What is Inflation?

[zyzzyva57]

Do we have the type of Inflation the FED is fighting?

"Wal-Mart" has no choice but to raise prices with energy prices so high, so what the FED is doing, it would seem to me, hurt the economy and accomplish nothing, because B.R.I.C. (the resources sponge from hell) is not going away

How can what the FED is doing force "Wal-Mart" to lower prices?

I am confused

Am I just putting what Master Cramer is saying about why the stock market is dying, but in the terms of "Inflation for Dummies"?

[Dreamer]

I think we are having "stagflation" right now, slower growth along with rising prices! Not good... The Fed was raising rates to lower growth, but it seems that the falling dollar and rising commodity prices is already taking care of lowering our growth rate in the US. Since commodities are priced in dollars, a rising dollar would lower commodity prices. I think the Fed needs to work on bolstering the price of the greenback.

Don't think I really answered your question, but this is my take on what is happening now. We obviously need to do something about our oil consumption as BRIC and the rest of the world increases their consumption. Various alternative energy sources are now viable because of higher prices, but it's going to take some time to ramp up production to the point where it can make a difference.

Right now, those high prices are hurting the average joe. The governor of my state, Massachusetts (who has his eye on the Presidency) is not willing to lower state taxes on gasoline, saying that that would only increase consumption, which he does not think is a good idea! Yeah, we all have to get rid of our SUV's (suddenly useless vehicles) and move to hybrids, but that is going to take some time. Why was the government subsidising the sale of these vehicles in the first place? That was extremely shortsighted! Probably to make Detroit more competitive as we never learned our lesson from the 70's when gas was rationed and everyone was buying Toyotas!

Enough of my rant!

[zyzzyva57]

I have what is best an ineffable feeling, because something is bad wrong in Amnesia. This November ALL politicians best have another day job lined up, and I would not advise that job being a lobbyist. I cannot understand what the FED is doing. I applaud them when it fights the Jimmy Carter type inflation, but this inflation is not like that. What is a retailer/wholeseller/manufacturer to do, but raise prices?! The problem with dropping gas taxes is it would bring gas prices back to around $2 and Amnesians will easily forget high gas prices. Unfortunately, for way too many, the core issue other than energy costs is "American Idol." Look at the illegal allien issue: the beloved social security system is about to take an almost unimaginable hit. If the FED is wanting to kill the economy, then why not do it in one fell hit and raise the interest rate to 6.5% in June--If that is so good, why not just go for 10%?! There is something else: if I was a politician, I would want Amnesia to win period, because I will win and all elections are local in the end. In sum: it is freightening what is happening and you feel the politicians are not listening.

[sportsmadness80]

We are in a time where public panic is the hot ticket for news media. Our government seems to lathargic with any solutions to anything. I know for sure the Republican governor Murkowski (former senator) is an idiot and a liar. He is lucky the people of this state have not torched his house. One thing is for sure the damn ludicrous bridge Senator Stevens wants will never happen. Its a joke just like what you guys been talking about concerning inflation. The government has no damn clue what to do about it. Why because the dinosaur fossil fuel money thieving oil dependency. I dont give a damn what party wants to move forward, lets just get some damn common sense here. Lets stop displacing the trouble at home with the mirage that another country needs our military for protection. Lets get cookin with technology that gives americans value. Yes value not some damn gas eating dinosaur. http://www.fadzter.com/smilies/swear.gif

[zyzzyva57]

I have never seen so many politicians of ALL stripes simply not get it. Can the voters tear themselves from "American Idol"? The politicians are counting big they cannot.

[sportsmadness80]

Once again I say you posted a good debate on the issue .... keep them coming your on a roll. :wink:

[zyzzyva57]

Thank you

Donald Trump, this morning on MSNBC on "Imus" had a good term for the present inflation--Automatic Inflation, that is, if energy prices go up, you get inflation, dah...

On CNBC this morning someone pointed out another dah that apparently for the big shots is not a dahhhh: the time lag. As the F.E.D. raise rates (as when it lowers them) there is a time lag before it shows up at Box Store, USA. Logic would dictate in a sane world the F.E.D. go neutral and see how its present rates are work through the system. With the hurricane season coming in June, the present way the F.E.D. views interest rates, this time next year the rates will be 10%+!

Gawd help us all at the first tropical depression off the coast of West Africa! Energy prices will go through the roof and ditto the interest rates...

[optimus25]

Inflation certainly has become a "conundrum"

[zyzzyva57]

As I see it: energy goes up, costs go up, F.E.D. raises the interest rate, then back to the beginning of this--This just seems like an endless loop or a self-fullfiling prediction...

Positively weird!

What am I missing?!

[optimus25]

I wondered the same thing. Energy costs rising isn't something the Fed can stop. Global demand is way too strong. With emerging markets building their infrastructure, increasing wealth, and buying more cars, Its difficult for me to see energy going down anytime soon. Technically, energy has been bullish the past three years so a correction in commodities is not unwarranted...nothin wrong with profit taking. My question is: How does the fed stop global energy demand?

I totally agree with the Fed though. Our economy has been propped up long enough from the "wealth affect" of astronomical real estate prices. Real estate bulls are gonna be in the "house of pain". If and when housing does drop because of the rising rates, will the economy still hold up.

[chemist308]

I do believe this is one of those times when Cramer's saying 'cash is for winners' applies. Right now I'm about 50% cash and considering going 100% Would it be safe to say the fed is probably not going to wake up and smell this for at the very least another quarter? I'm just a beginner, but it seems like everything is getting panic sold. Please correct me if I'm wrong here, because you're right that this doesn't make sense.

[optimus25]

I do believe this is one of those times when Cramer's saying 'cash is for winners' applies. Right now I'm about 50% cash and considering going 100% Would it be safe to say the fed is probably not going to wake up and smell this for at the very least another quarter? I'm just a beginner, but it seems like everything is getting panic sold. Please correct me if I'm wrong here, because you're right that this doesn't make sense.

Markets get overbought and oversold during times like these. Apparantly the markets are being sold, no matter what sector or stocks you hold. There are going to be bargains, but if everyone is selling, you can step on a landmine. Look up the work capitulation. I don't know the exact meaning but you'll be hearing this word on CNBC in the next couple of weeks.

[zyzzyva57]

Wouldn't you concur real estate is not the core issue, but energy. The bottom line, unlike with the past, we have B.R.I.C. soaking up any spare anything that once, very unofficially, provided the world with wiggle room (for example, Sadam and the oil embargo which was to make the west feel good while we gobbled up his oil--unofficially--while we wagged our finger)--ANOTHER QUESTION TO BUSH: WHERE IS IRAQ'S OIL BY THE DEAD AND WOUNDED AMERICAN SOLDIERS' WAY?!

[madcowdisease]

Optimus, capitulation simply means to give up, or throw in the towel. I for one, capitulated last week and am glad I did. I feel liberated to not have to check my portfolio every 20 minutes to see how much cash I lost. I agree with you that certain stocks in this market will become oversold and make great buying opportunities. Put SU on your radar. It flirted with sub-$72 today and if it goes to $70 it is screaming "buy". Just listen to their confernce call to see what I mean.

And I too wonder what happened to the Iraqi oil, zyzzyva57, that was supposed to pay for the war when our government pitched the plan to the American public. The Iraqi government officials owe all that they have, all their power and wealth, to the American soldier. So much so that they ought to sell it exclusively to America.

[zyzzyva57]

Why should Iraq help us? Hell, we are saps. Just ask the Mexican el presidente Fox--Unbelievable what is happening.

[madcowdisease]

Why should Iraq help us? Hell, we are saps. Just ask the Mexican el presidente Fox--Unbelievable what is happening.

Too true. The way our government holds its citizens up at gun-point and gives their tax dollars away to other countries just further bolsters your comment.

[optimus25]

Wouldn't you concur real estate is not the core issue, but energy. The bottom line, unlike with the past, we have B.R.I.C. soaking up any spare anything that once, very unofficially, provided the world with wiggle room (for example, Sadam and the oil embargo which was to make the west feel good while we gobbled up his oil--unofficially--while we wagged our finger)--ANOTHER QUESTION TO BUSH: WHERE IS IRAQ'S OIL BY THE DEAD AND WOUNDED AMERICAN SOLDIERS' WAY?!

Of course real estate isn't the core issue. But there will be reverberating effects if housing corrects right? If you factor in how many workers make their living in construction. A slow down will affect local economies in which we have seen the biggest growth. Energy is the main issue but don't you think the ever increasing price of energy as well as a decrease in the so called "wealth effect" of high home prices and concurrent slow down will have an adverse effect on our economy? The consumer and low interest rates have bolstered our economy.

[optimus25]

Too true. The way our government holds its citizens up at gun-point and gives their tax dollars away to other countries just further bolsters your comment.


I hear ya!

[zyzzyva57]

This from the Wall Street Journal (5/22/06): NOTE WHAT IS EXCLUDED! HOW CAN YOU EXCLUDE THIS--DOES NOT ENERGY FACTOR INTO THE PRESENT INFLATION EQUATION?!: "...But core inflation, which excludes food and energy..." ANYWAY HERE IS PART OF THE ARTICLE FROM THE FRONT PAGE:

"...Mr. Bernanke, then a Princeton University academic, found that economic growth begins to slow roughly six months after the Fed tightens monetary policy. But inflation doesn't begin to ease until about year has passed...

"The result often is an uncomfortable period when growth is slowing, inflation rising and the central bank facing a tough choice between higher rates and watchful waiting...

"That may be where the U.S. economy is now. After a first-quarter surge, growth is slowing, as higher interest rates and energy prices take their toll on housing and consumer spending. It "seems pretty clear that the housing market is cooling," Mr. Bernanke said Thursday, though the slowdown is quite "orderly and moderate." But core inflation, which excludes food and energy, reached a one-year high of 2.3% in April..."

[sportsmadness80]

Well today we found out the reason behind inflation. Beranke's mouth. After this week he will look like this -------> http://fool.exler.ru/sm/inv.gif