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inflation (ain't talkin' tires either)

Started by Cedarman, July 30, 2008, 10:28:25 PM

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Cedarman

Saw on the news where inflation is scheduled to hit 6%.  Any of you remember the Carter years?  Energy may be the culprit here with food not far behind.   We can grow more, change our diets and eat less (at least some of us need to eat less) taking care of the food price increase.  Since the increase in the cost of energy permeates all the things we buy, we may see more inflation yet to come.  Inflation is not as bad as deflation (think housing ).  But if it gets out of hand we could have serious problems with our economy.  Will government try to inflate the debt away?  Some African country has 12 million% inflation.
I think we are in for more INTERESTING times.
I am in the pink when sawing cedar.

Tom

Inflation, 6%?  I'll have to get me some of that.  My savings account is only 2%. :P :D

CLL

I seen on news that housing had dropped on and average of 13.2 % and in places was as much as 28%. I like the way the feds keep changing things around to make things look better, like not counting housing in the inflation rate. I think the thing that aggravates me the most is we have a president that acts like it could give a crap less about the average people, the congress is about as bad. It's all about me, me ,me.  The europeans say we are already in a depression and just won't admit it, because the government shores up STUPID banks, car companies, and people that couldn't afford the houses they bought.
Too much work-not enough pay.

Ron Wenrich

I'm not confident in the way they measure inflation anymore.  You can't tell what they are really measuring.  Core inflation omits food and energy, as if no one really uses them. 

Back in the Nixon era, we had price controls when inflation got above something like 3%.  Nowadays that is considered OK.

A lot of the inflation has to do with the devaluation of the dollar.  We've lost 1/3 of our buying power in the past 8 years.  The thinking has gone back to we can live on debt. 

I don't think the economy is all that bad.  Unemployment in my county is at 4.1%.  Good workers are hard to find and you haven't heard too much about illegal aliens the past year.  I guess they were hit hardest with the unemployment and don't show up in the figures.

The ones hurting the worst is the government.  Their incomes have gone down due to less turning over of dollars.  I see where Schwarzenegger is thinking of cutting the wages of 200,000 workers.  If he does that, can other government entities be far behind? 
Never under estimate the power of stupid people in large groups.

DanG

I think easy credit is mostly to blame.  We seem to have spawned a whole generation of people who don't care about the price of an item, as long as they can make the monthly payment. ::)  Their behavior is enabled by artificially low interest rates.  Maybe we should get back to the basics of finance here.  The basic concept is that people with money to invest loan it to people who need it, and charge interest to make additional money.  Pretty simple, eh?  What is happening now though, is people expect to pay 4 or 5 percent, or even 0% on money they borrow, yet think they have an entitlement to gain 10% or more on money they invest.  Well, that dog might hunt for a while, but he ain't never gonna catch the rabbit.

Another opinion I hold, and most people disagree, is that we are grossly over-educated.  I do agree that every youngster should have the opportunity for higher education if he wants it badly enough to EARN it, but this notion that everyone must go to college is for the birds.  We are inundated with college-educated people who can't find work within their field.  Most of them seem to think they are too good to get their hands dirty, so we have a shortage of good tradesmen.  As a result, the few people who are willing to work demand a very high price for their efforts, driving up the price of the goods and services they offer.  I personally know several young guys who are framing houses and apartment buildings, that are commanding $25/hr for work that is nothing more than common labor.  Most of them are barely 20 years old and have less than a year of experience, and their only qualification is that they are willing to bust their butt and blister their skin.  It is no wonder a $50,000 house costs a quarter mill these days!
"I don't feel like an old man.  I feel like a young man who has something wrong with him."  Dick Cavett
"Beat not thy sword into a plowshare, rather beat the sword of thine enemy into a plowshare."

Warbird

Well said, Ron.  I believe that many of the numbers they publish (like "expected inflation rate next year") are market/people manipulation tactics.  Think scare tactics.

OneWithWood

Easy credit is part of the problem for sure.  Governments will be hurting due in part to the easy credit they extended themselves.  Govs have borrowed heavily which contributes greatly to the dollars drop in value.  In response our federal government is borrowing even more - it is becoming a vicious cycle. 
Where is that going down the toilet smiley when you need it?

The current situation was easily predicted.  It is the old addage you can have guns or you can have butter, but you can't have both.  Our current economy is struggling but not in the doldrums just yet.  The debt situation is not going to go away and that bird will be coming home to roost in the very near future.  Propping up the mortgage industry, which fell on its own sword of extending easy credit while simultaneously making it harder to protect property through the bankruptcy proceedings, is a band aid on an arterial wound.  The amazing lack of oversight by the regulating agencies played a huge role in this mess.  Stronger regs and oversight will be the end result as congress strives to be seen as doing something.

I just wish for once congress would do something constructive...
One With Wood
LT40HDG25, Woodmizer DH4000 Kiln

CLL

Since we are borrowing tons of money from the Chinese will they REPOSESS us if we don't pay.
Too much work-not enough pay.

sharp edge

At first it was said, the last inflation was caused  by the Vietnam war. Lately they say big factor was to many baby boomer enter the work force, made big bucks, but didn't produce much.

sharpE
The stroke of a pen is mighter than the stroke of a sword, but we like pictures.
91' escort powered A-14 belsaw, JD 350-c cat with jamer and dray, 12" powermatic planer

Ron Wenrich

The last great inflation was largely due to the US going off of the gold standard.  Going off of the gold standard was a good thing.  The Bretton Woods agreement had the US currency pegged as the world currency and dethroned the British pound.  The reason the US dollar was made the world currency was due to the fact that we had most of the world's gold.

By the 1970s, it was evident that we could not expand our currency if we were pegged to gold.  Without an expanding currency, the world economics would be a whole lot different than today's.  There would be no money to fund anything and it would be really expensive.  So, Nixon did away with gold as underlying of our currency.  Many in the world lost confidence in the US dollar and the value slid.  Jimmy Carter's inflation was caused by Nixon. 

Paul Volcker got us out of the mess by raising interest rates and boosting the dollar's value.  It got so strong, that we had to buy other currencies to prop them up. 

To get the dollar back up on its feet the US will have to raise interest rates.  Raising rates will help the dollar gain value and the price of oil to fall.  If oil falls, ethanol is not as attractive, and corn drops.   The downside is that borrowing would be more expensive and businesses that thrive on it would be hurting (just like they are right now). 

The other way to raise the dollar value is to raise taxes.  No one likes that idea, since it isn't politically attractive.  We could reduce spending, but no one likest that idea, either (see previous statement ;)).
Never under estimate the power of stupid people in large groups.

logwalker

Ron, that pretty much hit all the talking points.  Joe
Let's all be careful out there tomorrow. Lt40hd, 22' Kenworth Flatbed rollback dump, MM45B Mitsubishi trackhoe, Clark5000lb Forklift, Kubota L2850 tractor

Polly

 8) :)  us has got plenty of money if we run short the us mint will print more nothing to back it up seems to me like that is about the same as counterfit money  :D :D 8)

DanG

The way to make the corrections necessary to stop this violent swinging is to make tiny adjustments, and then wait until they take effect.  You can't make ¼% adjustments on a monthly basis and expect the economy to be stable!

I don't think we're in as much trouble here as the pundits would like us to believe, however.  We have been going through a period of downturn as some previously backward countries, such as China and Mexico have started moving onto the World markets as major players.  As their people begin to achieve wealth, they become more progressive in their wants and needs, and begin to demand goods faster than their Country is able to produce them.  When that happens, they begin to import, and that means that other Countries export to them....namely US! ;D  If you want an example, just look at Japan.  We were once worried that they may take us over, economically, but they have been outsourcing to the U.S. for some little time now, because of the "cheap" labor here.

I think it was Roger Miller who sang, back before he was dead, "A pendulum swings like a pendulum do!" :)
"I don't feel like an old man.  I feel like a young man who has something wrong with him."  Dick Cavett
"Beat not thy sword into a plowshare, rather beat the sword of thine enemy into a plowshare."

Gary_C

Quote from: Ron Wenrich on July 31, 2008, 05:41:16 PM

Jimmy Carter's inflation was caused by Nixon. 

Paul Volcker got us out of the mess by raising interest rates and boosting the dollar's value.  It got so strong, that we had to buy other currencies to prop them up. 


Jimmy Carter may have been the nicest, most honest man ever elected president, but he got us into many messes all by himself. I would trust him with my wallet any day, but I would never trust him to run anything again.

Most of Carters economic problems were were the result if the OPEC actions and the resulting run up in prices of practically everything. Carters best remembered response was to wear sweaters and turn down the thermostats in the White House to 65 degrees.  ::)

And Paul Volkert was brought in late in Carters term in one of his infamous staff shakeups and managed to run the discount rate to over 21 % which almost destroyed the country and put every one on fixed rate of return investments into poverty. That discount rate is an all time record that may stand for eternity.

The best thing about Carter's presidency is that it was ended by Ronald Reagan who made us feel good about ourselves again.

As far as the dollar falling in value, I am not at all convinced that it was a bad thing. Most analysists agreed that the dollar was too high and the Yen was too low. Since the Chinese refused repeated requests to revalue the Yen, the US decided to let the dollar fall. The result is that we may be in the early stages of increased exports that will boost our economy.  8)
Never take life seriously. Nobody gets out alive anyway.

Cedarman

Easy credit leads to lots of problems.  The commercial I hate the most is the Visa commercial at the fast food restaurant where everyone is paying with plastic until some dude pays with cash and messes the whose system up.  They try to make us cash payers feel stupid.  I despise that attitude.  I do not take credit cards in my business and lose maybe 2 customers a year.  Most thank me for keeping prices 4% below what they would be.   I tell them that they save $80 bucks on their $2000 order by paying with check.  I know I am bucking the trend, but one of my sayings is  "If a million people do a stupid thing, it is still a stupid thing".

Easy credit leads to increasing demand which can lead to increasing prices.  Tightening credit leads to decreasing prices. (Housing market)
I am in the pink when sawing cedar.

Riles

Just for the record, the Japanese have the yen, the Chinese have the yuan.
Knowledge is good -- Faber College

TexasTimbers

Cedarman I see your point, and agree with it. Your business is very conducive to taking checks or cash only. Some businesses couldn't exist without taking the plastic. I'm a proponent of sound money too, but I take plastic knowing that the buyer is responsible to use his plastic wisely.

I use debit cards exclusively, except when I rent a car then I use my American Express because of liability considerations. But alot of us would see far more than 2 lost sales a year if we insisted on checks or cash only. Your business is well suited to it, some are not. I get few checks in comaprison to plastic sales. I get an occassional e-check but it usually only takes 4 days to clear and then I ship the product.

I would rather we lived in a barter, cash (gold-backed currency), and gold/silver specie only society. That would suit me just fine. The government's collection agency, the IRS, would not like it much though and that is one reason why it won't ever happen.

I think inflation has to happen or else the dollar is going to fall through the basement and not slowly. The only way to avoid inflating the currency would be to increase production of goods and services so dramatically it would have to rival the WWII GDO, and foreign banks would have to stop dumping bonds and notes on top of that! No sir, we ain;'t gonna weasel our way out of this one boys. Utility costs alone are going to increase 4 to 5 times times in just the coming decade. Better get your windmills up as fast as you can.
The oil is all in Texas, but the dipsticks are in D.C.

Cedarman

Most businesses that sell over the internet already have the product ready to ship.  Makes sense to use the card to speed things up.  I use the card for motel, gas , parts and lots of things that I order by phone.  Cards definitely have their place especially in business to business transactions.  Just can't see using the card to by burgers and fries. 

We don't start production until the check arrives and sometimes a week or two later if we are running behind, so there is no time lost with waiting on a check.  Custom work is a different kettle of fish.  I have never had a logger take a credit card.  They always want a check on Friday.  Same way with employees.  Mine don't want direct deposit.  Want check on Friday.

I am in the pink when sawing cedar.

Tom



Do they bite their 50¢ piece too.  :D :D

I don't think I would want a credit card to replace a paycheck either.   :)

TexasTimbers

Quote from: Cedarman on August 01, 2008, 10:10:07 PMMine don't want direct deposit.  Want check on Friday.

Back in my remodeling business days I was always having trouble with timely attendance and attendance at all in some cases mostly on Mondays after the weekend drinking. It was a point of constant frustration for me, especailly because i was running two cres and any single man not showing up was detrimental.

My dad had kept telling me "Son pay your good hands on Friday and those drunks and punks on Monday." I kept ignoring his advice thinking it was rediculous, but I finally took his advice after much procrastination. To my amazement but sheer delight it worked. Only one guy quit over that reason, but the other chronic Monday "I'm sick" crowd saw marked improvements in their weekend health and were rarely late after that. By the time Friday and Saturday night rolled around they were either out of beer money or just about so it put the kabosh on their 3 day drunks. Sunday became recovery day. 

Dad's get more wisdom as sons get older. :)
The oil is all in Texas, but the dipsticks are in D.C.

Radar67

Quote from: TexasTimbers on August 02, 2008, 06:27:07 AM
Dad's get more wisdom as sons get older. :)

It's not the dad's getting more wisdom, it's the son's finally realizing they are not bulletproof and that they were wrong..... :D :D
"A man's time is the most valuable gift he can give another." TOM

If he can cling to his Blackberry, I can cling to my guns... Me

This will kill you, that will kill you, heck...life will kill you, but you got to live it!

"The man who can comprehend the why, can create the how." SFC J

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