Inflation is Already Here

>Explosion might not be the right word, but there has been a steady increase in prices and the cost of living for the last several years.

Agree! The government cheats by not including energy costs in the mix.

2% annual money inflation is probably close to the ideal. The money supply should increase to keep up with the population.
As long as the inflation is steady - within +/- 1% limits or so - both business and citizens can plan for it.

 

I understand very little about economics but I do know that grocery prices have gone way up around here and there was a significant spike about 3 weeks ago. I figgered it was 'economics', but it didn't actually 'click' with me that it could be economics of the 'supply' kind. Thanks for the info. I'm gonna delve deeper into this.

I'm fortunate in that I have fertile land to grow food on, and so do my children. My wife and I have been 'slacking' over the past few years and not growing anything ([edit] except for tomatoes, peppers, and some herbs), but maybe it's time for us to go back like we did twenty years ago and grow a lot of what we eat. My middle daughter has already started intensive gardening (as much as she hated it when she was growing up at home).

I could use the exercise, just need the enthusiasm to do it. Maybe I'll get 'enthused' now.

 

I googled "food and drug administration on food shortages", and 'off the cuff' first appearance, it does appear to be coming from CT types.

 

I guess ultimately it is shortages, or overreations to anticipated shortages. But commodity prices have yet to reach what they did in 2008:

11-10-2-10

“.... Experts said the rising cost of corn, wheat and other commodities is causing the increases in virtually everything we buy. Wheat goes into bread while corn feeds the cows, pigs and chickens.

"We as consumers - it's been a long time since we've had prices rise as sharply as they are and are likely to in the next several months," said Nancy Sidhu an economist with L.A. Economic Development Center.

According to a U.S. Bureau of Labor statistic, prices for fruits and vegetables are up 3 percent, milk 10 percent and beef 13 percent. Officials said the price increases are so noticeable because overall inflation this year has been just over 1 percent.

Restaurants are also expected to raise prices in the coming weeks as well. “
http://abclocal.go.com/kabc/story?section=news/national_world&id=7766637


11-05-2010

“Global wheat prices have risen by 37% over the last year (October 2009-September 2010). Moreover, they have been steadily rising since August 2010 when widespread fires in Russia prompted a self-imposed ban on wheat exports from that country.

The move sent shockwaves through global commodity markets, with traders fearing scarcity of supply and resulting in an immediate escalation in commodity prices. More recently, price rises have been furthered over due to poor prospects for wheat output this year in Canada, which is expected to be 25% lower than in 2009, according to agricultural crop specialists in the country. Current global wheat prices, however, are still around 40% lower than the peak reached in March 2008 when average FOB monthly prices exceeded US$439 per tonne.”

“Corn prices, which historically tend to be fairly stable, have not escaped the current food commodity inflation trend either. Monthly average prices rose by 23% over the October 2009-September 2010 period, according to FAO official statistics. As with soybeans, corn prices are steadily increasing as a result of strong demand for animal feed in countries like China.

This trend is, according to most industry sources, likely to continue on the back of stronger demand for milk and fresh meat in rapidly growing Asian economies. As seen with wheat, current corn commodity prices remain far lower (by some 28%) than their peak in June 2008.”

“The underlying driver behind overreactions of wheat and corn commodity is, however, not entirely unjustified. There are concerns in the industry about the medium-term capacity of food producers to meet the needs created by future population growth. Between 2009 and 2014 alone, the global population is projected to grow by around 400 million, according to United Nations' estimates.

Most of this growth will take place in meat, wheat and corn-hungry emerging economies in Asia-Pacific, North Africa and Latin America. By 2050, according to the same UN projections, the world population could reach the nine billion mark, an increase of around 2.5 billion over 2009.

This is the reason why, despite the relative stability of year-ending stocks and crop output, wheat and corn commodities are predicted to remain under pressure over the medium to long term. Crucially, the underlying population growth trend makes them particularly vulnerable to the nervousness currently pervading global food commodity markets.”
http://blog.euromonitor.com/2010/11...ces-put-pressure-on-bakery-manufacturers.html

Anyway, my grocery bills are higher for sure.

 

Carpro has some of the answers in his post.

Another issue that sent huge shock waves through the world's financial community (and governments) was when the Fed made the decision to buy up American bonds. In other words, we're printing money to buy printed money. When we can no longer sell our bonds to finance the money we're printing, we're in deep doo-doo.

Doing so has been one of the root causes of most hyperinflation that we've seen throughout modern history.

Here is a decent link that explains the issue:

http://www.econlib.org/library/Enc/Hyperinflation.html

 

Yes, the puffed up money supply it is the proverbial sword of Damocles hanging over us.

The money supply, though sounds simplistic is not, it's management seems to me to be a convoluted entanglement of economics and statistics.

The money supply consists of 3 components (m1,m2,m3) m3 isn't even published anymore by the government (since 2006 I believe).

600 billion to be added via a back door by the end of the year.

The GDP is the health indicator of our economy.

Pumping up the money supply IMO has a counterpart anaology of Dr House (Hugh Laurie) cavalierly trying different drugs and procedures in an attempt to save a patient without really knowing what is basically wrong with the patient.

Give the economy a huge shot of money and watch the GDP and other indicators to see if the patient gets better or worst?

Hope we don't flat line.

HankD

 

The problem is, we cannot pull ourselves up by our bootstraps. Printing money eventually makes that money worthless. As soon as the general populace catches wind that our money is just paper they freeze and panic. We've seen that scenario lived out in multiple nations around the globe in the past century. Ireland is latest on the list and we just finished with Greece.

Sooner or later, the numbers on the bills will have to de-value to their actual worth. At that point, hyperinflation kicks in and we could loose between 1/3 to the all of the value of the dollar in a single swipe.

Just imagine a 50K income being poverty level, barely able to provide basic life necessities such as food, a single set of clothes, and warmth enough to not freeze to death... We in America have no real conception of that level of poverty. Our notions of "poor" are people that cannot afford a second car, have only one phone, can only afford McD's once or twice a week, and the microwave is 5 or more years old.

Argentina is a great example of hyperinflation devaluing the currency partially (not a full collapse). People still live and go to work. Still drive cars. Still have some semblance of personal freedoms and rights, but life is difficult to say the least. The biggest issue is personal protection and simply "having enough". Walking outside one's home is an invitation to robbery and worse. Criminals prey on the regular people, often dressing as utilities repair, etc., to gain entrance to a home where they live off the family like a tape worm lives off its host, ultimately destroying them and moving on to a new victim.

Here is a "nice" article about the issues in Argentina, with some commentary on our own issues. There are other articles out there, written on a more personal basis from the people surviving the collapse that are not the sort of stuff we might print here on this board. The pictures are rather grim.

http://www.thefreemanonline.org/columns/hyperinflation-lessons-from-south-america/