May 2008

Has Inflation Peaked?

In several prior diaries, including Why Inflation isn't the Problem and Is the Inflation Rate Peaking I have laid out a scenario in which a deepening recession causes consumers to cut back, and this decline in demand in return causes inflation to ease. I have pointed out that this has been the scenario in every modern recession going back to and including the stagflationary "oil shock" recessions of the 1970s.
With another month's CPI and PPI data, there are signs -- albeit with substantial qualifications -- that the scenario is coming to pass. What is most interesting is that the year-over -year (NOT seasonally adjusted, AND including both food and energy) inflation rate continued to back off from its recent high water mark. Here's why....

Oil $133 - forecasts to $150!

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Wow. This is bad, bad news and today I went looking for some sort of car that gets good gas mileage and its beyond the pale disgusting how little choices there really are. Does anyone else think it strange that there were better gas mileage cars around in the 1970's than there are today?

Oil Rises Above $133 on U.S. Supply Drop, Bank Price Forecasts :

Crude oil rose to a record above $133 a barrel as U.S. stockpiles unexpectedly dropped and banks raised price forecasts because of supply constraints and demand growth.

Inventories fell 5.32 million barrels to 320.4 million last week, the biggest drop in four months, the Energy Department said. Oil for December 2016 delivery rose more than $20 a barrel, or 17 percent, after Goldman Sachs Group Inc. on May 16 raised its outlook to $141 a barrel for the second-half of the year.

Measuring the Decline of America

So, here I was, working on a contrarian (you ought to know me by now!) diary about inflation being near or past its peak for this cycle (which I'll post tomorrow anyway), when I realized that nobody should give a damn! After all, if there is ZERO percent inflation in the price of unleaded gasoline in the next year, what does that mean? It means that gasoline will sell for $4 a gallon for the entire next year! That's why it's worthwhile to post this graph all over again and highlight it:

because this is a graph of the decline of middle America over the last decade. The average American family hasn't had a raise since 1999, and in fact for most of this decade has brought home less income (inflation adjusted) than it did at the peak of the Clinton boom:

Dollar down, PPI up

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Bloomberg:

The Labor Department said today in Washington that so- called core prices increased 0.4 percent from March, bringing the year-on-year gain to 3 percent, the biggest since December 1991

Speaking of funky statistics, this doesn't include fuel and food.

Congressional Hearing, May 22, Thursday, 10am, EST - Must watch! Outsourcing

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A hearing that will probably have a lot of good information about globalization and US jobs is happening this Thursday. There usually is a webcast to watch these, so I want to give ya all a heads up about it. I will also write about it after the hearing is over. Details:

Hearing to Examine How to Encourage U.S. Corporations to Invest at Home, Not Abroad

Title: American Decline or Renewal?-Globalizing Jobs and Technology

Committee: House Science and Technology Committee, Subcommittee on Investigations and Oversight

When: Thursday, May 22nd, 10 A.M. to 1 P.M.

Where: Rayburn House Office Building, Room 2318

*Please see the Committee announcement (attached) for more information.

Hard Numbers vs. Phony Numbers

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The official deficit for 2007 was $248.2 billion. However, our national debt increased by $501 Billion in 2007.
Meanwhile debt obligations for America increased by $2.5 Trillion last year.

So what's the real number? They are all real numbers. The differences between them is what you are looking at.
For instance, the deficit number accounts for how much money the government spent versus how much it took in, but not counting things like the Wars in Iraq and Afghansitan, or borrowing from Social Security. (OK, maybe this isn't a real number then.)

The national debt numbers account for all that, but doesn't account for promises of future payments.

Another squeeze by the Boa Constrictor economy

(hat tip to taonow: I've stolen your analogy)

A while ago, in a diary entitled Are Hard Times near? The Great Decline in interest rates is ending I pointed out that the great decline in interest rates that began in 1981 looked like it was coming to an end, and with it American consumers' ability to refinance debt at lower rates. I noted that if consumers could no longer refinance at better terms, and if their wages weren't growing, the engine of the American economy would stall, not just for a short time, but for a very long period -- What I have called "The Slow Motion Bust."

With oil prices at $126 a barrel, and $4 a gallon gasoline, the boa constrictor of higher prices has tightened around the average American's budgetary breathing space some more. A look at how much and how consumers are coping, below.

It's the Policy Stupid

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I have been watching the Democratic as well as the Republican primary and I must say at this point, the entire country seems to be stuck on stupid. From the media blackout on Clinton to the DNC rules and disproportionate distribution of pledged delegates, not counting two entire states, and then the superdelegates, well, I think it's fair to say the process is one rigged game where the actual voters don't seem to count for much.

To make matters worse, it appears policy has gone by the wayside. An intelligent, well researched and analyzed policy positions and debate on the effectiveness of those positions is long gone from the political blogs.

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