Have a look at the PPI report in detail. PPI was up 0.8 percent in January, adjusted. Goods either went up in price or the price declines slowed dramatically, with only a few exceptions (veal eaters might enjoy lower prices, e.g.). This very well could be the turning point, the end of the downward price pressure in most sectors, inflicted by the downturn, and the beginning of what could eventually become a wicked and devastating hyperinflation. If you doubt it, look at the money base.
Does anyone in the Obama admin have even the slightest clue what this could mean? It doesn’t seem like it. The fools seem pretty much like those who have presided over currency collapses many times in world history.
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“Let them eat veal!”
For those who “benefited” from a public school education on economics, can you please explain, or refer me to an explanation of exactly what the monetary base is?
My understanding is that this is the amount of cash reserves that the Fed is holding on behalf of banks in exchange for “other assets”?
@ Brent:
from http://en.wikipedia.org/wiki/Monetary_base
“The monetary base comprises only currency (banknotes and coins) and commercial banks’ reserves with the central bank. As such, it is a narrow definition of money supply, consisting of only the most liquid forms of money. Wider definitions of the money supply include the public’s bank deposits and are therefore larger in volume and encompass money of a lower liquidity.”
Also called “high powered money” (http://en.wikipedia.org/wiki/High-powered_money) “because the magnitude of changes in monetary base can be greatly magnified by the money multiplier. That is, a small change in the monetary base can result in a large change in the overall money supply. “
On the other side of the coin, we still need to look at the M1 Multiplier which is still in plummeting mode near record lows…
On the other side of the coin, we still need to look at the M1 Multiplier which is still in plummeting mode near record lows…
I know you look at data from government sources constantly, but it’s still important to look at the corporate bond market. The spread between corporate bonds and government bonds have still be running at extremely high levels. That means that a company’s marginal cost of collateral is still very high. A BBB- company would be lucky to get 14% on convertibles right now. That collateral cost has to be paid for with higher prices. Wherever this money is going, it’s not following to corporates (which may in the end be a “good” thing.)
Bottom line…
Are we looking at the beginning of an inflationary depression?
I doubt the deflation is over.
Technical’s on the charts show more to come which would back up the retail and commercial to go in a couple of months.
Putting more unemployed then the first round. 16%
Devaluation of the dollar will bring on an inflationary affect forcing things of credit to go lower (deflationary affect).
Without industry in this country and devaluing a dollar for imports to cease. Will leave tremendous burden on what cash is available for goods and put people in a survival mode and not pleasure of credit spending further driving down prices.
Deflation usually ends around the mood. When everyone is in total despair and without hope. 70% of the people surveyed still think it is a bump in the road.
Yeah, those six months of falling prices were scary. For a second, I thought that everything was going to end up free. That would have been terrible, just terrible.
But, now I can rest easy. Prices will continue their upward climb.
Deflation will end when the store shelves are empty. At that point, people will start bidding up the price of scarce commodities very rapidly. Hyper inflation does not occur while there is still a glut of unsold goods.
If I am right, then the question is where the goods are coming from? From naive producers who don’t recognize what is happening. Who would that be? China and other developing nations with lots of factories spewing out goods. There is still inertia to keep producing to keep people employed, so they will sell cheap to stay afloat.
At some point the supply will end and then scarcity will set in and prices will rise quickly and dramatically as consumers with an excess of federal reserve notes bid against each other. Then the government will start issuing more and more money bidding against consumers for scarce resources to keep the economy afloat. And around and around it will go while we march to Harare.
We can still have some price deflation while the markets clear of goods. Just be patient, the end of the world is coming soon. Buy and buy and by and by and it will be bye bye!
Assuming we’re talking about the future of the purchasing power of dollar, there are obviously two components that will determine it: the supply of dollars and the demand for them.
The Fed increased the monetary base, which increased the supply of dollars. However, all the new supply was demanded by banks and funneled into Treasuries (who in turn demanded the money), which essentially offset the decline in purchasing power it would have created.
Now that the Treasury is starting to spend the money in earnest through its Keynesian stimuli, it is reducing its demand for dollars. Ceteris paribus, that reduces money’s purchasing power.
However, we have to be sure to consider the possibility that whoever receives money from the Treasury will hold onto it, which would simply shift the demand from the Treasury to the public, and, generally speaking, the dollar would maintain its purchasing power.
Given my expectation that unemployment is likely to increase and asset values (real estate, securities) are likely to continue to decrease, I would not be surprised if money mostly maintains its purchasing power for several more months or longer.
Let’s not be too naive and just bank on one month of government data. Much of the increase was due to higher energy prices, which are now falling once again. Another thing, the dollar is still rising sharply and treasury bills are still yielding close to zero percent.
For a contrary view- go over to see what Mish has to say about this today.
Agree. Just finished reading Mish, and find it worth to give us a clickable link here:
Fiat World Mathematical Model.
C,
“consisting of only the most liquid forms of money.”
Cash is no longer liquid, if you pay your airline ticket in cash, your car in cash, if you try to deposit $10,000 in a bank account, if you try to move interstate with more than $3,000 you can get busted, confiscated, suspected and arrested.
Banks no longer accept cash for gold or other investments, they require a bank draft etc.
Cash is trash thanks to the war on drugs and government regulations.
C,
“consisting of only the most liquid forms of money.”
Cash is no longer liquid, if you pay your airline ticket in cash, your car in cash, if you try to deposit $10,000 in a bank account, if you try to move interstate with more than $3,000 you can get busted, confiscated, suspected and arrested.
Banks no longer accept cash for gold or other investments, they require a bank draft etc.
Cash is trash thanks to the war on drugs and government regulations.
C,
“consisting of only the most liquid forms of money.”
Cash is no longer liquid, if you pay your airline ticket in cash, your car in cash, if you try to deposit $10,000 in a bank account, if you try to move interstate with more than $3,000 you can get busted, confiscated, suspected and arrested.
Banks no longer accept cash for gold or other investments, they require a bank draft etc.
Cash is trash thanks to the war on drugs and government regulations.
Fuck the mises blog, why does it take forever to post a message anyways ?
You then think it’s an error and your repost it and you end up having post your message multiple times.
Mises blog is so slow, it’s deterring me from further postings.
From now on, I will READ only, I’m fed up with having to wait 5 minutes before my message posts.
To Mises Blog Sucks, a trick I figured out is to open up the comments page for an article in two separate windows. Then, once you have attempted to post a comment in the first window, refresh the comments in the second window to see if it has been received yet. The comment count in parentheses at the top of the page will increment, or you can just scroll down and see if it is there. If it has been received, you can just close the first window immediately rather than wait for the “comment posted” acknowledgement. I know it is a kludge, but it works.
For some reason, a comment will be quickly accepted to the forum and will show up online, but the acknowledgement will not be received by the comment application in the original window for a long time. Also, if you opt to “Preview” your post before fully submitting it, the acceptance message seems to come back a little faster.
Yeah, it is a pain to jump through hoops like that, but I hope that helps regardless.
It’s not the site. The site appears to be well done. It’s most likely the hosting platform. Chad is right, just “trick” it into posting faster with two tabs. Why fight it and get yer panties in a bunch?
Buy books and t-shirts so they can afford to get better hosting on a Linux system!
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