Inflation? Nope

December 1, 2010

Many consumers still feel over-burdened by debt in
the wake of the housing plunge that began several years
ago. After three years of paying down obligations (or
shedding them), monthly debt service is back to sustainable
levels, but the total amount of consumer debt remains
high by historical standards. More importantly, those
who are “trapped” in their home by negative equity are
not about to give up their frugal habits any time soon.
And because there’s a large segment of the population in
this predicament, odds are the pronounced deflationary
bias in the economy will continue.
Why? Because the definition of inflation is too
much money chasing too few goods and services. What’s
going on now is almost the exact opposite. Money is being
used to pay off debt, leaving too many goods and
services competing in a way that drives down prices.
The core CPI readings are essentially unchanged
over the last three months, and we think 2011 will bring
more of the same. The Fed is pulling out the stops to fight
deflationary tendencies, but they can only lead consumers
to debt, they can’t make them “drink.” Reducing interest
rates in this kind of environment is somewhat like pushing
on a string – while some consumers might jump at a better
deal on a mortgage or a car loan, most don’t want to take
on any additional debt (or may not be able to qualify for it).
The implications? Short-term interest rates could
remain at near-zero levels for most or all of 2011, and
bond yields are unlikely to climb by much.

From a very middle of the road financial news letter I subscribe to.



  1. Dog, I think that almost all of our regular readers understand this basic economic principal.

    Almost. 😀

  2. Almost…

  3. .. unfortunately food and energy inflation don’t count in the core numbers. They want us to believe inflation is practically non-existent, and it is…so long as you don’t have to eat, drive anywhere, use electricity, or heat your home.

    • There is a reason that food and energy prices aren’t included in the core inflation rate. Those commodities are subject to volatile international market pricing that has little to do with the state of the American economy. A spike in energy prices (from something like a disaster or a boycott) will eventually work its way into the core inflation rate. But right now there are still deflationary pressures in the economy. There have been for the entire past two years – maybe longer.

  4. Inflation=Rising Prices!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Products and Services today are OVERpriced for less.

  5. Egad.. did you all see Bennie B on 60 minutes.. He is stupid! They need to get these MIT, YALE people outta of there.. Bring in some BIG TEN folks. YA think!!

    I see INFLATION! Save your money today folks.. it will be a wild ride after Christmas..

  6. “Those commodities are subject to volatile international market pricing that has little to do with the state of the American economy.”
    Re-read this statement.. These commodities are all related into Markets one way or another.. Wheat, Corn, Silver, Gold, the Dollar, OIL, biotech, etc.

    We buy and sell goods and services from and to EVERYONE.. If there is demand, a new factory is created to make up for it. It is call a Free market. Now, if there are special interest groups who have ulterior motives.. (lobbyists).. the whole system gets messed up.. The Banks and FED got their hands smacked with those mortgage derivatives products.. they were panning out to the world..

    Did you see where the TARP went.. we gave it to GE, Caterpillar, private corp.. WHY? I don’t trust any numbers that come out of the WHO!

  7. Inflation? What inflation?

    Industries Today’s Change 5 Day 1 Month 1 Year Market Cap
    Footwear…………….+0.88% +0.32% +7.18% +41.77% 110.13bn
    Brewers………………+0.76% -0.12% +0.39% +8.61% 424.90bn
    Consumer Electronics+0.64% -2.25% +4.96% +8.45% 162.80bn
    Home Construction..+0.59% +1.11% -1.86% +4.95% 74.14bn
    Drble Household Products+0.53% +2.36% +4.05% +19.64% 153.56bn
    Nondrable Househld Prcts+0.49% +1.19% -1.80% +2.35% 269.29bn
    Recreational Products……+0.48% +3.91% +4.85% +40.03% 53.97bn
    Clothing & Accessories….+0.46% +0.78% +7.78% +49.64% 472.08bn
    Furnishings…………………..+0.44% +1.93% +8.53% +29.22% 41.28bn
    Toys…………………………….+0.35% +0.08%.+4.22% +23.14% 112.29bn
    Auto Parts…………………….+0.13% -0.09% +7.23% +55.61% 382.90bn


    Brent Crude OilAs of Dec 10 2010 21:26 GMT. Year change +25.70%
    WTI Crude OilAs of Dec 10 2010 22:14 GMT. Year change +24.39%
    RBOB GasolineAs of Dec 10 2010 22:14 GMT. Year change +26.10%

    CornAs of Dec 10 2010 19:14 GMT. Year change +48.67%
    WheatAs of Dec 10 2010 19:10 GMT. Year change +44.01%
    SoybeansAs of Dec 10 2010 19:37 GMT. Year change +23.46%
    Soybean MealAs of Dec 10 2010 19:14 GMT. Year change +7.77%
    CocoaAs of Dec 10 2010 16:49 GMT. Year change -14.27%
    Coffee (Robusta)As of Dec 10 2010 17:29 GMT. Year change +39.15%
    Coffee (Arabica)As of Dec 09 2010 17:34 GMT. Year change +43.17%
    White SugarAs of Dec 10 2010 17:29 GMT. Year change +16.54%
    CottonAs of Dec 10 2010 19:29 GMT. Year change +85.16%
    Orange JuiceAs of Dec 10 2010 18:59 GMT Year change +28.09%
    CattleAs of Dec 10 2010 19:45 GMT. Year change +27.53%
    Feeder CattleAs of Dec 10 2010 19:53 GMT. Year change +29.66%
    Frozen Pork BelliesAs of Dec 10 2010 18:38 GMT. Year change +23.53%
    Lean HogsAs of Dec 10 2010 19:36 GMT. Year change +8.83%
    LumberAs of Dec 10 2010 19:53 GMT. Year change +24.36%


    Is this the inflation you guys are referring to..
    Since the implementation of “substitution, hedonic adjustment and geometric weighting to make GDP look better, we haven’t had an accurate picture of CPI since the 80’s. Each decade they have added more ways to make CPI look lower to keep wage inflation down, GDP positive and the public fooled about how bad things are.

    Even most in Congress have no idea of how bad things are. There are many in Congress that still believe we can spend our way out of this like we did in past recessions. The only thing spending does is delay the collapse. As the President’s debt commission reported, “we couldn’t grow out of this with double digit growth for decades.”

    Commodity prices will not be determined by our meager 300 million but by the 2.5 billion middle class and rapidly growing consumers globally. We can be in the midst of the worst depression and we will pay what that global consumer base determines we will pay. The biggest threat is food!!!!

    I’m done..

  8. We are in a DEPRESSION… face it. All my models say so. Some states are worst off than others.

    Don’t you remember the Bluebird of Doom of two years ago.. She predicted what was going to happen today.. It all started out with the OIL bubble.. remember when it was 150/barrel.. the BAM!

    I’m tellin ya folks.. it will not be a good year.. we will be seeing more people go ballistic..

    Why do you think Obama’s tone was so harsh in his last address. He KNOWS..

    • So which is it? Are we in a depression, or are we experiencing runaway inflation?

      The two can’t exist at the same time.

  9. ohh. I morphed my avie.. I love it.. LMAO.. have to keep the interesting.. instead of bland.. milk toast.. You really need to morph gray.. Keep us on our toes.

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