Of course it's possible for goods to go up if import controls and tariffs are put in place. BTW, those are tactics of a deflationary or disinflationary time. Rest assured it will cause more problems than it solves (as in more people will be put out of work for it) than benefit from it (marginal producers).
I fail to understand what the H you are saying about hedonics.
If you think cars prices today have any comparison to car prices of 1930 then I think you are silly. Since I do not think you are silly I have no idea what you are saying.
No doubt there will be some goods rise in price. I can not predict what they will be but I would be inclined to think that it would not be food (or at least all food). Who knows. What the US needs to do is remove crop supports. If we did, prices would drop. Although everone needs to eat, the price of food is not even close to the scale of the price of a home that drops 45% in value. In the grand scheme of things food prices are not relevant if home prices crash.
Will a dollar purchase more?
yes.
More house, more stocks, more car, more foreign goods, etc.
Demand for goods will drop. Production thanks to China will likely not drop as much. We already have oversupply. That is why there is little passthru in many goods. There has been passthru in prices of stuff to make houses but that is about it, and that will end.
I expect oil prices to fall. Perhaps significantly. If I am wrong however, the result will be more people out of work.
Tax revenues are falling in the UK right now. Some people think that interest rates can not drop when that happens. Well it is happening. Tax revenues fell in Japan. That did not stop interest rates from heading to zero.
Furthermore, it is entirely possible to have monetary inflation and Deflation in most goods and services. In fact, we could see that and still have falling interest rates. Witness Japan.
Bottom line, if prices of houses and cars and manufactured goods drop, I really do not care what food does and nor will the FED. The US$ fell 30% or whatever and car prices did not rise 30%. In fact, I am not sure they rose at all. Now what happens to the demand for steel, lumber, copper, furniture etc etc etc etc when housing slumps?
A falling PPI is a no brainer regardless of what the US$ does.
Mish |
