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The Inflation thread, Discussion
nipper
post Posted: Jun 18 2018, 09:32 AM
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Beware the long-lost threat of inflation
QUOTE
For nearly a decade, inflation hawks such as yours truly have been the stopped clocks of economic forecasting – except that we're still waiting to be right once, much less twice, a day. As central banks throughout the developed world ran their money-printers furiously in hopes of jolting the economy from its swoon, we fretted at the prospect of overheating. It was as if we were offering lemonade during a blizzard.

My defense when reality-based colleagues called me out was that I'm old enough to have firsthand experience of roaring inflation – back in the 1970s – and it's no picnic. While it is true that inflation is a nifty way to file down the fangs of the national debt while boosting the take-home pay of workers, the lived reality has its darker sides.

For families such as mine back then, living pay cheque to pay cheque, the rising wages never seemed to catch up to the soaring prices. Eventually, rather than let things spiral out of control Venezuela-style, the Federal Reserve slammed on the brakes with double-digit interest rates in the early 1980s that threw the economy into an unpleasant recession.

So at the risk of being wrong again – an occupational hazard for all opinion columnists – allow me to ring a faint alarm on inflation once again. This time, I'm spurred by a recent conversation with a veteran of America's freight-hauling industry, a bellwether sector given the number of lives it directly affects.

For a variety of reasons, trucking prices have gone through the roof over the past year, with no end to the upward trend in sight. The problem starts with a shortage of drivers. Interstate truckers have a long history as the ill-treated workhorses of the US economy – underpaid, disrespected, pressured to put in long hours and battling loneliness far from home. With unemployment down to unusually low levels, blue-collar workers have plenty of alternatives to this life.

According to a report last year for the American Trucking Associations, US freight companies were short by about 50,000 drivers last year. Given that the median age of private-company drivers is 52 and that young Americans are shunning the field, the shortage could more than triple by 2026. Widespread adoption of self-driving trucks is too remote to offset the problem.

This explains the sign-on bonuses that major freight haulers are offering to new drivers. The going rate, according to one industry insider, has climbed tenfold over the past couple of years, from $1,500 to as much as $15,000, collectible after six months on the road. The chance to collect two bonuses per year is fuelling rampant driver turnover: as high as 95 percent annually at major fleets.

Important safety advances are adding to the labor shortage, most notably the new requirement that rigs be equipped with an electronic logging device, or ELD. Designed to tame the problem of overtired drivers skirting federal requirements for adequate rest, the tamper-proof ELDs record precisely the number of hours each driver has been on the road in a given day. My new friend from the freight industry estimates that more than 800,000 non-compliant trucks were pulled from circulation when ELD enforcement began on April 1.

These trends, along with rising fuel costs and strong consumer demand for shipped goods, are driving the price of freight sky high – up from last year by about four times the rate of inflation, and the worst may be yet to come. Demand for truck space is growing while supply is shrinking. Given that 70 percent of America's freight moves by highway, this runaway cost engine is felt in all corners of the economy.

At a time when high stock prices reflect expectations of growing corporate earnings, one manufacturer after another has reported that freight costs are weighing noticeably on profits. The story repeats itself across the iconic brands of America's grocery stores: Coca-Cola, Hershey, General Mills, Tyson, Procter & Gamble. You name it. The heat from this inflationary fire is singeing farmers, food processors, manufacturers, big-box stores, restaurants, and e-commerce giants such as Walmart and Amazon (whose founder and chief executive, Jeffrey P. Bezos, also owns The Post).

I know: Calm down. Labor anomalies in a single industry won't spark runaway inflation by themselves – though consumers are already seeing higher prices because of shipping costs, and they are sure to see more. And Federal Reserve Chairman Jerome H. Powell signalled last week that he's keeping a close eye on core inflation and won't let it spoil what he called a "very strong" economy.

But the search for a "Goldilocks economy" is never-ending. And for the first time in years, there is a place for us hawks at the table. Because too hot is now as threatening as too cold.

by David Von Drehle - The Washington Post



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Aug 29 2017, 07:48 AM
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these components always seem to be cited - another indicator of low numbers ahead?

QUOTE
...a fruit and vegetable oversupply [is] causing prices to plummet. Crops have been thriving in this year's unseasonably warm Queensland winter, pushing them to mature faster and earlier than usual; a stark contrast to six months ago, when stock was low in the wake of Cyclone Debbie.

Ipswich grocer Tracey Castellana said prices had fallen by more than 50 per cent. "A lot of the vegetables, the prices were through the roof and the customers were very unhappy about it, but now it seems to be a flood in the market," she said....
http://www.abc.net.au/news/2017-08-29/frui...r-crops/8848694



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
marketwinner
post Posted: Apr 8 2017, 07:23 AM
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In Reply To: nipper's post @ Mar 22 2017, 11:04 AM

http://www.nzherald.co.nz/world/news/artic...jectid=11829757

Eurozone inflation falls back below target in March - World - NZ Herald ...

http://www.feedstuffs.com/news/fao-index-s...e-decline-march

FAO index shows global food price decline in March


 
nipper
post Posted: Mar 22 2017, 11:04 AM
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QUOTE
Paul Moore: It's time to think differently

Interest rates and inflation have been on a downward trajectory since the late 80s, a 30 year trend. Paul Moore says 2016 was an inflection point and expects inflation to return. For the majority of investors this represents unchartered territory, so how do you approach such a foreign outlook?
https://www.livewiremarkets.com/wires/34945

QUOTE
The world's most influential central bank is raising rates, and has telegraphed several more this year and next.
The PBOC has adopted a more restrictive monetary policy whether they want to admit it or not.
Mario Draghi is much happier now and very keen to tell the Germans how successful his monetary experiment has been.
The Bank of Japan, however, spoilt my story by not doing anything at its meeting this week and not really saying anything at all.
But even in Japan the bar room chatter is about the BOJ reversing course by the end of the year.
Then we had the Bank of England leaving rates unchanged, but buried in the Monetary Policy Committee minutes was this observation..... "with inflation rising sharply, and only mixed evidence on slowing activity domestically, some members noted that it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted."

So, is it different this time?
Yes

Do we believe the FED this time.
Yes.

Will the FED raise rates three times this year?
Yes.

Is the global economy recovering?
Yes.

Will inflation continue to rise?
Yes.

Do I believe global government bond yields will rise further?
Yes.

Do I think the PBOC has commenced tightening?
Yes.

Will the ECB and BOJ reverse course over the next 12 months?
Yes.

One thing I have learnt is that if you name a price, don't name a date and if you name a date, don't name a price!

Do I think fiscal policy has replaced monetary policy as the key driver of global economic growth?
Yes.

Will investors continue to sell long duration fixed income assets?
Yes.

Are we likely to see violent eruptions of volatility as the markets realise that it really is different this time and the abnormal becomes more normal?
Yes.

Are the world's central banks at risk of falling behind the curve?
Yes.

Is the Reserve Bank of Australia (RBA) behind or in front of the curve?
They cannot find the curve!
Jonathan Pain



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: May 6 2016, 12:21 PM
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In its quarterly Statement on Monetary Policy the RBA retained a forecast for GDP growth to come within a range of 2.5 per cent and 3.5 per cent in 2016.

However, it sharply revised its inflation forecast down from 2-3 per cent to 1-2 per cent. The central bank targets an inflation rate of between 2 and 3 per cent, with the new figures hinting at the prospect of a further move on rates this year.

Its long-term forecasts for inflation were also trimmed, with previous expectations of 2-3 per cent through 2017 and 2018 reduced to a range of 1.5 to 2.5 per cent.
QUOTE
"The broad-based nature of the weakness in non-tradables inflation and the fact that wage outcomes were lower than expected over 2015 has resulted in a reassessment of the extent of domestic inflationary pressures, leading to downward revisions to the forecasts for inflation and wage growth,"

The central bank retained confidence in the strength of the labour market, but warned employment growth was "likely to remain lower than last year". Limited wage inflation was showing no signs of turning around, but the RBA said it still expected robust household spending to drive economic growth. "Low interest rates and gains to employment are expected to support continued strength in household demand, despite only modest growth in household income in the near term."

"Forecasts for growth in real household disposable income have been revised down as a result of a somewhat weaker outlook for nominal wage growth, which has been offset to some extent by downward revisions to the outlook for inflation.

"Nevertheless, consumption growth is projected to be a little above its longer-term average over the forecast period, consistent with the forecasts in the February Statement."




--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
flower
post Posted: Jan 25 2015, 04:27 PM
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In Reply To: nipper's post @ Jan 25 2015, 03:16 PM

QUOTE
wren, you could point out to others (I won't bother) the difference between

- Monetary policy; decided by, in Australia's case, the RBA, and

- Fiscal policy; largely guided by government of the day through the mechanism of budget settings in order to enact social policy


nipper, and one does not influence the other?

btw; the difference is already understood.



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nipper
post Posted: Jan 25 2015, 03:16 PM
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In Reply To: wren's post @ Jan 25 2015, 01:48 PM

wren, you could point out to others (I won't bother) the difference between

- Monetary policy; decided by, in Australia's case, the RBA, and

- Fiscal policy; largely guided by government of the day through the mechanism of budget settings in order to enact social policy






--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
flower
post Posted: Jan 25 2015, 02:07 PM
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In Reply To: wren's post @ Jan 25 2015, 01:48 PM

QUOTE
Flower are you seriously suggesting that the income pensioners receive from bank deposits is a consideration when setting monetary policy?


With a growing band of retirees presumably no government wants to countenance open ended/never ending state pension support, maybe the RB totally ignore that sector, but the pollies certainly cannot, probably of even greater concern is housing which is totally overblown pricewise and would explode following a rate cut.

Cannot see any conservative government stopping negative gearing, putting CGT on housing, all to reign in housing costs, don't suppose the big four want to loose that section of their deposit base either. Any further financial pressure on retirees will see them forced to enter the stockmarket in search of yields with likely disastrous results if the world economies weaken.

At this stage the RB is not yet stuck between a rock and a hard place and should sit pat--IMO.



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Combining Fundamental comments with Fundamental charts.
 
wren
post Posted: Jan 25 2015, 01:48 PM
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In Reply To: flower's post @ Jan 25 2015, 01:40 PM

Flower are you seriously suggesting that the income pensioners receive from bank deposits is a consideration when setting monetary policy?

 
flower
post Posted: Jan 25 2015, 01:40 PM
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In Reply To: nipper's post @ Jan 25 2015, 12:19 PM

QUOTE
That's all in jeopardy now, however, as Stevens, governor of the Reserve Bank of Australia, stands still while China's slowdown and deflationary forces close in. Markets are registering their disappointment by driving the Aussie dollar below 80 US cents for the first time since 2009. The message from traders: It's time for a rate cut. The question is, will Stevens act ahead of, or at, the central bank's February 3 policy meeting?


Hi nipper, heaven help us if the RBA start down this track---pensioners already screaming, domestic property way overvalued, and US rates supposedly to rise?

For pity's sake--NO to any rate cut.



--------------------
Combining Fundamental comments with Fundamental charts.
 
 


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