Still no deflation: Disinflation then lots of inflation

[GRG55]

Re: Still no deflation: Disinflation then lots of inflation

Will somebody tell me what I'm missing here? :confused:

You appear to be missing the fact that one chart shows 200 years of broad trend history, and the other chart shows "a brief history of time", namely the period from 2000 where the current FIRE economy [version 2.0] has entered its death throes and month-to-month CPI [as measured by the notoriously reliable and honest BLS remember] swings back and forth as the Fed and the Administration desperately try to keep the game going.

You think Greenspan timed his retirement so he could spend more time with his family? Or write his book? :rolleyes:

[friendly_jacek]

Re: Still no deflation: Disinflation then lots of inflation

This is one of the idiosyncrasies of Itulip. Some posters are browbeat for using the term deflation, yet EJ or Fred show plenty of evidence of deflation, especially in the context of Ka-Poom.

[tombat1913]

Re: Still no deflation: Disinflation then lots of inflation

Will somebody tell me what I'm missing here? :confused:

I leave you with the following history of inflations and deflations since 1900. Note that since every central bank abandoned the gold standard globally there have been two slight periods of deflation. These occurred before 1930. Since the international gold standard was abrogated by the US in 1971, ushering in the second era of floating exchange rates in 100 years – the last one ended badly as well – no deflation has occurred. Japan's on and off "deflation" does not even show up because in no year has deflation in Japan exceeded 2%.

We continue to expect that the actions of central banks to halt deflation will, as usual, in the long run work too well.

BLS data confirm deflation in Aug. 2008.

A month of negative inflation at annual rates occurred in Aug.

There have been 15 months of deflation since 2000.

2000 01 3.613
2000 02 5.076
2000 03 7.292
2000 04 -0.700
2000 05 2.127
2000 06 7.239
2000 07 3.541
2000 08 0.000
2000 09 6.436
2000 10 2.094
2000 11 2.090
2000 12 2.791
2001 01 7.094
2001 02 2.768
2001 03 0.684
2001 04 2.064
2001 05 6.297
2001 06 2.741
2001 07 -2.007
2001 08 0.000
2001 09 4.839
2001 10 -3.317
2001 11 -0.674
2001 12 -0.674
2002 01 2.048
2002 02 2.045
2002 03 3.423
2002 04 5.513
2002 05 1.347
2002 06 0.671
2002 07 2.706
2002 08 3.385
2002 09 2.013
2002 10 2.687
2002 11 2.005
2002 12 2.002
2003 01 5.410
2003 02 6.773
2003 03 1.979
2003 04 -4.473
2003 05 -1.947
2003 06 1.320
2003 07 4.004
2003 08 5.353
2003 09 3.973
2003 10 -1.289
2003 11 0.651
2003 12 3.292
2004 01 4.623
2004 02 3.270
2004 03 2.601
2004 04 1.941
2004 05 5.245
2004 06 4.556
2004 07 1.278
2004 08 1.920
2004 09 2.564
2004 10 6.509
2004 11 5.149
2004 12 0.628
2005 01 0.000
2005 02 3.821
2005 03 3.809
2005 04 5.745
2005 05 -1.842
2005 06 0.622
2005 07 8.362
2005 08 8.304
2005 09 17.114
2005 10 2.441
2005 11 -5.289
2005 12 -0.603
2006 01 7.512
2006 02 -0.600
2006 03 1.821
2006 04 6.180
2006 05 4.269
2006 06 3.636
2006 07 6.108
2006 08 5.455
2006 09 -5.172
2006 10 -5.757
2006 11 1.195
2006 12 7.363
2007 01 1.486
2007 02 3.656
2007 03 5.667
2007 04 3.870
2007 05 5.684
2007 06 3.240
2007 07 2.696
2007 08 0.231
2007 09 4.479
2007 10 3.212
2007 11 11.278
2007 12 4.351
2008 01 4.867
2008 02 0.283
2008 03 4.200
2008 04 2.504
2008 05 8.089
2008 06 13.423
2008 07 10.280

2008 08 -1.630

Before 2000 you have to go all the way back to 1986 to find a month of deflation. In fact, three in a row.

1986 02 -2.162
1986 03 -6.369

1986 04 -4.312

[metalman]

Re: Still no deflation: Disinflation then lots of inflation

Supply destruction, raja. Supply destruction...:eek:

Input costs are influencing everyone, everywhere. It's more acute in the US$ zone, but it's hitting China and others too.

you and fred talk about this, no one else i've come across.

what's with the blind spot on the supply side of the price level equation? i don't get it. have the deflationists all received a supplobotomy?

[GRG55]

Re: Still no deflation: Disinflation then lots of inflation

Why would input costs stay high?
If the grocer is having to tighten his belt by lower prices, why wouldn't those selling what he's re-selling have to do the same? Wouldn't demand destruction affect everyone down the line?

Supply destruction, raja. Supply destruction...:eek:

Input costs are influencing everyone, everywhere. It's more acute in the US$ zone, but it's hitting China and others too.

[FRED]

Re: Still no deflation: Disinflation then lots of inflation

Sadly, this bout of "disinflation" has whacked my precious metal mining stocks in a manner I'm sure Tony Soprano would be proud of. Ugh.:mad:

We have been 100% consistently against PM stocks forever. Why?

1. No one ever guesses which companies do not have stupid management.
2. Dollar weakness from falling dollar demand will drive up input costs faster than declining dollar value will drive up finished goods prices.
3. Now as PM demand falls, finished goods demand will fall faster than input costs; producers will cut production faster than recession will cut demand.

The paper gold market will obscure this, although rising spreads between spot and physical are indicative.

Hat tip to metalman: watch this site for gold prices. The secondary market will be more reliable indicator of demand for a while.

[Chief Tomahawk]

Re: Still no deflation: Disinflation then lots of inflation

Sadly, this bout of "disinflation" has whacked my precious metal mining stocks in a manner I'm sure Tony Soprano would be proud of. Ugh.:mad:

Re: Still no deflation: Disinflation then lots of inflation

Cutting prices to burn off inventory is certainly deflationary. Across the entire retail sector you will see it happen as the recession deepens. The question is, what is the new equilibrium price that your grocer pays for goods and can charge for it? Clearly he cannot stay in business for long if the input costs for his goods stay higher than what he can charge his customers. Input costs must fall as well to match the new discounted sale prices that are meeting demand or he will not be able to restock the next cycle of inventory and sell it at a profit.

Uh, oh. Not looking so good. Hope he's got a lot of cash on hand to float expenses. Better not be counting on the credit line.

What happens if half of the grocers in your area wind up going out of business? Then the ones that survive get to charge what they need to in order to stay in business. That may be more than they charge today. As a result your grocer's customers' buying behavior will change. They will buy less and they will substitute lower quality products.

That's how it is in countries where the standard of living has declined because the nation had lost purchasing power.

....better make friends with someone in the LDS church now while you can still get some food :eek:

[don]

Re: Still no deflation: Disinflation then lots of inflation

Cutting prices to burn off inventory is certainly deflationary. Across the entire retail sector you will see it happen as the recession deepens. The question is, what is the new equilibrium price that your grocer pays for goods and can charge for it? Clearly he cannot stay in business for long if the input costs for his goods stay higher than what he can charge his customers. Input costs must fall as well to match the new discounted sale prices that are meeting demand or he will not be able to restock the next cycle of inventory and sell it at a profit.

Uh, oh. Not looking so good. Hope he's got a lot of cash on hand to float expenses. Better not be counting on the credit line.

What happens if half of the grocers in your area wind up going out of business? Then the ones that survive get to charge what they need to in order to stay in business. That may be more than they charge today. As a result your grocer's customers' buying behavior will change. They will buy less and they will substitute lower quality products.

That's how it is in countries where the standard of living has declined because the nation had lost purchasing power.

I'll tell my wife! Good stuff, Fred.

[raja]

Re: Still no deflation: Disinflation then lots of inflation

Clearly he cannot stay in business for long if the input costs for his goods stay higher than what he can charge his customers. Input costs must fall as well to match the new discounted sale prices that are meeting demand or he will not be able to restock the next cycle of inventory and sell it at a profit.

Why would input costs stay high?
If the grocer is having to tighten his belt by lower prices, why wouldn't those selling what he's re-selling have to do the same? Wouldn't demand destruction affect everyone down the line?

[phirang]

Re: Still no deflation: Disinflation then lots of inflation

China has been tackling inflation by shutting down inefficient steel mills and retrenching other unproductive yet resource-intensive activities and focusing on using methods and technology with higher yields.

[JoeSixpack]

Re: Still no deflation: Connecting the dots

Lukester put up this lenghty piece The Fed is Dead. Long Live The US Treasury. today.

The key take-away for me was that it argues the Fed had only started to "print money" on Sep 17., when it implemented the "Supplementary Financing Program", where the Treasury issues into the Fed, and all the TAFs and whatnot had not increased the monetary base so far.

This is the most intruiging chart on the Monetary base from the article. http://research.stlouisfed.org/publications/usfd/page3.pdf

If you look up your gold charts from Sep 17., you will find that was the day when Gold futures went from a low of 777 to the high of 869, the largest one-day increas ever if i recall correctly.

[FRED]

Re: Still no deflation: Disinflation then lots of inflation

Disinflation Anecdote (Snail's Eye View) :

My wife and I did our weekly shopping yesterday at a local, comfortable middle class supermarket we frequent. Practically everything was on sale. Not a few cents off but a significant, practically across the board discount. Our ticket showed a 14% savings on a $145 buy.

By the amount of bags filled (sorry for the loose analysis here) this didn't appear to be a large price increase/temporary sale gambit, a commonplace here and I assume everywhere in grocery retail.

Motive? Critical cash flow for the chain? They have around 12 stores in the surrounding burgs. Time will tell.

Cutting prices to burn off inventory is certainly deflationary. Across the entire retail sector you will see it happen as the recession deepens. The question is, what is the new equilibrium price that your grocer pays for goods and can charge for it? Clearly he cannot stay in business for long if the input costs for his goods stay higher than what he can charge his customers. Input costs must fall as well to match the new discounted sale prices that are meeting demand or he will not be able to restock the next cycle of inventory and sell it at a profit.

Uh, oh. Not looking so good. Hope he's got a lot of cash on hand to float expenses. Better not be counting on the credit line.

What happens if half of the grocers in your area wind up going out of business? Then the ones that survive get to charge what they need to in order to stay in business. That may be more than they charge today. As a result your grocer's customers' buying behavior will change. They will buy less and they will substitute lower quality products.

That's how it is in countries where the standard of living has declined because the nation had lost purchasing power.

[don]

Re: Still no deflation: Disinflation then lots of inflation

Disinflation Anecdote (Snail's Eye View) :

My wife and I did our weekly shopping yesterday at a local, comfortable middle class supermarket we frequent. Practically everything was on sale. Not a few cents off but a significant, practically across the board discount. Our ticket showed a 14% savings on a $145 buy.

By the amount of bags filled (sorry for the loose analysis here) this didn't appear to be a large price increase/temporary sale gambit, a commonplace here and I assume everywhere in grocery retail.

Motive? Critical cash flow for the chain? They have around 12 stores in the surrounding burgs. Time will tell.

[doharra]

Re: Still no deflation: Disinflation then lots of inflation

To clarify: Are we, then, entering the moment of KA?

If so, it seems to put us right on the schedule outlined in the Original Ka-Poom theory.

And C1ue, also, just took a stab at describing possible POOMs here. Yes?

Am I connecting the dots?