Posts Tagged ‘inflation’

USA and inflation

Posted: May 19, 2014 in Uncategorized
Tags: ,

That is one thing you just do not hear about.

Well they cannot make you hear this uncomfortable truth as all the paradigms of growth via low interest would automatically fail if there was inflation.

But inflation is there.

Thomson-Reuters /University of Michigan consume confidence dropped from a 9 month high in May from 84.4 to 81.8 , as American are shaken by rising grocery and fuel bills at record high.

US Bureau of Labor statistics (yoy)

Price of shrimp +61%

Price of bacon +13.1%

Price of pork meat (end of 2014 projection) +20%

Ground chuck beef +5.9%

Chicken breast +12.4%

This is a time bomb.

While the super wealthy Americans (and in the world in general, BBC stated on Sunday that UK Billionaires last year improved their fortune by a massive +15%) – the average John Doe is struggling to have a plate of meat on his table. 

 

You do not know when it will hit the main media…but soon or later (now to 3 years), it will. And it will not be just the financial market to have an issue.

 

 

The Reserve Bank of Australia (RBA) has an issue (well more than one).

It does want a lowed Australian Dollar to stimulate the economy.

But a lower Australian Dollar will increase inflation and spike up the interest rate slowing the economy and propping higher the Australian Dollar.

Why?

The Australian Inflation is composed by two baskets, a tradable (EG imports) and non- tradable (electricity costs, rents..).

As anyone in Australia at least subconsciously knows, the cost of living (mainly non-tradable) increased much more than the headline inflation. Notwithstanding that, we have a very low inflation number. The reason is because the tradable basket, due to the currency, has been actually in deflation.

If the currency goes lower….inflation will automatically spike,

In effect a slightly higher dollar than necessary should be better for the RBA.