Also on the commodity market: crude oil barrel price down to
nearly $101; a rapid decrease from a week ago when it hit $110/barrel. Gasoline
supplies and oil supplies are enormous in the USA at this moment while demand is
down. Same for the rest of the global oil market. Thus: no inflationary
pressure for crude oil.
Gasoline pump prices: some analysts are pushing the panic
button and claiming inflation is rising and gas pump prices are the
indicator. Hogwash. The above
information denies and basis for their panic. And consider that pump prices are
up only because traders are bidding up the prices because they want them there,
and they are highlighting Middle East tensions between Iran and Israel ,
and Iran ’s
threats over the Straits of Hormuz. Gasoline prices in America are
thus manipulated to higher levels because of intrusive behaviors not related to
supply and demand; only fears of that. Thus: inflation should be zero at the
pump. It isn’t, but that has nothing to do with the real world, just market
hedgers.
The market analysts I read feel inflation is a problem and
the Federal Reserve needs to do something about it, namely raise key interest
rates. Again, Hogwash. Those rates go up
only when the Fed needs to dampen the economy and save us from runaway
inflationary pressures. Does anyone
really see any such pressure?
There are a few consumer related pricing problems but those
are not related to the overall economy, just the oddities of specific markets;
to wit:
- Rents are rising for homes and apartments; this is due to competition for such space as home ownership declines via foreclosures and owner ‘walk-aways;’ prices will ease as empty homes are added to the rental market
- Food products are more complicated; some produce is out of season and prices rise accordingly; some product price is rising due to the cost of fuel for delivery; neither is a trend supportive of inflation; could be but not yet
- Clothing prices remain low and controlled in the market unless you are speaking of designer duds or unique fad items; low prices come from global competition!
- Auto prices are stable as the industry globally works its way back to a healthy position; competition keeps price increases modest
- Transportation costs are rising (air and train fares) primarily due to fuel costs and the need to replace aging infrastructure and equipment; these are normal
- Home pricing remains depressed due to huge supply and low demand; this will change once employment returns to higher levels and disposable incomes allow consumers to re-enter the housing market
If fuel/natural gas/oil prices continue soft or downward,
some of the above pricing will soften as well. Thus, inflation is not a current
problem and one issue the Federal Reserve does not have to worry about.
Another economic concern: private employers are expanding
employment as they retool for a new, refreshed economy. Their economic
forecasts are positive. This is very
good news and one which cancels the earlier doom and gloom forecasts based on
lost jobs.
The real job losses in the past two years has been with
government employers. As tax revenues declined at nearly every level of
government – local, regional, state and federal – jobs were eliminated
permanently and temporarily. Re-employment in these areas have not yet resumed.
When they do the unemployment rates will fall.
Another word on employment data, and this will come as no
surprise to regular readers of this blog.
The recession we have been experiencing is more than a cyclical
downturn. It is also a restructuring of
the economy. Obsolete employers are out of business or in the process of their
final demise. Retailing is adjusting madly to etrade dynamics. Retail will not
return to old levels; sales will be from many sources but an increasing
Internet scene for sure.
Old jobs will likely not return. New jobs will be defined
and the unemployed will need to adjust their career paths accordingly. I’ve
stated that before; you know it is true. The only unknown is when and by how
much. And in which exact sectors.
Global economics will continue to compete with our nation’s
abilities and outputs. That is good for consumers inasmuch as cost of living
components will have price dampening competition working in their favor.
The economy is working its way out of its doldrums. It could
have done so much faster if the entire country had collaborated and worked
together. But such is the state of our political gridlock that that behavior is
absent.
Inflation? Not likely
with the exception of specific products and markets. That’s good news indeed. So please beware of
‘pretend facts’ as they compete with the real facts.
March 31, 2012