Inflation in U.S. Highest Since 1981; Fed Not Expected to Raise Rates

[JamesVU2000]

Im certainly bearish on the US economy. but every recession is the next great depression.

It led to massive over expansionary monetary policy for the last twenty years.

How likely is that unemployment is going to go to 20 percent?

Higher rates would produce price stability and the companies that over levered and have good longterm prospects would thrive. Why do we keep trying to prop all these crappy institutions? there all gonna fail anyway.

 

[Pa(b)st Prime]

Quote from Optional:

Its just getting started. There were no bread lines in 1928 either.

I've said this many times before here. We ALREADY HAD THE CRASH. If you weren't short from 2000-2002 then you missed it. THAT was the 29-32 fractal.

THIS is 1970's stuff. Down 30%, up 25%, down 30% ect. It's ALSO going to be South American in scope. A glut of money does not deflation make.......

 

[jonbig04]

Quote from Pa(b)st Prime:

You must be 18 years old because I've been hearing about people "maxing" out their credit cards since around 1979.......

Oh and I suppose you think that the % of people maxing out their cards now versus 1979 is the same? Think again.

 

[Pa(b)st Prime]

No doubt you're correct. HOWEVER the beauty of wage inflation (take a look at rents as a barometer) is borrowers will repay in cheaper dollars. I'm not talking about mortgage holders just credit card debt. Within the next decade a night of bartending or cab driving will be a 5k gig.....

Quote from ByLoSellHi:

Pabst, you know we have our differences, as well as some common views, too.

That's as it should be.

But would you take me up on this bet?

If you took credit cards away from Americans for one month - just one month - I'd bet consumer spending would fall the most it has in a decade.

Obviously, we can't proceed with this experiment, but if we did, it would be my guess that consumer spending would fall off of cliff.

And just assuming I'm right, what would that say about the state of the economy in the U.S.?

 

[achilles28]

Quote from Pa(b)st Prime:

No doubt you're correct. HOWEVER the beauty of wage inflation (take a look at rents as a barometer) is borrowers will repay in cheaper dollars. I'm not talking about mortgage holders just credit card debt. Within the next decade a night of bartending or cab driving will be a 5k gig.....

Yea, but then, they'll have 100K on their plastic instead of 25...

 

[dhpar]

Quote from achilles28:

M3 growing at 20%, yet inflation at a modest 5%. Thats a curiosity?

Where's all that money going?

decreasing velocity maybe? it is also called credit crunch...

that said i do not know who is served well by 2% fed fund rate (except banks).
by the way, if fed stays soft the commodity correction may be over in a wink....and that's what consumer feels much more than 25-50bps in the fed fund rate. typical washington justice....

 

[Pa(b)st Prime]

Quote from jonbig04:

Oh and I suppose you think that the % of people maxing out their cards now versus 1979 is the same? Think again.

Statistics are decieving. Take me as an example. I carry a decent amount of credit card debt and it's frankly too much. But vs. my net worth it's peanuts. Tons of people are like me. Back in the 80's a guy maybe owed 3k on his Visa but he had 10k equity in in his condo and a 30k a year job. Now that same guy has 20k in debt but a 75k a year job and 300k in IRA's and home equity.

Don't get me wrong, consumers are stretched and spending will slow BUT yours is a point I've heard made my entire adult life and except for slowdowns here and there wage/asset growth has bailed out CC holders.

Bottom line: there's two distinct economies going on. I realize I live in two wealthier than average cities so my view gets a bit skewed but there's a secret society of government workers/retirees, health care professionals, lawyers and techies who're STILL partying like it's 1999. To retail sales people, realtors, construction guys it's 1931. But I saw this movie already in 79-83 and 89-92 and 2000-02...........

 

[achilles28]

Quote from dhpar:

decreasing velocity maybe? it is also called credit crunch...

that said i do not know who is served well by 2% fed fund rate (except banks).
by the way, if fed stays soft the commodity correction may be over in a wink....and that's what consumer feels much more than 25-50bps in the fed fund rate. typical washington justice....

Yea, recapitalizing banks with low Fed Funds and high spread. Still inflationary as RE and equity losses are socialized via price hikes... Inflation @ 5% was more rhetorical. Its really upwards of 9% which makes more sense given context..

I wonder, did Japanese banks lend at high spreads during the 80's? BOJ @ 0% and Tokyo Bank @ 7%?

 

[Pa(b)st Prime]

Quote from achilles28:

Yea, recapitalizing banks with low Fed Funds and high spread. Still inflationary as RE and equity losses are socialized via price hikes... Inflation @ 5% was more rhetorical. Its really upwards of 9% which makes more sense given context..

I wonder, did Japanese banks lend at high spreads during the 80's? BOJ @ 0% and Tokyo Bank @ 7%?

Sure. The "carry trade" is another event going on my entire adult life. The Jap's have been sucking up higher yielding American and Euro issuance debt for 2 and a half decades.

In fact think of this nugget I shared with ET:
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Pa(b)st Prime
Registered: Oct 2006
Posts: 2795

07-23-08 10:58 AM

Quote from Daal:

What does it take to create deflation?clearly money printing is not a silver bullet to get out of that as the japanese has proven, so the dollar slides and import prices go up, so what, m1 and m2 are low, the banks are cutting back and assets are bursting everywhere. I mean seriously is it really necessary for C or Wachovia be taken over by the FDIC for some of you guys concede that it isnt a one way trade like that?

Pabst:

If you think housing in Toyko is deflationary then you and I are using quite different yardsticks:

"In Tokyo, Japan, in the Shibuya neighborhood (which is the equivalent of the upper East side in New York), you'd pay an average of $1.84 million for a 1,450 square foot two-bedroom condominium. In Hong Kong, in an area called the Peak, you'd pay $1.7 million for a home the same size.

In New York, on Fifth Avenue, you'd pay just $1.3 million for a slightly larger two-bedroom apartment. In the Pacific Heights neighborhood, in San Francisco, you'd pay only $900,000 for the same apartment.

According to the Corcoran Group, the top ten most expensive cities in the world, by price per square foot, are: Toyko, Japan ($1,271 per square foot); Hong Kong, China ($1,220); London, England ($1,101); Singapore ($906); New York ($890); Kobe, Japan ($884); Sydney, Australia ($839); Stockholm, Sweden ($753); Paris, France ($700); and Zurich, Switzerland ($667)."
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For all the ballyhoo and yes actual pain over Toyko's RE implosion it is still the worlds single most expensive spot.

That fact makes my case.........

 

[PohPoh]

Quote from Pa(b)st Prime:

No doubt you're correct. HOWEVER the beauty of wage inflation (take a look at rents as a barometer) is borrowers will repay in cheaper dollars. I'm not talking about mortgage holders just credit card debt. Within the next decade a night of bartending or cab driving will be a 5k gig.....

Will that be for one or two drinks, and one or two fares?
That sounds like an inflationary depression to me...

It has already begun...

$500 oil / $5000 gold within the next 5 years...