INFLATION: What are you doing to combat it?

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Mollymouser -> INFLATION: What are you doing to combat it? (6/16/2009 4:51:09 PM)
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of the functional currency buys fewer goods and services; consequently, inflation is a decline in the real value of money—a loss of purchasing power in the internal medium of exchange which is also the monetary unit of account in an economy. Prices seem to be creeping up .... groceries, insurance, utility rates, gasoline, household items, services, etc..... what sorts of things are you doing to deal with (or combat) rising prices / inflation?

GroupW -> RE: INFLATION: What are you doing to combat it? (6/16/2009 4:53:49 PM)
Haven't seen much of it yet. Oil and oil sensitive products, for sure. Inflation in the aggregate? Not much yet. Most price indices seem to be somewhat well behaved. That said, in my investments I did take a double short position on long term treasuries just in case .... Not so much because of inflation - just seemed like a sub-3% 10 year treasury right might have been a bit overcooked.

davelinde -> RE: INFLATION: What are you doing to combat it? (6/17/2009 10:32:22 AM)
I am not seeing inflation yet either, so I'm not sure where this question is coming from. Last year I was paying nearly $5/gallon for diesel fuel and now it is less than half of that. Many retailers are discounting aggressively and promoting often to the point that we are regularly getting 10% coupons off sale pricing on big ticket items. I assume they want/need to move inventory. That said I do anticipate inflation is on it's way - with government on a spending binge with no end in sight it seems inevitable. We are taking steps to reduce our fixed cost and investing in a few things (like windows and a furnace) to reduce our energy usage. I'm actually long in treasuries and sitting on some large capital gains. I think I'll just take the gains and roll that into a money market for now too.

blessedinnyc -> RE: INFLATION: What are you doing to combat it? (6/17/2009 12:36:56 PM)
quote: ORIGINAL: Harvie In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of the functional currency buys fewer goods and services; consequently, inflation is a decline in the real value of money—a loss of purchasing power in the internal medium of exchange which is also the monetary unit of account in an economy. Prices seem to be creeping up .... groceries, insurance, utility rates, gasoline, household items, services, etc..... what sorts of things are you doing to deal with (or combat) rising prices / inflation? Series I savings bonds that you can buy at the bank. I bought several back in April. Best move is to wait until November, though. If you buy right now, you'll get 0% interest for six months after the month of purchase. If you buy in November, however, they recalculate the inflation rate based on the previous six months' inflation. So if we get a lot of inflation between May and October, you'll be able to catch up by buying in November.

GroupW -> RE: INFLATION: What are you doing to combat it? (6/17/2009 5:04:27 PM)
quote: ORIGINAL: davelinde I am not seeing inflation yet either, so I'm not sure where this question is coming from. Last year I was paying nearly $5/gallon for diesel fuel and now it is less than half of that. Yeah, that hurt. We drove the RV from Denver to Seattle for vacation last year. The diesel fuel price once we got out of CO was eye opening. I think we spent about $1500 on fuel.

davelinde -> RE: INFLATION: What are you doing to combat it? (6/18/2009 9:54:38 AM)
quote: ORIGINAL: GroupW We drove the RV from Denver to Seattle for vacation last year. Yep we drive an RV all over too and get just about 10mpg with diesel. I did some calculations and although it's painful, we don't need to re-think it until fuel gets over $6/gallon, hopefully not soon. Then we may consider parking it. btw - driving home last night I heard some economic reports indicating that inflation is still well in check. I still believe it's looming, but I agree that I'm not seeing it yet. My biggest fear is that it will hit like a storm and de-value my savings.

GroupW -> RE: INFLATION: What are you doing to combat it? (6/18/2009 11:42:55 AM)
quote: ORIGINAL: davelinde quote: ORIGINAL: GroupW We drove the RV from Denver to Seattle for vacation last year. Yep we drive an RV all over too and get just about 10mpg with diesel. I did some calculations and although it's painful, we don't need to re-think it until fuel gets over $6/gallon, hopefully not soon. Then we may consider parking it. btw - driving home last night I heard some economic reports indicating that inflation is still well in check. I still believe it's looming, but I agree that I'm not seeing it yet. My biggest fear is that it will hit like a storm and de-value my savings. Seems to be in check at the moment. There's too much slack in the economy today for it to be an immediate issue. Longer term, who knows? Right now the when and if questions on inflation have economists pretty deeply divided. Scenario 1: Consumers rapidly curtail their expections and immediately start saving and spending at appropriate levels again. In that case, the economy stays fairly subdued for the next several years, the Fed gets lots of time to take that stimulus money out of the system, and we have happy days again. Scenario 2: Consumers curtail their spending slowly. If bank lending comes back online and we return to the go-go days, the Fed won't have much time to react. We're likely to get a bit more inflation and continue to have trade imbalances, low savings rates, etc. Not very pretty. Scenario 3: Consumers curtail their spending but not as quickly or as immediately as they probably should. Savings rates trend upward over time as expectations adjust gradually. This fits what we know of how consumers behave. As long as banks don't start lending aggressively again right out of the gate, we're probably fine. Since much of the excess lending was done via the securitized markets, and since that sector looks like it's going to remain derailed for at least the next year or two, I don't see a ton of excess lending heading our way. My leanings are toward #3 - currently being referred to as "muddle through economics". We get a touch of inflation, but not that bad. We get a touch of economic growth, but not that great. That said, either #1 or #2 remain possibilities. My favorite quote these days? "Don't Panic" (From the Hitchhikers Guide to the Galaxy by D. Adams.)

blessedinnyc -> RE: INFLATION: What are you doing to combat it? (6/18/2009 12:15:01 PM)
quote: ORIGINAL: GroupW Seems to be in check at the moment. There's too much slack in the economy today for it to be an immediate issue. Longer term, who knows? Right now the when and if questions on inflation have economists pretty deeply divided. Scenario 1: Consumers rapidly curtail their expections and immediately start saving and spending at appropriate levels again. In that case, the economy stays fairly subdued for the next several years, the Fed gets lots of time to take that stimulus money out of the system, and we have happy days again. Scenario 2: Consumers curtail their spending slowly. If bank lending comes back online and we return to the go-go days, the Fed won't have much time to react. We're likely to get a bit more inflation and continue to have trade imbalances, low savings rates, etc. Not very pretty. Scenario 3: Consumers curtail their spending but not as quickly or as immediately as they probably should. Savings rates trend upward over time as expectations adjust gradually. This fits what we know of how consumers behave. As long as banks don't start lending aggressively again right out of the gate, we're probably fine. Since much of the excess lending was done via the securitized markets, and since that sector looks like it's going to remain derailed for at least the next year or two, I don't see a ton of excess lending heading our way. My leanings are toward #3 - currently being referred to as "muddle through economics". We get a touch of inflation, but not that bad. We get a touch of economic growth, but not that great. That said, either #1 or #2 remain possibilities. My favorite quote these days? "Don't Panic" (From the Hitchhikers Guide to the Galaxy by D. Adams.) This is a great summary of the different scenarios we could face, but I'm wondering what assumptions economists are making about resources. The fact is that despite $150/barrel oil, we haven't been able to increase oil production capacity all that much over the past several years, and widescale use of electric cars is probably at least a decade and $10K/car worth of batteries away. I am getting the impression that economists assume that oil and other resource production will grow at the same rate as the GDP- something I'm a little more pessimistic on.

GroupW -> RE: INFLATION: What are you doing to combat it? (6/18/2009 12:26:15 PM)
Dave- One other thing. A lot of the money that's been pumped into the system has gone to buying fairly short term private debt like commercial paper, asset backed securities, etc. That money is pretty easy to pull back in over time. The securities mature, the Fed gets their cash back at the maturity. We're already seeing a lot of that going on in the commercial paper market. That's one bright spot. The other is that the Fed was being pressured to put 5 year money out there on the TALF program, mostly targeted to commercial mortgage backed securities. S&P recently tubed that whole idea via a very stupid decision to downgrade the super senior tranches of CMBS that otherwise would have qualifed. That severely limited the amount of CMBS that would really qualify for the 5 year money. I was on a call with one of the guys at the Fed at few weeks ago. Off the record, they're rather happy with that. They never really wanted to do the 5 year money anyway. They're really pushing hard to keep any monetary stimulus added to a 3 year horizon or less. That fits pretty well with what some folks think the path of consumer behaviour is likely to follow. Also, some of the lending programs that have been announced have never gotten off the ground. As the fixed income markets have stabilized, the Fed has let some of those announced programs go unfunded and die a quiet death (TALF for legacy loans being one example)

GroupW -> RE: INFLATION: What are you doing to combat it? (6/18/2009 12:31:09 PM)
quote: ORIGINAL: blessedinnyc quote: ORIGINAL: GroupW Seems to be in check at the moment. There's too much slack in the economy today for it to be an immediate issue. Longer term, who knows? Right now the when and if questions on inflation have economists pretty deeply divided. Scenario 1: Consumers rapidly curtail their expections and immediately start saving and spending at appropriate levels again. In that case, the economy stays fairly subdued for the next several years, the Fed gets lots of time to take that stimulus money out of the system, and we have happy days again. Scenario 2: Consumers curtail their spending slowly. If bank lending comes back online and we return to the go-go days, the Fed won't have much time to react. We're likely to get a bit more inflation and continue to have trade imbalances, low savings rates, etc. Not very pretty. Scenario 3: Consumers curtail their spending but not as quickly or as immediately as they probably should. Savings rates trend upward over time as expectations adjust gradually. This fits what we know of how consumers behave. As long as banks don't start lending aggressively again right out of the gate, we're probably fine. Since much of the excess lending was done via the securitized markets, and since that sector looks like it's going to remain derailed for at least the next year or two, I don't see a ton of excess lending heading our way. My leanings are toward #3 - currently being referred to as "muddle through economics". We get a touch of inflation, but not that bad. We get a touch of economic growth, but not that great. That said, either #1 or #2 remain possibilities. My favorite quote these days? "Don't Panic" (From the Hitchhikers Guide to the Galaxy by D. Adams.) This is a great summary of the different scenarios we could face, but I'm wondering what assumptions economists are making about resources. The fact is that despite $150/barrel oil, we haven't been able to increase oil production capacity all that much over the past several years, and widescale use of electric cars is probably at least a decade and $10K/car worth of batteries away. I am getting the impression that economists assume that oil and other resource production will grow at the same rate as the GDP- something I'm a little more pessimistic on. The folks I talk to don't seem to be making a lot of assumptions there. It's just a big wildcard. They're not even sure how much of an impact $150/bbl oil would really have on longer term inflation! We know we'd get a pop in the overall price level initially, but how much of that initial increase flows through to inflationary expectations is unknown. It's the latter question that would matter most. It's likely we can absorb a short term increase in prices without too much pain and agony, but a secular increase in inflationary expectations would not be good.

davelinde -> RE: INFLATION: What are you doing to combat it? (6/18/2009 4:59:40 PM)
quote: ORIGINAL: GroupW ...some of the lending programs that have been announced have never gotten off the ground. As the fixed income markets have stabilized, the Fed has let some of those announced programs go unfunded and die a quiet death I wasn't sure but I'd hoped that was the case. I was not concerned when the government was stepping in to maintain solvency and re-establish confidence. Now what worries me though, is the prospect of so much OTHER types of government spending which lead to so much more $$' being printed that they become worth less - essentially the definition of inflation....

GroupW -> RE: INFLATION: What are you doing to combat it? (6/18/2009 11:13:19 PM)
I think everyone is right to be concerned. Based on the conversations I've had, topic #1 at the fed right now is how soon before all this has to be unwound. I think they've got the right mechanisms and intents but there is no guaranty that they get it right. Less cause for panic though than it appears on the surface. Just my opinion though. As with all opinions, you get what you pay for. I offered that for free, so draw your own conclusions. [;)]

GroupW -> RE: INFLATION: What are you doing to combat it? (6/22/2009 1:36:29 PM)
Dave- Not his best article, but Alan Blinder's comments in the NYT today are worth reading. I think he's generally on sound footing here. http://www.nytimes.com/2009/06/21/business/economy/21view.html?partner=rss&emc=rss

Mollymouser -> RE: INFLATION: What are you doing to combat it? (6/22/2009 2:10:13 PM)
quote: ORIGINAL: GroupW Dave- Not his best article, but Alan Blinder's comments in the NYT today are worth reading. I think he's generally on sound footing here. http://www.nytimes.com/2009/06/21/business/economy/21view.html?partner=rss&emc=rss Interesting article. I especially liked this part ... The possibilities for error are two-sided. Yes, the Fed might err by withdrawing bank reserves too slowly, thereby leading to higher inflation. But it also might err by withdrawing reserves too quickly, thereby stunting the recovery and leading to deflation. I fail to see why advocates of price stability should worry about one sort of error but not the other.

GroupW -> RE: INFLATION: What are you doing to combat it? (6/22/2009 3:29:29 PM)
My favorite part as well. Particularly since you don't have to get it exactly right, just don't be catastrophically wrong. The economy is actually more resilient than we're currently inclined to believe, just like it was more fragile in 2007 than we wanted to think.

GroupW -> RE: INFLATION: What are you doing to combat it? (6/25/2009 12:47:10 PM)
Starting to see the Fed cut back a bit around the edges. Makes me feel a bit better to see some movement. Fed Trims Emergency Lending Programs as Financial Crisis Wanes Share \| Email \| Print \| A A A By Michael McKee June 25 (Bloomberg) -- The Federal Reserve will let one of its emergency programs expire and trim two others in a sign that improving financial markets allow a first step toward ending its unprecedented interventions. The three programs provide funds or Treasury securities to securities brokers and money-market funds. They are authorized under a provision allowing loans to nonbanks under “unusual and exigent circumstances.” Five other emergency facilities, including foreign currency-swap lines with central banks around the world, will be extended by three months through Feb. 1, the Fed said in a statement in Washington. They would have expired Oct. 30. “Conditions in financial markets have improved in recent months, but market functioning in many areas remains impaired and seems likely to be strained for some time,” the Fed said in its statement. The Fed didn’t announce the changes yesterday following the Federal Open Market Committee meeting because it needed to coordinate the extension of the currency swap lines with other central banks, a Fed official told reporters on a conference call.

Mollymouser -> RE: INFLATION: What are you doing to combat it? (6/26/2009 3:02:01 AM)
Interesting.

GroupW -> RE: INFLATION: What are you doing to combat it? (6/26/2009 1:17:09 PM)
More interesting is why your post was done at 3am!!!!! Sleep is a good thing!

Mollymouser -> RE: INFLATION: What are you doing to combat it? (6/26/2009 3:31:00 PM)
That's only 12:00am in California! I tend to be a night owl because my DH works odd hours (he's a military pilot!)

GroupW -> RE: INFLATION: What are you doing to combat it? (6/26/2009 5:35:55 PM)
These days, everything after 9pm seems late to me.

Mollymouser -> RE: INFLATION: What are you doing to combat it? (6/27/2009 1:20:23 AM)
That's ok ... everything before 9 AM seems early to me. [:D]

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