Inflation

william the wierd · 05-21-2008, 02:03 AM

I was just wondering what sources you are looking at for estimates of future inflation. If I am understanding my sources secondary effects of the current energy crisis will lead to 10+% inflation with the strong possibility that capital flight might bump unemployment to double digits prior to the inaugeral with ready made excuses for how McCain or Obama caused it with their platforms. I think my sources are perhaps tearing and printing the same stuff so I was wondering what other people were hearing?

Merantes · 05-22-2008, 05:01 PM

That's sobering. Where does this info come from?

william the wierd · 05-22-2008, 05:49 PM

Quote:

Originally Posted by Merantes

That's sobering. Where does this info come from?

Among others Jim Jubak at MSN, Lew Rockwell and the Foundation for Economic Education. In more muted form the same data is available from most news sources, all of the ones I have checked. The inflation drivers include:
Oil shortages caused by political/economic incompetence among key producers.
Food shortages caused by ethanol promotion.
Structual failures in the liquidation of the housing bust.

It is the timing I find questionable. For example, Georgia tax assessors trying to maintain $100,000 tax assessments on properties lenders are trying to dump for 10K. I don't think the resulting lawsuits can be resolved prior to the inaugural if Bush is determined to push the crisis into the next administration.

Grez · 05-25-2008, 12:54 AM

So your saying we are going to go from 5 to possibly 15% unemployment soon after the new incumbent takes the presidency? I find that a bit hard to believe myself, although I do see unemployment go up quite a bit. Why go to work for a low wage job when you can make more not doing a thing? I do see a lot more people filing for unemployment in the near future, because it will likely be worth it. Gas prices will continue to rise for sure thru the rest of summer and likely to the end of the year (although less steep during the latter parts) and I hope will trend down afterwards. There are many things we can do to counteract this, the question is will we? and the most likely is is not too much.

johnlocke · 05-25-2008, 11:44 AM

The problem with predictions of this sort is that they tend to create a panic and thus becomes somewhat self-fullfilling.

I would also observe that it isn't JUST oil prices that will create the increase in unemployment. It will be the rising cost of fuel coupled with a destabilized economy (driven by the housing/credit bubble). So what we will see here is not just that things are more expensive, but people will buy LESS of them because the they have no money.

william the wierd · 05-25-2008, 09:40 PM

Quote:

Originally Posted by Grez

So your saying we are going to go from 5 to possibly 15% unemployment soon after the new incumbent takes the presidency? I find that a bit hard to believe myself, although I do see unemployment go up quite a bit. Why go to work for a low wage job when you can make more not doing a thing? I do see a lot more people filing for unemployment in the near future, because it will likely be worth it. Gas prices will continue to rise for sure thru the rest of summer and likely to the end of the year (although less steep during the latter parts) and I hope will trend down afterwards. There are many things we can do to counteract this, the question is will we? and the most likely is is not too much.

I agree with you but I have not found other sources with credible reasoning that say different from the market gurus. Lew Rockwell and other online newsletters I subscribe to are claiming March rather than January of 2009 will be the downturn onset. I'm not sure I buy that.
More than 1% of the stocks in the US market have 0 debts and PEs less than 5 but greater than zero by my estimate based on the MSN screens I have used. (Debt ratio and PE as low as possible and running separate screens for other variables and their combinations in all possible modes eyeballing for non-duplicates was my plan. But max and min dividend screens took me well past what I considered to be a critical figure.) I do not see how total collapse is possible with any stocks available that have dividend yields greater than 100% and there are such, not many but at least one. This situation confuses me.

Latherty · 05-26-2008, 12:30 AM

Quote:

Originally Posted by johnlocke

The problem with predictions of this sort is that they tend to create a panic and thus becomes somewhat self-fullfilling.

I would also observe that it isn't JUST oil prices that will create the increase in unemployment. It will be the rising cost of fuel coupled with a destabilized economy (driven by the housing/credit bubble). So what we will see here is not just that things are more expensive, but people will buy LESS of them because the they have no money.

I think you are right about the double forces. But I see it as coming from the fact that the lower dollar should pave the way for export expansion and import replacement. But the credit crisis makes it hard for businesses to be mobile enough to adapt to the rapidly changing environment. Without import replacement the only solution for consumers is to cut back. A reversal of the credit multiplier (where-by money changing hands creates capital for economic expansion) could spell a very difficult time for Americans.

This is the New Asian Century, I reckon...

william the wierd · 05-26-2008, 12:55 AM

Quote:

Originally Posted by Latherty

I think you are right about the double forces. But I see it as coming from the fact that the lower dollar should pave the way for export expansion and import replacement. But the credit crisis makes it hard for businesses to be mobile enough to adapt to the rapidly changing environment. Without import replacement the only solution for consumers is to cut back. A reversal of the credit multiplier (where-by money changing hands creates capital for economic expansion) could spell a very difficult time for Americans.

This is the New Asian Century, I reckon...

Asia is too dependent on exports to America and Europe. China, Vietnam, Thailand and Taiwan are dependent on exports. Japan, South Korea, Malasia, Singapore and India much less so. I suspect Botswana, Senegal, Paraguay and Peru will be the next pack of free market tigers. I don't see the Asian century scenario playing out

Latherty · 05-26-2008, 02:07 AM

Quote:

Originally Posted by william the wierd

Asia is too dependent on exports to America and Europe. China, Vietnam, Thailand and Taiwan are dependent on exports. Japan, South Korea, Malasia, Singapore and India much less so. I suspect Botswana, Senegal, Paraguay and Peru will be the next pack of free market tigers. I don't see the Asian century scenario playing out

China is using the export market for foreign currency, but what will emerge is the internal generation of GDP as the cities and industrial centers connect through transport infrastructure.

Take a read of this article, its quite informative:
Economics focus | An old Chinese myth | Economist.com

william the wierd · 05-26-2008, 02:43 AM

Quote:

Originally Posted by Latherty

China is using the export market for foreign currency, but what will emerge is the internal generation of GDP as the cities and industrial centers connect through transport infrastructure.

Take a read of this article, its quite informative:
Economics focus | An old Chinese myth | Economist.com

True as far as it goes but China is a net importer of capital investment from Singapore and Taiwan. China also underinvests in its military while having long and disputed borders with two nuclear powers whose peoples and governments do not like China. That lack of investment will have to end soon or Russia, India, Vietnam and potentially other neighbors may decide to give themselves lebensraum. Chinese inflation is going into double digits which destroyed the last Chinese government. The Brazilian solution that China has chosen does not have a good track record.