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alstry (< 20)

Johnny....Inflation or Deflation??????



July 09, 2008 – Comments (5)

Bloomberg News / July 8, 2008

CLEVELAND - Procter & Gamble Co., the maker of Tide laundry detergent and Head & Shoulders shampoo, will raise prices as much as 16 percent because of higher costs for plastic, energy, and paper.

My gosh, how can anyone think that there is deflation.  How stupid can one be!!!!!!   Prices are skyrocketing everywhere!!!!!!!!!  Even P&G is doing the double digit price hike two step.

WSJ tonight:

U.S. drivers have cut back their use of gasoline to levels not seen in five years, data show. Meanwhile, supplies of gasoline are building. The weaker demand, combined with plentiful supplies, could lead to lower prices at the pump.

Inflation???? Are you an idiot.  Supply is rising and demand is falling... prices will surely being going down down down.  Just you wait and see.

As sure as night is dark and day is light.....just one solution......keep a close watch on this inflation rhyme, keep eyes wide open all the time ..because we'll know in time.....just walk the line......until the tide finally turns in this heart of mine

5 Comments – Post Your Own

#1) On July 10, 2008 at 1:29 AM, DemonDoug (31.53) wrote:

alstry - the one variable I never see you or other deflationists address is the federal budget deficit.  For every dollar we spend that we don't have, that's a dollar created out of thin air.  268b so far in the first 3 quarters of this fiscal year.  The net effect of those rebate checks is cancelled out by their inflationary effect.

Also, you claim demand is falling.  Is it?  The market for oil and gasoline is GLOBAL.  Just in case you hadn't noticed, India and China are continuing to import more and more oil and use more and more gas, MORE than making up for a few truckers who are cutting back their driving.  We also have restrictive tariffs in place that don't allow ethanol from Brazil, this also keeps gas high.

If we use 1 million less barrels of oil this year, but Chindia uses 2 million more, what is the net effect al?  C'mon, it's okay, you can admit it.

I'm sure there will be a short term correction for both oil and gas along the way.  Gas prices have dropped 5-10 cents here in LA in the past few days.  I'd love to see it get back below 3/gallon. 

al, every day you show us, and it's good data, more people losing jobs, businesses going bankrupt, the economy going down the tubes, and at the same time annoucements of price hikes.

Al, I asked this over on 4thAxis' blog but you did not directly respond.  You went with a nonsequitor argument about tech stocks.  I would like you to respond specifically to what I'm asking:

Imagine this scenario:

Increasing prices.  Increasing money supply.  Increasing unemployment.  Decreasing wages.  Decreasing corporate earnings (on the whole, not one specific company).  Corporations going out of business.

What kinds of things would be happening in a society where these things are happening?  Loss of confidence, loss of middle class-status, more people struggling, greater divide between the haves and have-nots, greater strain on government and charitable organizations with less tax receipts and contributions, and maybe even some fear in the population.  You would also expect some social things like a rise in crime and homelessness.

Does this sound familiar?  Does it seem that unreasonable that prices can be increasing in the face of falling wages and falling employment?

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#2) On July 10, 2008 at 3:26 AM, awallejr (35.47) wrote:

I was watching Fast Money tonight (yeah I watch it cuz Macke makes me laugh), and the CEO of Agrium was on. In response to questioning he stated that demand is still strong, it's just that they don't have the supplies to meet it.  Now that is a telling comment.

It has been and always will be about supply and demand.  Basic capitalism. The US no longer can expect the world resources to be ours alone.  Other Countries want economic prosperity (so long Communism, hello Capitalism).  Since natural resources tend to be finite (the inanimate ones anyway) and population growth is continuing this will always lead to upward pressure over time.  There will be lulls when price gets ahead of ability to pay, but in the end it will continue to inflate.

The only real question is which is more important to address, inflation or recession. 


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#3) On July 10, 2008 at 3:49 AM, alstry (< 20) wrote:


To your question, I agree with pretty much everything you say.  But in my opinion the outcome will be pretty much the same whether it is inflation or deflation.  With inflation, wages never keep up with rising costs.  With deflation, without a job, it doesn't matter how low prices go.

The only thing you and I disagree about is rising money supply.....and that becomes an issue about the defininition of money.

I am not trying to avoid answering your question...because my answer  is pretty much consistent with your position.....

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#4) On July 10, 2008 at 3:52 AM, AnomaLee (28.96) wrote:

Deflation is only possible today if unemployment rises to very high levels. Otherwise, there will still be fingers to exchange non-existing money, and speaking to Doug's point the current account deficit is expected to rise. (Link here)

I "only" expect unemployment to rise towards 7% between now and 2009 but depending on policy makers it could eventually be north of 10% just like 1981. However, we need jobs and full employment to fund our account deficits.

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#5) On July 10, 2008 at 11:48 PM, awallejr (35.47) wrote:

10% would actually be pretty serious.  You are right, however, by tempering the statement with "depending on policy makers." And, unfortunately, it is impossible to predict what the hell they will do.

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