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Started 1 year ago by JonMyers
Latest reply from christylwilliams

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JonMyers
HCMC ✈
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Have you noticed any radical price increases?

Recent headlines below:

Ã¢â‚¬Å“World Bank: Global food prices are rising to dangerous levelsÃ¢â‚¬Â

Ã¢â‚¬Å“Sysco declares force majeure, raises grocery pricesÃ¢â‚¬Â

Ã¢â‚¬Å“The J. M. Smucker Company Announces Coffee Price IncreasesÃ¢â‚¬Â

Ã¢â‚¬Å“Kraft warns on price increasesÃ¢â‚¬Â

Ã¢â‚¬Å“Kellogg says it will raise pricesÃ¢â‚¬Â

Ã¢â‚¬Å“Sara Lee to raise prices again on higher commodity costsÃ¢â‚¬Â

Ã¢â‚¬Å“Bridgestone To Raise PricesÃ¢â‚¬Â

Ã¢â‚¬Å“Goodyear will raise tire prices up to 6%Ã¢â‚¬Â

Ã¢â‚¬Å“Allstate rates rise; patience with execs runs thinÃ¢â‚¬Â

Ã¢â‚¬Å“State Farm wants 28 percent rate increase in Fla.Ã¢â‚¬Â

Ã¢â‚¬Å“Blue Shield to delay Calif. health rate hikes [for only 60 days]Ã¢â‚¬Â

Ã¢â‚¬Å“Wellmark [Midwest division of Blue Cross] Rate Hike ApprovedÃ¢â‚¬Â

Ã¢â‚¬Å“Abercrombie & Fitch CEO says retailer will have to raise pricesÃ¢â‚¬Â

Ã¢â‚¬Å“Sprint bumps up its smart-phone data plans $10 a monthÃ¢â‚¬Â

Ã¢â‚¬Å“Xcel Energy customers to see rate hikesÃ¢â‚¬Â

And then thereÃ¢â‚¬â„¢s this quote to tie it all together:

Ã¢â‚¬Å“Overall inflation is still quite low and longer-term inflation expectations have remained stable.Ã¢â‚¬Â Ã¢â‚¬â€ Ben Bernanke, February 9, 2011

If it wasnÃ¢â‚¬â„¢t perfectly clear before, it should be now. This man is either completely out of touch, or heÃ¢â‚¬â„¢s a conniving liar. In either case, you should not allow him to be responsible for your well being.

Inflation Doublethink

Posted 1 year ago #
Walker
The KLD / Downtown
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JonMyers wrote >>
Have you noticed any radical price increases?

I've heard quite a few local restaurant owners mention that some of their food costs have increased pretty significantly over the past year, but I think many of them are afraid to increase menu prices while still recovering from the recession. I imagine the same might be true for grocery stores for the time being. There will probably be a delay and a slow uptick on pricing for the end consumer.

Posted 1 year ago #
JonMyers
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Walker wrote >>

JonMyers wrote >>
Have you noticed any radical price increases?

I've heard quite a few local restaurant owners mention that some of their food costs have increased pretty significantly over the past year, but I think many of them are afraid to increase menu prices while still recovering from the recession.

Yeah, I've heard the same thing, and I think you nailed. They are afraid of raising prices due to the recession. It doesn't seem like a very sustainable strategy.

Posted 1 year ago #
Antonio

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JonMyers wrote >>
Have you noticed any radical price increases?

Recent headlines below:
Ã¢â‚¬Å“World Bank: Global food prices are rising to dangerous levelsÃ¢â‚¬Â
Ã¢â‚¬Å“Sysco declares force majeure, raises grocery pricesÃ¢â‚¬Â
Ã¢â‚¬Å“The J. M. Smucker Company Announces Coffee Price IncreasesÃ¢â‚¬Â
Ã¢â‚¬Å“Kraft warns on price increasesÃ¢â‚¬Â
Ã¢â‚¬Å“Kellogg says it will raise pricesÃ¢â‚¬Â
Ã¢â‚¬Å“Sara Lee to raise prices again on higher commodity costsÃ¢â‚¬Â
Ã¢â‚¬Å“Bridgestone To Raise PricesÃ¢â‚¬Â
Ã¢â‚¬Å“Goodyear will raise tire prices up to 6%Ã¢â‚¬Â
Ã¢â‚¬Å“Allstate rates rise; patience with execs runs thinÃ¢â‚¬Â
Ã¢â‚¬Å“State Farm wants 28 percent rate increase in Fla.Ã¢â‚¬Â
Ã¢â‚¬Å“Blue Shield to delay Calif. health rate hikes [for only 60 days]Ã¢â‚¬Â
Ã¢â‚¬Å“Wellmark [Midwest division of Blue Cross] Rate Hike ApprovedÃ¢â‚¬Â
Ã¢â‚¬Å“Abercrombie & Fitch CEO says retailer will have to raise pricesÃ¢â‚¬Â
Ã¢â‚¬Å“Sprint bumps up its smart-phone data plans $10 a monthÃ¢â‚¬Â
Ã¢â‚¬Å“Xcel Energy customers to see rate hikesÃ¢â‚¬Â
And then thereÃ¢â‚¬â„¢s this quote to tie it all together:
Ã¢â‚¬Å“Overall inflation is still quite low and longer-term inflation expectations have remained stable.Ã¢â‚¬Â Ã¢â‚¬â€ Ben Bernanke, February 9, 2011
If it wasnÃ¢â‚¬â„¢t perfectly clear before, it should be now. This man is either completely out of touch, or heÃ¢â‚¬â„¢s a conniving liar. In either case, you should not allow him to be responsible for your well being.

Inflation Doublethink

Bernake is out of touch with reality.

Look around the globe, riots are becoming normal over exploding prices.

Easier to mask it in the states, they reshape the packages, give you slightly less thinking you wont notice the difference.

Posted 1 year ago #
JoeMitchell

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domestic steel mills have substantial price increases annouced for 2011, which I find to be an accurate barometer for the economy

Posted 1 year ago #
JonMyers
HCMC ✈
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Antonio wrote >>

JonMyers wrote >>
Have you noticed any radical price increases?

Recent headlines below:
Ã¢â‚¬Å“World Bank: Global food prices are rising to dangerous levelsÃ¢â‚¬Â
Ã¢â‚¬Å“Sysco declares force majeure, raises grocery pricesÃ¢â‚¬Â
Ã¢â‚¬Å“The J. M. Smucker Company Announces Coffee Price IncreasesÃ¢â‚¬Â
Ã¢â‚¬Å“Kraft warns on price increasesÃ¢â‚¬Â
Ã¢â‚¬Å“Kellogg says it will raise pricesÃ¢â‚¬Â
Ã¢â‚¬Å“Sara Lee to raise prices again on higher commodity costsÃ¢â‚¬Â
Ã¢â‚¬Å“Bridgestone To Raise PricesÃ¢â‚¬Â
Ã¢â‚¬Å“Goodyear will raise tire prices up to 6%Ã¢â‚¬Â
Ã¢â‚¬Å“Allstate rates rise; patience with execs runs thinÃ¢â‚¬Â
Ã¢â‚¬Å“State Farm wants 28 percent rate increase in Fla.Ã¢â‚¬Â
Ã¢â‚¬Å“Blue Shield to delay Calif. health rate hikes [for only 60 days]Ã¢â‚¬Â
Ã¢â‚¬Å“Wellmark [Midwest division of Blue Cross] Rate Hike ApprovedÃ¢â‚¬Â
Ã¢â‚¬Å“Abercrombie & Fitch CEO says retailer will have to raise pricesÃ¢â‚¬Â
Ã¢â‚¬Å“Sprint bumps up its smart-phone data plans $10 a monthÃ¢â‚¬Â
Ã¢â‚¬Å“Xcel Energy customers to see rate hikesÃ¢â‚¬Â
And then thereÃ¢â‚¬â„¢s this quote to tie it all together:
Ã¢â‚¬Å“Overall inflation is still quite low and longer-term inflation expectations have remained stable.Ã¢â‚¬Â Ã¢â‚¬â€ Ben Bernanke, February 9, 2011
If it wasnÃ¢â‚¬â„¢t perfectly clear before, it should be now. This man is either completely out of touch, or heÃ¢â‚¬â„¢s a conniving liar. In either case, you should not allow him to be responsible for your well being.

Inflation Doublethink

Bernake is out of touch with reality.
Look around the globe, riots are becoming normal over exploding prices.

I see a lot of reports linking unrest in the Middle East to rising food prices and further, drawing connections to China's impact on the global food supply.

Posted 1 year ago #
Antonio

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Rising inflation, high unemployment.

http://www.bloomberg.com/news/2011-02-17/consumer-prices-in-u-s-rise-more-than-forecast-on-higher-food-fuel-costs.html

Posted 1 year ago #
JonMyers
HCMC ✈
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Antonio wrote >>
Rising inflation, high unemployment.
http://www.bloomberg.com/news/2011-02-17/consumer-prices-in-u-s-rise-more-than-forecast-on-higher-food-fuel-costs.html

Like most government's reports on inflation, I don't trust official US reports, which likely understate a rise in inflation.

Posted 1 year ago #
Antonio

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JonMyers wrote >>

Antonio wrote >>

JonMyers wrote >>
Have you noticed any radical price increases?

Recent headlines below:
Ã¢â‚¬Å“World Bank: Global food prices are rising to dangerous levelsÃ¢â‚¬Â
Ã¢â‚¬Å“Sysco declares force majeure, raises grocery pricesÃ¢â‚¬Â
Ã¢â‚¬Å“The J. M. Smucker Company Announces Coffee Price IncreasesÃ¢â‚¬Â
Ã¢â‚¬Å“Kraft warns on price increasesÃ¢â‚¬Â
Ã¢â‚¬Å“Kellogg says it will raise pricesÃ¢â‚¬Â
Ã¢â‚¬Å“Sara Lee to raise prices again on higher commodity costsÃ¢â‚¬Â
Ã¢â‚¬Å“Bridgestone To Raise PricesÃ¢â‚¬Â
Ã¢â‚¬Å“Goodyear will raise tire prices up to 6%Ã¢â‚¬Â
Ã¢â‚¬Å“Allstate rates rise; patience with execs runs thinÃ¢â‚¬Â
Ã¢â‚¬Å“State Farm wants 28 percent rate increase in Fla.Ã¢â‚¬Â
Ã¢â‚¬Å“Blue Shield to delay Calif. health rate hikes [for only 60 days]Ã¢â‚¬Â
Ã¢â‚¬Å“Wellmark [Midwest division of Blue Cross] Rate Hike ApprovedÃ¢â‚¬Â
Ã¢â‚¬Å“Abercrombie & Fitch CEO says retailer will have to raise pricesÃ¢â‚¬Â
Ã¢â‚¬Å“Sprint bumps up its smart-phone data plans $10 a monthÃ¢â‚¬Â
Ã¢â‚¬Å“Xcel Energy customers to see rate hikesÃ¢â‚¬Â
And then thereÃ¢â‚¬â„¢s this quote to tie it all together:
Ã¢â‚¬Å“Overall inflation is still quite low and longer-term inflation expectations have remained stable.Ã¢â‚¬Â Ã¢â‚¬â€ Ben Bernanke, February 9, 2011
If it wasnÃ¢â‚¬â„¢t perfectly clear before, it should be now. This man is either completely out of touch, or heÃ¢â‚¬â„¢s a conniving liar. In either case, you should not allow him to be responsible for your well being.

Inflation Doublethink

Bernake is out of touch with reality.
Look around the globe, riots are becoming normal over exploding prices.

I see a lot of reports linking unrest in the Middle East to rising food prices and further, drawing connections to China's impact on the global food supply.

China had experienced a severe draught this last harvest as well as Russia.

Recall last summer the bogs on fire around Moscow ?

Now you have the massive floods and super typhoon in Australia wiping out more and more. Growing corn to make ethanol is insanity, you spend more energy than you produce when you add it all up and they are taking millions of bushels of corn out of the market for it.

Insanity at it's finest.

Posted 1 year ago #
Walker
The KLD / Downtown
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JonMyers wrote >>
Yeah, I've heard the same thing, and I think you nailed. They are afraid of raising prices due to the recession. It doesn't seem like a very sustainable strategy.

Yeah, definitely not sustainable. Just trying to put off the inevitable for as long as possible.

Posted 1 year ago #
JonMyers
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Walker wrote >>

JonMyers wrote >>
Yeah, I've heard the same thing, and I think you nailed. They are afraid of raising prices due to the recession. It doesn't seem like a very sustainable strategy.

Yeah, definitely not sustainable. Just trying to put off the inevitable for as long as possible.

I remember when a coffee shop (Grounded) in the West Village I hung out in last summer raised bagel prices by $0.25. People got pissed, some made a mini-scene at the counter and eventually they had to put a sign up at the register explaining the price increase.

I think when the inevitable happens, which is price increases passed onto the consumer, it's not going to be pretty.

Posted 1 year ago #
gramarye
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For the restaurants, they're probably waiting for a market mover to make the first move; then all of them will follow suit in short order. The insurance industry works that way, too, when a given category of risk has gotten worse over the years (or simple inflation means that given losses cost more in nominal dollars to repair or replace).

For inflation generally: I saw the fact that domestic steel mills are increasing their prices, too. That is definitely an inflationary sign, and since it's in steel, it suggests that what's occurring is broader than simply the consequences of bad harvests in China, floods in Australia, etc. To the best of my knowledge, no major mining operations have been heavily disrupted. The increase in the price of gas at the pump is another significant sign.

Of course, the federal government *can* do a great deal to fight inflation. It probably *won't,* but it *can.*

On the monetary side, the Fed can begin to raise interest rates again, and can stop printing money to buy Treasuries. This is fairly direct inflation reduction: inflation is too much money chasing too few goods. Take money out of circulation, and you have a smaller amount of money chasing the same amount of goods.

On the fiscal side, reducing the federal deficit would be anti-inflationary, too.

The latter seems particularly unlikely to happen, or at least unlikely to occur quickly enough.

The other, more positive way to fight inflation is for the economy to simply become more productive. Again, inflation is too much money chasing too few goods. Reducing the amount of money out there is one way to fight it, but one would always prefer that inflation go down simply because there are more goods out there for it to chase. If you have a world with $10 and 1 apple, shifting to a world with $1 and 1 apple fights inflation, but you'd much rather accomplish the same thing by reaching the point of $10 and 10 apples.

Posted 1 year ago #
econJoe
Victorian Village
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Commodity inflation and "core" or "inertia" inflation are two very different things. Of course, grains, fossil fuels, and minerals are all important parts of our lives, but monetary policy based on the movement of such goods' prices is a poor approach. Such a discussion is beyond the scope of ColumbusUnderground, but I notice a lot of people turn the most uncontroversial things into the political. So bizarre.

Posted 1 year ago #
Antonio

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econJoe wrote >>
Commodity inflation and "core" or "inertia" inflation are two very different things. Of course, grains, fossil fuels, and minerals are all important parts of our lives, but monetary policy based on the movement of such goods' prices is a poor approach. Such a discussion is beyond the scope of ColumbusUnderground, but I notice a lot of people turn the most uncontroversial things into the political. So bizarre.

It's more so in other countries.

Turn on the TV and see the rioting worldwide.

Posted 1 year ago #
econJoe
Victorian Village
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Yes, Antonio, price increases in food can be very hard for the world's poorest, but food price increases have nothing to do with monetary policy. There are actual shortages of crop yields this year; it is not a monetary phenomenon.

Demand for food isn't very elastic either, so it takes huge price increases to decrease the quantity demanded by just a little bit. The price elasticity of grains, for instance, is on the order of about .04, which means that a 25% price increase only lowers quantity demanded by 1%. Well, this year, crop yields are 5% below average.

Posted 1 year ago #
rus

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http://www.slate.com/id/2285530/

Posted 1 year ago #
myliftkk
Columbus, OH
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@rus - that slate article is 50% garbage (speculation/low interest rates have very little to do with current food costs).

Krugman's covered this subject at length:

My usual reply is to point to the distinction between sticky and flexible prices, and argue that itÃ¢â‚¬â„¢s the sticky ones we need to worry about. But IÃ¢â‚¬â„¢ve realized something else: many of my correspondents donÃ¢â‚¬â„¢t seem to realize how little role commodity prices play in overall consumer prices. Not zero: oil prices are a large part of gasoline prices, which are in turn a major expense. But other things we buy, even if they seem to have a large commodity component, are actually made mainly out of labor and other sources of value-added.

Consider, for example, a humble loaf of white bread.

In December, says the Bureau of Labor Statistics, a one-pound loaf cost an average of $1.386. How much of that was the cost of wheat? As best I can tell, a bushel of wheat produces about 63 pounds of bread; wheat has lately been selling at around $10 a bushel; so weÃ¢â‚¬â„¢re talking maybe 16 cents of that loaf of bread, or less than 12 percent of the price, reflecting the cost of wheat.

Is Inflation Baked In?

So this isnÃ¢â‚¬â„¢t about a priori belief in markets; itÃ¢â‚¬â„¢s about whether we see the Ã¢â‚¬Å“signatureÃ¢â‚¬Â of a speculation-driven price surge.

Many people on the Ã¢â‚¬Å“speculators did itÃ¢â‚¬Â side like to point to financial data, especially large purchases of futures by various players. But food is a physical commodity, and plays in the financial markets can only move the price to the extent that they affect physical flows and stocks.

HereÃ¢â‚¬â„¢s my exotic model of the market for a physical commodity:

OK, how can speculation affect this picture? The answer is, it has to work through accumulation of inventories Ã¢â‚¬â€ physical inventories. If high futures prices induce increased storage, this reduces the quantity available to consumers, and it can raise the price. And you can, in fact, argue that something like this has been happening for cotton and copper, where there are apparently large and growing inventories.

But for food, itÃ¢â‚¬â„¢s just not happening: stocks are low and falling.

My experience in these debates is that the response consists of a blizzard of statistics about the size of forward positions, etc.. But remember, every purchase of a futures contract is also a sale Ã¢â‚¬â€ thereÃ¢â‚¬â„¢s someone on the other side. And neither the purchase nor the sale changes the physical quantity of the commodity available to the market.

Signatures of Speculation

WhatÃ¢â‚¬â„¢s behind the surge in food prices? The usual suspects have made the usual claims Ã¢â‚¬â€ itÃ¢â‚¬â„¢s all about the Fed, or itÃ¢â‚¬â„¢s all about speculators. But IÃ¢â‚¬â„¢ve been looking at the USDA World supply and demand estimates, and what stands out from the data is mainly that weÃ¢â‚¬â„¢ve had a huge global harvest failure.

Here are some percentage changes in world grain production between 2008/2009 and 2010/2011, according to the USDA estimates:

Overall grain production is down Ã¢â‚¬â€ and itÃ¢â‚¬â„¢s down substantially more when you take account of a growing world population. Wheat production (this time not per capita) is way down.

You might ask why a production shortfall of 5 percent leads to a doubling of prices. Part of the answer is that some kinds of demand are growing faster than population Ã¢â‚¬â€ in particular, China is becoming a growing importer of feed to meet the demand for meat. But the main point is that the demand for grain is highly price-inelastic: it takes big price rises to induce people to consume less, yet collectively thatÃ¢â‚¬â„¢s what they must do given the shortfall in production.

...

The USDA has estimates of price elasticities. For the United States, they put the price elasticity of demand for breads and cereals at 0.04 Ã¢â‚¬â€ that is, it would take a 25 percent rise in price to induce a 1 percent fall in consumption.

Soaring Food Prices

Posted 1 year ago #
gramarye
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Krugman's point seems fairly credible there--and is one reason that I'm disappointed to see that copper appears to be one of the exceptions, where both real and speculative inflation is pushing the price up. That's not because I have great needs for copper in the immediate future--but the activity of a certain criminal element in Canton, where I used to work, increased proportionately with the price of copper. That and the warmer weather could make it rough for urban residents trying to protect their wiring (and sometimes more).

I know, a bit of a digression, but seeing the point about copper brought it immediately to mind.

Posted 1 year ago #
myliftkk
Columbus, OH
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@jon - You can't conflate just any rising price and draw some sort of conclusion like "the world is burning". I've already pointed out, Krugman's dissected grain price increases, which has nothing to do with insurance price increases.

Specifically considering health insurance, I can tell you exactly why those are going up. It's because large institutional providers (whom I serve, are demanding and getting large increases in payments from insurance contracts who are in turn passing that on to their customers). For example, one major insurer just recently signed a contract increase of somewhere around 60%+ over four years with a large institutional provider. Why did the provider ask for the increase, because there's been about a 10% or so swing in gross patient populations from private insurance to Medicaid (which reimburses providers below cost) due to the recession and unemployment. Large providers, not ones to sit idly by if they have financial sense, are using their formidable pricing power to leverage upcoming private insurance contracts into more favorable financial terms. Insurance companies, however, aren't in the business of losing money either, so they're passing a majority of these new costs to their remaining customers.

If you have private insurance and your buddy loses his job, is forced out of private insurance and receives Medicaid coverage, your private insurance costs go up to cover the difference. It's that simple, and most probably don't even understand how it happened. That's why you're seeing insurers announcing large rate hikes. They're protecting they're own profit margins while they are signing large multi-year contracts with providers that protect theirs.

Posted 1 year ago #
JonMyers
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@myliftkk, I never said the "world is burning", though I did say I observed people becoming upset over a twenty-five cent rise in bagel costs.

Posted 1 year ago #