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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (4990)	1/13/2004 7:49:36 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

Here's a little more perspective on why watching Argentine and Brazilian skies Message 19679145 Message 19677598 in an environment of less than 100 million MT global grain inventories and Mad Cow disease, is a bigger deal than watching the Oz boys Ben and Al. Chart 1 shows the big break consumers have drawn over the last thirty years on nondurable goods. incontext.indiana.edu Notice that during that period durable goods spending has stayed steady, the same. The money once spent on nondurable goods has been diverted into supporting the service based economy (see chart 4). Chart 3 however shows the big story. First notice a couple percent drop in money spent on energy goods, the benefits of the now overly cheap fuel days of the 80s and 90s. An even bigger story in my mind shows a large decline in food costs. Most of that of course is higher productivity, but a portion of it is that food production has been neglected, especially worldwide, and has just been priced too cheaply. Plus the big stockpiles held by former communist countries like Russia and China are gone. biz.yahoo.com They've adopted just in time inventories just like us. If there are any farmers here, perhaps we can get a perspective on the risks of farming, and the lead times to bring good cropland (that there is) into play in response to meeting demand and higher prices? Not easy or quick, can't just turn on a switch. biz.yahoo.com Plus modern farming is very energy intensive,a special problem right now. So let's cut to the quick. I don't have to tell what a shift from say 3 to 4% spent on energy goods, and 14% to say 17% would mean to our economy at this stage of the game. A 1%, 2%, 3%, even 4% sudden shift to energy and food, I can't imagine, but it will be highly inflationary, a shock. And yes, I agree it will be deflationary elsewhere. That's why I say excluding food and energy as too volatile in the measure of inflation is foolish, and to blow it off and ignore it like Bernanke does is the ultimate stupidity.