Thursday, August 18, 2005

The PPI

Producer Price Index News Release text
AUGUST 17, 2005
http://bls.gov/news.release/ppi.nr0.htm

The year over year percentage increases tell the entire story:

the finished goods index increased 4.6 percent
finished energy goods advanced 15.2 percent
The index for intermediate goods climbed 6.5 percent
prices received by crude goods producers rose 8.4 percent

Inflation resides in these numbers, and must eventually be reflected in the Consumer Price Index. One might ask why it does not show up now. The Answer is: Because We are too busy running American businesses out of Business. We utilize cheap World Production centers to undercut domestic Production facilities, creating almost complete Price Inelasticity for their Products, so rising Costs grind them into bankruptcy or folding. Their elimination suppresses the PPI readings of associated Production materials:

Prices for materials for durable manufacturing decreased 0.9 percent in July, following a 0.5-percent decline in the prior month

June and July remain the most productive months of the Year. A decline during these months can be translated into a definition of a shrinking market. This reduced market comes from loss of Productive capacity, not from cheaper Mining and Milling Costs or greater productivity:

In July, the Producer Price Index for Total Mining Industries was 194.1 (December 1984=100), 24.7 percent above its year-ago level.

A Price rise of this magnitude means functionally that Production Costs have not gone down, and that the Mining Industries will rationally maintain full employment of Production capacity. The lowering of Prices at this Stage means the total Market is shrinking in volume by loss of Participants. Our Production facilities are decaying at rapid pace, and there is a price to be paid. The lack of industrial capacity will magnify the Inflation when it reaches the Consumer Price Index eventually, as cheap Imports turn into demons seeking to devour your Pocketbook, and George W. cannot sell any more Treasuries, as foreigners find little value in support of the Dollar when Americans have ceased buying Imports at such heightened rates. lgl

2 comments:

http://www.economicfractalist.com/ said...

The increasing PPI is only transient...


Is the global economy at the brink of a breakdown much greater than its predecessor in 1929? How do the current imbalances compare to those late Roaring Twenties' similar circumstances of consumer-level forward consumption, debt, overvaluation of assets, and industrial overcapacity? Will the devaluation and asset decay process at the end of the second 70 year sub-fractal - contained within the 140 year Second Grand Fractal cycle beginning in 1858 - be greater than at the end of its first 70 year sub-fractal?

A chicken in every pot and two cars in every garage has been replaced with eating out three of seven nights at the plethora of fast food and dining opportunities that 'froth' the highways and typify the service type of economy the States have become. Three SUV's and a Hummer distributed between a primary residence and an investment residence have superseded the two cars in a garage. Buy a radio or washer on credit has been bested with buy and buy with abandon everything imaginable with ubiquitously facilitated debt from refinanced or second mortgages based on the surety of ever appreciating house prices -the latter caused in part by fed fund rates 1/4 of the rates in 1928.

The evenly balanced declining and increasing annual GDP growth rates prior to 1929 have been replaced with continuous positive annual GDP's growth rates during the past 45 years. The great creditor nation status of 1929 has been substituted with a beggar man debtor bravado country wearing only the emperor's new clothes. Its treasury is writing bad checks against future income that can only be guaranteed if the remaining 57 percent of the US private (nongovernmental) work force becomes governmentalized allowing a Weimar type of hyperinflation. In short the consumer saturation point of 1929 looks very appealing against the very poor economic hand that America now holds. Consider America's current financial balance sheet and thereafter consider how badly the unbalanced excesses of 1929 unfolded.

In the next nine weeks, data - which has always been there - will be re-recognized. GM's and Ford's junk bond status and their probability of default on a collective 450 billion dollars of debt will reappear. The thousand mirrors that reflect a single dollar in the derivatives markets will have key reflecting glasses broken erasing the image in 925. The housing bubble, that is so historically remarkable in its uniqueness in that virtually all know it to be a bubble, will crack. The microcosm of forward consumption in the last two months of the American auto business will witness the expected necessary microcosm of historically poor follow-on monthly sales. Major airlines will throw in the towel declaring bankruptcy and pension amnesty. Declining monthly GDP will receive attention. The real position of the individual debtor and the debtor country in the face of declining asset valuations and projected tax revenues will get its due. Fiscally impossible city and state governmental pension funds whose futures are tied to the equity markets and escalating real estate property values will have a viability reality check. For the first time in many years the concept of consumer retrenchment will be seriously and widely explored as a probable scenario.

The comparative initiating decay fractals at the secondary summit, with respect to March 2000, of US equity indices suggest a very remarkable primary revaluation. Watch the general trend and descent of the long term US note and bond debt markets as exiting money from equities and commodities flows into these long term debt instruments driving their interest rates lower. Gold has potentially only one more week before completing its maximal 12/30/30 weekly growth cycle with an abrupt devaluation. Opposite to gold, the dollar will transiently trend well. Expect the unexpected. Within this quantum fractal decay process, expect nonlinearity. Gary Lammert http://www.economicfractalist.com/ "

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