Nov 16 2005
Inflation and Deflation Pinch = Squeezeflation
In the argument over deflation vs. inflation, the answer is both… Almost a squeezeflation… at least until The Fed triggers a recession in the Spring as we expect. But in the meantime, some mainstream publications are dismissing inflation concerns.
On one hand necessities, like food and energy, are up in price YOY… as is the Producer Price Index. (PPI).
But competition from abroad — created and financed largely by U.S. consumption fueled by bloating money supply and credit expansion — has vastly expanded capacity and supply of many goods, keeping prices in check on many items. We are now facing the issues of global labor, regulatory and tax arbitrage. In other words, our competitors are not hamstrung by the years and years of compounded legislatively created barriers to efficiency, hence they can produce quality goods at a fraction of the cost — leaving U.S. based businesses with very little pricing leverage.
So at the moment we don’t have outright inflation. CPI shows this (apart from its being already rigged to conceal what price increases that do exist…). Auto manufacturers are massively discounting their product at losses, but food costs are up. Wages are stagnant. TV’s are cheap, as are home theatres. Energy costs are up.
In the midst of rising bond prices and interest rates, massive consumer debt, and slowing retail, I’d say this murky read on inflation is hardly a cause for celebration.
