This, along with oil, precious metals, health care (as always) and some other forms of energy, have been among the few areas where I'll agree that some inflation has occurred within. But even here, I'm noticing 'lumpiness.' In other words, I see store and distributor led efforts to lower prices on things such as milk and bread (and some meats, including poultry), while many of the processed and prepackaged food prices are being increased, either straight up, or by reducing the content volume. Libertad talked of unemployment - that along with stagnating wages if not declining wages is going to act as a real firewall versus price hikes. But time will tell. I don't think the world producers and economies can afford to reduce supply enough to inflate prices without risking putting the global economy into an outright and downward spiraling depression. A great example of this is Opel in Europe - with high unemployment already (near 20% in Spain and Italy), governments are willing to subsidize production to ensure retention of jobs.
The Fed wants to inflate and they will succeed. It may take a year or so but ultimately the economy will improve. With the supply of goods down and the supply of money up, consumer prices will go higher.
This is a great thread. Thanks all for the great input. I would suggest that that the supply of money has been greatly reduced. I defer to the Internation Bank of Settlements ( http://www.bis.org/publ/otc_hy0905.htm ) to back this. One need only look at the dramatic decrease in the notional (measured in the hundreds of trillions) and gross market values (measured in trillions) in the global OTC derivatives markets to see that that pool of money is evaporating, not increasing. See Table 1: http://www.bis.org/publ/otc_hy0905.pdf?noframes=1 I believe that this is the missing piece that eludes the general public. They see the government rolling the printing presses, but what they don't see are see gargantuan sums of intended wealth that being destroyed. Also, we haven't seen what things will look like if financial institutions have to bear the brunt of their wagers. If the markets go lower, and I believe they will, governments will be unable to muster the political will, or capital, to continue the 'bailout everyone' strategy. This changes everything. Derivatives trading is supposed to be a zero sum game, minus commisions, but when counterparties begin to welch on their half of the bet, I believe the deflationary effects of the resulting destruction of capital will be cataclysmically historic and far reaching. Who's going to be buying lots of Toyota's? The Japanese? What then do they have to do to sell cars? Lower prices. What does Ford then have to do? Lower prices. To remain competitive then, wages must come down. This is just one ugly example of many that are unfolding. No, I don't see the end of this deflationary cycle happening quickly. And BTW, food prices are dropping at my local markets. Inflation? I thinking this will come into play AFTER deflation has run it's full course and the world begins to question the U.S. government's ability to effectively collect taxes and repay debts. At this point interest rates will have to go up simply to attract capital so that Uncle Sam can pay the bills, which seem to be stacking up. As the supply of dollars decreases, their value and purchasing power increases. Any other investement now must not only stand on it's own two legs, but must overcome the loss incurred by moving out of a cash position, at least in the near term. Like the old saying goes, "Cash is King!"
You disproving statement Rogers newer made. He newer called a bottom, neither in stock nor in commodities. All he said, that after deflation is over inflation comes next with commodities leading rally (AG with biggest risk/reward ratio). And you should know that he is the first to say that his timing is poor.
As for the supermarkets not lowering prices they rarely do on some products. I'm with a company that supplies fresh produce and vegetables directly to supermarkets around the world. We've fought with retailers for years to lower prices relative to what they pay for our product (to increase movement) and they don't do it. They have price points and margin goals and don't care about farmers and growers. Milk is a good example and so is produce. If the dollar continues to fall, everything we import will be more expensive, yet our homes and cars will plummet in price, so we'll experience the worst of both worlds for awhile. Gas and food will double and triple over the next few years, and housing will drop another 30%.
you know that wealth isn't created via inflation. inflation destroys wealth. high interest rates always follow inflation and with so much debt, FED will keep inflation under control so rates are low. low rates could mean a sale or purchase of a house and even value of a house. high interest rates or no financing could mean insolvency for many companies.(job losses) in the long run inflation is a given but hyperinflation in the short term is bad news for everyone except for market speculators. people who predict inflation is always right in the LONG TERM
Of course they are right, since inflation is a true long term policy. In relatively short term (20 years?) the policy is to create business cycles via control of $. As some have noted here and in other threads, it is likely that some assets will deflate while others inflate.
The M3 chart says it all. They're having trouble pumping up the money supply with a grossly overleveraged consumer: http://www.shadowstats.com/alternate_data But I think it's a little premature to call deflation. Remember: Bernanke is obsessed with deflation and will sell his mother to keep it from scathing our fair land...
It is very important to note that there can be technical deflation and an increase in prices concurrently due to currency devaluation. This means that real estate prices will not drop as low as they should and will be artificially kept high even as the ultimate purchasing power of the currency decreases nevertheless. Hyperinflation itself is due to currency crisis' and is not as simple as the money supply + credit= inflation/deflation argument alone at least without assumptions based on the stability of the currency. Hyperinflation in the US depends on when the dollar loses its reserve currency status. Extreme deflation and contraction in money supply +credit on the other hand can result in one of our creditors going bankrupt and being forced to sell treasuries which may set off a panic, that is what the Fed is concerned with PANIC.