. August 14, 2008 SouthAmerica: When I saw the news headlines as follows: · Home Prices Fall 7.6 Percent- CNNMoney.com · US Foreclosure Filings Surge 55 Percent- AP · Inflation Jumps to 17-Year High- AP I thought the stock market would go down in reaction to the news. Then a realized that the market is up because this kind of news means that Ben Bernanke and the Fed might be considering to lower the Fed Funds rate even further. This is another example why the general perception is that Wall Street and La La Land are becoming interchangeable terms. ******* Consumer prices rise at double the expected rate Associated Press - Thursday August 14, 1:16 pm ET By Martin Crutsinger, AP Economics Writer Consumer prices jump 0.8 percent in July, leaving inflation rising at fastest rate in 17 years WASHINGTON (AP) -- Consumer prices shot up in July at twice the expected rate, pushed higher by surging energy and food costs. The latest surge left inflation running at the fastest pace in 17 years. The Labor Department reported Thursday that consumer prices rose by 0.8 percent last month, twice the 0.4 percent gain that economists had been expecting. It marked the third straight month of oversized inflation increases following jumps of 0.6 percent in May and 1.1 percent in June. And it leaves inflation rising by 5.6 percent over the past year, the biggest 12-month gain since January 1991. Core inflation, which excludes volatile food and energy costs, rose 0.3 percent in July, slightly higher than the 0.2 percent increase that economists had expected. For the past 12 months, core inflation has risen by 2.5 percent, the highest 12-month change since February. The inflation surge presents a major problem for the Federal Reserve: Will inflation force it to start raising interest rates even as the economy struggles to avoid a recession? Some economists said they believed this could be the last truly horrible inflation report, noting that energy prices have been falling since hitting a peak last month. Others worried that the July report could be a signal that inflation is not going to moderate as quickly as had been expected because the surge in energy prices is now starting to spread to other sectors of the economy. "The battering of consumers continues as prices are rising for just about everything," said Joel Naroff, chief economist at Naroff Economic Advisors. "If you think things are going to get a lot better with the drop in petroleum prices, think again. The increases (in July) were broadbased." The core inflation figure was driven higher by a big 1.2 percent jump in clothing costs, the biggest increase in this area since August 1998. Airline ticket prices, which have been surging because of higher fuel costs, jumped another 1.3 percent in July. The big rise in inflation left consumers even more squeezed. The Labor Department said that average weekly earnings, after adjusting for inflation, fell by 3.1 percent in July compared to a year ago, the biggest year-over-year decline since November 1990. The Labor Department also reported that the number of newly laid off workers filing for unemployment benefits fell by 10,000 last week to 450,000. The decline was less than expected and showed the labor market remains under severe stress from the weak economy. The four-week average for claims rose to the highest level in six years. Democrats, who hope to win control of the White House in the November elections and widen their margins in Congress, said the new reports were evidence of failed Republican economic policies. "Today, we got the truly shocking news that inflation hit a 17-year high of 5.6 percent," Jason Furman, economic policy director for Democratic presidential candidate Barack Obama, said in a statement. "Families have now lost an entire decade's worth of raises to inflation as weekly earnings adjusted for inflation lies below the level they reached in August 1998." Sen. Charles Schumer, D-N.Y., noting the news on inflation, rising jobless claims, soaring mortgage foreclosures and falling real incomes, said, "If this administration were competing in the 'bad economic policy' Olympics, they'd receive four gold medals today." Douglas Holtz-Eakin, McCain's top economic advisor, said that Obama's economic policies would result in higher taxes and wasteful government spending. "Obamanomics is lavish government spending that must be paid for by new tax increases on a struggling economy," Holtz-Eakin said in a statement. Wall Street took the inflation news in stride, as bargain hunters moved in to purchase stocks after two straight days of heavy declines. The Dow Jones industrial average was up more than 100 points in early afternoon trading. The 0.8 percent rise in consumer prices reflected big increases for energy and food, a pattern that has been happening for months. Energy prices jumped by 4 percent last month, driven upward by a 4.1 percent rise in gasoline prices. In July prices at the pump were 37.9 percent above where they were a year ago. There could be some relief on the way, however, as gasoline prices, after hitting a record at $4.11 per gallon in mid-July, have been falling in recent weeks. They now average nationwide around $3.79 per gallon, according to the survey by auto club AAA and the Oil Price Information Service. Crude oil prices are also down about $30 per barrel from a peak in early July and analysts are hoping that this decline will help relieve some of the pressures on energy costs. Food costs shot up by 0.9 percent in July, reflecting higher costs for a wide variety of food products. Over the past 12 months, food prices have risen by 6 percent, reflecting surging commodity prices. The Agriculture Department reported this week that this year's corn and soybean harvests will be among the largest in history, though, easing fears that had been fueled after heavy flooding in the Midwest in June. Source: http://biz.yahoo.com/ap/080814/economy.html .
They wish they could lower the rates again, if they could they would do it tonight and if they could they would lower them to 0% to create another fresh round of liquidity to create more inflation and more economic problems. They knew knocking down rates from 5% to 2% was going to create inflation but what do they care, they had to bail out the banking system which is still writing down billions of dollars and in far worse shape then they were just 6 months ago.
. August 15, 2008 SouthAmerica: Reply to S2007S The inflation is rising in our area of the country for years and right now the general mindset is that inflation is out of control. Wall Street looks at the price of gas that they pushed way up with their short term games and when that price comes down a little they pointed to us how great this is for the economy. But the reality is a year ago the highest price that I paid for gas at the pump was US$ 3.25 per gallon for regular gas and I paid that price for just a mater of days then soon after that the price went below US$ 3.00 per gallon here in New Jersey. A month ago I paid as high as US$ 4.09 per gallon for regular gas here in our area in New Jersey and the prices still around US$ 3.75 per gallon right now. Even though the price of gasoline has declined a little the current price still is 25 percent above the price that we were paying in our area about a year ago. The price of just about everything in the supermarket have skyrocketed â and it is not only the prices that are going up the producers are making their packages and products much smaller â the unit price also is skyrocketing for just about most products. Very soon it will be cheaper to use US dollar bills as toilet paper instead of buying toilet paper tissues. The prices of everything is getting ridiculous around our area or the US dollar is becoming completely worthless for example â two years ago Midas (the muffler people) was charging US$ 55 per hour as the labor rate when they did any work on your car and only 2 years latter they are charging US$ 93 per hour for the same thing. And I want to remind the reader that this is not real specialized labor since they can train any illiterate to do that kind job in a matter of hours. The price of food at our local diners and restaurants are also up a lot in the last year. And it is laughable when the US government comes out and publishes the rate of inflation affecting the US economy. Basically the US government official numbers it is just a bunch of garbage and nothing else. Alan Greenspan created the foundations for the sub-prime mess by keeping the Fed Funds rate so low for such a long time and it seems to me that Ben Bernanke has not learned the lesson as well. It is possible that Ben Bernanke is trying to see if he can beat the inflation rate of the late 1970âs and early 1980âs. That could be the strategy to make the US dollar worthless and in that way the Republican mantra âDeficits does not matterâ makes sense. The US government can pile up a few more trillion dollars in debt and everybody that holds US dollars from around the world would have the choice of using their US dollar holdings as toilet paper or as Confetti. .
SouthAmerica, you're completely right. There is a disconnect. The USD has increased in value on imrpoving interest rate and growth differential. It looks like FX traders and equity traders don't talk to each other. More likely the stock traders are seeing it will be all roses for the next couple of months. If anything bad happens the FED will throw its weight behind it, and if there is any agressive shorting the SEC will ban it. Thus creating an artificial one way street. I am surprised by the strength of SnP despite the bad news including inflation that keeps coming out. PS I'm short but with no conviction
. August 15, 2008 SouthAmerica: Reply to womblevader You are a new member on this forum and you may not know that I am a Brazilian. The fact that I am a Brazilian means that I have a better appreciation about the destructive power that inflation have in the entire economic system. And one of the people that I really admire is former Fed Chairman Paul Volcker. Paul Volcker is the only Legend the Federal Reserve ever had. He was the real thing. Now you know one of the things that influence my way of thinking. After inflation gets completely out of control this time around you can blame Ben Bernanke for his lack of balls. .
market is up b/c we are in a bear market rally, record inflation was spun as irrelevant since oil has dropped nicely since that cpi data was collected
Bernanke has already proven his inadequacy by willfully being guided by the collusiveness between the larger banks and big US governmental politics. What is clear is that Bernanke is nursing along socialism, and has already proven himself to be educated beyond his intelligence, just as many US Professors are. This is one reason that they stay in the lower paying academia and government pay levels, rather than entering Wall Street top paying firms. Guys like Bernanke just do not cut the mustard. Now what you have is a mire of socialist and collusive economic soup, which when eaten is highly poisonous to those who have made true capitalism possible. Namely savers, true entrepreneurs, and the other major components of true capitalism. Every time that any country violates the capitalist wall with cracks of legal largesse imposed socialism, economics go awry in a highly negative way. No country improves with a weak currency. This is step A, professor Bernanke. Word of advise......go back to academia .....and stay there..... Perhaps nothing has been so harmful as economic theories being practiced real time, while never being proven before implementation. Did you ever hear of an idiot called Greenspan, who even today and to his grave will continue to spew out worthless gas ? Greenspan is moron number 1, who is enjoying his crossover to making money by selling books, and making speeches. Greenspan ranks about as high as GW Bush & Cheney......which as if ground level = 0, they would be far below the surface in capability.... .................................................................................................. Solution.... Very simple.....The US has some of the best business minds in the world. To turn the US around, find a capable person, and pay them in accordance with improving individual savings rates, strong currency, and the other economic components of capitalism.....just like in corporate America except for that the stock price has to go up.... In fact, why not just turn the US into a stock, owned by each US citizen....The better the leadership, the higher the value of the bankable stock......Get a good CEO......