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Politics : View from the Center and Left
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To: Sam who wrote (494675)7/15/2022 8:26:53 PM
From: cosmicforce  Read Replies (1) of 543095
 
Many factors - e.g. pumping the gas pedal with free cash while people were working less efficiently due to COVID helped. I would call this "natural inflation". These are compounding factors - if there are 10 steps in each supply chain and there is only a 1% loss of efficiency, that is 0.99^10 is about 0.904 - a lost of over 9% which would have to be offset. This alone would account for some of the inflation along with the "remarkable" profits that oil producers found by simply raising the costs for domestic oil without any antecedent costs driving it. Of course we have to pay the WORLD price for stuff produced here.

Oil increases always cause rapid price increases at the pump that are monetized by the producers in anticipation of higher real costs but aren't realized by the supply chain. These are followed invariably by slow price declines ostensibly caused by high price oil remaining in the supply chain. We are seeing that glacial pace now despite oil dropping 20% off its high.

CFOs aren't stupid - they know they can jack the prices up when there is scarcity (or perceived scarcity) and do so. This will backfire if they don't downsize the supply chain as people will stop overbuying. There is deflation in some key indicators - like the lumber/gold ratio. This seems to be projecting deflation. I closed my PALL position because it spiked so quick. It is down 12% off my price and dropping.

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