Walmart Survey: Inflation already here

[cpwill]

There might not have been a second round of quantitative easing, if Federal Reserve Chairman Ben Bernanke shopped at Walmart.

A new pricing survey of products sold at the world’s largest retailer [WMT 54.13 -0.21 (-0.39%) ] showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate...

On November 3, the Fed announced its much-anticipated purchase of $600 billion in Treasury securities. An effort to keep market rates low since the central bank’s benchmark rate is already at zero. The Federal Open Market Committee’s statement said, “Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.”

But since that statement, interest rates have actually gone up, backfiring on a Fed chief who wants his quantitative easing to spark inflation of 2 percent annually. A moderate amount of inflation would be considered good for the economy. The problem is that inflation is already running well above a healthy level, investors said, Bernanke is just not looking in the right place, like a Walmart.

“I suspect that when the Chairman thinks about reflation he has a difficult time seeing any other asset besides real estate,” said Jim Iuorio of TJM Institutional Services. “Somehow the Fed thinks that if its not ‘wage driven’ inflation that it is somehow unimportant. It’s not unimportant to people who see everything they own (homes) going down in value and everything they need (food and energy) going up in price...

 

[Diogenes]

Somehow, I get the feeling that none of the economic big guns in this administration shop at WalMart. That at least is one explanation for the total cluelessness they exhibit in their policies.

 

[MKULTRABOY]

Somehow, I get the feeling that none of the economic big guns in this administration shop at WalMart. That at least is one explanation for the total cluelessness they exhibit in their policies.

No, they use a general basket of goods across the whole economy to measure inflation.

 

[Diogenes]

No, they use a general basket of goods across the whole economy to measure inflation.

Yes, which is why they are the last to know. And they leave out a couple of important items like food and energy.

 

[richrf]

We need to entertain the possibility that Bernanke, in the words of the German finance minister, really is clueless. He was appointed by Bush, who was clueless, and reappointed by Obama who is even more clueless. The electorate likes people who have no idea what they are doing and the bankers simple adore naive chief executives - which may be excellent news for Palin.

 

[MKULTRABOY]

Yes, which is why they are the last to know. And they leave out a couple of important items like food and energy.

I'm sure they would never consider FOOD in their basket. And Im SURE they are last to know. :roll:

 

[Diogenes]

I'm sure they would never consider FOOD in their basket. And Im SURE they are last to know. :roll:

I suspect that once you are done with your schooling and begin your education in the real world, you will find it somewhat painful.

Herewith, a must-watch video: Quantitative Easing Explained.

 

[Dittohead not!]

There might not have been a second round of quantitative easing, if Federal Reserve Chairman Ben Bernanke shopped at Walmart.

A new pricing survey of products sold at the world’s largest retailer [WMT 54.13 -0.21 (-0.39%) ] showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate...

On November 3, the Fed announced its much-anticipated purchase of $600 billion in Treasury securities. An effort to keep market rates low since the central bank’s benchmark rate is already at zero. The Federal Open Market Committee’s statement said, “Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.”

But since that statement, interest rates have actually gone up, backfiring on a Fed chief who wants his quantitative easing to spark inflation of 2 percent annually. A moderate amount of inflation would be considered good for the economy. The problem is that inflation is already running well above a healthy level, investors said, Bernanke is just not looking in the right place, like a Walmart.

“I suspect that when the Chairman thinks about reflation he has a difficult time seeing any other asset besides real estate,” said Jim Iuorio of TJM Institutional Services. “Somehow the Fed thinks that if its not ‘wage driven’ inflation that it is somehow unimportant. It’s not unimportant to people who see everything they own (homes) going down in value and everything they need (food and energy) going up in price...

0.6% over two months translates to an annual percentage rate of 3.6% for the types of consumer goods sold by WalMart. If you factor in large purchases (autos, appliances, etc.) the rate may be different, I'm not sure. One thing that is keeping the official rate low may be housing costs.

We can live with an inflation rate of 3.6%. If and when it goes into double digits, then we'll begin to feel a real pinch. If the doomsayers are correct, and we wind up with hyperinflation due to excessive government spending, then we'll learn just what a depression is all about.

One thing is for sure: There is no free lunch. The deficits will have to be paid for one way or another.

 

[richrf]

We can live with an inflation rate of 3.6%.

Interesting assessment. Like Bernanke, you have decided what others can live with. Well, where I live, people are getting 0% raises, 0% interest on their savings, losing their jobs to outsourcing, and only finding jobs at $6/hour working at Burger King, Walmart, or some fancy pants clothing retailer for the rich. I just finished a budget committee meeting for our condo (we are all middle class owners) who were begging for some reduction in assessments in order to help make ends meet. And you ... and your pal Bernanke, has decided that it is not enough to destroy the savings of millions of households, let's add some inflation to boot. Here is something I pulled from an article this morning:

"Over the past year, the price of wheat has increased 74%; corn: 14%; oats: 68%; heating oil: 29%; gasoline: 25%; pork: 60%; coffee: 27%; beef: 18%; sugar: 44%; copper: 37%; and cotton: 66%."

"It is the consumers who can least afford who suffer the most from rising commodity prices, especially since personal income in the U.S. continues to fall, as it did once again in September, 2010. According to the Bureau of Labor and Statistics, the 20% of Americans with the lowest wages spend nearly 60% of their after-tax income on food and energy. The highest 20% of earners spend about 10% of their after-tax income on these necessities."

This country is suffering and what we don't need is some glib reminder of how the well-heeled can live with 4% inflation.

 

[Slartibartfast]

Also, "the rent is too damn high"

 

[Dittohead not!]

Interesting assessment. Like Bernanke, you have decided what others can live with. Well, where I live, people are getting 0% raises, 0% interest on their savings, losing their jobs to outsourcing, and only finding jobs at $6/hour working at Burger King, Walmart, or some fancy pants clothing retailer for the rich. I just finished a budget committee meeting for our condo (we are all middle class owners) who were begging for some reduction in assessments in order to help make ends meet. And you ... and your pal Bernanke, has decided that it is not enough to destroy the savings of millions of households, let's add some inflation to boot. Here is something I pulled from an article this morning:

"Over the past year, the price of wheat has increased 74%; corn: 14%; oats: 68%; heating oil: 29%; gasoline: 25%; pork: 60%; coffee: 27%; beef: 18%; sugar: 44%; copper: 37%; and cotton: 66%."

"It is the consumers who can least afford who suffer the most from rising commodity prices, especially since personal income in the U.S. continues to fall, as it did once again in September, 2010. According to the Bureau of Labor and Statistics, the 20% of Americans with the lowest wages spend nearly 60% of their after-tax income on food and energy. The highest 20% of earners spend about 10% of their after-tax income on these necessities."

This country is suffering and what we don't need is some glib reminder of how the well-heeled can live with 4% inflation.

4% is not going to ruin the country. 40% will. Did you read the rest of my post?

 

[PeteEU]

There might not have been a second round of quantitative easing, if Federal Reserve Chairman Ben Bernanke shopped at Walmart.

A new pricing survey of products sold at the world’s largest retailer [WMT 54.13 -0.21 (-0.39%) ] showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate...

On November 3, the Fed announced its much-anticipated purchase of $600 billion in Treasury securities. An effort to keep market rates low since the central bank’s benchmark rate is already at zero. The Federal Open Market Committee’s statement said, “Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.”

But since that statement, interest rates have actually gone up, backfiring on a Fed chief who wants his quantitative easing to spark inflation of 2 percent annually. A moderate amount of inflation would be considered good for the economy. The problem is that inflation is already running well above a healthy level, investors said, Bernanke is just not looking in the right place, like a Walmart.

“I suspect that when the Chairman thinks about reflation he has a difficult time seeing any other asset besides real estate,” said Jim Iuorio of TJM Institutional Services. “Somehow the Fed thinks that if its not ‘wage driven’ inflation that it is somehow unimportant. It’s not unimportant to people who see everything they own (homes) going down in value and everything they need (food and energy) going up in price...

A few things about this..

Fuel prices have gone up world wide. That has nothing to do with QE2, but with speculation and Asia. However it does have an impact on food prices in the US, since food needs to be transported.

The Russian wheat embargo has pushed wheat prices up. This in turn up's the price on a considerable number of stable foods.

There are many other factors that can push Walmarts prices up and they have nothing to do with QE2.

 

[richrf]

4% is not going to ruin the country. 40% will. Did you read the rest of my post?

Yes, the top 1% will do well while everyone else has to figure out how to continue to live without enough money for rent or food. What world are you living in? I live with people who are living week to week and month to month wondering where they will get enough money to pay their mortgages, assessments, food bills, utilities, etc. These are ordinary people who are being pressed to the wall and there are more of them every day as their savings are running out and their income is either stagnant or sliding, due to no small measure to the 0% they receive on their savings coupled with rising inflation. This is the slow rot caused by inflationary polices. While I am no big fan of Dick Bove, today he said on CNBC:

“A country (that) has a huge debt and then debases its currency and prints money" -- which is what we're doing now and what happened in Germany in the 1920's - "is creating a problem that’s structural and long-term in nature.” "The time has come for the Fed to realize this is going to hurt the economy not help."

Here is a very funny video satirizing the silliness and smugness of the Bernanke inflationary policies that is making the rounds on the Internet:

Quantitative Easing and Inflation Explained

 

[Kernel Sanders]

There might not have been a second round of quantitative easing, if Federal Reserve Chairman Ben Bernanke shopped at Walmart.

A new pricing survey of products sold at the world’s largest retailer [WMT 54.13 -0.21 (-0.39%) ] showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate...

When the economy went to **** walmart artifically lowered its prices to boost sales. It has been ending that policy over the past few months

Source [Time | Has Walmart's Price Chopping Come to an End?]

Walmart has rolled back its rollbacks. Earlier this year, the retailer tried to spark sluggish U.S. sales by lowering its prices — already bargains — even further. One analyst called it "an initiative that screams: Price! Price! Price!" These rollbacks, as they are known in Walmartspeak and in the company's advertising, were intended to overwhelm the shopper. [...]

Walmart expected a flood of customers to its stores, which would help lift the company's stock out of its rut and get Walmart rolling again.

Instead, cutting prices depressed sales, as shoppers took the bargains and ran. For the quarter ending July 31, Walmart's U.S. same-store sales fell 1.8%. The company's same-store sales have now fallen for five straight quarters. Of the rollback strategy, Bill Simon, the president and CEO of Walmart U.S., told investors at a September conference, "It did not do what we had hoped it would do. It did, however, drive price perception. It did not drive sales or traffic." As a result, Walmart rolled back the deeper discounts, and prices started inching upward this summer

Given this policy Walmart's prices are necessarily outpacing general inflation

 

[Dittohead not!]

Yes, the top 1% will do well while everyone else has to figure out how to continue to live without enough money for rent or food. What world are you living in? I live with people who are living week to week and month to month wondering where they will get enough money to pay their mortgages, assessments, food bills, utilities, etc. These are ordinary people who are being pressed to the wall and there are more of them every day as their savings are running out and their income is either stagnant or sliding, due to no small measure to the 0% they receive on their savings coupled with rising inflation. This is the slow rot caused by inflationary polices. While I am no big fan of Dick Bove, today he said on CNBC:

“A country (that) has a huge debt and then debases its currency and prints money" -- which is what we're doing now and what happened in Germany in the 1920's - "is creating a problem that’s structural and long-term in nature.” "The time has come for the Fed to realize this is going to hurt the economy not help."

Here is a very funny video satirizing the silliness and smugness of the Bernanke inflationary policies that is making the rounds on the Internet:

Quantitative Easing and Inflation Explained

Holy crap!

Pretty soon, we may be looking back at 3.6% inflation as the good old days.

As I said before, there is no free lunch. Out of control spending will have to be paid for one way or another. If it ends with 3.6%, we'll survive. We have before, with 10% and higher.
Not that it will be pleasant, or easy, and not that there is a guarantee that it won't go way into the double digits this time around.

 

[imagep]

A small amount of inflation is actually good for our economy. Businesses are more willing to invest when we have inflation. Consumers are quicker to spend money when we have inflation.

An inflation rate of 3.6% can only do good things for our economy.

 

[Kushinator]

0.6% over two months translates to an annual percentage rate of 3.6% for the types of consumer goods sold by WalMart. If you factor in large purchases (autos, appliances, etc.) the rate may be different, I'm not sure. One thing that is keeping the official rate low may be housing costs.

We can live with an inflation rate of 3.6%. If and when it goes into double digits, then we'll begin to feel a real pinch. If the doomsayers are correct, and we wind up with hyperinflation due to excessive government spending, then we'll learn just what a depression is all about.

One thing is for sure: There is no free lunch. The deficits will have to be paid for one way or another.

You cannot have hyperinflation -- I repeat -- You cannot have hyperinflation with this much "slack" in labor markets (this applies for developed economies). Secondly, government spending, given its mechanism, does not lead to hyperinflation. To suggest otherwise is to take the contradictory arguments presented on the shows of Rush, Beck, and Medved in a theoretical level.

Take the simple equation M x V = P x Q. How can the product of P x Q remain constant if P is increasing on an exponential level? Remember, to have hyperinflation, production (Q) must not increase by a factor = (δ/P), where δ is a factor by which P has increased. How much does the M x V equation have to increase to yield "hyperinflation"? That depends entirely on the definition. Lets take a trivial definition of prices increasing 100% from year 1 to year 2.

So, we then have 2(M , V) = 2P x Q. This states that the product of money supply and monetary velocity must increase by a factor of 2. Either the money supply has doubled, velocity has doubled, or a combination of the two. Here, δ = 2; so for hyperinflation to exist, prices must double and production (Q) must stay constant.

To take this further, assume V remains constant as well. We then have 2M x V = 2P x Q. This is the argument being made from the extreme right, that monetary inflation will emerge even though people are not making anymore purchases. Sounds plausible on the surface, but it negates the mechanism for which bank reserves are converted to the money supply. Excess bank reserves can only lead to M if people are making the purchases required for fractional reserve banking to create new money. This necessarily means that V has to have some sort of similar increase; and then the entire argument falls apart.

Deficits during deflation are far more damaging than deficits during inflation.

 

[imagep]

You cannot have hyperinflation -- I repeat -- You cannot have hyperinflation with this much "slack" in labor markets (this applies for developed economies). Secondly, government spending, given its mechanism, does not lead to hyperinflation. To suggest otherwise is to take the contradictory arguments presented on the shows of Rush, Beck, and Medved in a theoretical level.

Take the simple equation M x V = P x Q. How can the product of P x Q remain constant if P is increasing on an exponential level? Remember, to have hyperinflation, production (Q) must not increase by a factor = (δ/P), where δ is a factor by which P has increased. How much does the M x V equation have to increase to yield "hyperinflation"? That depends entirely on the definition. Lets take a trivial definition of prices increasing 100% from year 1 to year 2.

So, we then have 2(M , V) = 2P x Q. This states that the product of money supply and monetary velocity must increase by a factor of 2. Either the money supply has doubled, velocity has doubled, or a combination of the two. Here, δ = 2; so for hyperinflation to exist, prices must double and production (Q) must stay constant.

To take this further, assume V remains constant as well. We then have 2M x V = 2P x Q. This is the argument being made from the extreme right, that monetary inflation will emerge even though people are not making anymore purchases. Sounds plausible on the surface, but it negates the mechanism for which bank reserves are converted to the money supply. Excess bank reserves can only lead to M if people are making the purchases required for fractional reserve banking to create new money. This necessarily means that V has to have some sort of similar increase; and then the entire argument falls apart.

Deficits during deflation are far more damaging than deficits during inflation.

Sounds complicated, I am not sure that I am following you.

Is that a way of suggesting that the act of the gov printing up money and loaning it to banks, who then don't lend it, does not add to our money supply or lead to "too much money chasing too few goods"?

 

[Dittohead not!]

I'm not sure just what M, V P and so on stand for, either. I do know that some nations have already experienced hyperinflation of 100% or more. That kind of inflation is bad for any economy.

 

[Coronado]

I'm not sure just what M, V P and so on stand for, either.

Half man, half amazing!

 

[Kushinator]

Sounds complicated, I am not sure that I am following you.

Is that a way of suggesting that the act of the gov printing up money and loaning it to banks, who then don't lend it, does not add to our money supply or lead to "too much money chasing too few goods"?

The government does not simply print money and lend it to banks.

Regardless, what i am getting at is: Hyperinflaiton is being used as rhetoric by those who have political ambitions to capitalize on the lack of public knowledge.

The only way we get hyperinflation is if the Fed begins crediting the accounts of foreign entities to the point where the US government does not have an external debt and world oil supply suddenly is cut by something like 75%.

 

[Kushinator]

I'm not sure just what M, V P and so on stand for, either. I do know that some nations have already experienced hyperinflation of 100% or more. That kind of inflation is bad for any economy.

This should be helpful

 

[cpwill]

weren't you telling us we were in a deflationary threat period?

 

[Kushinator]

weren't you telling us we were in a deflationary threat period?

We still are. Short term volatility in sensitive baskets are to be expected. Fiscal austerity is looming, and the employment market still shows slack. To expect anything different is to ignore reality.

 

[cpwill]

I'm not sure just what M, V P and so on stand for, either. I do know that some nations have already experienced hyperinflation of 100% or more. That kind of inflation is bad for any economy.

he's talking about (among other things) the speed that money shuttles around the economy. how fast does someone who get's paid 5$ spend that 5$ on a happy meal, and how fast does that restaraunt then pay it to an employee who then uses it to purchase a watermelon, and so on and so forth; the more the same money get's spent within a given time period (the equation goes) the higher the inflation. think of it as a helocopter (an apt analogy, hah); the more you shoot gas into the engine, the faster the rotor spins, and the higher the helocopter goes. the problem, of course, is that just as gas is not the only factor in how fast a helocopter goes up (air pressure, temperature, etc), that formula might not capture the full story of inflation

what's happening now is that the people looking out the windows are saying "hey, the helocopter is flying much higher much faster" and people like Goldenboy are saying "no no no, despite the fact that we're pouring on the gas; the rotor isn't spinning any faster", and the people looking out the window are saying "but we're still going higher", and the deflation hawks are saying "no, the rotor still isn't spinning faster".

so who are you going to believe; the perfect all-things-being-equal world of the formula? or your lying eyes?