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Here comes the deflation...

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November 19, 2008 – Comments (9)

Consumer prices post biggest monthly drop on record. Gobnmint numbers are here, but, of course, they don't measure stuff the way it used to be measured, so you can't make that claim on an apples to apples basis. Still, prices are dropping, though year over year, we're still paying more for stuff.

Nothing like a worldwide financial panic to reduce demand, and bring down prices, I guess. Does this work itself into a self-feeding cycle and start a depression?

A couple of weeks ago, I would not have entertained that thought for long, but given Paulson's evident panic and his acknowledgement that he has no idea what he's doing, and given Bernanke's utter impotence, I think it's something we ought to consider.

So, is now really the time to let the automakers plow into the deck?

Sj

9 Comments – Post Your Own

#1) On November 19, 2008 at 9:13 AM, TDRH (99.72) wrote:

Old spending habits die hard, I have a hard time believing that the American Consumer can just quit cold Turkey.   

  A contraction is occuring/ shift in demand that will weed out the weaker players.   My only hope is that the wealth effect from declining energy prices may provide an ever so small spark to get the engine running again, though at a much slower speed and with more hiccups along the way.

 

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#2) On November 19, 2008 at 9:19 AM, dwot (75.87) wrote:

"Plow the deck?"  Not sure what you are saying with that expression.

No question in my mind we are experiencing a deflation, although the really high energy caused a spike in some prices.  Still haven't seen that spike come off here, but gas is down and it has to come off soon.  

The demand destruction in gas was particularly interesting to see here.  When I arrived last year it was about 40-50c per gallon more here then the closest town 200km away.  Most of the gas is purchased to go to the town 200km away.  I think people cut their trips to town in half and the spread in prices completely disappeared, indeed, it was 4-5c/gallon cheaper here my last trip.

Energy has really hit this community.  Many time dependent food prices (milk) went up 20-30% since I got here and I expect to see most of that coming off because going to town has gotten attractive relative to local prices again.

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#3) On November 19, 2008 at 9:25 AM, GNUBEE (26.87) wrote:

Plow into the deck....Carrier landings?, let the automakers "crash and burn"?

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#4) On November 19, 2008 at 9:39 AM, goldminingXpert (29.53) wrote:

where's the hyperinflation, goldbugs?

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#5) On November 19, 2008 at 9:51 AM, lquadland10 (< 20) wrote:

Let them plow the deck with the rest of us. where's the hyperinflation, goldbugs? less than a year from now.

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#6) On November 19, 2008 at 9:58 AM, sobodobo75 (73.08) wrote:

Yes, that's it, refers to a less than ideal carrier landing.

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#7) On November 19, 2008 at 11:53 AM, starbucks4ever (98.28) wrote:

There will be some deflation and then hyperinflation.

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#8) On November 19, 2008 at 1:35 PM, jesusfreakinco (28.90) wrote:

Helicopter Ben to the rescue - increase in monetary supply surely to lead to inflation; devaluation of the USD - only a matter of time...

May lead to hyperinflation - GMX - look at the Weimar experience - got gold?

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#9) On November 21, 2008 at 10:39 AM, saunafool (98.81) wrote:

The era of big government has returned.

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