frightening prospect, regardless of the economic theories.

My conclusion: Stagnant GDP and growth most certainly remains a possiblity, as does deflation. Understandably, without defense spending, our GDP gains last quarter would have been minimal, if I'm not mistaken. What we require, in my opinion, is somehow a lessening of this terror threat, concluding the war in Iraq ASAP and developing more inovative business strategies to address the lack of jobs.

Addressing the Jobs issue is paramount. I believe the economic stimui was short by about 200b and I'd have preferred the dividend issue eliminated.. (mainly because of 'attitude' issues) Folks won't go into debt for purchases is job failure looms ahead then the Mfg. loses sales and poof the job failure becomes reality... on down the line..
Your point about the low interest bearing instruments... used by folks for living expenses is another reduction to spending and the cut back by suppliers.. The Fed deals with a two edged sword... stimulate growth with low rates at the same time create an offset to growth by the folks who spent that income which is offset by the companies who paid the interest etc... net, net, net, however is less jobs in the sector due to the reduction of purchases.
The refi is about refied out.. it did pump about 200b into the economy over 2 plus years but, rates ticked up a point and off went the refi issue, for the most part, as an economic stimuli.
Government spending and the debt... the interest rate should climb and inflation should parallel... but, not doing so.. yet. The spending must be looked at from the delta $ in spending for the war... they'd be paying all those soldiers anyhow... the no tax issue is minor for combat arena pay... but, if you look at the delta cost... which I can't find accurate numbers for (numbers exist but I don't accept them because they have unknown assumptions) you'd see maybe the war is limited to the rebuild issue. So we have a sector doing ok but, we've not the mfg base here to withstand all the issues. IMO
More stimuli is needed and to create mfg based jobs. Stop sending work to india even if it increases the costs... inflation? Start some kind of alternate fuel vehicle incentive geared to offset foreign made imports... Fix us first then deal with the global effects.

 

[UltraQuiet]

Originally posted by: LunarRay

Originally posted by: burnedout
Back on topic. Now, I'm obviously no economist. Just a longtime investor. Anyway, here is my 2 cents on the deflation argument.

Yes, deflation is quite possible in this day and time. A considerable number of our senior citizens, who are not solely reliant upon SS and various pensions, have a relatively large amount of assets invested in conservative, fixed-income producing instruments. Instruments such as CDs, Govt. bonds and annuities. Since interest rates have been lowered extensively over the past 2.5 years, their available discretionary income has responded in kind.

In some respects, I see the quagmire of Japan calling, albeit remotely. A nation mired in low interest rates and little economic growth. If I'm not mistaken, most of our GDP increase during the previous quarter was because of defense spending. Quite naturally, this defense spending was mainly for the war that we so heatedly debate around here.

Yet, the lower interest rates have also sparked another round of debt refinance. This debt refinance has created underwriting opportunities (home mortgage refinancing, bond underwriting, etc.) and has therefore generated wealth. Additionally, more capital on behalf of the debtor becomes available due to the lowered borrowing costs on houses, corporate bonds, etc.

I'm not really too keen on the idea of so many service-sector jobs going overseas either. Yes, there are those who say that the additional profit will cause the corporations to follow one of three paths: 1.) invest in new internal operations, 2.) invest in another industry or 3.) spend the extra profit. Still, the exportation of roughly $136 Billion per year in domestic wealth, to me, is indeed a frightening prospect, regardless of the economic theories.

My conclusion: Stagnant GDP and growth most certainly remains a possiblity, as does deflation. Understandably, without defense spending, our GDP gains last quarter would have been minimal, if I'm not mistaken. What we require, in my opinion, is somehow a lessening of this terror threat, concluding the war in Iraq ASAP and developing more inovative business strategies to address the lack of jobs.

Addressing the Jobs issue is paramount. I believe the economic stimui was short by about 200b and I'd have preferred the dividend issue eliminated.. (mainly because of 'attitude' issues) Folks won't go into debt for purchases is job failure looms ahead then the Mfg. loses sales and poof the job failure becomes reality... on down the line..
Your point about the low interest bearing instruments... used by folks for living expenses is another reduction to spending and the cut back by suppliers.. The Fed deals with a two edged sword... stimulate growth with low rates at the same time create an offset to growth by the folks who spent that income which is offset by the companies who paid the interest etc... net, net, net, however is less jobs in the sector due to the reduction of purchases.
The refi is about refied out.. it did pump about 200b into the economy over 2 plus years but, rates ticked up a point and off went the refi issue, for the most part, as an economic stimuli.
Government spending and the debt... the interest rate should climb and inflation should parallel... but, not doing so.. yet. The spending must be looked at from the delta $ in spending for the war... they'd be paying all those soldiers anyhow... the no tax issue is minor for combat arena pay... but, if you look at the delta cost... which I can't find accurate numbers for (numbers exist but I don't accept them because they have unknown assumptions) you'd see maybe the war is limited to the rebuild issue. So we have a sector doing ok but, we've not the mfg base here to withstand all the issues. IMO
More stimuli is needed and to create mfg based jobs. Stop sending work to india even if it increases the costs... inflation? Start some kind of alternate fuel vehicle incentive geared to offset foreign made imports... Fix us first then deal with the global effects.

I'm trying hard to keep up but here's a couple of comments:

1. You say they'd be paying those soldiers anyway but remember a couple of things. There's a lot reservists on AD who wouldn't be getting paid if they were just in a drilling status and all the enlisted money over there is tax free. It's probably just a drop in a very large bucket but it is worth clarifying.

2. Greenspan is on record saying that the thing he worries about most is inflation. He may be moving too cautiously because of that.

3. I read an article today that says a lot of employers labor decisions are being driven by health care costs. I don't think socialized meds are the answer however as I said a couple of months ago some sort of tax relief might be in order to offset employer provided health care. If that cost can be controlled or offset it may be enough to keep jobs in the country. The 70% savings realized when sending jobs to India is gonna be tough to beat but we gotta try.

4. I won't tell you what I pay for bread at the commissary but I'm very glad I can.

 

[LunarRay]

UQ,
I'm trying hard to keep up but here's a couple of comments:

1. You say they'd be paying those soldiers anyway but remember a couple of things. There's a lot reservists on AD who wouldn't be getting paid if they were just in a drilling status and all the enlisted money over there is tax free. It's probably just a drop in a very large bucket but it is worth clarifying.

2. Greenspan is on record saying that the thing he worries about most is inflation. He may be moving too cautiously because of that.

3. I read an article today that says a lot of employers labor decisions are being driven by health care costs. I don't think socialized meds are the answer however as I said a couple of months ago some sort of tax relief might be in order to offset employer provided health care. If that cost can be controlled or offset it may be enough to keep jobs in the country. The 70% savings realized when sending jobs to India is gonna be tough to beat but we gotta try.

4. I won't tell you what I pay for bread at the commissary but I'm very glad I can.
********************
Your 1) True, but the big picture is in govt spending on their salary or on their unemployment.. (or the person who took their place) almost a net 0. I meant that it was tax free... (the military pay) I always understood that under O3 is irrelevant anyhow..

Your 2) He hinted at dis inflation and his hints are loud... his info source, the Fed economists, speak loudly for him.

Your 3) I liked "Dave's Plan" in that, it was a means of creating jobs.. but, must have a market to sell to. The attitude of the purchaser has to be changed to a "We're doing fine" from "I'm worried"... just change that mind set among the folks and you'll see the biggest economic stimuli in history..

Your 4) Green card.... grey card... part of the cost structure gone awry... ... so is milk... and no tax at the exchange..

You keep up better than most graduate economists... reality is before us... to see it is reality..

 

[BarneyFife]

Originally posted by: xxxxxJohnGaltxxxxx

Originally posted by: dmcowen674
Unless Gas prices go down I don't believe it. Not just gasoline either, Natural Gas has gone up 200% in 3 years.

Are you going to go thread-to-thread ranting about gas prices and your lack of economic comprehension?

Relax Johnnyboy. You're very bitter. You need to find a better job and most importantly you need to get laid.

 

[BaliBabyDoc]

Your 3) I liked "Dave's Plan" in that, it was a means of creating jobs.. but, must have a market to sell to. The attitude of the purchaser has to be changed to a "We're doing fine" from "I'm worried"... just change that mind set among the folks and you'll see the biggest economic stimuli in history..

Oh I hated "Dave's Plan" . . . what was Dave's Plan? The cost of petrol and natural gas are unlikely to decline any time soon. And in the one field I can truly claim expertise . . . I can GUARANTEE healthcare is going to go from expensive to mad expensive. Even with a lot of patents expiring in the next few years Big Pharma has got big time cheddar coming. Hospital beds still run $800-$1000 a night. Everybody and their uncle are trying to find new ways to use PET, SPECT, or functional MRI. Now that CT scans have fallen below 5 Benjamins we've got a new modality. PET-CT or pet cat as we like to call it. Much better resolution, localization and functional imaging for the bargain price of $6000.

 

[BaliBabyDoc]

I friend leaving the farm next year was quite prophetic when we talked last month. "You know I'm tired of this sh!t. I hate this. I can't wait to start working . . . make my 400K and then retire after 10-15 years." He's radiology . . . which means no office expenses, low medmal, and great hours.

So everyone should go thank valiant public servants trying to keep deflation at bay.

 

[LunarRay]

Originally posted by: BarneyFife

Originally posted by: xxxxxJohnGaltxxxxx

Originally posted by: dmcowen674
Unless Gas prices go down I don't believe it. Not just gasoline either, Natural Gas has gone up 200% in 3 years.

Are you going to go thread-to-thread ranting about gas prices and your lack of economic comprehension?

Relax Johnnyboy. You're very bitter. You need to find a better job and most importantly you need to get laid.

The masons are out of work and adobe is in and now you advise a brick to brack... hmm well... makes sense economically

 

[LunarRay]

Originally posted by: BaliBabyDoc

Your 3) I liked "Dave's Plan" in that, it was a means of creating jobs.. but, must have a market to sell to. The attitude of the purchaser has to be changed to a "We're doing fine" from "I'm worried"... just change that mind set among the folks and you'll see the biggest economic stimuli in history..

Oh I hated "Dave's Plan" . . . what was Dave's Plan? The cost of petrol and natural gas are unlikely to decline any time soon. And in the one field I can truly claim expertise . . . I can GUARANTEE healthcare is going to go from expensive to mad expensive. Even with a lot of patents expiring in the next few years Big Pharma has got big time cheddar coming. Hospital beds still run $800-$1000 a night. Everybody and their uncle are trying to find new ways to use PET, SPECT, or functional MRI. Now that CT scans have fallen below 5 Benjamins we've got a new modality. PET-CT or pet cat as we like to call it. Much better resolution, localization and functional imaging for the bargain price of $6000.

"Dave's Plan" was a credit to enable companies to employ and not have the disincentive of heath costs as a reason why not, in part.
The economy of scale should reduce the unit cost on lots of health care issues. Increase the patient load and the pill consumption along with the amortization of the hardware over higher volume of patients etc.
Lets assume that health care is broken. Fixing it should not mean to do more than getting more bodies in the pool to start. Then let the parts fall into place and look see what regulation is needed. It should start with a tiered approach. With tiered facilities... basic, mid, high and for the elite and MD's and Congress the ultra tier.. We may benefit from more facilities (teaching) and consider delta benefit to delta cost on the new fangled machines that obsolete every 24 hours. BUT... until the economy is sound... real sound... any attempt to fix the health care beyond basic tweaking will result in more negative attitudes... we need positive thinking and anything that breeds worry should get a dose of zoloft or something in the meantime.

 

[BaliBabyDoc]

Dave's got a couple of neurons twinkling . . . you are right that good economic times would make the initial expense more palatable. But waiting will only lead to more draconian measures later on. Healthcare has always been rationed to a certain extent . . . more bodies in the pool is a solution where resource allocation is excessive compared to need . . . but that typically exists in the high and ultra tiers only. The system is in disarray b/c it was thrown together with regulations always tailing . . . and the regulations are often more suggestions than rules b/c enforcement is lax. HealthSouth and HCAColumbia did not happen in a vacuum.

 

[LunarRay]

Doc,
The body is like the nation. It will heal itself of most disease all by itself or can be tweaked by MD's to recover or a more rapid recovery or it can die.
Health care can cure itself at the expense of the healthy and diseased folks over time. The question is, I think, which issue do you address first. I only argue that the bleeding artery is first and that is the economy as it relates to jobs. I am a demand side thinker. I say create demand and supply will fall in line. Demand is fueled by attitude to increase Debt. Debt is the accepted means today. If this nation reduces debt (personal) and goes back to the old days we will suffer till it reaches the point where it reverses again. Imagine folks using their funds to pay down just credit card debt... the banks will have a flood of dollars and no one needing them. Disinflation... We got to get the attitude fixed and then go about the rest of the body... Folks are tending to not incur more debt but soon they will start pay it down or go bankrupt.. a 50 yr. Jubilee type affair may be in order..