Inflation and Deflation at the same time - yes

[joe_momma]

This article crystallized an idea that had been rolling around in my mind for a few days - how is it that we're seeing both deflation and inflation at the same time?

Conclusion - the price of raw materials and finished products are dropping in many categories (over supply, excess world production capacity, increased production efficiency) even as labor costs rise (as taxes increase to cover the burden of expanding social services).

Third world countries have to be seeing a brutal hourly wage drop as each country tries frantically to undercut their neighbors (industrialized nations appear to have a pass for now via Quantitative Easing - though this will eventually stop working).


http://www.businessinsider.com/the-us-is-faced-with-both-rocketing-inflation-and-deflation-at-the-same-time-2010-6 (http://www.businessinsider.com/the-us-is-faced-with-both-rocketing-inflation-and-deflation-at-the-same-time-2010-6)


(snip)
The widening gap in this chart is a graphical representation of prosperity, where an hour's worth of labor buys more and more things. The difference between these two lines amounts to an increase in consumer purchasing power of a little over 100%, which in turn is solely due to a change in relative prices. The change in relative prices, in turn, is due primarily to the increased productivity of labor. The average worker today (and around the world) is able to produce far more than ever before with a given amount of work. In short, this chart is showing us just how much more valuable labor has become relative to things.
(snip)


In truth, BI is more of a "USA Today" economic website - pretty thin on research and critical thinking, but this was interesting enough to merit posting.

Best wishes

:)

[Heimdhal]

stagflation.

[joe_momma]

Not sure that is is "pure" stagflation - as we're seeing consumer (durable) goods drop in price while labor costs are increasing and wages remain stagnant.

My (faint) recollection of the 70's stagflation was that wages froze as prices increased across the board as wages remained frozen. (Primarily driven by the huge increase in oil prices started by the oil embargo, the demobilization from the Vietnam adventure, and the erosion of manufacturing jobs to Asia).

Here, we're seeing finished goods actually drop in price but fewer buyers acting on the opportunity. Market cannibalization? Manufacturers seem to be cutting prices to cover only the cost of goods sold (i.e., no profit but keeping the lights on in the factory).

[keehah]

A primer on stagflation: http://www.internetional.se/toft/stagflation.htm

http://www.internetional.se/toft/images/stagflationmodel.png

Lots of interesting quotes and facts and references: http://www.internetional.se/realitycheck.htm

[Libertarian_Guard]

http://www.youtube.com/watch?v=Wv4gpyfLF3s

[Silver Shield]

I have long been in the camp of hyper inflationary depression.
The contradictive nature of this can best be explained by what measuring stick are you using?
If you are using FRNs hyper inflation will be the result of QE2 and other keyesian responses to debase the currency.
If you are using Gold or Silver it will be a deflationary depression since all things will be dramatically cheaper and grind downward versus the increasing purchasing power of Gold and Silver.