[Tyler_JC]

I have a buddy whose dad works for the state of Vermont. I hope he's alright...

This begs the question:

Would you rather lay off workers or give everyone a cut in pay?

Most Americans (2/3) would prefer a pay cut according to a recent NBC poll.

[vision-master]

$this->bbcode_second_pass_quote('Tyler_JC', 'I') have a buddy whose dad works for the state of Vermont. I hope he's alright...

This begs the question:

Would you rather lay off workers or give everyone a cut in pay?

Most Americans (2/3) would prefer a pay cut according to a recent NBC poll.

[vtsnowedin]

Vermont is just a bit ahead of the curve here. I can think of no state that will not be cutting back after this years reciepts are added up. Ahhnold is facing a real terminator in Kalifornia and the rest have just not read the tea leaves yet.

[vaseline2008]

I have been seeing McDonald's Ads and TV Commercials for 2 Big-Macs for $3.50 (a 2 for 1 type deal). I think I saw another burger chain with a similar offering. It seems everywhere I look there is a buy 1 get 1 free offer.

Has anyone else noticed this? Are these signs of things to come?

[heroineworshipper]

It's probably 1oz of beef. Lettuce not included. The sales here have been like that. 50% off for 1/4 the size. There's too much money chasing too little food.

[Plantagenet]

Fast food chains make all their money on the fizzy sugar drinks.

When you pay $1.99 for a large coke to go with your free cheeseburger, then they come out ahead----the coke costs them just a few pennies.

[vtsnowedin]

As credit drys up the prices people are able to pay comes down to the cash they have in hand. This will force prices down in real terms not just the gimmics which we have always seen. The problem is that before you get any real benefit out of lower prices your job goes toes up and you have no money to buy anything at any price. In a depression cash is king so hang on to yours.

[vaseline2008]

Oh, I know about the cereal makers and their reduced portions. Hmmm, maybe I have to go and investigate...

[patience]

I think we are at the very beginning of deflation in consumer prices. Retailers have a big problem, however. THEIR costs aren't going down much yet, and there are a lot of goods in the pipeline/on shelves, that were bought when prices were high.

My steel wholesaler has a warehouse full of steel that he paid top dollar for, but he will have to cut prices to move it. New steel is not selling because: Retail is dead, so manufacturers aren't getting orders, so they aren't buying raw materials, therefore, the steel mills are shutting down.

If this goes on long enough, first, retailers will die, then factories, then factory suppliers (steel mills, plastic makers, chemical makers, etc.), then mining, etc. That can all happen pretty fast in today's "just in time" markets. The result is fewer stores with less on the shelves. Dramatically lower prices could happen right before the store goes out of business. The first big bummer is loss of jobs. The next is loss of SUPPLY, of many things.

Already there are problems in commercial real estate, such a the owners of strip malls who have lost enough rental income that they can't pay their loans on the property. If that goes on down a ways, we have banks in even deeper trouble with more bad loans. This could get REAL bad.

[Micki]

McDonalds is probably not a good leading indicator.
Last report I saw indicated that fast food restaurants actually were doing well as many families stop going to restaurants and instead have more fast food.

I have a feeling that certain retailers, like garment which is a very competative sector, should be among the first ones out with long running sales.
Secondly I think music/video/cinema should suffer as people stick to downloading and/or borrowing/copying from each other.

[TreebeardsUncle]

Again, this is no big deal. There is a glut of retail space. In 2 years, business as usual will continue as if nothing had happened in 08 and 09.

g

[Plantagenet]

$this->bbcode_second_pass_quote('TreebeardsUncle', ' ')In 2 years, business as usual will continue as if nothing had happened in 08 and 09.

[gollum]

I suspect that inflation of 10-15% would be beneficial to an indebted society. If we have inflation of 15% for 4 years, in relative terms and debt obligations would have lost 60% of their relative value.

[emailking]

$this->bbcode_second_pass_quote('gollum', 'I') suspect that inflation of 10-15% would be beneficial to an indebted society. If we have inflation of 15% for 4 years, in relative terms and debt obligations would have lost 60% of their relative value.

[copious.abundance]

We've now got 5 months of wholesale deflation in a row. The retail numbers, as usual, come out tomorrow.

--> December wholesale prices fall 1.9 percent <--



And another Marketwatch article on the bond market-deflation connection:

--> Deflation may go past 2008, bond market shows <--
$this->bbcode_second_pass_quote('', 'D')eflation has probably hit the U.S., the December consumer price index is expected to show Friday, and one gauge widely watched by the bond market indicates it may stick around for years to come.

Economists anticipate consumer prices fell in December by 0.8% from November, according to a MarketWatch survey. This monthly decline would mean prices fell 0.2% from the prior year, the first year-over-year decline since 1955. Prices have already been tumbling at the wholesale level.

While much of December consumer price drop can be chalked up to plunging energy prices at year-end, deflation may not end there. The $530 billion market for Treasury Inflation Protected Securities shows prices are expected to continue dropping for several years as a shrinking economy curtails demand.

"The market is forecasting a deflation scenario for years," said Tim Wilhide, co-manager of the $831-million Hartford Inflation Plus Fund. "Nothing on the horizon says right now that the economy is turning around."

[...]

[copious.abundance]

3 months of consumer deflation in a row now, and counting.

--> Consumer prices down 0.7% in December <--

[copious.abundance]

We have our first rise in wholesale prices (+0.8%) after 5 months of decline. We'll see if this starts a new trend or is just a blip. As usual, the retail prices comes out tomorrow.

>>> Yahoo! News <<<

[Micki]

And Baltic Dry Index seems to have been picking up a bit. Hearsay is it's up 300% from bottom and has reached 2006 levels.
Gold/Silver/Platinum up from their lows.
Still too early to say of this is just counter trend or early indications of swing towards the inflationary but given that I am a firm believer in an inflationary outcome, I am using dips regularly now as buying opportunity.

[copious.abundance]

The retail level number is out, and it showed a 0.3% rise for January:

>>> U.S. Economy: Consumer Prices Rise for First Time in Six Months <<<

Not sure why that Bloomberg article said it was the first time in 6 months 'cause my previous articles above said it had fallen for only 3 months in a row.

Anyway we'll keep an eye on this for maybe another few months, and if deflation does not return we'll have learned not to take the bond market's "predictions" too seriously.

[deMolay]

A lot of charts that do not bode well for the future. I like the phrase Sudden Stop. It would be interesting to hear some feedback on this article. http://www.itulip.com/forums/showthread ... #post83348