First year-over-year deflation in 54 years

[dullard]

I thought someone would have mentioned this, but I didn't see it anywhere. Deflation has bared its ugly teeth for the first time in 54 years. Link. The consumer price index for March 2009 is 0.38% below that of March 2008. The last times year-over-year deflation has occured were:
[*]1954,1955 - mild deflation hit and lasted for about a year.
[*]1949,1950 - moderate deflation hit and lasted for 14 months.
[*]1921-1940 - Inflation and deflation were both present, but it was mostly severe deflation.

We have been on the verge of deflation since Dec 2008, but it never quite happened until now.

You can debate food/energy/tobacco taxes all you want, but if you inculde the three then there was deflation and if you exclude the three there was possibly deflation. Both cases were mild and nothing too concerning yet.

 

[frostedflakes]

Makes sense, obviously CPI is going to go down when oil goes from $150/bbl to $50/bbl.

 

[miketheidiot]

maybe the hyper-inflation bozos will stfu now.

 

[dullard]

Originally posted by: frostedflakes
Makes sense, obviously CPI is going to go down when oil goes from $150/bbl to $50/bbl.

#1) This thread is about yearly change. Oil was NOT $150/bbl in March 2008. It was closer to $100/bbl. The $150/bbl will make summer 2009 look like it has massive deflation unless oil or other prices goes back up dramatically this summer.

#2) CPI if you remove energy and food was still remarkably low, given that about the only significant gain was from tobacco tax hikes.

 

[Amused]

I'm gonna have to agree with frostedflakes. The oil bubble created a 6% inflation rate last year. The bursting of that bubble is bound to be reflected in some correction in prices.

The bubble started growing long BEFORE this month last year, so a 50% cut in oil prices from this month last year WILL have an effect on prices.

 

[sandorski]

All Commodities were getting ridiculously expensive. All except Gold has falllen to more reasonable levels.

 

[dullard]

Originally posted by: Amused
I'm gonna have to agree with frostedflakes. The oil bubble created a 6% inflation rate last year. The bursting of that bubble is bound to be reflected in some correction in prices.

The bubble started growing long BEFORE this month last year, so a 50% cut in oil prices from this month last year WILL have an effect on prices.

Yes, energy will have some effect on prices. No one said it doesn't. Below are the big movers (more than 5% change from last year).

Inflationary:
* Cereals and bakery: +7.4%
* Other food (sugars/fats/oils): +7.9%
* Water/sewer/trash services: +5.9%
* Hospital and related services: +6.1%
* Education: +5.6%
* Tobacco and smoking products: +18.1%

Deflationary:
* Lodging away from home: -7.8%
* Fuel oils and other home fuels: -30.5%
* Used cars and trucks: -11.8%
* Motor fuel: -39.6%
* Public transportation: -5%
* Computers and peripherals: -14.1%
* Nondurables less food, beverages, and apparel: -17.8%

The rest ranged from mild deflation to mild inflation. What I am basically saying is that focussing on just one item (energy) and ignoring the rest is being a bit ignorant. Yes some things are going up quite a bit. But others are going down quite a bit. The latter part with many items going down is unusual. Sure, normally an item or two is undergoing mild deflation. But the breadth of the deflationary items is not common.

 

[frostedflakes]

Originally posted by: dullard

Originally posted by: frostedflakes
Makes sense, obviously CPI is going to go down when oil goes from $150/bbl to $50/bbl.

#1) This thread is about yearly change. Oil was NOT $150/bbl in March 2008. It was closer to $100/bbl. The $150/bbl will make summer 2009 look like it has massive deflation unless oil or other prices goes back up dramatically this summer.

#2) CPI if you remove energy and food was still remarkably low, given that about the only significant gain was from tobacco tax hikes.

The point is oil was much more expensive even one year ago than it is now. Having oil (and consequently food) prices fall so quickly will have a large effect on CPI. Core CPI, however, which neglects energy and food costs, experienced inflation, not deflation.

The economy has definitely slowed down, but I doubt we're in true deflation territory yet.

 

[StageLeft]

Originally posted by: miketheidiot
maybe the hyper-inflation bozos will stfu now.

Well, it comes down to timing. Deflation has been likely and not hard to predict for months now, but very few don't feel that inflation will kick in within the next few years and the potential for it to be severe is quite high, considering we have Bernanke and co all but willing to drop cash from helicopters to stop deflation. If they don't time it right (and Bernanke didn't see this recession coming at all the first time, so it's not likely he'll know when it's time to tone things back), then inflation will definitely hit, and substantially. This is probably why gold is still high. It's not all schiff cultists who are keeping gold where it is. Perhaps they are just looking at a longer time horizon, but then the economy is still pretty screwed so it may just be an oh-sh*t play.

 

[Acanthus]

If you dont believe that we are in a deflationary state, walk through a walmart and look at the number of "roll backs" in each aisle.

More than 30% of the items in the store have gone down.

 

[StageLeft]

Originally posted by: Acanthus
If you dont believe that we are in a deflationary state, walk through a walmart and look at the number of "roll backs" in each aisle.

More than 30% of the items in the store have gone down.

BTW did I dream this today? Dunkin has sold medium coffees for $1.85 until today but I paid only $1.80. I'm 99% sure I was paying $1.85 prior to this.

 

[LegendKiller]

Originally posted by: Skoorb

Originally posted by: miketheidiot
maybe the hyper-inflation bozos will stfu now.

Well, it comes down to timing. Deflation has been likely and not hard to predict for months now, but very few don't feel that inflation will kick in within the next few years and the potential for it to be severe is quite high, considering we have Bernanke and co all but willing to drop cash from helicopters to stop deflation. If they don't time it right (and Bernanke didn't see this recession coming at all the first time, so it's not likely he'll know when it's time to tone things back), then inflation will definitely hit, and substantially. This is probably why gold is still high. It's not all schiff cultists who are keeping gold where it is. Perhaps they are just looking at a longer time horizon, but then the economy is still pretty screwed so it may just be an oh-sh*t play.

If you performed a regression analysis of inflation + gold vs credit/economic crisis + gold, you'll find a far higher R^2 toward the latter.

Gold is a "safe haven" investment, similar to government treasuries. When looking at gold from an inflation standpoint, it has actually *lagged* inflation significantly.

Even more ironically, inflation can be priced into good/services much easier than it can be priced into gold. Why? Because many goods/services have fewer replacements and more utility, resulting in less price flexibility. Gold, however, has no real use and is almost exclusively consumed by jewelery, which has marginal utility and a lesser price elasticity.

If you wanted to invest for inflation, the best way to do it would be stocks, the second best would be oil. Housing is another good investment for inflation, since in the value of the house and the input costs will need to follow inflation. Housing, over the long run, has kept up with inflation very well.

The reason why gold is still sky high is because people aren't done with thinking volatility is over and I happen to agree with them. Many stuck money into gold as a safe haven and are now starting to come out.

As far as inflation, it is pretty fucking easy for the Fed to contract the money supply. However, in comparison to the amount of asset wealth destroyed, their input into money has been relatively small.

 

[First]

And this is exactly why the Fed is going to buy (long-term) bonds to increase the money supply to the tune of $300B, because it probably isn't going to jumpstart scary inflation given recent/current price levels.

 

[charrison]

Originally posted by: Acanthus
If you dont believe that we are in a deflationary state, walk through a walmart and look at the number of "roll backs" in each aisle.

More than 30% of the items in the store have gone down.

Same thing has been happening at the local grocery store for the last month or so.

 

[Hacp]

Originally posted by: Acanthus
If you dont believe that we are in a deflationary state, walk through a walmart and look at the number of "roll backs" in each aisle.

More than 30% of the items in the store have gone down.

No one pays MSRP. They jack it up to fuck with people's psychology.

 

[rchiu]

Originally posted by: Skoorb

Originally posted by: miketheidiot
maybe the hyper-inflation bozos will stfu now.

Well, it comes down to timing. Deflation has been likely and not hard to predict for months now, but very few don't feel that inflation will kick in within the next few years and the potential for it to be severe is quite high, considering we have Bernanke and co all but willing to drop cash from helicopters to stop deflation. If they don't time it right (and Bernanke didn't see this recession coming at all the first time, so it's not likely he'll know when it's time to tone things back), then inflation will definitely hit, and substantially. This is probably why gold is still high. It's not all schiff cultists who are keeping gold where it is. Perhaps they are just looking at a longer time horizon, but then the economy is still pretty screwed so it may just be an oh-sh*t play.

Sure, like hyper inflation is gonna happen over night. For your info, it does not and Fed has an army of analyst looking at inflation figure on day to day basis. You can bet Fed is gonna slow or reverse the pumping money into market if inflation becomes an issue.

 

[miketheidiot]

Originally posted by: Skoorb
very few don't feel that inflation will kick in within the next few years

no one serious thinks that inflation will be a significant threat, as soon as inflation even starts rear its head, the fed will stomp it out.

 

[Dari]

I wished the CPI did a true analysis of food prices. I noticed I'm paying more for packaged food that are coming in smaller boxes. Even my beloved Snickers bar has shrunk over the years while the price has more than doubled.

 

[charrison]

Originally posted by: Dari
I wished the CPI did a true analysis of food prices. I noticed I'm paying more for packaged food that are coming in smaller boxes. Even my beloved Snickers bar has shrunk over the years while the price has more than doubled.

That snickers bar also costs you less as a percentage of income now than when it costs you 25 cents as well. For the most part food prices have been falling as a percentage of income.

 

[Dari]

Originally posted by: charrison

Originally posted by: Dari
I wished the CPI did a true analysis of food prices. I noticed I'm paying more for packaged food that are coming in smaller boxes. Even my beloved Snickers bar has shrunk over the years while the price has more than doubled.

That snickers bar also costs you less as a percentage of income now than when it costs you 25 cents as well. For the most part food prices have been falling as a percentage of income.

But my income hasn't doubled in that time span either. I understand they have to raise prices, but the size should at least stay the same.

 

[charrison]

Originally posted by: Dari

Originally posted by: charrison

Originally posted by: Dari
I wished the CPI did a true analysis of food prices. I noticed I'm paying more for packaged food that are coming in smaller boxes. Even my beloved Snickers bar has shrunk over the years while the price has more than doubled.

That snickers bar also costs you less as a percentage of income now than when it costs you 25 cents as well. For the most part food prices have been falling as a percentage of income.

But my income hasn't doubled in that time span either. I understand they have to raise prices, but the size should at least stay the same.

Food costs is a downward slope
I dont think many people realize how good we have it. Yes there has been inflation, but it has been more than offset by growing incomes.

 

[Dari]

Originally posted by: charrison

Originally posted by: Dari

Originally posted by: charrison

Originally posted by: Dari
I wished the CPI did a true analysis of food prices. I noticed I'm paying more for packaged food that are coming in smaller boxes. Even my beloved Snickers bar has shrunk over the years while the price has more than doubled.

That snickers bar also costs you less as a percentage of income now than when it costs you 25 cents as well. For the most part food prices have been falling as a percentage of income.

But my income hasn't doubled in that time span either. I understand they have to raise prices, but the size should at least stay the same.

Food costs is a downward slope
I dont think many people realize how good we have it. Yes there has been inflation, but it has been more than offset by growing incomes.

But that is obvious for any economy that's growing, even poor ones.

 

[charrison]

Originally posted by: Dari

Originally posted by: charrison

Originally posted by: Dari

Originally posted by: charrison

Originally posted by: Dari
I wished the CPI did a true analysis of food prices. I noticed I'm paying more for packaged food that are coming in smaller boxes. Even my beloved Snickers bar has shrunk over the years while the price has more than doubled.

That snickers bar also costs you less as a percentage of income now than when it costs you 25 cents as well. For the most part food prices have been falling as a percentage of income.

But my income hasn't doubled in that time span either. I understand they have to raise prices, but the size should at least stay the same.

Food costs is a downward slope
I dont think many people realize how good we have it. Yes there has been inflation, but it has been more than offset by growing incomes.

But that is obvious for any economy that's growing, even poor ones.

It might be obvious, but many overlook or ignore these facts because they want inflation too look far worse than it is.

 

[Dari]

Originally posted by: charrison

Originally posted by: Dari

Originally posted by: charrison

Originally posted by: Dari

Originally posted by: charrison

Originally posted by: Dari
I wished the CPI did a true analysis of food prices. I noticed I'm paying more for packaged food that are coming in smaller boxes. Even my beloved Snickers bar has shrunk over the years while the price has more than doubled.

That snickers bar also costs you less as a percentage of income now than when it costs you 25 cents as well. For the most part food prices have been falling as a percentage of income.

But my income hasn't doubled in that time span either. I understand they have to raise prices, but the size should at least stay the same.

Food costs is a downward slope
I dont think many people realize how good we have it. Yes there has been inflation, but it has been more than offset by growing incomes.

But that is obvious for any economy that's growing, even poor ones.

It might be obvious, but many overlook or ignore these facts because they want inflation too look far worse than it is.

I see your point. I'm still hurtin over the Snickers though. One of my goals in life is to eat one with a knife and fork

 

[First]

^ Woah there Mr. Pitt, take it easy.