Inflation Expectations Rising Sharply

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Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Inflation Expectations Rising Sharply

I just came across this article today and I think it might be very telling. It certainly got my attention: http://www.bloomberg.com/apps/news?pid=20601109&sid=aIwFmyvJJiv4&refer=home

***Also be sure to click on the "graphic" tab near the top of the article.

According to a monthly consumer survey that is conducted by the University of Michigan, inflation expectations have risen very sharply in the past couple of months. As the chart shows, the expectations are roughly correlated with commodity prices, particularly oil.

If we listen to Jim Sinclair, he points out that regular inflation occurs when the money supply is increased without a commensurate increase in the productive capacity of the economy. But hyperinflation is a different beast. It is generally associated with expectations, psychology, and a loss of confidence. The impetus of hyperinflation seems to primarily be an increase in the velocity of money and this is generally associated with increased inflation expectations.

Has anyone else seen this or been following expectations? I think that the expectations could be a signal of when things might turn, even if we don't go to all out hyperinflation. Have commodity prices effectively bottomed? Any thoughts on this?

plantguy90's picture
plantguy90
Status: Gold Member (Offline)
Joined: Jan 26 2009
Posts: 271
Re: Inflation Expectations Rising Sharply

I see inflation all around me; but everyone keeps whistling deflation...  I use cash, and things are getting expensive to live on, in spite of all the coupons and special deals offered here and there.  I dont look at my property value, maybe that's why. 

Everyopne is worried about hyperinflation, but if your real costs are rising about 5-10% a year, and you aren't making that in your money, stock, or real estate markets, then you are taking hits in your lifestyle; so I believe we all are suffering now. 

strabes's picture
strabes
Status: Diamond Member (Offline)
Joined: Feb 7 2009
Posts: 1032
Re: Inflation Expectations Rising Sharply

I think the U Mich survey is still down near term with uptick in inflation expectations long term though still below historical levels.  I believe the uptick will change once the scale of this depression is realized.  The collapse hasn't really hit yet.  We're getting ready to see commercial real estate collapse, prime residential real estate foreclosures, corporate bankruptcies, bank bankruptcies, way more layoffs...all deflationary.  Given globalization, pricing pressure in the US is down, a lot.  To reach equilibrium in manufacturing, wages will need to drop by a factor of 100...Chinese levels.  Debt/credit is still collapsing...deleveraging is bigger than the Fed's re-leveraging.  As Volcker said, "inflation doesn't do well in depressions."  And if the Treasury bond market shows signs of collapse, the Fed will shoot rates to the moon to defend it.  That will be a deflationary noose around the economy.  However, even though I'm anticipating deflation, I still think it's a good idea to have some gold in a hard crash situation. 

RubberRims's picture
RubberRims
Status: Silver Member (Offline)
Joined: Nov 22 2008
Posts: 145
Re: Inflation Expectations Rising Sharply

Why HYPERINFLATION is Already Here!

 

Where is this all leading?

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