Inflation

Inflation Watch: Food Prices

|

Reuters says time to start stocking up on nonperishable food:

U.S. grain prices should stay unrelentingly high this year, according to a Reuters poll, the latest sign that the era of cheap food has come to an end.

U.S. corn, soybeans and wheat prices—which surged by as much has 50 percent last year and hit their highest levels since mid-2008—will dip by at most 5 percent by the end of 2011, according to the poll of 16 analysts.

Some specifics:

The average forecast of 16 grain analysts showed that Chicago Board of Trade corn futures will end this year at $5.96 per bushel, down eight percent from Thursday's close of $6.50-3/4 and down five percent from the end of 2010.

Corn futures posted the best gains among grains and oilseeds last year, surging 52 percent as U.S. stockpiles fell to the lowest in 15 years in the wake of strong demand from the ethanol industry and steady exports after the Russian drought.

Wheat futures were forecast at an average $7.93 per bushel, down 6 percent from Thursday's close of $8.46-1/4 and virtually unchanged from the end of 2010. Wheat futures surged 47 percent last year amid the crop damage.

Soybean futures were forecast at an average of $13.20 per bushel, down 6 percent from Thursday's close and down 5 percent from the 2010 close. Soybean futures rose 34 percent last year for the second straight year of increases.

Prices for corn and soybeans topped out at 2-1/2 year highs last week, while wheat hit a 29-month high on Thursday.

Ron Bailey wrote back in July 2008 on government complicity in high food prices.

Advertisement

NEXT: Reason Writers on TV: Peter Suderman Talks Egypt, Oil, and Foreign Aid on Freedom Watch

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. The elephant in the room, the Ben Bernank?

  2. I think we should burn more food as fuel and continue to subsidize food producers not to grow crops.

  3. Solution: More Subsidies.

  4. There is no inflation. Ignore that man behind the curtain.

    1. Of COURSE there’s no inflation! Only a simpleton rube would include such mundane things as food to eat, and fuel to heat their homes or run their cars in such delicate equations! Because NONE of those prices matter at all, ya dumb hicks! It’s only inflation if the cost of luxury yachts, mink coats, new stainless steel refrigerators goes through the roof!

      1. You forgot arugula…have you seen the price of that stuff lately?

    2. Well, I’ve not checked Fred at the St. Louis Fed since October 2010. Yet, from the peak of the credit expansion (August-September 2007) until then, credit contraction set in.

      Of course inflation means action undertaken by Fed Res bankers to increase sales of products of their members — loans in the form of revolving credit and non-revolving credit. Deflation means action undertaken by those same Fed Res bankers to slow the growth of revolving and non-revolving credit.

      Because nearly all do not get money, credit, banking and central banking, they suffer from false beliefs.

      Since 2008, money accretion — new notes and coins joining existing ones in circulation — has risen 18% even in the face of contraction of both revolving and non-revolving credit. This has happened strictly because of Quantitative Easing (Fed Res bankers issuing checkbook credits to government agencies in exchange for bonds).

      The prices of cash-based goods have risen in response to this money accretion.

      Likewise, prices of non-revolving credit goods have fallen (e.g., houses) because of contraction in non-revolving credit over the period.

  5. I want to know exactly what libertarians are going to do about poor weather, and the chinese and developing nations that are growing to prevent commodity prices from rising…did i miss the answer some where? Are you going to convince them not to eat, want cars, etc?

    Or are you trying to hint that something else is causing food prices to go up? Supply and Demand doesn’t exist anymore? Your economic theory is hogwash?

    1. PS. Where was the article about the fear of massive deflation back when commodity prices were tanking? Could i get a link please?

      1. Re: SM,

        Where was the article about the fear of massive deflation back when commodity prices were tanking?

        Why would there be? Is deflation something to be feared?

          1. Or, how about ask the US? Ever hear of the great depression?

            1. Re: SM,

              Or, how about ask the US? Ever hear of the great depression?

              Oh, you think it was deflation that caused the problems back then?

              1. It was asked if deflation was to be feared…the great depression bought on deflation. I accept your apology.

                1. Re: SM,

                  It was asked if deflation was to be feared…the great depression bought on deflation. I accept your apology.

                  No, I asked YOU why should it be FEARED, not if it happened.

                  I will accept YOUR apology, but I won’t be standing up waiting for it. Like I said, I had you measured 200 posts ago.

          2. Re: SM,

            Ask japan.

            What’s a “japan”?

            Anyway, YOU brought it up, you back up your claims.

      2. Or are you trying to hint that something else is causing food prices to go up?

        Are you trying to slyly insinuate that stupid ‘energy’ policies that skyrocket the price of fuel as well as diverting foodstuffs to feeding cars instead of people, along with a bevy of other idiotic market distorting antics allows unfettered supply and demand forces to actually exist anywhere? Or that once such forces have been so sullied as to be virtually irrelevant, they can STILL be pointed at, successfully, as either failures or causation of the misery self inflicted by dumb assed politicians?

        1. Wait…you think our energy policies over here in this country where we have 2% of the reserves of oil in the world have something to do with oil prices rising? How quaint. Again, do you understand supply and demand, worldwide consumption, etc?

          So, i’m gonna have to go with, no, you don’t seem to understand what is actually going on in the world. You know, there is this big country called “china” and all these other countries that are called “developing”…maybe you should look it up sometime.

          I know you people love to believe in absurd “market distortions” any time prices don’t go down as you believe they always should…hell, i have to listen about how “distorted” our market is which is causing healthcare prices to rise, when every other country that has a less free market pays less for healthcare than we do…but don’t let reality get in the way of an absurd ideology.

          PS. It got hot in russia. Look that up too. Then get back to me about commodity prices.

          1. I know you people love to believe in absurd “market distortions” any time prices don’t go down as you believe they always should…hell, i have to listen about how “distorted” our market is which is causing healthcare prices to rise, when every other country that has a less free market pays less for healthcare than we do…but don’t let reality get in the way of an absurd ideology.

            And having the government run health care will make things better?

            The government runs education, and spends more money per pupil than other nations.

            1. Get back to me on relative levels of spending when it comes to teachers wages.

              Hint: the teachers from the top 10% in finland…tell me which deciles they come from here…you read the story about finlands successful unions in Reason last week, right?

          2. You’re right SM. There’s no such thing as “market distortions”.

            There is only political distortion of markets.

            For every product that ever has existed and for every product that ever shall exist, the winning bids of demand in the face of supply set the price.

            The supply of medicine gets curtailed by political distortion as a cartel of key players seek to keep out competitors.

            And as persons have great want to stay alive, they’ve figured out that if they trade their power and sovereignty away to politicians, in turn, politicians use force to extract cash from the many in which to snatch up the curtailed available medicine, thus outbidding all participants in the marketplace for medicine. The net effect of squeezing supply with an ever increasing willingness to bid higher results in this: HIGHER PRICES.

            1. …which would exist without governments…get over it…the people with power will find a way to beat you with their stick…i’m not sure why you haven’t learned this yet…

    2. Re: SM,

      I want to know exactly what libertarians are going to do about poor weather[…]

      I will strike my hammer upon this rock, and clear the skies so Valhalla can be seen by the Gods.

      Or are you trying to hint that something else is causing food prices to go up?

      How about the fact that food futures are priced in dollars?

      1. Oh, you don’t understand exchange rates? Here, let me help you.

        It doesn’t matter what a commodity is priced in, dollars, euros, whatever. If the “dollar” goes up, that means its going up in relation to the euro – which means the price of oil will fall for us, but increases for the Europeans, because they first have to exchange euros for dollars, then buy oil. HOWEVER, the actual price of oil has not changed. Now, if the price of the dollar falls, the price of oil goes up for us – instead of europeans, who will now be paying less, because they can exchange their euros for more dollars, and pay the price of oil in those dollars.

        Do you understand yet? When you get to college you can take a macro course and they’ll explain this to you. In either case, the absolute price of oil has not changed. The only thing that changes that is SUPPLY AND DEMAND. I thought libertarians believed in markets and all that?

        That is, if the libertarians don’t cut the doe and pell grants and subsidized loans and you instead spend the rest of your life in ignorance.

        1. Unfortunately for you, college Economics courses don’t include any training in reading comprehension that involves parsing of linguistic devices such as irony, humor, allusion, etc.

        2. Here’s a hint, though. Old Mex wasn’t talking about exchange rates at all.

          1. Here’s a hint: he was, and didn’t even realize. Neither do you.

            1. Re: SM,

              Here’s a hint: he was, and didn’t even realize. Neither do you.

              Here’s a hint for you, SM: I WASN’T. You simply think I was, because of your wrong concepts.

        3. If the “dollar” goes up, that means its going up in relation to the euro – which means the price of oil will fall for us, but increases for the Europeans, … HOWEVER, the actual price of oil has not changed.

          [1] The price does not fall for us. Winning bids of demand in the face of supply set the price. This is the great, invariant Law of Prices.

          [2] Put quotes around “goes up” and the dollar as you have, wrongly.

          [3] You’re clueless about all things money, credit, central banking, foreign exchange and thus the whole of economics.

          1. *and not the dollar

          2. Assuming they demand less oil based on the price, yes, it will fall for us. You know, supply and demand.

            1. The QUANTITY they demand decreases as the price increases– you know, “Law of Demand.”

        4. Re: SM,

          It doesn’t matter what a commodity is priced in, dollars, euros, whatever.

          Hey, genius – it DOES matter.

          Do you understand yet?

          And do you understand the Nash Equilibrium? Do you? DO YOU?? Heathen!!!

      2. I will strike my hammer upon this rock, and clear the skies so Valhalla can be seen by the Gods.

        I had planned to do that next week sometime. Let me know if you don’t get around to it and I’ll go ahead and take care of that for you.

    3. Changes in food prices are caused by changes in Nash equilibria. I can’t believe you’re so stupid that you didn’t know that, you fucking moron.

      1. “Nash Equilibrium” sounds like a sucky alt-country band.

      2. Still haven’t figured out what i mean? Go learn about the difference between cooperative and noncooperative game theory. Even an elementary understanding would do you some good…

        1. Shitbird, I know a lot more about game theory than you do, no matter how many terms you sling about in an attempt attempt to intimidate. What are you, a junior econ major?

        2. Maybe if you tried to explain what you mean instead of implying we are idiots who couldn’t possibly understand you? Maybe turn the smug down a bit?

      3. Food prices are often determined by real-world forces that lie completely outside tidy mathematical models used by Economists who really like tidy mathematical models.

        1. …Economists who really like tidy mathematical models.

          Hey, be fair, who doesn’t.

          1. I used to date a mathematical model.

    4. I want to know exactly what libertarians are going to do about poor weather

      drive SUVs to make it better. what’s your plan?

  6. What about European grain prices? I’m wondering if I need to start stocking up on Pilsner and Munich malts…

  7. Something is grossly wrong with that story. Paul Krugman and Dean Baker have assured me that printing money and running deficits doesn’t lead to inflation in lousy economies.

    1. This is actually working perfectly according to Krug Theory. Higher prices mean that we will drain our bank accounts and run out to buy more food than we would normally. This stimulates the economy, and… RECOVERY!

      1. finally someone has the smarts to pick up on the fine intricacies of Nobel Laurate Krugman’s theory. But you forgot the key point that running a 11 TRILLION DOLLAR deficit doesn’t matter, because we can pay it off with our future dollars, which will be worth so little that $11T will be about the value of a used Kia Sportage. So, all problems solved there.

      2. That’s the essence of Price Inflation.

        Dummies wrongly belief that price inflation means a rise in prices. It does not.

        Inflation means action undertaken by central bankers, in the case of the U.S.A., Fed Res bankers, to try to increase the sales of products sold by their members, i.e., revolving credit loans and non-revolving credit loans.

        Price Inflation means action to push up prices, which in turn, triggers a need for bank products — loans of revolving and non-revolving credit.

        Quantitative Easing — trading checkbook bank credits for government agency bonds — is a typical tool used by central bankers to engage price inflation.

        The practice goes like this: increasing checkbook bank credits increases an economic quantity of purchasing. Since money accretion requires an increase in cash withdrawals from bank tellers and ATMs, new cash into circulation drives up prices for cash-based goods, e.g., food, gasoline, and to a lesser extent, revolving credit-based goods, e.g., those who need to use credit cards for gasoline purchases.

        Once money accretion drives up prices high enough that sticky wages can no longer maintain living standards, persons seek out bank loans. Vo?la, price inflation has led to increased bank sales of credit instruments!

        1. Thanks for the supply side drivel…good luck with that.

          If the fed prints a ton of money, but there is no demand for any goods, tell me exactly why the price will go up? Why will i demand more TVs when they cost $2000, just because THE FED has printed money, than i do at $1000?

          That’s what i thought…that was an awful lot to type “i don’t understand supply and demand or inflation.” Well, at least you understand “inflation” is “increased prices” – you should read some of the people around here.

          1. Re: SM,

            If the fed prints a ton of money, but there is no demand for any goods, tell me exactly why the price will go up?

            It won’t go up. Not right away. The first thing that WILL go up is capital goods, after credit becomes cheaper and people (or businesses) are fooled into thinking that SAVINGS have increased. The Fed prints money to prop up the credit expansion scheme of the banks. That’s the Austrian Business Cycle Theory which explains what happens during an inflationary process by the Fed.

            Capital goods go up because businesses will have a financial incentive to indulge in capital investments in new ventures, as the interest rate seemingly shows people are putting off current consumption. Once money starts flowing to these capital investments, the recipients will increase demand for OTHER goods, and the manufacturers of those goods will increase demand for yet OTHER goods and so on, pulling sequentially like a locomotive pulls cars. Inflation ALWAYS manifests itself in the lower levels of production (raw materials exploitation, machinery, pre-finished goods), going steadily towards the higher levels of production, towards retail. This was seen in asset prices, capital goods prices, and it is BEING SEEN in consumer goods. The demand for capital goods has tapered off because of the bust, but like a tidal wave, the destruction is still ripping throughout the economy.

            You on the other hand totally misunderstand the structure of capital. You were most likely taught that capital is homogeneous, which would explain why you mistakenly believe that an increase in money supply would have instantaneous effects, which would lead you to the strawman you invented.

            1. You realize we can tighten when the recovery has taken hold, right? We can worry about inflation when inflation might become a concern, ie, when demand picks up in our country.

              You also know that there is a recovery in developing countries, which is causing the rising prices globally. No matter how strong the dollar is, how much we reduce our currency supply, prices will be going up.

              I understand why you’re conflating the two to argue for your preferred ideology. I see conservatives do it daily.

              You remember 1937, right? No reason to repeat that.

              And please, explain japan’s QE and its effect on inflation in that country…the people of this site would love to know…because, you know, QE always leads to inflation…

              1. Re: SM,

                You realize we can tighten when the recovery has taken hold, right?

                What does this have to do with what inflation is, SM?

                We can worry about inflation when inflation might become a concern, ie, when demand picks up in our country.

                Inflation is not simply “demand.”

                I understand why you’re conflating the two to argue for your preferred ideology.

                Conflate what, SM? You’re the one that confuses increased prices with inflation.

                And please, explain japan’s QE and its effect on inflation in that country[.]

                Explain what? Why it was, or what it is? I don’t understand your question, SM. I believe you’re simply asking these absurd questions because you’re upset, not because you’re thinking straight.

                Let me ask you this: What do YOU think Japan’s QE consisted of?

          2. “If… there is no demand for any goods”

            SM lives in fairy land, where apples fall up and magical elves tapdance on ceilings!

        2. Realistically, who uses cash anymore except for drug buys? Or the laudromat? Or to sell to dollar starved Venezuelans?

  8. Perhaps it is the best time to kill subsidies?

    1. “kill”???

      VIOLENT, ELIMINATIONIST HATEMONGERING RHETORIC!

    2. “kill”?

      Hey, enough of this violent, hatemongering and eliminationist rhetoric, missy!

  9. Inflation Watch: Food Prices

    No! No! No! There’s NO inflation! The CPI only increased 1% – shriek told me so!!

    I mean… He wouldn’t be wrong about it, would he????

    1. Between August/September 2007 through October 2010, inflation failed to increase revolving credit and non-revolving credit — the two broad classes that describe all bank products.

      Owing to the affects of money accretion, only those goods bought with cash primarily saw substantial price increases in the face of fixed supply.

      I’ve seen shriek on the boards. He/she is clueless about all things economics. However, he/she was right that inflation failed to increase credit instrument sales. Prices of those things bought primarily credit, e.g., houses, fell during the period.

  10. I think inflation is probably coming, but… is a time when prices are high already and predicted to drop 5 or so percent the time to stock up?

    It seems to me that is the definition of buy high, since buying today places you at the top of what everyone seems to think is a 5 percent drop over the year.

  11. Can you link me to the stories about deflation after the last bout with fluctuating commodity prices? I’m sure it was a big concern here too…

    …and where were the apologies for the previous “OMG INFLATION!!!11ONE” stories before the last run up in worldwide commodity prices?

    Any of you able to show me a graph between money supply and inflation? I’d be curious to see the historical correlation…

    1. Re: SM,

      Can you link me to the stories about deflation after the last bout with fluctuating commodity prices?

      Repeat after me, “college grad”:

      DEFLATION is the correction after INFLATION.
      DEFLATION is the correction after INFLATION.
      DEFLATION is the correction after INFLATION.
      DEFLATION is the correction after INFLATION.

      Learn this and then we will talk.

  12. Ok, so here we have the money supply, M2…i see the big increase in the second half the recession…

    http://research.stlouisfed.org…..fq=Weekly, Ending Monday&fam=avg&fgst=lin

    And here we have the CPI…i see a huge run up in the first half of the recession when the money supply isn’t expanding as fast, but then when the money supply expands…i see it bottom out…

    Now, this would be the opposite of your “printing money = inflation” hypothesis…so you’re going to have to explain it a little better…are you saying it doesn’t always apply? Because i have just shown you an example of where it doesn’t…

    1. Huh..can’t link to those? Let me try shorter links:

      M2 – http://bit.ly/gSvnTH
      CPI – http://bit.ly/h1pVut

    2. —“this would be the opposite of your “printing money = inflation” hypothesis…so you’re going to have to explain it a little better”—

      Inflation IS an increase in money supply (printing money). Increased prices are not inflation, they are a reflection of either increased demand or short supply.

      1. Actually, inflation is a process undertaken by Fed Res bankers to increase the sales of the members — opened contracts of revolving credit and non-revolving credit.

        Central bankers cut interbank lending rates and reduce reserve requirements as ways to engage in inflation. Inflation does not work, always, as we’ve seen this through the period of peak credit (August-September 2007) until at least October 2010.

        However, inflation is action and NOT the result. Hence, inflation is not an increase in “the money supply”.

        All too many confuse money accretion — new notes and coins joining in circulation with existing ones — as inflation. Yet money accretion is not inflation.

        Likewise, a rise in price is not inflation.

        Because many do not get money, credit, commercial banking and central banking, they suffer from many false beliefs about all things economics.

        1. This would take too long to correct. You know all the terms but don’t understand any of them.

          “Central bankers cut interbank lending rates and reduce reserve requirements as ways to engage in inflation.”

          No, they do that to increase the money supply, not inflation. It COULD lead to inflation (or have no effect), but it is certainly not done to “engage” in inflation.

          “Likewise, a rise in price is not inflation.”

          Uh…inflation is a rise in prices over a period of time.

        2. Back in the olden days over 40 years ago(when Econ 101 was Econ 1, more inflation it appears), inflation was defined as an increase in the money supply. Maybe since I studied then, I learned a different set of words to describe things.

          When money supply increases, prices may or may not increase. A number of factors come into play, including the price of money. The Government has been paying banks to sit on their reserves, giving the banks no reason to lend. The price of money (as interest rates) is low, but there doesn’t seem to be much demand, at least a demand by qualified borrowers. Businesses are sitting on their hands waiting to see which direction the economy moves before making significant investments in new equipment and capacity. Private borrowers are scared to death abnout their levels of debt. A large portion of Government Bond sales are to foreign investors and institutional investors who are looking long term.

          It is rather like the definition of poverty. When the statistics don’t match anticipation, the word gets redefined to mean something else.

          Monetary inflation is what we used to call inflation. Price inflation is what we used to call prices going up. You can have both at the same time, or just one or the other. Prices are determined, not by the money supply alone, but by product demand and supply. The Government finds numerous ways to influence one or the other, but the definitions remain the same. Unfortunately, what the Government decides to do usually has no relation to reality, but to politics.

          When I studied Econ, the genral thought was that about 3% inflation (increase in the money supply) was considered to be about the right annual rate as it allowed for adequate money to maintain the economy with the addition of new jobs and consumers. I don’t know what the consensus is now. Personally, since I carry no debt and buy cash only, I rooting for deflation to take hold.

      2. So this is how bad it’s gotten around here…

        “Increased prices are not inflation.”

        Holy shit…you have less of an idea than the rest of these clueless people…

        Tell me again why “inflation” is the Fed having one trillion or two trillion bucks, when the price of a cup of coffee is still $1…that’s your definition of “inflation”?

        1. —“”So this is how bad it’s gotten around here…

          “Increased prices are not inflation.”

          Holy shit…you have less of an idea than the rest of these clueless people…””—

          More money (INFLATION) chasing too few goods (SHORTER SUPPLY) causes the price of available goods to increase. Simple.

          Increased prices are not inflation.

    3. In your analysis, are you accounting for (a) that inflation doesn’t instantly occur — increased money supply takes time to disseminate; (b) unprecedented Fed policies encouraging banks to keep a lot of that new money supply in reserves, thereby delaying inflation.

      1. If there is no demand, there is no inflation. Get over it.

        Until we have sufficient demand, we have no concern of inflation. Core inflation is still low. We can print money right now and not have to worry about it.

        Hell, look at the amount of money japan printed in the 90s…their central bank did QE to the max in the 00s, bought up tons of their debt so their interest payments went back to their treasury…where was all the inflation?

        Again, there has to be demand, then you can worry about inflation. Right now, there is no concern. When there is concern, then we can tighten.

        Otherwise you people sound like those clowns in 1937…INFLATION IS COMING, CUT! TIGHTEN!

        How’d that work out again?

        Do you people insist on repeating the mistakes of history?

        Hows austerity working out for the UK?

        The people you are listening to have been wrong about virtually EVERYTHING in our economic history. Stop. Please.

        1. I asked a short, specific, two-part question. You didn’t answer it.

          1. A) the money may not disseminate, inflation may not occur. See: japan. If inflation ever becomes a concern, we can deal with it then by tightening, raising rates, etc. There has been no core inflation, commodity prices are volatile.

            B) banks did this on their own, QE was to counteract this so the money supply did not contract. That said, when/if inflation is on the horizon, the fed can tighten as needed. You seem to not know what happened to japan. I do not want another lost decade. Worrying about inflation now is like worrying about water conservation while fighting a fire. There is a greater risk of deflation right now than there is of inflation.

            1. Re: SM,

              A) the money may not disseminate, inflation may not occur.

              You just contradicted your previous argument. Money that is not disseminated is NOT a SUPPLY of money. Inflation, under YOUR definition, should be INDEPENDENT of this.

              See: [J]apan. If inflation ever becomes a concern, we can deal with it then by tightening, raising rates, etc.

              But, SM, you just said that inflation is the increase in prices and NOT of the money supply, so what makes YOU think that tightening is going to have an effect? You can’t have it both ways!

    1. Are you trying to have a conversation with the troll? This will end in frustration.

      1. Because troll will not accept baseless assertions that are not founded in facts…i bet that is frustrating to you…”libertarianism is best…derp derp.”

        1. Not sure you’re a troll, but you’re not as smart nor as good at explaining yourself in writing as you think you are. It was asked above, but not answered. Are you some kind of junior-year Economics student?

          1. Ask him about the Nash Equilibrium. Go on, ask him!

    2. A positive, proportional relationship between the price level and money relative to real income is quite consistent with the evidence…Statements to the contrary or assertions that there is no information content in monetary aggregates are misguided at best.

      Huh.

      1. You understand the difference between correlation (“positive relationship”) and causation, yes? You’re not conflating the two, right?

        1. SM: Any of you able to show me a graph between money supply and inflation? I’d be curious to see the historical correlation…

          Painted yourself into a corner, I see. It would appear that you have not chosen a dominant strategy.

          1. Did you read the quote? Even they conceded it was not the same all the time.

            Still waiting for someone to find that graph…i’ve provided plenty of graphs that prove the opposite…

    3. Now, did you actually read that?

      Can you tell me how that applies to our current recession?

      Did you realize they said they couldn’t explain why their theory didn’t hold for the last have of the 90s, and it didn’t apply in all countries either, so those were left out? Did you realize that stopped in the mid 90s?

      I have given you the recent graphs as they apply to our country or M2 – same as they use, and CPI. Please explain the divergence.

      “There is, however, one noticeable exception to this
      generalization. An apparently unprecedented deviation
      appears in the 1990s: money relative to income falls, and
      the price level does not. This divergence between the
      price level and money relative to income suggests that
      money growth can be misleading. For the first half of the
      decade the behavior of money relative to real income sug-
      gests virtually no inflation. Although the actual inflation
      rate during this period is substantially lower than in the
      1970s and 1980s, it is not zero on average. After a rela-
      tively brief period of time the slopes of the two lines do
      appear to agree for later years in the decade. This subse-
      quent parallel movement suggests that the different
      growth rates may be specific to the early 1990s. Is this
      recent divergence for the United States unusual?”

  13. The US is engaged quite openly, and successfully, in devaluing the dollar.

    The dollar is the reserve currency in which most international transactions, including food, are denominated.

    For the US, that means each dollar buys less, and you have inflation. Predictable as can be, and actually exactly what Bernanke has said he is trying to accomplish.

    Of course, this dollar devaluation inflation is hitting at a time when food prices would ordinarily be going up anyway, due to supply constraints (bad weather, bad policy) and demand increases (all those expanding third world countries improving their diets, more people to feed all the time).

    Remember, foreign countries are buying their food imports in devalued dollars because it is the reserve currency. So we are exporting our inflation to countries that are less able to absorb it, just because they are so much poorer.

  14. “The dollar is the reserve currency in which most international transactions, including food, are denominated.”

    No, no, no, stop it. This is very simple to understand if you could pass econ101. I’ve already explained this above.

    If printing dollars was causing the inflation, it would be because our dollar has suffered RELATIVE (“devalued”) to other currencies – this is what you’re saying. “Devalued.”

    What that ALSO MEANS is that the other currencies have APPRECIATED relative to ours – which means, if oil was the same absolute price, it would cost LESS for them to buy it because their currency is worth MORE. Do you understand?

    Instead, the cost of commodities are increasing WORLDWIDE. We cannot all be DEVALUING our currency at the same time, causing commodity prices to rise. If we were ALL printing money and ALL devaluing, then our currencies wouldn’t change at all RELATIVE to each other – and oils price would be the same.

    Why is this so hard for you people to understand? This is econ101. Maybe you guys shouldn’t engage in these talks if you can’t understand simple concepts like this.

    1. hmm, interesting concept you invented there of an “absolute price”? do you have a definition of that? what denomination is it in? can you provide a link to that?

      oh, no you can’t, because it’s a concept that only a deranged half-educated kook would come up with. bye, troll.

      1. Sorry, i meant nominal price.

        Go ahead and get an elementary econ textbook that disagrees with what i said…i’ll wait right here.

        1. I think the concept you apparently have heard of is Nominal Value, which is much more complicated and intricate than you lay out above in your incoherent rant above, which would get you a solid C- in ECON 101. Hope you haven’t graduated High School yet, because you have a lot to learn! good luck.

    2. Re: SM,

      If printing dollars was causing the inflation, it would be because our dollar has suffered RELATIVE (“devalued”) to other currencies – this is what you’re saying. “Devalued.”

      World – meet YET ANOTHER nitwit who believed his Econ teacher.

      Inflation has NOTHING to do with exchange rates. You can INFLATE both currencies and never notice a thing, yet food would still require increasingly more and more notes to buy.

      Inflation is the constant increase in the money supply. That’s the PHENOMENON, the ACTUAL THING. The effects of inflation can be: increased prices in certain foods due to added demand (as people think they’re suddenly wealthier), increased valuations of certain assets (bubbles), malinvestments, and subsequent busts. THAT’S the PHENOMENON.

      Why is this so hard for you people to understand? This is econ101.

      Yes, I know – Econ101. Samuelson. Keynes. Alchemists and Charlatans all. I use Samuelson’s book for kindling – good BTUs.

      1. “increased prices in certain goods“…. sorry. Too fast on that ‘submit’ key.

      2. Too funny…inflation is not an increase in prices, but an increase in money supply…hilarious.

        You realize we’ve had bouts of inflation without increasing the money supply, right? You realize we’ve had inflation even while on the gold standard? History is a bitch…maybe you should learn it.

        You’re just another lost supply sider…

        1. Re: SM,

          Too funny…inflation is not an increase in prices, but an increase in money supply…hilarious.

          Why is it hilarious? You are the one who confuses an increase in prices with inflation, but they are not the same thing. Inflation causes higher prices, just like sunlight causes sunburn, but not ALL burns are sunburns.

          You realize we’ve had bouts of inflation without increasing the money supply, right?

          You are dense, SM. Inflation is NOT simply increases in prices.

          You realize we’ve had inflation even while on the gold standard?

          You should treat your Foot-In-Mouth disease. Again, you confuse Inflation with “increased prices”.

          You’re just another lost supply sider…

          I don’t know what you mean. I am an Austrian when it comes to economics.

          1. Increases in prices over a period of time is THE DEFINITION of inflation.

            Increasing the money supply is not inflation.

            I don’t understand how you have this so backwards. Try to prove me wrong.

            Oh, you’re an Austrian, so you’re used to being wrong. Now i get it.

            1. Re: SM,

              Increases in prices over a period of time is THE DEFINITION of inflation.

              That’s the definition in the college Econ books, SM. The definition does not explain what it IS, since rising prices are the effect, not the phenomenon per se.

              Like saying: Electricity is this thing that makes light.

              Increasing the money supply is not inflation.

              It is inflation.

              I don’t understand how you have this so backwards.

              I don’t understand why you would confuse cause and effect. The CAUSE is something someone DID. The effect is what we experience. That is how things work.

              Oh, you’re an Austrian, so you’re used to being wrong. Now i get it.

              I got what you are like 200 posts ago. I have you measured.

        2. The distinction you are trying to make is between price inflation (currency deflation) and monetary inflation, which are two related but separate things, as is well known to everyone but you. We can have one or the other or both. If you were really such an expert in Economics you would know this.

          Also I bet you can’t cite a single example of hyperinflation (not mere price inflation due to demand spikes or special events like war) during a true redeemable gold standard period.

      3. I think he is just a troll. A Pretty good one though. He almost seems to have a point worth disagreeing with. But besides not liking our definition of inflation, most everything he says is nonsense.

        1. You’re redefining “inflation” to mean something that it is not. Search “inflation” and copy and paste all the definitions here. I’ll wait.

          It DOES NOT MATTER HOW BIG THE MONEY SUPPLY IS MADE TO BE if prices DO NOT INCREASE. IF PRICES DO NOT INCREASE, THEN THERE HAS BEEN ZERO INFLATION.

          This is about as simple a concept as you can get.

          I understand that some people want to argue that in SOME CASES increasing the money supply leads to inflation later, but HISTORY has shown that during this type of recession, that is not a concern at all – instead, deflation is a concern. See: JAPAN, LOST DECADE OF.

          1. so, you are arguing only about the definition of inflation, a point on which you are so wrong you are “not even wrong”.

          2. Re: SM,

            It DOES NOT MATTER HOW BIG THE MONEY SUPPLY IS MADE TO BE if prices DO NOT INCREASE.

            You’re extra dense today, SM. Inflation is not the money supply or how big it is – inflation is the INCREASE in the money supply. It’s a Velocity, dV/dt. Maybe you’ll get it now.

          3. The macroeconomics text “Foundations of Economics” 4e, by Bade/Parkin defines inflation as “The situation in which the cost of living is rising and the value of money is shrinking.”

    3. Let’s say, hypothetically, all major countries in the world simultaneously “printed” enough money to double the number of dollars, yen, etc. out there. Oil prices would double everywhere, no matter what currency it is expressed in, no? If I had 10 dollars in my pocket, it would buy half as much gasoline as it did yesterday, no?

      Are you just being pedantic about using a particular definition of the word, devalue, to avoid engaging on the larger point being made?

  15. Sure, SM. As I see it, you’ve got basically two point:

    (1) Commodity prices are going up worldwide, in all currencies.

    OK, but my point is that this supply/demand driven increase is exacerbated when denominated in devaluing dollars.

    As an aside, at least some of this increase comes from people swapping their devaluing dollars for hard assets.

    (2) When the reserve currency devalues, it doesn’t matter because the local currencies are appreciating.

    Well, yes and no. First, “reserve currency” means all those foreign countries hold large amounts of dollars “in reserve” to use for foreign transactions. Their dollar reserves are depreciating, which means they are feeling the dollar devaluation inflation.

    Second, increases in the relative value of local currencies hurt their exports, because they increase the price of those exports to foreign buyers. That’s inflation, too.

  16. “OK, but my point is that this supply/demand driven increase is exacerbated when denominated in devaluing dollars.”

    I’ve explained this ONE THOUSAND TIMES…it doesn’t matter that they are “denominated” in “dollars.” Stop with the nonsense.

    Pretend they were denominated in euros right now. Our currency goes down in relation to the euro – we have to trade for euros, which are worth more now, so we get less…oil is more expensive for us cause we have to trade more dollars. Do you get it? It doesn’t matter what its “denominated” in, it has its own price based on SUPPLY and DEMAND.

    For example, say our currency is appreciating in value – then, by your theory, oil would be cheaper for us – but china decides it needs twice as much…and oil prices STILL go up. It HAPPENS ALL THE TIME.

    For example, the dollar appreciated from 98.5 to 00.5 and at the same time…OIL APPRECIATED! Imagine that! By your theory that USD value is what prices oil, that could have never happened!

    Over a longer period, from 96 to 02, the dollar had a massive appreciation – yet oil prices stayed relatively the same.

    From 85 to 88 there was a massive decline in the value of the dollar…yet oil prices also showed a massive decline…that should have never happened, right?

    Until you understand that WORLDWIDE SUPPLY and WORLDWIDE demand effect oil prices a hell of a lot more than minimal inflation in this country, you will never understand what is going on right now.

    Take a look at oil prices

    http://www.guardian.co.uk/busi…..ommodities

    and the usd index…think about it…

    http://www.fxstreet.com/rates-…..lar-index/

    1. Still missing the points, SM.

      First, you completely avoid the issue of how the dollar, as a reserve currency, drives monetary inflation around the globe, because the (large) dollar reserves held by everyone are depreciating.

      You also leave aside the point that dollar devaluation forces other nations to devalue their currencies, in order to keep their exports from cratering. So, reserve currency devaluation drives currency devaluation everywhere.

      Second, you miss that point that, regardless of what the underlying supply/demand price of a commodity is, if you are buying it with a depreciating currency, you are paying more for it than you would if the currency wasn’t depreciating.

      Sure, oil and the USDX aren’t a perfect negative correlation, because there are other (supply/demand) factors involved. So what? If the dollar had the same value today as it had 5 years ago, dollar-denominated oil would cost less. Ergo, devaluation increases prices (which I believe is your definition of inflation).

  17. PS. If our currency was appreciating, you’d be bitching that china is dumping cheap crap with their undervalued currency and our trade deficit was massive – even as oil prices went up. If our currency is declining you’ll be bitching about imaginary inflation even while its at historical lows…its impossible to win with people like you who don’t understand what is going on and push their ideology no matter what the facts are…

    1. Not sure who the “you” is that you’re responding to anymore, but in general the commenters on this site don’t give credence to the “trade deficit” idea. It’s just mercantilism dressed up in modern language. China dumping “cheap crap” on us is generally a good thing for us; not so good for the people in China, though.

      1. Not so good for wage earners though….let’s think about this for a second.

        Imagine if we get to your ultimate goal – everything in this country comes from china because it is cheaper than making anything here…we have zero exports, because there is no need to compete. How does our economy function then, if we make nothing? How do people earn money to purchase even “cheap” chinese crap?

        There is a reason china has devalued THEIR currency – because its good for their economy. They don’t have a lot of rich people in their country, so they’re creating jobs and products, so they can ship them over here, where we still have a large consumer base.

        If having a “strong” currency is so important, like everyone here insists, why aren’t the chinese doing it?

        I’d like for once the people of this site be intellectually consistent…it would seem reasonable to me to assume that people in this country would be well served by actually making things that are competitively priced around the world and selling them in a balanced manner…so they could earn a few bucks and buy some of the other things in life…

        1. Re: SM,

          Imagine if we get to your ultimate goal – everything in this country comes from china because it is cheaper than making anything here…

          What a bad way to start a discussion.

          “Imagine that we get what YOU want, that is the end of the world…”

          we have zero exports, because there is no need to compete.

          Sure, basically ignoring the Law of Comparative Advantage. Go on, “econ grad”, go on….

          How does our economy function then, if we make nothing?

          Imagine we import landscaping services from China… Hmmm…

          How do people earn money to purchase even “cheap” chinese crap?

          Imagine we import land from China… Hmmm…

          There is a reason {C]hina has devalued THEIR currency – because its good for their economy.

          It’s not China, it’s the central bank, and I thought they devalued their currency because of their merchantilistic claptrap [i.e. exports good, imports ewwww]. But go on, “econ grad”, do go on…

          They don’t have a lot of rich people in their country, so they’re creating jobs and products,

          And one thing follows the other….

          so they can ship them over here, where we still have a large consumer base.

          Despite the fact that the Chinese make “cheap” crap that rich people would not buy. I didn’t understand why you brought up “rich people” in the previous paragraph, because the internal market is pretty big as it is.

          If having a “strong” currency is so important, like everyone here insists, why aren’t the Chinese doing it?

          Because they’re stupid?

          But don’t fret – they will get over it and stop indexing their yuan to the dollar, once they figure out the US has ran out of wealth.

          I’d like for once the people of this site be intellectually consistent…

          I’m yearning for the same thing – from YOU.

        2. “we have no zero exports” is not the result of buying things in China; the opposite is. Buying imports sends dollars leaves foreigners with dollars; assuming said foreigners don’t just like the pretty pictures on our green paper, these dollars are then used to buy exports.

          You shouldn’t skip so many of those econ classes; midterms will be here before you know it and I wouldn’t be surprised if your grades are already slipping.

        3. SM’s mom: I think I’ll drive over to the CostCo in the next town to see if they have a cheaper price on your Yoohoo!
          SM: If we get to your ultimate goal, our town will have no jobs at all! Have you thought about that, Mom!
          SM’s mom: Since when have you been interested in jobs in our town. Get out of my basement and you can buy your own Yoohoo!

        4. Not so good for wage earners though…

          Wage earners are also wage spenders, no?

  18. Oh, and no one is making them buy our currency…they’re doing it because they want to keep theirs valued less than ours so that they can export more to us…i don’t see how we should help them by cutting our money supply…

    …oh, and you know what happened in 1937 when we cut our money supply during the recovery, right?

    1. Oh, and no one is making them buy our currency

      Well, this is wrong. Every trading partner they have is making them buy our currency to fund their purchases (unless they have a bilateral agreement to use yuan instead).

  19. Re: SM,

    If the fed prints a ton of money, but there is no demand for any goods, tell me exactly why the price will go up?

    It won’t go up. Not right away. The first thing that WILL go up is capital goods, after credit becomes cheaper and people (or businesses) are fooled into thinking that SAVINGS have increased. The Fed prints money to prop up the credit expansion scheme of the banks. That’s the Austrian Business Cycle Theory which explains what happens during an inflationary process by the Fed.

    Capital goods go up because businesses will have a financial incentive to indulge in capital investments in new ventures, as the interest rate seemingly shows people are putting off current consumption. Once money starts flowing to these capital investments, the recipients will increase demand for OTHER goods, and the manufacturers of those goods will increase demand for yet OTHER goods and so on, pulling sequentially like a locomotive pulls cars. Inflation ALWAYS manifests itself in the lower levels of production (raw materials exploitation, machinery, pre-finished goods), going steadily towards the higher levels of production, towards retail. This was seen in asset prices, capital goods prices, and it is BEING SEEN in consumer goods. The demand for capital goods has tapered off because of the bust, but like a tidal wave, the destruction is still ripping throughout the economy.

    You on the other hand totally misunderstand the structure of capital. You were most likely taught that capital is homogeneous, which would explain why you mistakenly believe that an increase in money supply would have instantaneous effects, which would lead you to the strawman you invented.

    1. Capital is just a big capital K in SM’s formulas. No need to try to understand how it works in the real world.

      1. He got duped by his Econ teachers and now is not willing to accept he had the wrong concepts. I understand him: After expending a lot of time and monye learning the wrong things, it is difficult to accept one was taken for a ride. Denial is not a river in Egypt (not that the Nile was what it used to be either!)

    2. Thank you for conceding inflation will not necessarily occur, ie the “[price] won’t go up.”

      I get it, you’re a supply sider. You think more money will necessarily mean more demand. You’ve been wrong throughout history. One would think you’d have learned by now?

      PLEASE EXPLAIN JAPAN…they didn’t have inflation even after 200% debt/gdp, QE, the whole deal. They could not print enough money to cause it. This would be impossible in your world.

      If there is no demand, there is no inflation. Its that simple. You can’t “supply” your way out of this.

      1. SM, please read the Wikipedia page on Inflation, go down to “Related definitions”. If you are capable of understanding it, you will see how full of it you are. There are multiple valid definitions and types of inflation.

        Besides which, are you really so deluded that you think expansion of the money supply maigh have NO EFFECT AT ALL? Just because it doesn’t show up in your precious CPI doesn’t mean it is not causing pricing to rise and/or currency to devalue – somewhere. That was kind of the whole point of this article, you should try reading it.

      2. Re: SM,

        Thank you for conceding inflation will not necessarily occur, ie the “[price] won’t go up.”

        Inflation is NOT THE SIMPLE INCREASE IN PRICES.

        Dumbell.

        I get it, you’re a supply sider. You think more money will necessarily mean more demand.

        That doesn’t make me a supply-sider.

        You’ve been wrong throughout history.

        Zimbabwe being a figment of everybody else’s imagination, it seems….

        PLEASE EXPLAIN JAPAN…they didn’t have inflation even after 200% debt/gdp, QE, the whole deal. They could not print enough money to cause it. This would be impossible in your world.

        No, it’s perfectly possible – UNLESS YOU THINK INFLATION IS THE INCREASE IN PRICES.

        If there is no demand, there is no inflation.

        No, there’s INFLATION all right. Just no demand – because the Japanese (the people and businesses) are tightening their belts.

        Its that simple. You can’t “supply” your way out of this.

        Now you’re talking in neologisms. I don’t know what you’re talking about.

  20. Do you see, people? This is what happens when you allow yourselves to be some troll’s porn. No Nash equilibria anywhere.

  21. OK, not sure I want to wade in here, but I do have a question.

    How much of this price increase is due to hoarding of commodities? When the stock market went down I remember reading about a movement of money from equities into commodities. There was a lot of talk about the futures markets, and people betting on rising prices in the long term. I remember Southwest Airlines did this with fuel years ago.

    Could the current rise in prices reflect an artificially high demand, because of hoarding in anticipation of shortages in the future, and could we be in fact seeing some bubble building as a result.

    Note: I am not an economist, and have no opinion on the definitions of inflation/money supply, I am simply asking about hoarding of goods in anticipation of future shortages, versus real current shortages driving up prices.

    1. Not so much hoarding, as speculation. People want to get out of a depreciating asset (dollars), and into something that won’t depreciate, so they diversify into hard assets.

      1. Not so much hoarding, as speculation.

        And the difference is? Don’t you get the same result either way?

  22. I wondered how this thread got over 100 comments. Now I know.

    I get it, you’re a supply sider. You think more money will necessarily mean more demand.

    Louder, SM!

    Louder!!!!!!!!

    1. Shit. You just drove it to 200 comments. Don’t you know when you should just keep your fingers shut? Or still. Or unflapping.

      Non-typing, no-verbage-adding, don’t-say-nothing-nope-nuh-uh.

      Okay I give up.

  23. As the British monetary empire dies, our food supply is in grave danger. Put controls on food prices now, just as Franklin Roosevelt did in WWII.

    http://www.larouchepac.com/node/18390
    The approaching food crisis demands that the US government heed the warnings of Lyndon
    LaRouche and follow in the steps of Franklin Roosevelt. Shut out the speculators
    and fix food prices now.

    http://www.larouchepac.com/node/18381

Please to post comments

Comments are closed.