Fed struggles to halt march of stagflation

Why does it seem that such a disproportionate number of high quality reads seem to come from across the pond? Perhaps that distance gives them a perspective we lack, given our own closeness to matters here in the States.

No matter. This is from the Times of London:

"When sorrows come, they come not single spies, but in battalions,” said Claudius in Shakespeare’s Hamlet. Stagflation hadn’t been invented back in the Bard’s day, but, as with much of the man’s insights, his description of Ophelia’s desperate condition might well serve as a useful piece of modern economic analysis.

The ailing US economy is confronted not by a single threat but by a whole battalion of sorrows on the march that comprises deepening recession and accelerating inflation.

Last week the Government reported that in the year to January consumer prices rose by 4.3 per cent. This is so far above the top end of anybody’s definition of price stability as to be more than slightly alarming. The detail of the data showed just how pervasive inflation has become. It goes well beyond the usual suspects of oil and energy-related products and even food…

This is why people in the United States are worrying openly about stagflation. The rising inflation trend seems, at least so far, to be impervious to the weakening economy. Even as price pressures have picked up, the signs of recession have proliferated."

Go read the whole thing . . .


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Source:
Fed struggles to halt march of stagflation
Gerard Baker
The Times, February 26, 2008
http://business.timesonline.co.uk/tol/business/columnists/article3433830.ece

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What's been said:

Discussions found on the web:
  1. Vermont Trader.. commented on Feb 26

    Inflation is a lagging indicator. GDP growth slows before inflation peaks. Unlike the 70’s Oil production has not dropped and unit labor costs are not rising rapidly. I expect to see inflation peak sometime this quarter.

    ~~~

    BR: So what are you saying? Sire, its a lagging indicator, but so what — inflation has moved higher and higher for 5 years now.

    That the data is 30 days behind does not make the overall trend — higher costs, weaker dollar, any less true . . .

  2. Don commented on Feb 26

    A couple of questions:
    Does anyone know how the housing component affects PPI vs. CPI? It seems to me that the deflationary pressures of housing only affect CPI as most of the commodities that go into a finished product are still experiencing inflation, does that mean that PPI and the CPI will have different trends?
    Does anyone have any other sectors that would be experiencing deflationary trends?
    thanks for any comments

  3. Stuart commented on Feb 26

    Not a chance it’ll peak in Q1. Inflation is a monetary phenomena and they haven’t even started priming that pump yet, in fact for a while they were deflating the monetary supply. So many think inflation is rising prices, even economists on CNBC, no. When they start pushing out money to monetize debt (which can only compound now..past the point of no return), wait for the climax in a few years. Good luck to either Obama, Clinton or McCain. I sure as hell hope that someone gives them the straight goods as to what’s to come during their 1st tenure. Energy, Food, inflation, Debt… geopolitical unrest. They better be prepared, because we are all going to need them to be. Inflation in Q1, I understand why some think that way, but sorry, Q1 2012 perhaps.

  4. Ross commented on Feb 26

    What Stuart said.

  5. Shreksodus@gmail.com commented on Feb 26

    Im with Stuart. At some point this whole system is going to lead to serious civil unrest.

  6. BG commented on Feb 26

    BR….in a word….Absolutely!

    That is the reason I am so thankful for this blogsite. I have been for some time now to the point I don’t believe a #$%king damn thing I read or hear any more. When I want an independent assessment of what is really going on, I find myself either at bloomberg.com or financialtimes.com. I am not endorsing those sites, I am for the most part just looking for comments from someone without the spin. The orgy of information (~blather) from the media in this Country is of little to no value when it comes to investing. Is it really blather or intentional disinformation? I tend to think it is the latter.

  7. Mike M commented on Feb 26

    Our media does not want to report negative views. Just yesterday, reports surfaced about the ineffectiveness of antidepressant drugs. Guess what, only European outlets reported it. Shameful, in my opinion.

  8. mojave commented on Feb 26

    nakedcapitalism (which TBP has linked to in the past) posted a little thing yesterday comparing (generally) a piece in the WSJ vs FT. FT presented more unbiased fact and analysis, WSJ more hope and bias. For years I would defend the WSJ, but lately have come to appreciate FT more and more. I’m guessing that will only grow…

  9. michael schumacher commented on Feb 26

    Anyone else realize that we now have almost a week in between the CPI and PPI releases??

    They were released within a day of each other before….

    More manipulations to come..

    Ciao
    MS

  10. Peter Boockvar commented on Feb 26

    Jan PPI rose a much stronger than expected 1% headline and .4% core. The y/o/y gain was 7.4%, the most since Oct 1981. The core y/o/y gain was 2.3% from 2% in Dec. Food for the month rose 1.7% and is up 8.3% y/o/y while energy rose 1.5% for the month and 22.6% y/o/y. Putting upward pressure on the core # was a gain in cars and trucks and prescription drugs. Inflation in the pipeline is also robust as intermediate goods inflation rose 1.4% and .8% core. The implied inflation rate in the 10 yr TIPS in response is at 2.44%, up almost 6 bps from yesterday’s close and it matches the highest level since Nov ’07 and a hair shy of the highest since June ’07. The almost daily record highs in the CRB index should have made everyone aware that the risks are clearly to the upside in inflation.

  11. JustinTheSkeptic commented on Feb 26

    Oh forget about inflation/stagflation, with the Fed dropping interest rates, congress’s stimulus, and and the monos/duos getting bailed out. This economy is going to bounce back like the Titan it is! Hell, the U.S. has the most efficent workforce in the world, bar none! We’ll have all those rusty manufacuturing plants up and running in a jiffy! Mr. and Mrs. American consumer is going to kick-in big time somewhere in the second half of the year and buy all those flat screen tv’s that are made in the U.S. – (after we get the manufacturing facilities built that is.). But no, seriously we’ll all be able to buy, buy, and buy because our jobs at Mickey-D’s and Walmart afford us such vast purchasing power. ROLL-ON BIG AMERICA! ROLL ON….

    Hell, and after all the charts are pointing at a bottom, so how can we go any lower? LOL

  12. Vermont Trader.. commented on Feb 26

    BR – I am saying that based on the past relationship between GDP and inflation that now is exactly the time in the cycle that inflation peaks.

    I am saying that the time has come to start trying to establish short positions in energy and commodity stocks.

    I am saying that it is not different this time. The laws of supply and demand have not been repealed.

    I don’t know what the catalyst will be or how much higher prices might go in the short term but I think commodity prices will be lower at this time next year.

  13. Gary commented on Feb 26

    “Why does it seem that such a disproportionate number of high quality reads seem to come from across the pond?”

    Well here’s the response from a high-schooler:

    “Coz, like dude, you know the stuff they teach at school is like, you know not really useful. Like what the hell does this shakespeare dude know about it? I’m not down with that sh*t, you know, ya gotta keep it real.”

    And here’s a response from a business professional:

    “The paradigm shift experienced by today’s professionals is not conducive to facilitating the bandwidth necessary for such time expenditure as demanded by the prolific output of Mr. Shakespeare’s undoubtedly prescient comments for his time. It is difficult to leverage such dated communication with the business synergies required in today’s reality. Our SWOT analysis clearly indicates that today’s busy professional is better served by leveraging their network of contacts in real-time customizable platforms such as World of Warcraft.”

    I’m not sure which has done more to destroy effective communication in this country – K-12 education or college education.

  14. Francois commented on Feb 26

    “Why does it seem that such a disproportionate number of high quality reads seem to come from across the pond?”

    When “journalists” tell you with a straight face they consider that fact-finding isn’t part of their job description, can one expect ANY quality in reporting? Journalism in the USA is looking more and more like what France had in the heydays of “Le Journalisme d’Opinion”. Lots of theories, ideas, points of view, (a.k.a. partisan talking points, sophistry and pure BS respectively) and a nano-dose of facts.

    “Just yesterday, reports surfaced about the ineffectiveness of antidepressant drugs. Guess what, only European outlets reported it. Shameful, in my opinion.”

    Shameful? It’s worse than that. I went last night to the specialized Psychiatry section of Medscape to check the news…nada, zippo, zilch rien!

    This is called obfuscation in my book. Yet, when your main sponsors could be displeased by certain news…integrity starts to suck big time.

  15. Patrick commented on Feb 26

    Best tip you can ever give someone who wants news is if you wish to find out news about a particular country you read news from organizations OUTSIDE that particular country.

    Domestically produced and distributed news is always biased in general towards that particular market for the obvious reasons.

  16. shtove commented on Feb 26

    “Just yesterday, reports surfaced about the ineffectiveness of antidepressant drugs. Guess what, only European outlets reported it. Shameful, in my opinion.”

    Shameful? It’s worse than that. I went last night to the specialized Psychiatry section of Medscape to check the news…nada, zippo, zilch rien!

    This is called obfuscation in my book. Yet, when your main sponsors could be displeased by certain news…integrity starts to suck big time.

    Posted by: Francois | Feb 26, 2008 12:01:35 PM

    ———

    That report about antidepressants was based on a British survey of American studies!

    America no longer has the balls to accept what its brain is saying.

  17. TempusFugit commented on Feb 26

    What tends to go unreported on both sides of the pond is that our war spending is a root cause of this inflation. War spending increases the federal deficit (because we postpone payment to the distant future). Worse, it is highly unproductive spending…literally the equivalent of taking trillions of dollars and blowing them up. Remember the “peace dividend” of the 1990s? Included as part of the dividend was lower inflation.

  18. Pat G. commented on Feb 26

    “I am saying that the time has come to start trying to establish short positions in energy and commodity stocks.”

    I’ll take the long side of those trades as you are going to get killed. It is all about supply and demand, think emerging markets NOT just the U.S.

  19. PFT commented on Feb 26

    I also find that most of the better political (Sibel Edmonds, Downing Street memos) and financial stories (Basels impact on current crisis) come from across the pond. The US media is so controlled, and besides, they know more about whats happening in the US today and are taking some pleasure from it.

    The thing you have to understand , is the Brits were never happy about the Revolution and always had plans to get us back, after we did all the heavy lifting for them. The current economic crisis is a financial 9/11 executed by the British controlled banks and their NY agents who took control of our money in 1913 via the Fed, and derivative traders with their financial WMD’s in the British controlled Cayman islands. The 1988 Basel Accords set the stage with Basel II kicking in this year. Sir “Bubbles” Greenspan, no relation to Osama, was their loyal agent, and he set the fuse before he bailed out and left Helicopter Ben to crash and burn. After the London led UN bailout of the US following the depression they induce, we will again be joined with the British, with our capitol in London, ala 1984’s Oceania.

    Sorry, lost my mind for a moment, the cool aid, maybe the fluoride, something….

  20. Wars and INflation commented on Feb 26

    Inflation always go nuts during and after wars.

    Look at what happened to inflation:

    WWI
    WWII
    KOREA
    VIETNAM
    GULF WAR I (Poppa Bush was smart enough to get the Saudi’s et al to pay with our oil money so not so much inflation)

    IRAQ Now has lasted longer than WWII, cut taxes prior to the war, an extended war in the Middle East driving oil prices up)

    Just guess what happens to inflation. It is going nuts, it doesn’t take a genius to figure this out. Just read a little history.

  21. David commented on Feb 26

    We have Stagflation JR.
    Also, we have three poor presidential candidates, we have inflation off the charts and future bank failures coming, we have the Fed making up trillions of dollars, we have $100 per barrel oil and going up, we have nations running way from the dollar, so what do we do, but lower fed rates.
    Those who forget the past are doomed to repeat it, or as Shakespeare said.” “Old men forget: yet all shall be forgot..”

  22. flow5 commented on Mar 2

    Vermont Trader: Pick your entry point to short in Mar. Bottom is May.

Read this next.

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