And the funny thing is, I remember when oil was going to 140 and everyone was raising their prices because of the cost of gas...but when oil went down to 35, i dont remember prices falling as much(if any) as we saw gas hit 1.50. Now when oil goes up again, they have an excuse to raise prices, and blame gas prices on the raised prices again, even though they already raised them last year. A double whammy for the consumer.
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The Big Inflation Scare - Oooooh, How Scary; Prove Him Wrong
- Thread starter ByLoSellHi
- Start date
And the funny thing is, I remember when oil was going to 140 and everyone was raising their prices because of the cost of gas...but when oil went down to 35, i dont remember prices falling as much(if any) as we saw gas hit 1.50. Now when oil goes up again, they have an excuse to raise prices, and blame gas prices on the raised prices again, even though they already raised them last year. A double whammy for the consumer.
Given the unemployment arch, companies that assume they have the liberty to raise their prices on their schedule may find their sales plunging and competitors taking much of their market share.
Here's a great example of someone lowering their prices for consumers because a competitor is taking their market share away, and so they're further reducing their costs -
- think about the ramifications and trickle down effect when many businesses squeeze all their suppliers/vendors..
â¢Starbucks Seeks 25% Lower Rents, Taking Advantage of Leasing-Market Slump
http://www.bloomberg.com/apps/news?pid=20601109&sid=a7ytPFQVUKBc&refer=home
Here's a great example of someone lowering their prices for consumers because a competitor is taking their market share away, and so they're further reducing their costs -
- think about the ramifications and trickle down effect when many businesses squeeze all their suppliers/vendors..
â¢Starbucks Seeks 25% Lower Rents, Taking Advantage of Leasing-Market Slump
http://www.bloomberg.com/apps/news?pid=20601109&sid=a7ytPFQVUKBc&refer=home
Quote from peilthetraveler:
And the funny thing is, I remember when oil was going to 140 and everyone was raising their prices because of the cost of gas...but when oil went down to 35, i dont remember prices falling as much(if any) as we saw gas hit 1.50. Now when oil goes up again, they have an excuse to raise prices, and blame gas prices on the raised prices again, even though they already raised them last year. A double whammy for the consumer.
The reason the retail price didn't follow the decline in oil prices is because the cost basis on inventory was on the higher oil price. Companies could have sold product for a loss (to generate cash) but is seemed to me a Mexican stand off of who could hold out the longest for the next rise in oil prices.
nobody can predict right now with 100% certainty if we get deflation or inflation since this is depening on the FED.
If they continue to monetarize the dept (taking dept in their books) and even these measures cannot keep long term interest rates down we could see a crash at the Bond market rather soon. The FED can't buy all the threasuries so they need at least some buyers left. If they do the wrong things at the wrong time we can even see going 10year yields top >7 percent. Even if the FED does everything right but China acts stupid (seeling threasuries) we could see a bond market crash.
In this case, financing the dept would become impossible (no more buyers stupid enough to buy USA dept) and we would see a complete breakdown of the Dollar and chapter11 of USA.
All this CAN happen and it depends on factors that are depending on few key persons. It will be necessary to react fast and not have a fixed opinion since this can cost a lot of money.
I am convinced that some more 3 Sigma events are looming in the future.
When you compare Japan you should immediatly see that there is a difference because Japan was sucessfull when they began to monetarize the dept because they brought long term interest rates down efficiently.
Now we have the situation that the FED TELLS that they are buying a lot of dept and they even DO so and still the Bond market crashed since the last months.
What more can the FED do now ? I would be rather nervous if I where the FED, they are running out ot ammun very fast.
If they continue to monetarize the dept (taking dept in their books) and even these measures cannot keep long term interest rates down we could see a crash at the Bond market rather soon. The FED can't buy all the threasuries so they need at least some buyers left. If they do the wrong things at the wrong time we can even see going 10year yields top >7 percent. Even if the FED does everything right but China acts stupid (seeling threasuries) we could see a bond market crash.
In this case, financing the dept would become impossible (no more buyers stupid enough to buy USA dept) and we would see a complete breakdown of the Dollar and chapter11 of USA.
All this CAN happen and it depends on factors that are depending on few key persons. It will be necessary to react fast and not have a fixed opinion since this can cost a lot of money.
I am convinced that some more 3 Sigma events are looming in the future.
When you compare Japan you should immediatly see that there is a difference because Japan was sucessfull when they began to monetarize the dept because they brought long term interest rates down efficiently.
Now we have the situation that the FED TELLS that they are buying a lot of dept and they even DO so and still the Bond market crashed since the last months.
What more can the FED do now ? I would be rather nervous if I where the FED, they are running out ot ammun very fast.
Quote from Pascal:
Oil going from 40 dollars a barrel to 65; That is very inflationary. We are going to see higher prices as a result. Higher oil prices filter into every area of the economy. So, to say that inflation is under control is highly contradictory to what we are seeing right in front of our eyes. The second part is the dollar. The dollar index has basically fallen from 87 to 80 within a month. The chart looks as though it could break hard to 75 very shortly. If that's not inflation, I don't know what is. A weak currency by definition is inflation.
I agree. Oil prices going up eventually causes all prices to climb, and is it ever going up! The weakening USD is also indicative. Deflation isn't entirely off the table yet, but inflation is the more likely result.
Quote from matgallis:
The spread between banking lending and to it's customer base is the largest it's ever been. That's pure money creation without the demand to follow. This will cause the dollar to continue to fall
Wait.
So, banks are not lending money.
Banks are using TARP funds to recapitalize deeply wounded balance sheets, and may also be deriving some bonus funds because of the spread between the Fed Overnight Funds Rate and what they charge consumers to borrow, even though few consumers are borrowing, mostly because of the fact that banks aren't lending at probably 1/4 the rate they were just two years ago.
So, again, real money is not getting into the hands of consumers, who are responsible for 2/3rds of spending.
At the same time, businesses are radically cutting back on building inventories or expanding (they're cutting).
I'm happy for those of you who've made $$ long commodities, but there is a rational case to be made that the strengthening commodity market has been built on expectations rather than reality, and that those expectations are false.
I won't get into whether the USD will continue to fall relative to other currencies, and how that affects oil, specifically, but I will say that if we start to see building crude oil stocks, it won't matter.
Inflation is %100 given..done deal.
TIPS are by far the best way of maintaining wealth.
TIPS are by far the best way of maintaining wealth.