Inventories depleted, inflation coming
Across the USA, production has been scaled back. Companies of every description are liquidating their inventories, and have scaled back on production of additional product.
We’re going to reach the point of total liquidation of existing inventory in the 3rd fiscal quarter.
Once that point is reached, consumer prices will inevitably increase.
The classically incompetent “cash for clunkers” program nicely illustrates this problem. Car dealers have pretty much sold out of their inventory, but there is no more inventory in the pipeline.
Now, even such a basic commodity as sugar is being exhausted.
Folks, the US dollar is now a third-world currency. Get ready for wild fluctuations in consumer retail prices of all kinds of basic goods.
August 13th, 2009 at 7:08 am
hmmm…seems a little early to be predicting inflationary spiral. Burning down inventory happens in every recession, but inflation does not have to follow, and often does not.
Demand will remain weak for a good while. Recovery slow.
No inflation will be seen.
Don’t be a chicken little, ‘rico.
LC
August 13th, 2009 at 7:20 am
Production cuts have been far deeper in this cycle than is typical, and the cuts have been global. Besides inflation, we’re also going to see even more assault and battery on corporate earnings. with little to sell, we will see declining corporate revenue.
August 13th, 2009 at 7:32 am
The Fed printing money out of thin air to monetize the debt, 2 Trillion dollar deficits and rising unemployment spells a comeback of the Misery index.
Everything you need to purchase or need to use will be getting more expensive, but things that increase a persons wealth (real estate, personal and commercial) will decline in value as future liquidation will be necessary to survive the next downturn.
All the while the politicians have the arrogance that they are fixing things when in fact they keep throwing monkey wrenches in the economic engine.
September 8th, 2009 at 12:16 pm
The currency issue seems to me to be the biggest factor… who wants to hold dollars anymore? With so much foreign content now embedded in our supply chain, prices will have to rise regardless of demand pull. Why analysts can’t seem to mutter the word ’stagflation’ is beyond me.