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Strategies & Market Trends : Commodities - The Coming Bull Market
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To: craig crawford who wrote (213)6/13/2001 4:25:57 AM
From: craig crawford  Read Replies (1) of 1643
 
June 8, 2001

Floyd Norris: Wheaties Inflation Indicator: Will Price Increases Stick?
nytimes.com

By FLOYD NORRIS

Cheerios prices are up. So are AT&T's basic rates. President Bush wants to protect the steel industry. Those events may not seem to be closely related, but there is a common thread. Corporate America is being hurt by rising costs in a slowing economy, and is looking for ways to pass on the costs to consumers. Inflation is still widely viewed as something that went away two decades ago, and therefore of little concern to investors. It is recession that has worried Wall Street, and the markets now seem to be reasonably confident that the Federal Reserve has warded off that threat.
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The Fed's aggressive easing will not soon revive the new economy, where far too much money was invested and overcapacity haunts many companies. But lower interest rates are stimulating the old economy, where companies need to pass on higher costs, particularly for energy.

We are not approaching the stagflation of the 1970's, when a stagnating economy combined with inflation in the double digits. But there are more inflationary pressures now than one would expect in a weak economy. If the current round of price increases endure, more could follow.
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