Higher Food, Gas, and Cotton Prices on the Horizon

[Patriotxi]

While inflation has remained steady for the most part during this economic crisis, goods which are grown for food or clothing, known as commodities, are rising sharply in price. Bill Whitaker reports from Los Angeles.
http://www.youtube.com/watch?v=sv0F9_mMjEk

[teacherone]

honey, honey, poison.

truth, truth, lie.

vid blames supply problems (floods in pakistan, corn going to ethanol) and demand (china!) ignores the obvious truth--money printing.

msm up to its old tricks again.

[Kregisen]

honey, honey, poison.

truth, truth, lie.

vid blames supply problems (floods in pakistan, corn going to ethanol) and demand (china!) ignores the obvious truth--money printing.

msm up to its old tricks again.

It's not inflation though. Maybe prices on most goods are staying steady or increasing at the inflation rate but some foods are increasing in prices rapidly. I haven't researched this so I'm assuming the video is correct by saying it's simply more demand and less supply.

Maybe if the government stopped with its ethanal subsidization corn prices wouldn't increase so much.

[teacherone]

inflation targets at random. there is no way to predict which commodities will get hit.

right now there is obvious inflation in oil (high unemployment, low demand, high prices) and in china (QE1 and 2 money leaving our shores).

of course china receives all our dollars and then purchases goods bidding up prices---that's monetary and price inflation right there.

[Kregisen]

inflation targets at random. there is no way to predict which commodities will get hit.

right now there is obvious inflation in oil (high unemployment, low demand, high prices) and in china (QE1 and 2 money leaving our shores).

of course china receives all our dollars and then purchases goods bidding up prices---that's monetary and price inflation right there.


What are you talking about? Inflation doesn't target at random...it hits EVERYTHING. The whole money supply is increased, so anything with a price tag is inflated. You can't target inflation just like you can't target fat-loss.

[teacherone]

What are you talking about? Inflation doesn't target at random...it hits EVERYTHING. The whole money supply is increased, so anything with a price tag is inflated. You can't target inflation just like you can't target fat-loss.

you're contradicting yourself--i said quite clearly that you can't "target" inflation, that it acts at random.

inflation hit real estate in the 70s so we got the savings and loan bubble in the 80s which burst causing a recession.

inflation hit tech stocks in the 90s--so we got a tech stock bubble which burst causing a recession.

then inflation hit housing in the 00s--so we got a housing bubble which burst causing a recession.

now china is raising rates because the fed's hot money is heating their economy too fast.

china is purchasing certain commodities with its dollars, investment banks are doing the same.

some commodities are spiking. some aren't.

those that are, are doing so because of monetary expansion followed by inflation.

[Kregisen]

you're contradicting yourself--i said quite clearly that you can't "target" inflation, that it acts at random.

inflation hit real estate in the 70s so we got the savings and loan bubble in the 80s which burst causing a recession.

inflation hit tech stocks in the 90s--so we got a tech stock bubble which burst causing a recession.

then inflation hit housing in the 00s--so we got a housing bubble which burst causing a recession.

now china is raising rates because the fed's hot money is heating their economy too fast.

china is purchasing certain commodities with its dollars, investment banks are doing the same.

some commodities are spiking. some aren't.

those that are, are doing so because of monetary expansion followed by inflation.

The inflation the federal reserve creates is demand-pull inflation. It affects everything equally. This does increase food prices but does not explain why food prices are increasing so much more than other goods, because inflation is a variable for both sides.

China's economy is simply growing....it's not because of the fed.

[teacherone]

The inflation the federal reserve creates is demand-pull inflation. It affects everything equally. This does increase food prices but does not explain why food prices are increasing so much more than other goods, because inflation is a variable for both sides.

China's economy is simply growing....it's not because of the fed.

this is totally untrue and have already proven it... but you can stick to your faulty beliefs.

i will just reiterate for the lurkers-- one can never predict which products price inflation will affect--after the monetary expansion, after the price signals are distorted, the market allocates the money as it sees fit.

mal-investment occurs but not evenly across the board; this is obvious from recent history--i have given examples above.

china is of course VERY worried about QE2 distorting its economy. china knows that the hot money is coming its way and just this very weekend raised interest rates to combat the wave of new dollars coming onto its shores. china also very vocally denounced QE2 on the world stage and will take any measure to stamp down inflation CAUSED by the fed's money printing distorting emerging markets.

[Kregisen]

this is totally untrue and have already proven it... but you can stick to your faulty beliefs.

i will just reiterate for the lurkers-- one can never predict which products price inflation will affect--after the monetary expansion, after the price signals are distorted, the market allocates the money as it sees fit.

mal-investment occurs but not evenly across the board; this is obvious from recent history--i have given examples above.

china is of course VERY worried about QE2 distorting its economy. china knows that the hot money is coming its way and just this very weekend raised interest rates to combat the wave of new dollars coming onto its shores. china also very vocally denounced QE2 on the world stage and will take any measure to stamp down inflation CAUSED by the fed's money printing distorting emerging markets.

First off, you have the strangest font. Each sentence has like a paragraph of coding.....

How have you proven it? Assuming Most of this new money is buying goods in china, which from there buys mostly food, then what happens with the money after it buys the food?

It gets put back into the economy, and demand for EVERYTHING goes up. That's why given a little time, inflation affects EVERYTHING. You can't single one one thing. Food has been going up over this past year, and continues to skyrocket. That's not due to demand-pull inflation. (the inflation federal reserve creates)


That's strictly higher world demand. Are you saying other countries like China and India aren't getting richer very fast right now?

[VBRonPaulFan]

First off, you have the strangest font. Each sentence has like a paragraph of coding.....

How have you proven it? Assuming Most of this new money is buying goods in china, which from there buys mostly food, then what happens with the money?

It gets put back into the economy, and demand for EVERYTHING goes up. That's why given time, inflation affects EVERYTHING. You can't single one one thing. Food has been going up over this past year, and continues to skyrocket. That's not due to demand-pull inflation.

you're under the faulty assumption that the newly minted money will be equally spent across the board, which it WILL NOT BE. it'll flood into certain 'in demand' areas of the economy, artifically inflating and affecting those prices first, and then it'll slowly creep into the rest of the market. inflation isn't an across the board thing... this rush of new money will only inflate prices on goods/services that it is used on first. you'll see a spike in the areas where it is used first rapidly...

[Kregisen]

you're under the faulty assumption that the newly minted money will be equally spent across the board, which it WILL NOT BE. it'll flood into certain 'in demand' areas of the economy, artifically inflating and affecting those prices first, and then it'll slowly creep into the rest of the market. inflation isn't an across the board thing... this rush of new money will only inflate prices on goods/services that it is used on first. you'll see a spike in the areas where it is used first rapidly...


Right, I expanded on this when you were typing this post. The new money will affect prices of some products first, but given a little time, will affect everything. This isn't some little community, this is the nation. If you pour water into one side of a pan, it'll quickly rush across the whole pan. As soon as the food producers receive the new money, they spend it on other expenditures. What teacherone is arguing is a very small sliver of what the culprit is. It's like saying the interest on our national debt is what's putting us in deeper debt, when it's only 5% of the federal budget.


Food and oil prices are going up rapidly MAINLY because world consumption is going way up. Not really sure why someone is arguing against this....

[Polskash]

You are incorrect Kregison.

From "What Has Government Done to Our Money", Rothbard writes:


Inflation has other disastrous effects. It distorts that keystone of our economy: business calculation. Since prices do not all change uniformly and at the same speed, it becomes very difficult for business to separate the lasting from the transitional, and gauge truly the demands of consumers or the cost of their operations.


It would be totally unrealistic to believe that all prices would immediately and uniformly increase as a result of money printing. In order for this to hold, when money is printed, it would have to spontaneously appear in the pockets of ALL individuals in the market. Those individuals would then have to have their preference scales remain unchanged, then go out and all spend that money at the same time. Do you see the problem?

[Polskash]

Now that you've cleared up what you meant, it makes more sense.

[Kregisen]

You are incorrect Kregison.

From "What Has Government Done to Our Money", Rothbard writes:


It would be totally unrealistic to believe that all prices would immediately and uniformly increase as a result of money printing. In order for this to hold, when money is printed, it would have to spontaneously appear in the pockets of ALL individuals in the market. Those individuals would then have to have their preference scales remain unchanged, then go out and all spend that money at the same time. Do you see the problem?

You're playing with words here. Of course not everyone starts off with the new money. It gets spent somewhere (in this case, china gets a hold of it then buys food with it), and within a couple of transactions later, after the food producers get it and spend it, etc. (which doesn't take long at all...how long do you go before spending money?), the money gets spread everywhere else.

The issue we're discussing is the food prices which have been skyrocketing for over a year. That's my point. That's why it's illogical to say it's because of inflation. By the time a year rolls around, inflation won't have caused food prices to have gone up 15 times the rate of all other goods.

Everyone understand now?

[teacherone]

you're still a bit off.

inflation causes bubbles--mal-investments in certain sectors of the economy: tech stocks, housing, or commodities.

the very definition of a bubble is that one sector is overvalued, over priced. it is only because of inflation that a bubble can form.

right now you are seeing a bubble in emerging markets, mainly the BRIC. if their "economy" is growing (GDP) it is due to hot money coming out of the fed.

as the reserve currency of the world we export our inflation the world over.


QE2 may put huge pressure on emerging economies
By Nie Peng (chinadaily.com.cn)
Updated: 2010-11-08 14:40

The US Federal Reserve's second round of quantitative easing, or QE2, will bring huge challenges to emerging economies, Vice Finance Minister Zhu Guangyao said at a seminar on Nov 6, the Shanghai Securities News reported on Monday.

On Nov 3, the Fed announced its plan to purchase $600 billion worth of government bonds to prop up the ailing economy.

Zhu said the current US trouble resulted from the absence of the "bolstering" role of capitals to the real economy, instead of insufficient liquidity.

He warned newly-added liquidity would flood the US stock market as well as flow into emerging markets to seek profits, posing great challenges to those economies. Many of them would have to take measures to restrict capital inflows, Zhu added.
Chinese economists are worried that excessive liquidity as a result of QE2 would flow to emerging countries including China and Brazil, the paper said.

Zhou Xiaochuan, governor of the People's Bank of China, the central bank, said earlier at an economic forum that QE2 was "not likely" to benefit the global economy although it might help the US boost employment and keep a low inflation rate.

Zhou said China will work to prevent abnormal capital inflows by stepping up foreign exchange controls and maintaining overall liquidity at a proper level.
http://www.chinadaily.com.cn/bizchina/2010-11/08/content_11517091.htm



Will QE2 Create a Bubble in Emerging Markets?
By Carla Fried


Well, it turns out the Federal Reserve’s $600 billion quantitative easing policy known as QE2 isn’t just controversial on our own turf. Economic leaders in emerging markets are none too pleased with Ben Bernanke’s big gamble, either. The fear is that the Fed’s QE2 policy will set off a bubble in emerging markets. The U.S. dollar has already taken a big hit because of QE2, igniting currency-war saber rattling that should be a featured event at the upcoming G20 summit later this week. And the longer-term concern is that if, as the Fed intends, businesses and investors do grow sick enough of the paltry yields available in U.S. fixed income
investments and look for alternatives, the strong-growth economies in emerging markets will see big inflows.

http://moneywatch.bnet.com/economic-news/blog/daily-money/will-qe2-create-a-bubble-in-emerging-markets/1531/



QE2 to speed triumph of emerging markets
OCT 12, 2010 07:49 EDT

ECONOMY | FEDERAL RESERVE | QUANTITATIVE EASING
While “decoupled” is not the same as “immune”, look for growth and investment performance in emerging markets to be better than in the sclerotic developed world.

In the short term emerging markets will be free riders as the U.S. launches the second round of quantitative easing. A portion of the stimulus generated by “QE2″ will inevitably leak cross border, while the risks of the gambit will fall almost entirely on the U.S. and on dollar-denominated assets.

QE2 is designed to work in two ways: to stimulate investment by making it cheaper to borrow money and to lift consumption by boosting asset prices.

To the extent it succeeds a goodly portion of that consumption will be goods and services purchased by the developed world from emerging markets.

As for investment, in the absence of capital controls U.S. corporations that choose to invest using borrowed money can be counted on to put a lot of the money to work where opportunities are best: emerging markets.

http://blogs.reuters.com/great-debate/2010/10/12/qe2-to-speed-triumph-of-emerging-markets/

[Kregisen]

So you're saying it's just one big bubble and as soon as QE ends it's gonna pop?

I'm also still not understanding how that money won't travel into other sectors of the economy within a year. Explain.

[teacherone]

i don't know when it will pop. no one does. that's why central planning always fails.

my guess is that the US economy is way too fragile to absorb the inflation that's coming.

18% unemployment? huge foreclosure rate? and oil above $90?

something's gotta give. if i had to wager, the US will slide back into a serious recession and suffer stagflation for years.

anyway, the point of my post three pages back is that "Inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output." (friedman)

the video in the OP only looks at the symptom of the inflation (price increases) instead of the cause (monetary expansion).

[Kregisen]

I'm still not understanding how you concluded that the food prices are in fact a bubble and isn't caused by increased world demand.

[teacherone]

I'm still not understanding how you concluded that the food prices are in fact a bubble and isn't caused by increased world demand.



then you don't understand how inflation occurs--

inflation occurs when the monetary base expands.

more money in people's hands chasing the same amount of good leads to increased prices.

that's inflation.

[Kregisen]

then you don't understand how inflation occurs--

inflation occurs when the monetary base expands.

more money in people's hands chasing the same amount of good leads to increased prices.

that's inflation.

And while annual inflation is around 3% or so, food prices have gone up as much as 100%. You claimed this was due to inflation and haven't backed it up.

[akforme]

I think it's a relationship issue, things we need will become more expensive while things we want will cost less. The prices of both might go up but at different speeds. I've lowered my prices because my biz isn't a needed commodity. My suppliers have lowered their prices as well so as long as I can make money I'm not raising.

[teacherone]

And while annual inflation is around 3% or so, food prices have gone up as much as 100%. You claimed this was due to inflation and haven't backed it up.

really? i swear to god i said multiple times on the first page that inflation attacks different sectors of the economy differently.

let's see, home prices collapsed, people are unemployed...hmmm what purchases will they need to make with their money...

why! food and oil. conveniently left out of the government CPI numbers you cite.

how else would these prices rise given the world's second worst recession?

[Kregisen]

really? i swear to god i said multiple times on the first page that inflation attacks different sectors of the economy differently.

let's see, home prices collapsed, people are unemployed...hmmm what purchases will they need to make with their money...

why! food and oil. conveniently left out of the government CPI numbers you cite.

how else would these prices rise given the world's second worst recession?

You're saying the housing bubble wasn't caused by giving out way too many loans to people who couldn't afford them? You're saying it was just inflation?

And now food prices are just inflation too? There aren't growing economies around the world? Everyone else is wrong?

Really?

[teacherone]

my god...this thread is going around in circles.

i'm out kriegsman.

best of luck!

[teacherone]

arghhhhhhhhhhhhh okokok

for fuck's sake---where did the banks get the money to loan out?

and why were the loaning out to anyone and their brother?

from the fed---for cheap.

that's inflation buddy.

low rates increase money supply.

more money chasing same goods = higher prices.

higher prices = price inflation.

enough already.


You're saying the housing bubble wasn't caused by giving out way too many loans to people who couldn't afford them? You're saying it was just inflation?

And now food prices are just inflation too? There aren't growing economies around the world? Everyone else is wrong?

Really?

[Romulus]

With the oil bubble.. everyone was blaming 'demand'. Demand just does not appear overnight and drive up prices to record levels. That is manipulation, of either the market or the money supply. Demand is often the scapegoat and used to rationalize and hide what inflation is doing.

It's not demand that's driving food prices up. Demand does not surge like that.

[teacherone]

try telling that to junior here.

more concisely--inflation creates false demand in products by hiding pricing signals.


With the oil bubble.. everyone was blaming 'demand'. Demand just does not appear overnight and drive up prices to record levels. That is manipulation, of either the market or the money supply. Demand is often the scapegoat and used to rationalize and hide what inflation is doing.

It's not demand that's driving food prices up. Demand does not surge like that.