Skip to comments.What Deflation Quacks Like
Posted on 12/07/2015 10:25:37 AM PST by blam
Dec 07, 2015
As yet another day of headlines shows, see the links and details in todayâs Debt Rattle at the Automatic Earth, deflation is visible everywhere, from a 98% drop in EM debt issuance to junk bonds reporting the first loss since 2008 to corporate bonds downgrades to plummeting cattle prices in Kansas to Chinaâs falling demand for iron ore and a whole list of other commodities.
The list is endless. It is absolutely everywhere. And itâs there every single day. But how would we know? After all, weâre being told incessantly that deflation equals falling consumer prices. And since these donât fall -yet-, other than at the pump (something people seem to think is some freak accident), every Tom and Dick and Harry concludes there is no deflation.
But if you wait for consumer prices to fall to recognize deflationary forces, youâll be way behind the curve. Always. Consumer prices wonât drop until weâre -very- well into deflation, and they will do so only at the moment when nary a soul can afford them anymore even at their new low levels.
The money supply, however itâs measured, may be soaring (Ambrose Evans-Pritchard makes the point every other day), but that makes no difference when spending falls as much as it does. And it does. The whole shebang is maxed out. And the whole caboodle is maxed out too. All of it except for central banks and other money printers.
Everyone has so much debt that spending can only come from borrowing more. Until it canât. We read comments that tell us the global markets are reaching the end of the âcredit cycleâ, but can the insanity that has âsavedâ the economy over the past 7 years truly be seen as a âcycleâ
(Excerpt) Read more at marketoracle.co.uk ...
Brace yourself for the wave of posters who will tell you how expensive milk has gotten.
Yada yada yada. Having experienced Jimmy Carter’s stagflation, deflation seems benign. Granted, living
on a fixed income is harder with zero interest rates,
but not as crippling as soaring prices.
I take it you don’t get out to the grocery store much... I believe my eyes, checking account and grocery bill more than I believe this cats numbers and postulations. There may indeed be deflation but it is not happening at the grocery store.
I have been around for Inflation, Deflation and Stagflation. Now how about some just plain ordinary every day...”Flation?”
“The whole shebang is maxed out. And the whole caboodle is maxed out too. All of it except for central banks and other money printers.”
So, get off of FR and get back to work, SERFS! 0bama needs your tax dollars to make ends meet.
Well, it’s pretty likely that our ‘ends’ WILL never ‘meet’ again with close to 20 TRILLION in debt, but still!
Actually, I think it’s starting. Yesterday, cooking oil (canola) was $4.98/gallon. It’s been $7+/- for years. There was no big screaming SPECIAL tag, either. My local grocery sent out their weekly flier and all portioned meat is close to the usual full muscle cut per pound...maybe a 15% price drop for beef, as well as pork. Eggs came down again a few weeks ago. If you shop carefully, some stores have bacon at just over $2.00/lb and butter at well under $2.50/lb.
Then for non-food items: I use lavender oil in the kitchen for burns and here and there for aroma/air freshening. For a couple of years, the best price was around $10 for 10ml (1/2 oz). I have Prime, so yesterday, I was searching Amazon for some lavender oil and supplier after supplier was offering 4 full oz, no fillers, good quality with good reviews for just under $14+free shipping. This was strange, because candles scented with lavender are hard to find, the larger sizes are more expensive, most manufacturers are selling blends.
We are listing our property this spring and I have been watching prices in my area fall. The realtor comes this week to start the process and we have decided to start off asking a lower price, because the down-sized properties we have been looking at have all dropped, some considerably.
And of course, everyone is aware of the drops in silver and gold.
Now, these are wildly different assets and commodities,but I’m starting to see price drops scattered everywhere. I should add that I have expected deflation for years. Oh, and the other side of the equation: we are self-employed, hand-manufactured goods and personal services, totally discretionary. Business has been terrible to flat for the past seven years and we are starting to see an uptick. We think this means people have more disposable income. YMMV
By, the way: for shippable food items, like coffee, for an example, if you have Amazon Prime, you can save a lot ordering online. The coffee I like, Sumatra, is either way up (50%) or not available in my local stores. I can get it online, 2 days free ship, good quality for $3 (20%) or so below the best store price. Besides the streaming TV shows, I think I’ve already saved the entire cost of my membership within a couple of months. Caveat: I took advantage of their anniversary offer and added in $5 in Amazon points, so I paid $60 or so for membership.I’m at the point of always checking Amazon before I buy anything.
Straight-line extrapolations don’t go forever, in either direction. And items do disappear when the prices exceed what the market will bear. So, waiting for more and more price cuts may take a long time, during which other items may increase. It’s fluid.
Amen! Not only are prices going up but packages are getting smaller!
Thanks blam. Crude prices have led the way down, but not everything comes down as quickly, irrespective of the quirks of each commodity. That includes gasoline. Of course, as long as there's someone to scapegoat for it, everyone is happy being miserable.
I have been down the inflation and stagflation road before with the former worst president in US history. Now we just have a total mess. How can you believe anything the US government publishes. Their numbers just don’t add up to reality.
That's crazy. On average American individual real wealth is at an all time high. He's right that we got deflation and the reason is nobody's spending (money supply's up, velocity's down), but the average American is definitely not in the red.
Those that went thru FDR's deflation would not want to use the word 'benign'. Yeah, inflation's not as good as stable prices but ten percent deflation's a lot worse than ten percent inflation.
Compared to Carter’s inflation, what we have now is benign.
Maybe I didn’t state it well enough the first time.
The market sets the price. :') Sellers sometimes sell stuff at a loss because they risk losing even more by holding on to inventory. If the necessary losses are going to crater the business, they either live off savings until the crisis passes, or they go out of business, or sell the whole thing (sometimes it depends how close they are to retirement). Somewhere I've got PJ O'Rourke's book (audio version) about Adam Smith's "Wealth of Nations", and highly recommend that; Smith tried to work up an explanation for price, but ultimately price is what a buyer is willing to pay when the seller is willing to part with it.
Right out of the Austrian school. Love it. I phrased it wrong, the value of money defines the cost of goods, in a way, the product must reflect value that the Billions of buyers attach to it, if it does not the product fails in the market. The value of goods and services determine the value of money as judged by the buyer.
My dad said no one had any money then.