Posted on 10/15/2015 9:16:50 AM PDT by Lorianne
The math is pretty simple: A lack of purchasing power for consumers has led to a lack of pricing power for companies.
When it comes to the U.S. economy big-picture outlook, the ramifications are more complicated, and not particularly pleasant.
Wednesday's producer price index reading, showing a monthly decline of 0.5 percent, demonstrates a larger problem: At a time when policymakers are hoping to generate the kind of inflation that would indicate strong growth, the reality is that deflation is looming as the larger threat. Declining prices often would be treated as a net positive by consumers, but income weakness is offsetting the effects.
Even Wall Street is feeling the heat. Prices for brokerage-related services and financial advice dropped 4.3 percent in September, accounting for about a quarter of the entire slide for final demand services.
(Excerpt) Read more at cnbc.com ...
It now costs less to eat out then to spend time shopping and cooking for yourself or for others. The food mafia sells to commercial accounts, restaurants, hotels, etc. at reduced prices. Grocery stores sell raw food and processed odd marked up so that it is more expensive than commercially prepared food. Weird situation....
I read somewhere several mos ago that there are about 150 million real workers of working age so 95 million out of work. Not too good.
You can have both at once. Yes, deflation is the problem. The deflation comes from the fact that not enough dollars are chasing durable goods. Right now all dollars are either going to pay down consumer debt, pay for shelter, food, and medicine (all of which are way, way up), or paying for the cost of government (which is way, way, way up at all levels).
What you are seeing right now, this inversion - the inflation of staples coupled by a deflation in durable goods - is the inflection point. This is where it starts to roll over.
1930’s Germany, Weimar. Venezuela. Greece. Same symptoms - bread is expensive, but you can’t give away financial services. Lawyers are on the streets. 2 year grads from nursing schools can’t get jobs (now you need a four year degree, since its a buyer’s market now)
Remember when nursing was going to hire all those people?
$1.4 T in US government debt sold last week - 0% yield. That’s money that isn’t buying capital equipment, expanding the number of stores, training new people.
That’s the sign - when loaning Uncle Sugar your money for free is more attractive than ANY OTHER INVESTMENT OPTION AVAILABLE, the log is about to roll over.
Look at how many companies are buying their own stock! Notice that the shareholders are no longer punishing the stock price for that anymore? Used to be, when a company bought its stock, it was a sign that they were out of ideas for growing the business and were hoisting the white flag.
There ya go. This is not complex.
For 30 years fat corps have off shored tens of hundreds of thousands of jobs and entire industries to maximize THEIR profits.
While at the same time those they bought off in D.C. flooded the country with millions of low wage illegal workers.
WTF did they think would happen to the country?
Is there anyone who actually believed this was a good thing?
There is a Free Traitor™ Army on Free Republic led by C. Edmund Wright that will disagree with you vehemently and call you a a communist protectionist throw back troglodyte for even questioning this situation.
Keynesian economics
Keynesian economics
Keynesian economics
Epic FAIL!
#4 A dozen large eggs are $5.49 here in southern California.
Regardless.
If this were a (R) administration, you’d have day/night reports of the nearly HALF of possible/working-age Citizens being on food stamps/disablity/SS/etc. (IE: OUT of the work-force); along with the TRUE unemployment figures (Bush was trounced @ ~5%. But I can’t say anything as the man, nor the party, did NOTHING to impede the narrative)
Those #’s are breath-taking.
CNBC is staffed by idiots. The lack of pricing power is not due to consumers, but to ZIRP.
CNBC analysts would be lucky to tell you that ZIRP means Zero Percent Interest Rates...they certainly don't have the mental capacity to link long-term low interest rates to low pricing power.
...but that's what happens in a credit-based economy. While low interest rates can be a brief economic stimulant in an otherwise healthy economy, such rates are akin to drug use over long periods of time where the user requires greater doses to achieve the same high.
In economic terms, low interest rates keep marginal zombie companies afloat...operating and producing goods and services...when they should have been shuttered. Liquidated.
By keeping so many zombie firms on low interest rate life support, the market is flooded with over-capacity.
You can see what over-capacity does to oil prices: it drives them down. That's not due to consumers.
...and low interest rates are universal, so they prop up marginal zombie companies in every industry and service nationwide.
That means that the good companies don't have pricing power...anywhere.
To get pricing power (inflation), you have to kill off the marginal companies. The zombies must die.
Do that, and the over-capacity problem goes away. This is also known as the Boom-Bust cycle. You have to have a Bust to get a new Boom.
Now, there are lots of ways to kill off the marginal zombie companies...and any way that you kill them restores pricing power to the entire rest of the market. The economic Boom begins again.
Delaying that die-off likewise delays the onset of the next economic Boom.
One way to kill off the zombie companies is to *raise* interest rates.
CNBC staffers just fainted...
I ca't figure out if they're lying or actually believe the bull---- they're saying.
And I'm not sure which alternative is more frightening.
Can’t raise prices? You’d never know
it from complaints running ten to one
in favor of “grocery prices are over
the moon!”
But the Fed can’t raise interest rates because it would cause the US government to go bankrupt. There’s no way they can roll-over $19 trillion in short term T-Bills to a higher interest rate: how would the US government pay the interest?
Yellen is starting to wear the pressure too. She needs to quit before the job ends up killing her.
She’s learning what every pioneer has learned from the beginning of pioneering - reaching the top feels good for one day.
Tomorrow you have to actually prove you can do the job. In her case, Bernanke used up all the ammo in the can, and Obama helped himself to the food and medicine.
When she got to the command bunker, there was nothing there but a PR flack and a stylist.
Oh please. They buy their own debt. Worrying about the debt is akin to thinking that 3-shell-monties on the street corner run the economy.
To make a counterfactual argument: if the Republicans had a brain, they would tie COLA's and raises for government workers to COLA's for Social Security recipients-- gov workers get no raise higher than what Social Security recipients get.
Beans and pickles have more liquid/water, bacon & sandwich meats need to be blotted with a paper towel before use.
My favorite brand of kefir is now only available in 15 oz (not a pint, mind you) bottle at almost twice the price of the old quart bottles (by volume). It's insane, and very dispiriting.
Guns and ammo are pretty cheap, though.
There’s plenty of ammo in the can, they just don’t understand economics.
They could, if desired, lower bank reserve requirements while *raising* interest rates...if they wanted to give a quick 1-time jump start to the economy.
...but there’s only so much that monetary policy can do. Worry about it doing more is worrying about things that you have no control over...useless stress in your life when you fall into that trap.
For an actual recovery, fundamentals have to be changed, not monetary policy (if monetary policy alone could save an economy, no nation in the world would *ever* have a recession, at all).
For example, USA companies currently hold $2.2 Trillion earned in foreign nations, offshore.
Because of our high corporate tax rate on foreign earnings (if Repatriated), those monies stay offshore (and untaxed that way)...out of our economy here.
Well, if you changed that corporate tax rate on Repatriating foreign profits for our domestic companies, that $2.2 Trillion would flood into the current USA domestic economy.
That’s a 12.9% GDP boost!
Washington policy wonks would faint from such an economic rush.
Approving the Keystone Pipeline is another fundamental. Approve it and thousands get hired. New construction from private monies commences.
These are easy things to do if you understand economics and *want* the economy to flourish.
Change economic fundamentals if you want sustainable economic growth.
You could give away some federal land ala the Oklahoma Land Rush. Poof! Instant economic boom.
Lots of ways to improve an economy...it’s just that policy-makers and politicians in DC+NYC don’t have the first clue about economics.
Do you own your own business? If so, you have piles of ca$h you could be spending everyone knows that! You’re just a greedy capitalist. And you didn’t build that either < /obamanomics >
#41 I can buy a steak meal at a restaurant cheaper then buying just the steak at the store. The restaurant even cooks the food and cleans the dishes for me all at a lower price.
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