Core Producer Prices Jump Upward (weak dollar/inflation)

As energy prices drop 1 percent, food drops 0.2 percent, our soft dollar and job exporting come home to roost in the prices of everything else.


http://story.news.yahoo.com/news?tmpl=story&cid=568&ncid=749&e=3&u=/nm/20050218/bs_nm/economy_ppi_dc

Core Producer Prices Jump Upward

WASHINGTON (Reuters) - Sharp gains in the cost of cigarettes and autos helped push core U.S. producer prices up at their fastest rate in six years in January, while overall prices also edged higher, the Labor Department said on Friday.

The producer price index, which measures prices received by farms, factories and refineries, moved up 0.3 percent in the month, the department said. But the core index, which strips out volatile food and energy prices, shot up 0.8 percent, the biggest gain since December 1998.

Wall Street economists had forecast a 0.2 percent gain in both overall and core producer prices, but some had changed their view after the department issued revised figures for prior months earlier this week.

The numbers are likely to fan inflation concerns and could bolster a growing expectation that the Federal Reserve will keep raising interest rates well into 2005. <snip>

interest rates for the foreseeable future. He also said he doesn't understand what's going on now. Things aren't working the way the models say they should.

Methinks he understands too well what's going on, but doesn't want to talk about it.

"If you laid all the the world's economists end to end, they would still be wrong."
-Anonymous

:-(

policies.

It didn't work the first time either.

I can't remember the exact term, something like an "Inverse interest earning curve."

The good news is, these things ALWAYS predict a Recession. Every time since 1960, only exception was 1966, when the economy just barely stayed in positive territory.

<http://marketplace.publicradio.org/>

It's about 10-15 minutes into the show, when David Johnson comes on to talk stocks with Host David Brown.:evilgrin:

and it was in this part of the show:
<http://marketplace.publicradio.org/shows/2005/02/18/PM200502181.html>

See my other post for the rest.

http://www.fmsbonds.com/strat_invertyield.html

One of the newer buzzwords in financial circles.

Basically, pushing up short-term interest rates tightens the money supply, slowing growth and/or shoving us toward recession.

Now, here's the problem-- No one remembers if we've ever been in a situation where our trade deficits were so out of balance, the dollar was so weak, there was a serious alternative to the dollar(Euro), the Federal debt was such a high percentage of GDP, wealth and income were so disparate, and we had such enormous military and entitlement bills to pay. Oh, and we haven't ever been economically challenged by two huge competing blocs like Europe and Asia before.

Some of these things were true just before the Depression. Some of the others would tend to make things worse.

Just for fun, note that just before, and during the early years of the Depression, we screwed up royally by tightening the money supply while we should have loosened it. Now, loosening the money supply could make some of the other problems worse, so they seem to be choosing the lesser evil.

Looks like we have two likely futures-- either muddling through it all and barely surviving, or worldwide economic collapse.

(ever wonder why they call economics the "Dismal Science"?)

A lot of MAJOR Dollar investors have been fleeing the Dollar for months now. If China does any of the things they been hinting at,
We're DOOMMED.

is that everyone in the world is working overtime to prevent it.

The Chinese and Japanese don't really like us all that much, and they certainly don't like having to bail the dollar out like the Bundesbank did for years. Actually, the Bundesbank never really liked taking a hit buying up Eurodollars for years either.

But, they do it because if we go down, they go with us.

If it seems very strange that the Chinese keep buying US bonds with money that they would rather use to invest locally, it is. They have to keep buying our bonds so we can keep buying their cheap shit.

What it boils down to is the US having a store card with an unlimited limit, and not enough income to pay the bills with.

Then why am I about to pay 2.02/ gallon for regular gas and why was my Dec. electric by the most it has ever been? Fvcking propagandists.

Jay

You as a consumer have to pay extra because...well, that's the way it works in *land. :crazy:

This is in an ~1,200 sq. ft. home.

NEW YORK (Reuters) - The dollar made broad gains on Friday after a report on U.S. producer prices showed an unexpected jump in core inflation, suggesting increased chances of higher interest rates.

But the U.S. currency pared some of those gains in thin, pre-holiday weekend trading. United States markets are closed on Monday for the President's Day holiday.

Higher inflation in the United States could step up pressure on the Federal Reserve to raise interest rates. The prospect of higher interest rates tends to increase the attraction of short dated dollar deposits to foreign investors.

http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=7674781

I didn't think it was good. Just inevitable, considering our debt load.

Fri Feb 18, 2005 05:13 PM ET

By Tim Ahmann
WASHINGTON (Reuters) - U.S. producer prices, excluding food and energy, shot up at their fastest pace in six years in January as tobacco, auto and alcohol costs spiked, the government said on Friday in a report that fanned inflation fears.

A separate report showing U.S. consumer sentiment softened this month failed to ease financial market worries on inflation and profits, fueled by the broad-based price gains, which also raised expectations for Federal Reserve interest-rate hikes.

Overall, the producer price index, which measures prices received by farms, factories and refineries, rose just 0.3 percent last month as energy prices tumbled 1 percent and food costs slipped 0.2 percent, the Labor Department said.

But the core index, which strips out volatile food and energy prices, shot up 0.8 percent, the biggest gain since December 1998. Over the past year, core producer prices climbed 2.7 percent -- the largest 12-month gain in nine years.

Wall Street had expected core prices to rise just 0.2 percent and the surprisingly big jump weighed on markets.

<http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=7678305&src=rss/businessNews>

They way I see it is like this:

No one is buying our Treasury Bonds because the interest rate is too low.

Greenie cranks up the rate 6X now and bonds/CDs, other fixed investments have only mildy risen.

Loans are a bit higher but not much.

Housing market is still cranking along nicely.

The rich are getting tremendous tax breaks.

The "war" is costing about 10X more than anticipated (at least) and is in fact breaking the bank.

Social security is alleged to be going broke.

Yeah it doesn't all add up does it Greenie?

It adds up just fine to me.

No one wants our lousy bonds being we are no longer liked by other countries. We are going broke. Social security has been robbed. Perhaps this is the "crisis"? The economy is not recovering and inflation is exorbitant. The poor are getting poorer; the rich survive.

Duh ... I'd say its a bit bigger of a problem then a "recession". Might I suggest the "D" word?

:kick: