Here Comes Inflation...Get Ready for it

Discussion in 'Politics' started by Flashy, Jun 10, 2009.

  1. Flashy

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    when runaway spending occurs....and oil prices rise...ole mr inflation comes back.

    While everyone has been thrilled by the 40% equity rally, nobody has seemed to notice gold has climbed 19% since January...nobody has seemed to be watching oil prices go over 71 per barrel

    a 1.9 trillion dollar deficit, only 10% of the stimulus money spent, soon to hit us with an extra 500 billion for the down payment on the health care plan...the spending is out of control, the budget is completely screwed inside out

    Bernake has been trying to keep mortgages low, to aid the recovery, and they are rising and the rate is rising...FAST. The Fed needs low interest rates to stabilize the housing market and ease the squeeze on businesses...however...



    In April, 30 year fixed rates were at 4.85%...end of last week...5.57%


    10 Year Treasurie yields were at 2.2% in January...Today?...3.95%


    Bond investors are cruising in to get the higher yields...the government is pushing up the yield rates to attract buyers for this mountain of money they are desperately injecting into the economy, but bond investors are only nibbling...the yields are going to have to keep going up to attract buyers, and the higher they go, the more interest our government needs to pay out.




    All of these factors are pointing towards high inflation, which is going to totally screw up the housing market even worse, since mortgage rates will go up, causing housing prices to fall, and bingo, the recession continues on its merry way.


    The Fed has no wiggle room whatsoever. They cannot keep pumping trillions of money into the US Economy to ease the recessions bottom and at the same time, they have to keep interest rates low while managing to stave off inflation, and deal with a president and congress intent on spending no matter what.



    Oil is going to keep going up...the price of gasoline has risen roughly 43 days in a row now


    national average per gallon is $2.62...end of 2008, the low was $1.62
    It has increased roughly 65% since december....last summer it was over $4...the drop in oil prices by december was crucial for many people saving money...now, the rising costs are wiping out any money people are saving from their payroll "tax cuts"


    for people who were getting between $400 to $800 in tax cuts, that amounts to roughly $8 to $16 a week.


    how many gallons of gas does the average person put in their car weekly?


    how many miles do you drive in the average week? the average american drives 12,000 miles a year, roughly, or, 240 miles per week. if your car gets 30 miles per gallon, roughly (depending on your type of car, obviously) you need 8 gallons of gasoline per week.



    as of right now, if gas prices *REMAIN* (which they won't) at 2.62 per gallon nationally averaged, that means, that since early February, when the stimulus was passed on February 13th, gas prices were at roughly $1.95 per gallon, the average american will be spending 67 cents more per gallon or roughly $5.36 per week...over the course of a year, if prices remain at 2.62, that is roughly $279 extra dollars a year to the average american.


    Summer is when gasoline is at its highest demand, and supply is very tight. we are going to anywhere between 80-100 a barrel again, and fast.



    Just remember...we use 140 billion gallons of gas a year...every .50 cents per gallon gas goes up, means 70 billion less in consumer spending, which is the only thing that was being counted on to help the economy recover. If gas goes back over $3.50 per gallon, which it will, things will get exponentially worse. spending on retail sales start falling drastically, as people spend more and more on gas.


    the dollar is weakening with every dollar the government pumps into the system, and investors and hedge funds are buying commodities, namely oil and gold, to hedge against the fall in the dollar...


    gas is up from last month alone from $2.20 to $2.62. as of right now, if gas goes up another 29 cents a gallon, it effectively wipes out the $400 stimulus payroll tax credits people received, and we are essentially screwed even worse, with high inflation, high oil prices, a weak dollar, not to mention even higher unemployment, a 1.9 trillion dollar deficit and unimaginable deficits over the next decade and no way out.



    this is going to be ugly. buckle your seatbelts.
     
  2. VeeP

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    I agree.. there's so much going on that isn't being talked about... flea-flicking secured bond holders in the auto deals, buying up our own debt... this can't end well.
     
  3. oralhijinks

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    My analysis in a different post is not inflation, the result will be stagflation. I guess as a politician you try to be all things to all people but it has set fiscal policies at odds with each other. When it comes to the kinds of money that can make or break the entire world economy you take it step by step in a very methodical fashion. I know it's vogue to throw cash against the wall and see what sticks but what sticks tends to get squirreled away into pockets of those it was never intended to help.

    For example, the UAW has been given 17.5% ownership in GM as part of Chapter 11 process. The UAW or any union for that matter has but one purpose: to protect the worker. By giving the UAW ownership it has been set at odds with the very workers it was designed to protect. Basically as an equity holder it has the right to receive 17.5% of all declared dividends. If GM become profitable again, that can represent a huge amount of money, far more than what the UAW receives in union dues. This will drive the UAW to want a profitable GM potentially at the expense of the worker. Money that goes to the UAW does not flow to the worker. The UAW only represents the workers for the purposes of bargaining. Now it will have sources of income directly opposed to the welfare of the worker. What sticks falls into the pockets of the union leadership.

    This is a little off track but directly relates to the methodical approach to fiscal policy not currently seen.
     
  4. B_starinvestor

    B_starinvestor New Member

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    There is simply too much money being circulated, and with interest rates as low as they are, they are promoting borrowing but not saving.

    Inflation will go nuts when we get out of this cycle.
     
  5. javyn

    javyn New Member

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    All the more reason to support Ron Paul's bill to audit the Federal Reserve. Keeping interest rates this low for so long, are they crazy!? How can you have an economic recovery without contracting the money supply? You can't.

    I don't have issue with Obama because his a 'socialist' boogeyman and all the other bullshit the right spews about him. I have issue with Obama because he is a Keynesian, just like Bush was.
     
  6. lucky8

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    Exactly. Audit the Fed to expose how fraudulent it really is. And do you know what's gonna happen...again? The economy is going to become dependent on these low rates, the Fed is going to raise them again, and boom...another recession (if we can even get ourselves out of this one)

    The 10 year auction today shows the lack of confidence investors have in our country. Weakened demand for 10 yr notes tells me that the bond bubble may be ready to burst.

    The temporary slow down in layoffs is a facade, all it is is the stimulus money going to work. Once that runs out, and our economy start truly recovering, oil prices will surge inflating the price of goods even more, our currency will start to weaken, the Fed will raise interest rates, and we'll be right back where we started (probably where we should be).

    But on a lighter note, our national debt should be much less if the Fed is actually de-valuing our currency like I believe they are
     
  7. D_Tully Tunnelrat

    D_Tully Tunnelrat New Member

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    All of this maybe true, but if you listen to one of the few economists who called this disaster, Nouriel "Dr. Doom" Roubini, we have at least 6-9 months more of recession to endure. That means that we could have another drop in the market, like last fall, this year. It happened in '29-'31. Bernanke seems to understand that all this money is inflationary, but thinks he can control it. History shows it's rarely the case with a fiat currency, once we reach the tipping point. I like FuzzyKens' point about the UAW, talk about an interesting twist on labor-management relations.
     
  8. B_starinvestor

    B_starinvestor New Member

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    That was an interesting perspective.

    Well done, Fuzz.
     
  9. Drifterwood

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    Let the UAW pay the worker benefits from the profit of their stake - no profit, no benefits.

    Betting against the $ has to be the most obvious punt since Soros.
     
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