Inflation

[a_unique_person]

I don't know what's happening in the rest of the world, but fresh food seems to have shot up in price recently. I doubt it's just the hurricane here that's the cause. If inflation does go up, then, according to orthodox economic thought, interest rates should not be far behind.

 

[ERGONER]

I don't know what's happening in the rest of the world, but fresh food seems to have shot up in price recently. I doubt it's just the hurricane here that's the cause. If inflation does go up, then, according to orthodox economic thought, interest rates should not be far behind.

...well, an overall increase in prices, including the price of borrowing money (..interest rates) is NOT economic "inflation" --- it is the result of monetary inflation.

Monetary inflation is a deliberate policy of the U.S. government, implemented thru the Federal Reserve System. The government artificially inflates (...debases) U.S. currency for the same reason private counterfeiters do --- free money for themselves.

The new Chairman of the Federal Reserve System strongly indicates that he will continue the current U.S. policy of monetary inflation.

Prices & interest rates will continue to rise sharply.

The 2006 U.S Dollar has only half the real purchasing-power of a 1980 Dollar ...and only a tenth that of a 1950 Dollar.

"Monetary inflation is the preferred solution of politicians for new funding. The real cause of the public's increased cost of living can be hidden from most voters, who are economically ignorant, naive, and trusting."

{-- Gary North}

 

[aerocontrols]

...well, an overall increase in prices, including the price of borrowing money (..interest rates) is NOT economic "inflation" --- it is the result of monetary inflation.

Monetary inflation is a deliberate policy of the U.S. government, implemented thru the Federal Reserve System. The government artificially inflates (...debases) U.S. currency for the same reason private counterfeiters do --- free money for themselves.

The new Chairman of the Federal Reserve System strongly indicates that he will continue the current U.S. policy of monetary inflation.

Prices & interest rates will continue to rise sharply.

The 2006 U.S Dollar has only half the real purchasing-power of a 1980 Dollar ...and only a tenth that of a 1950 Dollar.

Spout your dogma elsewhere.

Rising prices in Australia have next-to nothing to do with policies of the US government, deliberate or not.


...Gary North is that famous Y2K woo, isn't he?

 

[brodski]

I don't know what's happening in the rest of the world, but fresh food seems to have shot up in price recently. I doubt it's just the hurricane here that's the cause. If inflation does go up, then, according to orthodox economic thought, interest rates should not be far behind.

how significant a part of the average person outgoings is spending on fresh food?
In the UK, for the past few decade we have been consistently been spending a smaller proportion of our income on food so an increase in some types of food, would be unlikely to have a great impact on overall inflation.

 

[a_unique_person]

Try saying that again with three teenage boys in the family. We had a cyclone that wiped out 80% of the banana crop, but prices of all vegies and fruit seem to rising.

 

[aerocontrols]

Try saying that again with three teenage boys in the family. We had a cyclone that wiped out 80% of the banana crop, but prices of all vegies and fruit seem to rising.

That's going to take me at least 13 years. And that's if I get lucky and knock her up with male triplets.


/Unless I marry a woman who already has teenage boys!

 

[Manny]

I don't know what's happening in the rest of the world, but fresh food seems to have shot up in price recently. I doubt it's just the hurricane here that's the cause. If inflation does go up, then, according to orthodox economic thought, interest rates should not be far behind.

Both your thoughts are correct, if not particularly sophisticated.

First, your impression is correct -- the price of fresh food, particularly vegetables and fruit, has gone up lately. Not just in Australia, but in most developed countries. This is a result of oil prices. Not only have transportation costs increased but fertilizer costs, too. So even if you're right next door to the freshest green beans ever (mmmm...) you'll find that your neighbor's cost of production has increased. (To be clear, the transport costs are the bigger part of the increase for fresh stuff -- it can't afford to sit around in a warehouse waiting for a spare truck and has to pay rack rate for transportation, maybe even refrigerated transportation.

Second, yes, if inflation increases one would expect to see interest rates increase. In fact, you'd expect to see interest rates increase in anticipation of higher prices. Indeed, this is exactly what has happened. In Australia, for example, benchmark short interest rates increased by 30 basis points (.3%) in April. The world is worried about inflation.

However. Third, increasing food prices need not portend general inflation. Indeed, on a month to month basis food and energy are traditionally broken out of the inflation figures precisely because they are so volatile. (over longer terms it doesn't make sense to do that -- if prices of those things are up, they're up and people don't stop eating or driving or heating their homes). Prices for many household consumer durables (washers and driers, computers, tvs, etc) are in all but freefall as worldwide competition pressures profit margins. Clothing is also falling in price, at least for comparable goods. I think it makes more sense now to worry about inflation than in, say, early 2001, but the book isn't written on it just yet.

 

[Nyarlathotep]

I don't know what's happening in the rest of the world, but fresh food seems to have shot up in price recently. I doubt it's just the hurricane here that's the cause. If inflation does go up, then, according to orthodox economic thought, interest rates should not be far behind.

Are Gas prices going up there as rapidly as they are here? Because that ought to affect the price of anything that needs to be shipped from point A to point B, including produce.

 

[NoZed Avenger]

"One swallow does not make a summer."

Zen Economist

 

[Nova Land]

...Gary North is that famous Y2K woo, isn't he?

I'm not familiar with North's Y2K stuff, but his name rings a bell for me as a prominent writer of John Birch Society materials a couple decades or so ago.

 

[Q-Source]

During inflation, only nominal interest rates increase. This creates a money illusion and I wouldn´t recommend anyone to put his money in a savings account.

On the other hand, real interest rates go down...

 

[Art Vandelay]

During inflation, only nominal interest rates increase. This creates a money illusion and I wouldn´t recommend anyone to put his money in a savings account.

On the other hand, real interest rates go down...

Real interest rates only go down during the period in which inflation is rising. Once a new equilibrium is reached, real interest rates return to their pre-inflation values.

...well, an overall increase in prices, including the price of borrowing money (..interest rates) is NOT economic "inflation" --- it is the result of monetary inflation.

Potato, potahto.

Monetary inflation is a deliberate policy of the U.S. government, implemented thru the Federal Reserve System.

And how do they do that? Do you have cites?

The government artificially inflates (...debases) U.S. currency for the same reason private counterfeiters do --- free money for themselves.

How much money do they make? Do you have a cite?

The new Chairman of the Federal Reserve System strongly indicates that he will continue the current U.S. policy of monetary inflation.

Prices & interest rates will continue to rise sharply.

If the rate of inflation is maintained, then interest rates should also remain constant.

 

[CapelDodger]

Try saying that again with three teenage boys in the family. We had a cyclone that wiped out 80% of the banana crop, but prices of all vegies and fruit seem to rising.

[smug]The freshest food I eat is from my garden and free.[/smug]

OK, that means leeks, potatoes and spring onions in the current season.

If you have a garden, set your boys to cultivating it. You could even pay them for their produce.

 

[CapelDodger]

"One swallow does not make a summer."

Zen Economist

It makes a snack, though.

 

[CapelDodger]

Are Gas prices going up there as rapidly as they are here? Because that ought to affect the price of anything that needs to be shipped from point A to point B, including produce.

The relevant price is the price of energy - of which the oil price is only a component. The relevant cost is the cost of energy - of which transportation is only a component.

Oil has provided an era of cheap energy, just as Europe's long-gone forests once did. That era appears to be over, or at least is in its last days.

 

[Nova Land]

I don't know what's happening in the rest of the world, but fresh food seems to have shot up in price recently.

I'm not sure about other parts of the US, but I also have noticed a significant increase in food prices in recent months. Potatoes, for instance, are usually available at about $2 for a 10 pound bag -- currently I can't find one for under $3. Generic lemon juice, a long time a reliable dollar a quart, has recently gone to $1.20. I used to be able to buy generic vegetable oil at $1.50 for a 48 oz. bottle -- that's now generally $1.75 to $2.00 depending on the type of oil (soy still cheap, but premium added for corn or canola). Spaghetti, for a long time stable at $.50 a pound, jumped to $.60. Generic tomato sauce, long time stable at $.33, has now jumped to $.39. Numerous other items have gone up by similar 20% leaps.

Dried beans look to have gone up about 5 to 10 cents a pound, but there's often fluctuation there so too early to tell if it's a permanent hike.

Oranges, apples, and bananas seem to be about the same price as normal. Mushrooms, though, look to be increasing. Onions fluctuate too much that I haven't noticed yet whether they've undergone inflation.

Thankfully, generic cola is holding steady at $.50 for the convenient single-serve (i.e. 2 liter) bottle.

 

[Zep]

It's getting like this here!

 

[jj]

All prices for nearly everything are tied to oil prices, since that's where the energy to make them comes from.

B O H I C A

 

[HeavyAaron]

All prices for nearly everything are tied to oil prices, since that's where the energy to make them comes from.

B O H I C A

That's a price theory I've never heard before. It also begs the question... what drives the price of oil?

My personal price theory is that price depends upon labor. The more labor something takes to create, the pricier it is. Note that the price includes the price of inputs (such as oil) which themselves have a price based on labor.

So that seems to beg the question, well what drives the price of labor? My theory would be the price of labor is just high enough to find someone willing to perform whatever task is in question.

btw. for intellectual integrity this is Karl Marx price theory give or take, though I did develop it independantly. Note also that it is not a complete theory.

Aaron

 

[Art Vandelay]

My theory is that price of something depends on the value that society assigns to it.