Walmart CEO says "serious" inflation ahead...

http://www.usatoday.com/money/indust...nflation_N.htm

U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday.

The nation's largest retailer needs to get back to its roots as the lowest priced one-stop shop for consumers, Walmart CEO Bill SImon said.
The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.
Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."
Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.
"Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."
Consumer prices — or the consumer price index — rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.
The scenario hits Wal-Mart as it is trying to return to the low across-the-board prices it became famous for. Some prices rose as the company paid for costly store renovations.
"We're in a position to use scale to hold prices lower longer ... even in an inflationary environment," Simon says. "We will have the lowest prices in the market."
Major retailers such as Wal-Mart are the best positioned to mitigate some cost increases, Long says. Wal-Mart, for example, could have "access to any factory in any country around the globe" to mitigate the effect of inflation in the U.S., Long says.
Still, "it's certainly going to have an impact," Long says. "No retailer is going to be able to wish this new cost reality away. They're not going to be able to insulate the consumer 100%."

Not a matter of if, but when. I'm in the clothing industry and we've had about 5-7 price increases since January. Last quarter of '10, the mills would give us a head up of the increase, now we're getting notices that say "effective immediately".

The Repugs will say it's all Barry's fault and all the Fed's fault.

Boutons says, surprise, the Repugs are lying.

There is certainly no salary-push inflation (people are intimidated into accepting whatever job and pay they have or can find, as the employers intend), there's no demand-pull inflation, as consumer confidence has taken a huge drop.

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Originally Posted by boutons_deux

The Repugs will say it's all Barry's fault and all the Fed's fault.

Boutons says, surprise, the Repugs are lying.

There is certainly no salary-push inflation (people are intimidated into accepting whatever job and pay they have or can find, as the employers intend), there's no demand-pull inflation, as consumer confidence has taken a huge drop.

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living life with such cognitive dissonance must be hard.

And so it starts...the US won't have any choice but to follow or they won't be able to sell bonds.

http://www.reuters.com/article/2011/...72S1AE20110331

ECB FOCUS-Europe rates to lead U.S. as global power shifts


By Paul Carrel

FRANKFURT, March 31 (Reuters) - After following the Federal Reserve's lead for over a decade, the European Central Bank is poised to launch a series of interest rate hikes before the U.S. central bank for the first time in the ECB's history.

The change from the traditional pattern reflects the ECB's greater preoccupation with inflation pressures, as well as its higher level of discomfort with the emergency bond-buying programmes run by central banks.

But the "decoupling" of ECB and Fed policies is also the result of an historic shift in the global economy: the increased influence that Asia, rather than the United States, is having on the euro zone's economy.

"I think we are in a new world where global interest rate cycles are not initiated by the Fed," said Jens Sondergaard, senior European economist at Nomura.

"There has been a lot of import price inflation pushing up euro area inflation...and a lot of this is related to above-trend growth in Asia."

Sondergaard said monetary policy tightening already initiated by central banks in emerging markets, including China, was increasingly important for the rest of the world. China has raised official interest rates three times and commercial banks' reserve requirements five times since October.

ECB Executive Board member Lorenzo Bini Smaghi cited growth in emerging economies as well as higher commodity prices when he said in mid-March that inflation risks had increased.

He explicitly warned that the euro zone risked importing inflation from China, where consumer prices have been rising at an annual rate of around 5 percent. [ID:nLDE72D2I7]

After a few years of virtually no inflation, what would one expect?

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Originally Posted by ChumpDumper

After a few years of multi trillion dollar deficits, what would one expect?

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Fixed it

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Originally Posted by CosmicCowboy

Fixed it

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No, you didn't fix anything. That doesn't explain the inflation in other countries.

Using your "logic," why would you have expected worldwide prices to stay relatively flat even now, CC?

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Originally Posted by ChumpDumper

No, you didn't fix anything. That doesn't explain the inflation in other countries.

Using your "logic," why would you have expected worldwide prices to stay relatively flat even now, CC?

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You honestly think that the US was the only country running deficits? Emerging countries under valuing their currencies, creating trade deficits and financing those deficits by loaning those developed countries money while they kick started their emerging economies (creating short term dis-inflation in developed countries) obviously couldn't last forever. Theres a couple billion "new" consumers in China and India now competing for goods.

But you think the flat levels of inflation would last forever if some countries only didn't run deficits?

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Originally Posted by ChumpDumper

But you think the flat levels of inflation would last forever if some countries only didn't run deficits?

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I think that 1.5 trillion annual deficits in the US are indefensible and unsupportable by any logical person.

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Originally Posted by CosmicCowboy

I think that 1.5 trillion annual deficits in the US are indefensible and unsupportable by any logical person.

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Sure, but you really think there would be no inflation if the deficits hadn't been so high?

Brazil ran a surplus for the past year and has over 6% inflation.

"no inflation" is your straw man, not mine. Inflation can be reasonably contained by exercising fiscal responsibility.

You know what I mean. The levels of inflation seen the past two years.

Has Brazil been responsible in its government spending?

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Originally Posted by ChumpDumper

You know what I mean. The levels of inflation seen the past two years.

Has Brazil been responsible in its government spending?

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You're kidding, right? Brazil is the poster child for currency meltdowns and manipulation. It's catching the same emerging market inflation flu hitting China, India, South America, etc.

OK, then is there a country now not facing the kind of inflation the US is facing (that wasn't really quantified in that article, btw) due to its sound fiscal policy? I'm trying to find one.

Kind of stupid to separate fuel increases from inflation. Energy expenditures are the single most important aspect in what we pay for anything today.

Chump, we probably more agree than disagree on this issue, we are just coming at it from different angles.

Developed countries sovereign debt and artificially low interest rates was the driving force behind the dearly departed boom times, which saw developing countries economies explode to feed the demand for cheap consumer goods which drove down the apparent inflation rates in the developed countries as relatively expensive locally produced goods were replaced by cheap imports. Now that these developing countries have matured some and created their own consumer class there are now billions of new "over consumers" chasing a finite amount of commodities and goods. This doesn't even take into account big international flows of money diving into these emerging markets seeking higher returns and creating more localized inflation. Put it all together and a pretty nasty bout of inflation seems pretty inevitable. The US deficits are gonna be an economy destroyer in inflationary times...

And the printing of money out of thin air, contributes to the inflation or just makes it worse?

Inflation isn't all bad. Your debt also loses value. For what thats worth.

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Originally Posted by Viva Las Espuelas

And the printing of money out of thin air, contributes to the inflation or just makes it worse?

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Monetizing debt just postpones and makes it worse. Interest rates would already have been forced up at treasury auctions without QE.

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Originally Posted by MannyIsGod

Inflation isn't all bad. Your debt also loses value. For what thats worth.

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Trust me, Manny, for someone like you, it's bad. Your hourly wages will NOT stay up with the pace of inflation. Plus, if you read the fine print your student loans are probably adjustable rates indexed to inflation.

That's when class warfare will get really fun here.

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Originally Posted by Viva Las Espuelas

That's when class warfare will get really fun here.

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Yeah, fuck those lazy poor people....:lmao

Daaaaaaaaaaaaaaaaaaaaaaaaaaaaamn.

Excuse me.....class kinetic-military-action-fare.

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Originally Posted by CosmicCowboy

You honestly think that the US was the only country running deficits? Emerging countries under valuing their currencies, creating trade deficits and financing those deficits by loaning those developed countries money while they kick started their emerging economies (creating short term dis-inflation in developed countries) obviously couldn't last forever. Theres a couple billion "new" consumers in China and India now competing for goods.

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There is quite a bit of evidence that suggests that the Chinese are not holding their currency that much cheaper relative to the dollar than it would be otherwise.

Chinese inflation has been ramping up quite markedly in the last couple of years, as the OP noted for a couple of reasons. That would have the effect of making the dollar stronger over time, as producer prices in China start affecting trade balances, requiring less and less intervention by the Chinese government.

If you like, I can probably present a few links to articles that support this.

I think inflation in China will do more to "re-balance" our trade with them than you might think.

To be fair, there is still some anecdotal evidence that suggests the yuan is undervalued:

http://media.economist.com/sites/def...1030fnc885.gif
(July 2010 economist.com)

ASK Western policymakers how they intend to squeeze growth from their sluggish economies and most pin their hopes on higher exports. That makes exchange rates an especially sensitive topic. A weaker currency improves the competitiveness of a country by making exports cheaper. It also encourages domestic consumers to switch from expensive imports to domestic goods. The Economist’s exchange-rate scorecard, the Big Mac index, shows that currencies continue to be cheap in the developing world but overvalued in Europe.

The index is a lighthearted attempt to gauge how far currencies are from their fair value. It is based on the theory of purchasing-power parity (PPP), which argues that in the long run exchange rates should move to equalise the price of an identical basket of goods between two countries. Our basket consists of a single item, a Big Mac hamburger, produced in nearly 120 countries. The fair-value benchmark is the exchange rate that leaves burgers costing the same in America as elsewhere.

Asia remains the cheapest place to enjoy a burger. China’s recent decision to increase the “flexibility” of the yuan has not made much difference yet. A Big Mac costs $1.95 in China at current exchange rates, against $3.73 in America. Our index suggests that a fair-value rate would be 3.54 yuan to the dollar, compared with the current rate of 6.78. In other words the yuan is undervalued by 48%.

Other Asian currencies such as the Thai baht and the South Korean won are also undervalued. The Brazilian real is one of the few emerging-market currencies that is trading well above its Big Mac benchmark. With interest rates high—the policy rate now stands at 10.75%—Brazil has attracted lots of attention from yield-hungry investors. Burgernomics suggests that the real is overvalued by 31
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Originally Posted by RandomGuy

There is quite a bit of evidence that suggests that the Chinese are not holding their currency that much cheaper relative to the dollar than it would be otherwise.

Chinese inflation has been ramping up quite markedly in the last couple of years, as the OP noted for a couple of reasons. That would have the effect of making the dollar stronger over time, as producer prices in China start affecting trade balances, requiring less and less intervention by the Chinese government.

If you like, I can probably present a few links to articles that support this.

I think inflation in China will do more to "re-balance" our trade with them than you might think.

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Inflation is definitely happening in China and their cost to produce goods is definitely rising. Recent labor strikes for higher wages at auto plants is one leading indicator. This will have a direct cause/effect on inflation in the US. At the same time, I don't see our balance of trade shifting anytime soon...It is still WAY CHEAPER to produce goods in China than the US.

I suspect that the dollar is overvalued, but I'm no economic expert. Can someone fill me in on how that connects with inflation (if it does), and why my debt is devalued in that scenario?

Dumb questions probably, but my math skills don't work unless voodoo operators and strange symbols are involved. :lol

The US Dollar has been over valued because when the world economy crashed US treasuries were the safety net of choice and they are denominated in dollars. This dynamic is changing as the US keeps monetizing debt and investors quit buying treasuries.