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Inflation, Deflation and “Got You” Prices
George Washington Blog
Wednesday, July 15, 2009
Scott Patterson writes in the Wall Street Journal that we won’t get inflation until unemployment is down below 5%:
A rule of thumb is that inflation doesn’t become sticky until the unemployment rate dips below 5%…
“I see very little prospect of accelerating inflation” partly because of the employment outlook, said Mark Zandi, chief economist of Moody’s Economy.com. “I don’t think the risk shifts toward inflation until 2011, or even 2012.”
Because even Obama and Larry Summers think that unemployment will probably rise (and see this), that argues against inflation happening any time soon.
Renowned economist Dr. Lacy Hunt is calling 15-20 years of deflation.
Ellen Brown, Tyler Durden and Mish all argue that the break down in the securitization markets ensures deflation.
And James Perry, Phil’s Stock World, and Niels Jensen all give their own arguments about why deflation will rule for some time to come.
On the other hand, a lot of very smart people are predicting runaway inflation given the amount of money the feds are printing. For example, Marc Faber is 100% guaranteeing hyperinflation at some point, but thinks it might not happen for years or even decades.
“Got You” Prices
You know from experience that when you’re in a national park, movie theater or some other contained place, prices are higher than elsewhere.
Basically, the stores in such places know you can’t go somewhere else, so they can charge you what I call “got you” prices. In other words, you’re a captive buyer, and they’ve “got you”.
(ARTICLE CONTINUES BELOW)
I’ve noticed the same thing with health care costs. My family’s health care premiums increased 6% last year – on top of the 6% increase the year before.
This is “got you” prices. The health care industry knows that Americans are desperate for health care, and that if they raise prices, people will pay.
I’ve previously pointed out that inflation versus deflation is not necessarily an all-or-nothing proposition: we can have inflation in some asset classes and deflation in others.
So my current theory is that we will have deflation for some time in most asset classes, but inflation in the “got you” classes of basic necessities that everyone need – food, energy, and health care.
In a tough economy, companies that can squeeze broke consumers for more money will do so.
See this for more on the great inflation versus deflation debate.
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20 Responses to “Inflation, Deflation and “Got You” Prices”
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July 15th, 2009 at 5:21 am
Good reporting on opinions and guesses of various people.
Our debt is large and is bought by thoses willing to believe they will be repaid. Future events alter thinking of those debt buyers. When they think buying US debt is riskier then they ask for more interest. If the Treasury needs to issue more debt they have to raise or lower interest on the issues to sell.
Everyone buys bonds and bills. The question is what will the interest be on future issues?
If US debt looks shaky then long term interest on bonds and bills will rise like during 1978-1980 period. I used to get 15% on 6 months cds.
In my opinion we will have much higher inflation from this and shortages in comodities which everyone needs just to make ends meet…. food, energy, drugs on and on.
When will this occur?
It’s the 15 trillion dollar question. Supply and demand always is and always will be the determinator even with artificial interference which does effect timing, depth and so on.
Most logical hedges are things people need to just get by. If you have abundance then you may live well and barter well.
Simply!
IT
July 15th, 2009 at 6:35 am
LET THE SQUEEZING BEGIN
July 15th, 2009 at 7:16 am
Oh dear. The situation is bad. You must click on my ad. Look for me, Max the orange HOMEGAIN gorilla. Enter zip code.
Madman Reply:
July 15th, 2009 at 7:34 am
Half the website is effectively ad’s now… either for Alex’s stuff, or his sponsors.
July 15th, 2009 at 7:32 am
We have had serious INFLATION. Whereas last year I spent £25 for the same mix of veg and fruit and stuff, this year it is £40. That’s inflation. Not to mention massive increases for transport, energy.
July 15th, 2009 at 8:57 am
I give you the evidence right here:
http://cheapogroovo.vox.com/li.....hoods.html
July 15th, 2009 at 10:29 am
Point well noted, but tell us somethng we dont know. Oil companies know we depend on their product for every facet of our daily lives so the increase and decrease prices at their likeing. Not based on justifications of “demand” and shortages, but rather because they can. How was it that before it was “accepted” that we were in a recesion they were allowed to charge us nearly $5 USD / gal, justified it, then whe we officially hit recesion or depression they loweres prices down to like $2 USD? thats alot of margin to be able to play with and tells me that the powers that be……….Got us!!!! with Oil.
July 15th, 2009 at 10:29 am
So aren’t you gold and silver bugs glad you stocked up a couple of years ago?
I mean didn’t all these assclowns say that we were heading towards a complete collapse of the USA and that the only thing you needed to be safe was Gold! (or silver).
Again I ask now aren’t you glad you purchased GOLD?
It’ll be real useful in about 3, 5, or 10 years after you sold it back at a %50 loss. You’ll probably get rid of all your GOLD around the time that Hyper-Inflation starts.
Thanks Alex for all your Paranoia and Hype.
Not to forget that you’re fucking mentally ill and your buddy Ted is a socio-path if I ever saw one.
Thanks Again for helping me dig my hole.
armed druggie Reply:
July 15th, 2009 at 11:47 am
joe from richmond, if you have been listening long term to alex he told us to buy gold way back in 2000, for that I am very happy, and we sold it all at the peak, you know, now that everyone including JP morgan is saying to buy gold that should be a contrary indicator, can’t blame alex for that. and alex hasn’t been saying buy gold exclusively recently, his advice has been qualitatively different to include food storage and seed storage and various stockings up off staples such as shoes as well as metals.
July 15th, 2009 at 11:19 am
I bought huge amounts of gold back in 1998 at $270 an ounce.
Along with some oil investments and investing in the Euro.
Nothing has paid off as well as these three investments over a ten year period. And they are all holding their value just fine.
Should I see something new on the horizon then I will transfer my wealth to that vehicle.
But paper is dead…all paper assets are actually debt instruments.
The time has come to own, in your physical possession, commodities.
Gold will fluctuate in the $1000 to $1500/an ounce range for a long time. It may drop down to $500 every now and then, but will again rise to this firm range.
Unemployment will rise because the problems with the U.S. economy, companies and banks are even bigger than you think they are.
July 15th, 2009 at 11:42 am
I don’t know if I agree with desperate for health care, most of the healthcare we get in america is prescriptions for symptomology, and we’ve just been thru a lot about the baxter thingy, I am afraid of healthcare in america, not desperate for it, but maybe that’s just me.
July 15th, 2009 at 12:06 pm
I remember hearing alex saying EVERYDAY for MONTHS that “It’s Over Folks”, in referring to the economy and all the other BS. He then had someone from the GCN owned Midas Resources come on talk up gold and how cheap it was and that its only going to go up in value. Better buy now while you can because its getting real scare. There’s only so much left … blah blah blah.
I SERIOUSLY DOUBT THAT THAT ASSCLOWN TED ANDERSON REALLY THINKS THAT GOLD IS “GOING TO THE MOON”!!! If we have deflation for 5 or 10 years the DOLLAR will be worth a whole lot more than a hunk of gold or silver.
THE DOLLAR ISN’T GOING ANYWHERE BUT UP!!!!!!!!!!!!! for the next 5 to 10 YEARS NOT DAYS, WEEKS, or MONTHS BUT YEARS!
THE SOONER YOU PEOPLE REALIZE THAT ALEX’S WHOLE SHOW CENTERS AROUND MAKING YOU FEEL UNEASY ABOUT THE FUTURE AND INVESTING IS GOLD IS THE ONLY WAY TO PROTECT YOURSELF THE BETTER OFF YOU’LL BE.
You’ve been saying this long enough and so far NO or very little inflation and definitely NOT medium, high, super or HYPER-INFLATION.
What will we continue to have for the next 5 to 10 years??????????????????
DEFLATION!
JUST IN CASE YOU DIDN’T GET THAT
DEFLATION!
Don’t throw your CASH away you’re going to need it.
THESE PEOPLE DON’T GIVE A CRAP ABOUT YOU.
THEY WANT YOUR FUCKING MONEY – PERIOD.
Aunty Semite Reply:
July 15th, 2009 at 12:27 pm
well said joe. I agree.
I think it’s disgusting manipulation that Alex features his boss as a financial “correspondent” – when really it’s just an advert for Anderson’s COIN SALES. It isn’t even gold and silver – it’s coins…..the value comes from them being “collector’s coins” – not because of the silver and gold content.
And yes – the whole deal is to make people fearful about the dollar…….so that they’ll worry, and change their dollars into Anderson’s coins.
And funny thing is, Alex always criticises the powers that be for the dollar’s fall in value – but what does Alex do if not reduce the value of the dollar? He says day after day that the value’s going down – and he tells his listeners to DUMP DOLLARS – AND BUY SILVER. That’s only going to further dollar decline, and will make a nice wedge for Alex on the side too. Hell – ain’t that patriotic? Making money out of scaring people, helping devalue dollar, talking-up gold price….and selling over-priced dumbass coins…….not real bullion.
And as you say – why is Anderson and GCN/Alex selling it all if it’s so valuable? Does Alex let you buy his crappy videos with such coins? Or does he take “worthless” dollars, VISA payments, cheques? Does he cash them at Wells Fargo? Yes. DOLLARS ONLY. Hmmm.
July 15th, 2009 at 12:08 pm
If TED ANDERSON really thinks that GOLD and SILVER are “GOING TO THE MOON”
WHY THE HELL IS HE SELLING IT????????????
Because it isn’t !
He needs cash!
July 15th, 2009 at 12:19 pm
“You know from experience that when you’re in a national park, movie theater or some other contained place, prices are higher than elsewhere.”
—–
Funny – but that sounds like an argument *FOR* globalisation.
July 15th, 2009 at 12:22 pm
Joe, if indeed you did buy gold a couple of years ago, like 2006, you have doubled your money, same with silver. And to see that gold was, lol, “in a tailspin” because it dropped to $900 a week ago. It has risen $40 per ounce in just a couple of days (that’s right, in three business days it is up $40 to $941 as of right this second). Do not be fooled, if you have already prepared with needed items like food, seeds, power, you are INSANE not to hunt for good deals on silver and gold. Right before the Zimbabwe dollar completely inploded in April, it took $500,000,000,000,000 (yes, 500 trillion) to buy 3 eggs. Now that the currency has completely failed, EVERYONE is panning for gold, they can support their family on 3 grams of gold nuggets a day. If they had bought real, pure minted gold, they would rule the country. Gold and silver will always work. Always. It may take a little time, but our time is comming.
July 15th, 2009 at 12:40 pm
Who in their right mind would buy gold and silver coins from Ted Anderson? Pure .9999 from your local coin shop is the best deal you will find. period.
July 15th, 2009 at 1:14 pm
There is no avoiding the economic fundamentals associated with the printing of money instruments that are not backed by some finite commodity. Inflation is the only way to deal with it. Do you think the Government is going to suddenly recall the trillions of dollars and then burn them so they are out of circulation? Gold is a hedge, and nothing should be used to vest 100 percent in; not land, securities or commodities; but gold will appreciate versus the dollar and the dollar will for damn sure appreciate against foreign currencies…for a while.
I have read (maybe on this site somewhere) that if China alone were to convert only 5 percent of its currency reserves into gold, it would demand the entire glodal production of the metal for one year.
What does that say about paper money?
July 15th, 2009 at 11:44 pm
Finally someone who has defined the inflation/deflation game in America. The necessities are inflated while chinese made toys, clothes, are cheaper than a school textbook. Great Article !
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