Consumer prices fall for third straight month

[CatholicGerman]

From MSNBC:

The Consumer Price Index, the government’s most closely watch inflation barometer, dipped 0.1 percent, the Labor Department reported Friday. Less expensive energy bills were a big factor behind the drop. Prices for some food items, airlines fares, computers, telephone service and personal care products also fell last month.

So-called “core” consumer prices, which strip out volatile energy and food, rose 0.2 percent in June. That means core prices rose only 0.9 percent over the past year. That’s below the Fed’s inflation target and has core prices holding at a 44-year low.

Companies are wary of jacking up prices because consumers have cut their spending for two straight months. And factories and businesses are still operating well below full throttle.

The recent stretch of falling prices, both at the consumer and producer level, has stirred talked about deflation. It’s a widespread and prolonged drop not only in the prices of goods at stores but also real estate, stocks and wages. America’s last serious case of deflation was during the Great Depression of the 1930s.

Most economists don’t believe deflation will happen, although some Fed officials have recently raised such concerns.

“Inflation is essentially a non issue right now, and that’s good news for consumers who feel stretched and uncertain. There are some bargains to be had,” said economist Joel Naroff, president of Naroff Economic Advisors. “Once consumers get more confident and are willing to spend again, they will see that stores are filled with goods at prices they like.”

Some of these economists have detached themselves from reality. If Americans are cutting back the amount they spend on food staples like cereal and fruit, then they are really and truly broke. Considering that the average American holds $7,394 in credit card debt, I really don’t see how they expect us all to go out shopping. Especially while we’re getting laid off, and our houses lose their worth.

Deflation… here we come!

 

[billy10388]

Thanks you for the post.

---

Watch Salt Online Free

 

[josephdavid]

Great post. I believe (I hope) the American consumer now knows that cash is king. That the past 30 years and especially the past 10, this economy pushed up by credit and not cash. Cash will drive the consumption for the next few years (again I hope).

Hopefully President Obama, the Democrats, AND the Republicans will get it through their heads that we are not stimulating the economy right now. We just placed a bandaid over it. Extending unemployment benifits was a good / moral thing to do. BUT, this again, is a bandaid. We need a long term economic plan that consists of job programs, fair trade deals which takes our industries first. We need to become the export king again through manufacturing. Bring a lot of the manufactured goods home, which in turn is one the components to recducing our debt (e.g. forgeign trade debt @ $700billion + /yr).

 

[philochsfan]

From MSNBC:

Some of these economists have detached themselves from reality. If Americans are cutting back the amount they spend on food staples like cereal and fruit, then they are really and truly broke. Considering that the average American holds $7,394 in credit card debt, I really don’t see how they expect us all to go out shopping. Especially while we’re getting laid off, and our houses lose their worth.

Deflation… here we come!

I, for one, am not scared of deflation. Perhaps, if it happens, prices will be what the items are really costing people to make them, plus a few percentage points more. Would I want my pay to go down? If I could get a loaf of bread for a nickel, and rent for $200/month, why should I need a lot of money?

Let us put confidence in the dollar, and not in the cosumerable goods that are made.

I could live more comfortably if i knew I was not being gouged by prices.

Also, what makes a piece of property worth anything, anyway? Not very many people have oil wells in their yards.

Can management folks be a bit more humble and take home 50,000 dollars a year, instead of 5 billion? Sure, it would come as a shock, but gee, if I am willing to go lower than $7.25 an hour, why can’t they be willing to give up their millions. Even at 50,000 dollars a year, if the price of everything has gone down, they still could be living well, compared to the rest of the population.

Janice

 

[bbarrick8383]

Cash will drive the consumption for the next few years (again I hope).

Extending unemployment benifits was a good / moral thing to do. BUT, this again, is a bandaid.

Companies are not hiring people who have been unemployed for a long period of time. Many of them are getting tired of offering jobs to people who just decline them to sit at home and draw a check.

 

[CatholicGerman]

Great post. I believe (I hope) the American consumer now knows that cash is king. That the past 30 years and especially the past 10, this economy pushed up by credit and not cash. Cash will drive the consumption for the next few years (again I hope).

Yes, but it’s going to be a very painful transition, and will take years to clear up. Again. These things really do happen in astonishingly predictable cycles. And every time, the politicians tell everyone that “This time it’s different. This time you can continue to spend on credit forever.” No, it isn’t. It’s just same-old, same-old.

I don’t think people actually believe this tripe, but

stagnant wages + high inflation + family breakup + cheap credit = credit bubble.

People weren’t generally “living large” on credit. People were using their credit cards and loans to pay their mortgages, tank their cars, and buy groceries. People were *subsisting *on credit. That is the shocking and scary thing, and was what should have warned us that the end was nigh.

Bring a lot of the manufactured goods home, which in turn is one the components to recducing our debt (e.g. forgeign trade debt @ $700billion + /yr).

Yes, losing our production capacities was a clear sign of the rampant inflation we’ve been dealing with for years now. People are waiting for inflation to hit, but inflation already hit: inflated house prices, inflated stock prices, inflated commodities prices, inflated college fees. Those are all clear signs of loose monetary policy. It explains both the incredible rise in public and private debt and the fact that the financial sector now makes up 1/3 of GDP, and rising. Inflation is over. It’s time for deflation already.

Our country’s economy is based upon people borrowing, lending, regulating, defending, selling, and shopping. Hardly anyone produces anything anymore, but true wealth comes only through added value, or surplus. It is true that, once you have created a large surplus, it is possible to “spread the wealth around” a bit, but you still have to have someone creating the wealth. We can’t all just spend our days spreading it around and sharing it out. Or, as one German economist puts it: “We can’t just cut each other’s hair. Somebody has to create the money to pay for the hair cut.”

For Catholics, this is all especially interesting. Men produce most of the wealth-generating surplus, so any policies that discourage men from working at their full potential, innovating, and risk-taking will drag the entire economy down with them. In other words, abortion, contraception, no-fault divorce, and the subsequent decline of marriage are among the direct causes of our economic decline. Strong families make for a strong nation.

 

[CatholicGerman]

I, for one, am not scared of deflation. Perhaps, if it happens, prices will be what the items are really costing people to make them, plus a few percentage points more. Would I want my pay to go down? If I could get a loaf of bread for a nickel, and rent for $200/month, why should I need a lot of money?

Deflation is considered bad because it tends to lead to entrenched joblessness and economic decline. It also makes it more expensive to pay back debt. New purchases are cheaper (which is good), but people will increasingly default on their debt. If you have a 30-year mortgage, and your income is steadily declining, soon you will be unable to make your mortgage payment, despite the fact that you have kept the same job.

Our parents and grandparents lived through inflation, which is why so many of them managed to buy their own home. They had more real income (by purchasing power), houses were cheaper, and their income was steadily rising. So their house payment (and other debt) declined in value every year, at the same time that their pay increased every year. In addition, they generally started off with one income, with the wife at home. They bought their house based upon that, so when the wife later went to work, their income increased substantially. Most modern couples, the house is being paid for with both incomes, so the loss of any one income (compounded by deflation) results in a loss of their home.

And deflation is especially dangerous when one considers that the government can already hardly pay the interest on it’s debt, as it is. If the currency increases in value, the government debt will become more expensive and there will be an increase in sovereign defaults.

 

[IHeartAquinas]

I know it won’t happen, but, can we at least hope for a Norman Rockwell 1950’s revival after this?

 

[CatholicGerman]

I know it won’t happen, but, can we at least hope for a Norman Rockwell 1950’s revival after this?

Why do you think the 30–50s was “all about family”, in comparison to the Roaring 20s? Norman Rockwell’s 1950s depended upon the Great Depression to end hedonism and it’s cousin feminism.

Remember, the feminism of the 1960s was the Second Wave. The First Wave ended when the stock market crashed in 1929. No more easy money, and those husbands they were scorning and belittling start looking like a pretty reliable source for a warm meal. It was women who demonized “working women” and chased them back in the home. The goal was to remove women from the workplace in order to open up job opportunities for men. The wives of unemployed men are going to start chaffing at watching “their sisters” troop off to work every day for “fulfillment” and “independence”. What are fulfillment and independence for her, if your own children have gone without dinner again, and your house is in foreclosure. Rather than patriarchal oppression, the new slogan will focus on selfish decadence.

Feminism is a luxury good, and it tends to get thrown out in hard times. People have to eat, you know. Just as the saying goes “there’s no atheist in a foxhole”, there are no feminists in a bread line.

There are three ways out:

• reintroduce marriage as the norm (to make men more productive, to increase surplus, and stimulate the economy)
• dissolve into anarchy/war
• or retreat into totalitarianism.

Let’s wait and see what comes about. It should be interesting, at least. This is truly the Church’s moment to step in and help people back to their senses. And that is the explanation for why so many members of the Tea Party movement are women.

 

[josephdavid]

Companies are not hiring people who have been unemployed for a long period of time. Many of them are getting tired of offering jobs to people who just decline them to sit at home and draw a check.

You really believe that hype that majority of Americans are just sitting at home collecting their unemployment instead of working?

Do you have any stats to prove your point? I mean personally I can drive through the city and on occassion I have seen lines outside of placement agencies or retail stores when job openings are posted.

I have a friend with 2 BS’s, MBA and is considered a minory, a woman, AND STILL cannot get a job. I have lost count how many different companies she has sent her resume to. How many temp jobs she has taken and now is taking a job at a local Costco. She got the job because she knew the manager. Her friend was reluctant to hire her because usually these jobs do not go to people with degrees or advanced degrees.

I have to find the story about the software engineer who played by the rules. He lost his job 2 years ago because their company outsourced his job to India. He could not even get a retail job because those were going to people with at least a HS diploma. Not some one with a Masters in Computer Engineering. I will post it when I find it. However, I must ask you is this person lazy?

bbarrrick please do not get suckered into the hype by some of these people who are now calling the unemployed lazy.

 

[josephdavid]

Why do you think the 30–50s was “all about family”, in comparison to the Roaring 20s? Norman Rockwell’s 1950s depended upon the Great Depression to end hedonism and it’s cousin feminism.

Remember, the feminism of the 1960s was the Second Wave. The First Wave ended when the stock market crashed in 1929. No more easy money, and those husbands they were scorning and belittling start looking like a pretty reliable source for a warm meal. It was women who demonized “working women” and chased them back in the home. The goal was to remove women from the workplace in order to open up job opportunities for men. The wives of unemployed men are going to start chaffing at watching “their sisters” troop off to work every day for “fulfillment” and “independence”. What are fulfillment and independence for her, if your own children have gone without dinner again, and your house is in foreclosure. Rather than patriarchal oppression, the new slogan will focus on selfish decadence.

Feminism is a luxury good, and it tends to get thrown out in hard times. People have to eat, you know. Just as the saying goes “there’s no atheist in a foxhole”, there are no feminists in a bread line.

There are three ways out:

• reintroduce marriage as the norm (to make men more productive, to increase surplus, and stimulate the economy)
• dissolve into anarchy/war
• or retreat into totalitarianism.

Let’s wait and see what comes about. It should be interesting, at least. This is truly the Church’s moment to step in and help people back to their senses. And that is the explanation for why so many members of the Tea Party movement are women.

I agree with you in principle but in many cases due to wages not keeping up with cost of living. In fact wages have been stagnant or falling (depending on the year) for the past 30 years. Now it went from luxury for women to work to a necessity. I hope the laity and the Catholic Church begin to be more vocal on this issue. We must hold both the people who are to represent us in government and people who run corporations accountable!

 

[CatholicGerman]

You really believe that hype that majority of Americans are just sitting at home collecting their unemployment instead of working?

please do not get suckered into the hype by some of these people who are now calling the unemployed lazy.

There is some of it going on, in some areas of the country. And even if someone can’t find a position, paying for him to stay where he is unemployed just compounds the problem. I do believe that some people are trying very hard to find a job, but aren’t finding any.

Many jobs are simply disappearing forever, because they were never particularly productive or value-adding jobs, in the first place. Who needs another MBA, another paper-pusher or administrator, or another computer programmer (like me )? HVAC companies are hiring, plumbers are hard to find, utilities have to keep running, trains are being built, and lettuce has to get picked. And what about all of the patents that could be made, and companies that could be started, by desperate men taking a risk? If we get things right, we can eventually replace those jobs with truly productive ones (which will be mostly for men), and those people will again get employment. We’ve done it before, we can do it again.

 

[CatholicGerman]

I agree with you in principle but in many cases due to wages not keeping up with cost of living. In fact wages have been stagnant or falling (depending on the year) for the past 30 years. Now it went from luxury for women to work to a necessity. I hope the laity and the Catholic Church begin to be more vocal on this issue. We must hold both the people who are to represent us in government and people who run corporations accountable!

That was my point. Why didn’t wages keep up with the cost of living? Rampant inflation, that’s why. Wages were increasing, but not as fast as prices were increasing. The mass-entrance of women into the workforce created a glut of cheap labor and held down wages. So then even the women that didn’t want to work, had to.

Deflation cancels that, and will make wages lower, but worth more. Women leaving the workforce en mass will increase the buying power of those remaining (not only men, as women are better at some jobs) workers. Workers will become more scarce, and therefore more valuable. These things all go in cycles.

 

[bbarrick8383]

You really believe that hype that majority of Americans are just sitting at home collecting their unemployment instead of working?

Do you have any stats to prove your point? I mean personally I can drive through the city and on occassion I have seen lines outside of placement agencies or retail stores when job openings are posted.

bbarrrick please do not get suckered into the hype by some of these people who are now calling the unemployed lazy.

No, I believe that the majority of Americans still have a job. But, I’d like to believe that the majority of those on unemployment are seeking and not sitting on their behinds. But even those hard working ones would be tempted by an extension of unemployment.

I don’t have time to look them up right now, but yes I have been reading about companies not hiring those that say they have been on unemployment for very long, I remember one was on CNN not too long ago.

I’m not naive, I know that it happens, how much? Who really knows. But unemployment benefits is just a means for someone to be idle when otherwise they would be forced to find a way to provide for themselves and their family.

 

[CatholicGerman]

But even those hard working ones would be tempted by an extension of unemployment.

This is true. Give people the choice between “something for nothing” or “work really hard for very little”, and don’t be surprised if they choose the former. Especially when politicians are tripping all over themselves to assure everyone that the “something for nothing” will never end, and when the welfare payment is hidden under the respectable title of “unemployment insurance”.

I don’t have time to look them up right now, but yes I have been reading about companies not hiring those that say they have been on unemployment for very long.

In Germany they call them the Langzeitarbeitslose (long-term unemployed) and they usually just write them off as a loss. The government moves them off of the unemployment statistics, hands them a welfare check, and pretends like they don’t exist. America shouldn’t go down that road, because it’s a very rocky one.

 

[josephdavid]

There is some of it going on, in some areas of the country. And even if someone can’t find a position, paying for him to stay where he is unemployed just compounds the problem. I do believe that some people are trying very hard to find a job, but aren’t finding any.

Oh I do not disagree that there are some who take advantage of the system. But we should not upend the vast majority because of a few bad apples. Even the wealthy and employed take advantage of the system. Does that make all wealthy people bad? No

You mad a good point in your second sentence. What makes me so disappointed right now is that it is pointless to extend unemployment benifits with out providing a good solid jobs creation program. As I mentioned earlier the unemployment benifit extension was only a little ductape to temporarily plug the leaky pipe.
Democrats and Republicans do not seem to want to protect their own workers and infrustructure. Even all these road projects are temporary. What do we do when all the road projects are finised? The work is finished and unless there is more in the pipline these workers will be laid off too further putting a burdon on the welfare system and thus adding to the national debt (via more unemployment checks, less or no wages = less or no tax revenue).

Many jobs are simply disappearing forever, because they were never particularly productive or value-adding jobs, in the first place. Who needs another MBA, another paper-pusher or administrator, or another computer programmer (like me )? HVAC companies are hiring, plumbers are hard to find, utilities have to keep running, trains are being built, and lettuce has to get picked. And what about all of the patents that could be made, and companies that could be started, by desperate men taking a risk? If we get things right, we can eventually replace those jobs with truly productive ones (which will be mostly for men), and those people will again get employment. We’ve done it before, we can do it again.

We need to expand manufacturing and trades here. The MBA and Bachelors are now just highly overrated. My brother conteplated getting out of the military to stay home more and at least do Reserve duty. He applied for jobs and was denied many good paying managerial jobs because he did not have a diploma. He said on one interview " Me being an E7 in the military and my experiences in leadership and management in the military means nothing? BUT if I had a degree in at least basketweaving I would have this job?" The prospective employer said point blank, “yes” Absolutely crazy.

We need to promote manufacturing as a great job with our young adults. We need to encourage the States and Nationally to start apprentiship programs with the highschools. Much like Germany. When working in Germany Ioved seeing the kids come in the afternoons after their basic courses in the morning, to learn manufacturing skills starting from the basics. We need that here. Our manufacturing structure is not only gone with capital infrastructure but with labor force as well. Very scary. The top two exporters in the world all have a solid domestic and export manufacturing base. Those top 2 are Germany and China (virtually tied). Except China (as well our American companies) exploits their workforce with virtual slave wages, poor and unsafe working conditions, and environmental nightmare detrimental to their health.

 

[josephdavid]

In Germany they call them the Langzeitarbeitslose (long-term unemployed) and they usually just write them off as a loss. The government moves them off of the unemployment statistics, hands them a welfare check, and pretends like they don’t exist. America shouldn’t go down that road, because it’s a very rocky one.

This is true. You would perhaps know that this is a very hot topic amongst Germans. They need to crack down on those people. Germany has a very good welfare system but perhaps too generous. This is why in '94 we had to crackdown on our welfare system with major reforms. I am suspecting Germany will do same very soon (I hope).

I also believe with the number unemployed here in the U.S. to be high for some time to come, there will be hopefully some meaningful reform also. I believe the government has a role in protecting the American people and to help when in need. BUT I do not excuse laziness. But it is difficult to find who is truly being lazy, because after-all that fell off the charts may have gone back to school to change careers.

 

[CatholicGerman]

This is why in '94 we had to crackdown on our welfare system with major reforms.

It didn’t really help though. Women (who made up the overwhelming majority of welfare recipients) just moved from welfare to (government-supported) work. Affirmative action for women, public service jobs for women, increased regulation creating administrative positions for women, etc. And their welfare check turned into a child-support check from their Baby Daddy. Same difference, really. We just restructured welfare, we didn’t eliminate it. It has grown increasingly in size, over the years, and is expanding rapidly at the moment.

I believe the government has a role in protecting the American people and to help when in need.

That was what unemployment insurance was supposed to do. It was supposed to give you a breather, and some time to find a new position. But these long-term extensions are pure welfare, and therefore demoralizing. It’s not just about laziness. Being unemployed for a long time is depressing, and can lead to self-destructive behaviors that are not exactly conducive to job-hunting or entrepreneurship.

It’s best to get people right back into work, as fast as possible. Even if the new job is terrible, or doesn’t pay very well, or requires a long commute or a move. Even if they’re spending their days cleaning toilets for minimum wage, they need to be working or they lose momentum and end up stuck. I’ve seen it a lot in Germany.

Men especially, need to work, or they start to fall apart. Women can get laid off, come home, and still feel useful. That is why I believe it was a shocking failure of this government that the stimulus focused so much on creating government jobs, many of which went to women. No society can handle large numbers of unemployed men, especially unemployed *young *men. They’re ransoming the future with that, so getting those men into employment should be priorities 1, 2, and 3.

An unemployed woman can marry an employed man and they can live a decent life together. An unemployed man will have trouble getting married, and is more likely to get dumped by his wife (divorce). The majority of the unemployed are now men, and the majority of the employed are now women. This is completely backward! But women make up the majority of voters, so politicians on both sides know where their bread is buttered.

I believe the government has a role in protecting the American people and to help when in need. BUT I do not excuse laziness. But it is difficult to find who is truly being lazy, because after-all that fell off the charts may have gone back to school to change careers.

I think they exclude people who are ill, attending college, or are in job training from the unemployment statistics. Someone is only considered “unemployed” if they are actively looking for a job. The real number of unemployed (those wanting to work) is much higher than the statistics imply.

 

[CatholicGerman]

We need to expand manufacturing and trades here.

Most definitely.

But they don’t even have to compete with university degree programs. My husband is an electrician by trade, and he used his German apprenticeship as a springboard into a technical college, where he became an electrical engineer. In other words, he understands the theoritical and the practical, and is doubly-useful for his employer.

The focus of university should be on the liberal arts: rhetoric, logic, natural sciences, metaphysics, the humanities, etc. People should go to college to learn how to lead and to reason. In other words, university should be a continuation of secondary school. (Okay, I’m showing my homeschool-bias there.)

The professions and trades should be taught through apprenticeships, at trade schools, and technical colleges. Why does someone who wants to become a nurse have to study Plato? Nurses should study nursing. I think that professions have overtaken colleges because our primary and secondary education is now so terrible that it is assumed that a nurse who doesn’t study logic in college, will never be exposed to it. Why isn’t she exposed to it in high school?

The top two exporters in the world all have a solid domestic and export manufacturing base. Those top 2 are Germany and China (virtually tied). Except China (as well our American companies) exploits their workforce with virtual slave wages, poor and unsafe working conditions, and environmental nightmare detrimental to their health.

If American had kept up it’s education system, supported the trades, kept wages low (by preventing systemic inflation and reducing wage-related taxes), and streamlined the beauracracy, the companies would never have left in the first place. There are few places that provide a better manufacturing base than America. Our own government has been working to make us appear less productive and efficient than we really are.

It is as if we took a prime race horse, broke one of it’s knees, and then watched as everyone starting betting on the other horses. The other horses weren’t better to begin with, but with our own horse hobbled, they start to look pretty darn good.

 

[CatholicGerman]

From his Semiannual Monetary Policy Report to the Congress:

Inflation has remained low. The price index for personal consumption expenditures appears to have risen at an annual rate of less than 1 percent in the first half of the year. Although overall inflation has fluctuated, partly reflecting changes in energy prices, by a number of measures underlying inflation has trended down over the past two years. The slack in labor and product markets has damped wage and price pressures, and rapid increases in productivity have further reduced producers’ unit labor costs.

My colleagues on the Federal Open Market Committee (FOMC) and I expect continued moderate growth, a gradual decline in the unemployment rate, and subdued inflation over the next several years.

In the first paragraph he states the truth (deflation is upon us) and then he turns around in the second to announce that the Wealth Fairy is going to bring us all prosperity. Yay!

Three cheers for the Wealth Fairy and the Money Tree!

Over at the Wall Street Journal, he goes on to say:

“The best approach, in my view, is to maintain some fiscal support for the economy in the near term, but to combine that with serious attention to addressing what are very significant fiscal issues for the United States in the medium term,” Mr. Bernanke said. “I don’t think it’s either/or. I think you need to really do both. If the debt continues to accumulate and becomes unsustainable … then the only way that can end is through a crisis or some other very bad outcome.”

With almost half the unemployed out of work for more than six months, Mr. Bernanke noted the long-term risks of persistent joblessness.

“People who are unemployed for a long period of time often see their skills atrophy or see their skills become irrelevant,” he said. “So not only for the sake of the unemployed and for the short-term strength of the economy, but also for our long-term viability and international competitiveness, I think we need to be very seriously concerned about the implications of long-term unemployment.”

Bad outcomes and implications like… oh, I don’t know… rioting in the street, children going hungry, schools and hospitals closing, prisons emptying, and elderly homeless people?

We’re already moving there, Mr. Bernanke. Do you mean to say it might get even worse? Oh, I forgot. We can count on the Wealth Fairy! Thank goodness for that. I was frightened there, for a minute. I was afraid you meant to imply that there might soon come a day when Social Security, Medicare, and welfare all just stop sending people checks. Thank you for reminding us that that will *never *happen, since we have the Wealth Fairy to protect us.