Inflation running at the fastest pace in 17 years

[torchbearer]

http://www.msnbc.msn.com/id/26195964

WASHINGTON - Consumer prices shot up in July at twice the expected rate, pushed higher by surging energy and food costs. The latest surge left inflation running at the fastest pace in 17 years.

The Labor Department reported Thursday that consumer prices rose by 0.8 percent last month, twice the 0.4 percent gain that economists had been expecting.

It marked the third straight month of oversized inflation increases following jumps of 0.6 percent in May and 1.1 percent in June. And it leaves inflation rising by 5.6 percent over the past year, the biggest 12-month gain since January 1991.

Core inflation, which excludes volatile food and energy costs, rose 0.3 percent in July, slightly higher than the 0.2 percent increase that economists had expected. For the past 12 months, core inflation has risen by 2.5 percent, the highest 12-month change since February.

The inflation surge presents a major problem for the Federal Reserve: Will inflation force it to start raising interest rates even as the economy struggles to avoid a recession?

The big rise in inflation left consumers even more squeezed. The Labor Department said that average weekly earnings, after adjusting for inflation, fell by 3.1 percent in July compared to a year ago, the biggest year-over-year decline since November 1990.

The Labor Department also reported that the number of newly laid off workers filing for unemployment benefits fell by 10,000 last week to 450,000. The decline was less than expected and showed the labor market remains under severe stress from the weak economy. The four-week average for claims rose to the highest level in six years.

On Wall Street, stock futures took a tumble after the report on worries about inflation.

The 0.8 percent rise in consumer prices reflected big increases for energy and food, a pattern that has been happening for months.

Energy prices jumped by 4 percent last month, driven upward by a 4.1 percent rise in gasoline prices. In July prices at the pump were 37.9 percent above where they were a year ago.

There could be some relief on the way, however, as gasoline prices, after hitting a record at $4.11 per gallon in mid-July, have been falling in recent weeks. They now average nationwide around $3.79 per gallon, according to the survey by auto club AAA and the Oil Price Information Service.

Crude oil prices are also down about $30 per barrel from a peak in early July and analysts are hoping that this decline will help relieve some of the pressures on energy costs.

Food costs shot up by 0.9 percent in July, reflecting higher costs for a wide variety of food products. Over the past 12 months, food prices have risen by 6 percent, reflecting surging commodity prices. The Agriculture Department reported this week that this year’s corn and soybean harvests will be among the largest in history, though, easing fears that had been fueled after heavy flooding in the Midwest in June.

The core inflation figure was driven higher by a big 1.2 percent jump in clothing costs, the biggest increase in this area since August 1998. Airline ticket prices, which have been surging because of higher fuel costs, jumped another 1.3 percent in July.

 

[Paul.Bearer.of.Injustice]

and PM's are down.

 

[torchbearer]

and PM's are down.

sounds like a good time to buy. cheap money and cheap metal.

 

[Sarge]

Rest assured the government will never acknowledge the true inflation.

Just add 5 percent more for now. Next year, one might have to add 10 percent more.

Take a look what is happening in Europe. They are up to their eyeballs in credit card debt.

I found this,

And the UK - The Pension Protection Fund (PPF) in Great Britain just announced that their aggregate funding position for UK defined benefit plans has dropped to a surplus of 8.3B Pounds at the end of June, from surplus of more than $53B Pounds just one month prior! That's not a warning sign. That's a big slap in the head. One of the UK's consulting firms, Redington Partners, released a report showing the FTSE100 pension plans have a $9B Pound deficit, down from a $21B Pound surplus. Startling numbers? You better believe it. And things get worse. Much worse.

How in the heck do they go down that much in one month? 45B Pounds down in one month. Robin Hood back in action?

 

[torchbearer]

Consumer credit has grown another 14 million in US too.
Meaning, they will be in more debt soon.

 

[acptulsa]

Consumer credit has grown another 14 million in US too.
Meaning, they will be in more debt soon.

Of course. They're just trying to cling to the middle class as long as they can. Credit cards are mighty leaky life preservers.

 

[torchbearer]

Of course. They're just trying to cling to the middle class as long as they can. Credit cards are mighty leaky life preservers.

Duck dinner mechanism. explained in this seminar: http://video.google.com/videoplay?docid=2618811931680926682

This is how I know G. Edward Griffin is speaking the truth. Everything he talks about in the above seminar is really happening.
After listening to this seminar, i am able to see and identify all the mechanism of the banking scam.

 

[Mister Grieves]

and PM's are down.

And stocks are up as well.

However, the manipulation cannot continue forever, and the correction is going to be harsh and swift.

Things are just being held in place long enough so certain players can quietly leave the table with their stolen loot, while Joe Flannel continues racking up debt " 'cause things have to turn around soon."

 

[Acala]

Question

I am strongly on the side of predicting continuing and escalating inflation. But I am trying to parse things out to make sure I fully understand what is going on. So I am trying to put together a list of factors influencing money supply. See what you think:


Deflationary Factors:
1. A reduction in people and businesses borrowing money from banks
2. People stashing cash in their mattress
3. People and businesses paying off their debt

Inflationary Factors:
1. People and businesses borrowing money
2. People and businesses defaulting on loans
3. Government distributing stimulus checks
4. Government bailing out banks
5. Government bailing out businesses
6. Government borrowing Fed money to cover its budget
7. Foreign holders of dollars using them to buy American goods and assets
8. Foreign holders of US treasuries cashing them in

Contingent Inflationary Factors:
1. The Fed pushing more credit into the hands of banks IF people and businesses then borrow from the banks


Am I missing anything? Am I wrong on anything? Comments? How do these factors balance out in your opinion?

 

[efiniti]

You're forgetting the banks writing off their bad loans as deflation. Remember, they count mortgages as assets. If a mortgage was worth 200k and the people who were paying the loan defaulted then the bank owns the house. But since housing is overabundant and nobody is buying them at their high prices then the price drops. If the market value of the house is now 100k then the bank just lost 100k worth of equity.

 

[Acala]

Not so sure

You're forgetting the banks writing off their bad loans as deflation. Remember, they count mortgages as assets. If a mortgage was worth 200k and the people who were paying the loan defaulted then the bank owns the house. But since housing is overabundant and nobody is buying them at their high prices then the price drops. If the market value of the house is now 100k then the bank just lost 100k worth of equity.

Let's see how this works.

If I borrow $100,000 to buy a house, the $100,000 is newly created money added to the money supply. I pay that money to the seller who uses part of it to pay back HIS loan and the rest he spends. So part of the money is now in circulation and part has gone back to the bank. But HIS bank then loans out 90% of what they got back. This goes on until more than 90% of the original loan is in circulation.

Suppose I pay back my loan. That takes the full value of the loan out of circulation. Until the bank loans it out again. But suppose I DON'T pay back the loan. Then the full value of the loan stays in circulation! Debt CREATES money. Paying back debt destroys it. By defaulting I have made the loan permanent as far as money supply is concerned.

So the bank gets the house. And just to make it extreme, lets say that I am angry at losing the house so I burn it down. Now the bank has squat. The bank loses the principle of the loan on its books. But so what? The money that was created for the loan is still in circulation, isn't it? The bank's loss may put the bank's reserve in peril, and thereby limit the amount the bank can loan to others temporarily, but they can fix that easily because so much Fed credit is available. They can borrow the money (freshly created by the Fed) to shore up reserves, pay next to nothing in interest on it, and get back to the business of creating money with loans.

Loss in asset value doesn't reduce the money supply although it may impair future creation of money because the asset can only secure a smaller future loan.

So it seems to me that defaults are actually inflationary while paying off loans is deflationary. What happens to the bank's balance sheet doesn't matter - especially when the Fed is virtually flooding them with cheap credit.

The big deflationary force seems to me to be the unwillingness of people to borrow the new money from the banks.

I am new to some of this so I could be wrong.

I'm reading the Creature from Jekyll Island and it is blowing my mind. I thought I had a pretty good understanding of this stuff. But I have a lot to learn . . .

 

[Sarge]

Wrong on the arson example. They find out it was you, and you go to jail.

Every mortgage requires you carry Fire and EC coverage with them as an additional insured to protect their mortgage interest.

They get paid, as they didn't set the fire, and you go to jail. They get their money.

 

[Acala]

Not the point

Wrong on the arson example. They find out it was you, and you go to jail.

Every mortgage requires you carry Fire and EC coverage with them as an additional insured to protect their mortgage interest.

They get paid, as they didn't set the fire, and you go to jail. They get their money.

You missed the point. I used the total loss of the equity by fire to try and make an extreme example of loss to the bank to show that even if the bank gets NOTHING back on the principle, the money supply is not contracted.

If the fire distracts you, think of a strongly depressed housing market so the bank can't recover much of its principle by selling. The same analysis applies.

 

[torchbearer]

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