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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

Inflation in Africa

On April 20, 2011, in Commodities, Currencies, by Tim

As if they didn’t have enough to worry about in Africa when it comes to buying food – the AP reporting today on the latest round of protests after the price of wheat, rice, and maize soared 87 percent, 30 precent, and 25 percent, respectively, in the last three months – in Zimbabwe, according to this BBC report, an ATM has been spitting out the old currency.

An ATM in Zimbabwe’s capital Harare has been issuing the old national currency, sparking rumours that the defunct bills are back in circulation.

For the last two years, Zimbabwe has used US dollars and South African rand after its world record inflation rates rendered its dollars worthless.

The BBC’s Brian Hungwe in Harare says most Zimbabweans have no wish to see the return of million-dollar notes.

The bank manager said the notes had been left inside the ATM by mistake.

Our reporter says a woman approached an Interfin Bank ATM in central Harare on Tuesday to withdraw $110 (£67). But to the her horror, it spat out wads of old worthless Zimbabwean dollar notes.

They note that hyper inflation in Zimbabwe reached a peak annual rate of 13.2 billion percent two years ago, just before they abandoned it, leading to the obvious question, “What’s Reserve Bank of Zimbabwe President Gideon Gono doing with himself these days?” According to Wikipedia, he’s still in charge at the central bank, but, without a national currency, you’d think there is much less for him to do.

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Inflation Explained

On April 20, 2011, in Economy, by Tim

Another Xtranormal video by Omid Malekan has been making the rounds lately and it does a pretty good job of explaining how the Federal Reserve’s recent money printing benefits some (the wealthy) while it hurts others (the poor) due to how it impacts prices for items that are important to the former (stocks) and the latter (food and energy).

Favorite exchange:

Dumb logic is at the core of modern economic theory.
So, is there a good alternative to modern economic theory?
Yes. It’s called common sense.

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A Fed President in Our Midst

On April 15, 2011, in Economy, Our Culture, by Tim

The byline for some of yesterday’s reports on Federal Reserve speechmaking read “Helena” and, with only a little effort it was learned that a Fed bank president had visited the Treasure State’s capital not far from here as detailed in this story at the Independent Record.

At an early Thursday meeting of business and civic leaders, the president of the Federal Reserve Bank of Minneapolis said that there’s very little inflation pressure currently in the U.S. economy, which would seem to indicate that the Federal Reserve will keep its target interest rates low for the near-term future.

As a current voting member of the Federal Open Market Committee, Narayana Kocherlakota is in a unique position to influence the nation’s economy, and as such his every public utterance is subject to close scrutiny. Shortly after his remarks at Hometown Helena, reporters from Reuters and Bloomberg had stories on the wire passing along Kocherlakota’s latest reading of the tea leaves.

But the president’s claim of few inflationary pressures wouldn’t seem to jibe with what Montanans and all Americans are seeing at the gas pump, where prices have surged 70 cents a gallon or more in the past few months.

Kocherlakota explained in the morning meeting and again in an afternoon interview that from the perspective of setting monetary policy designed to keep inflation in check and unemployment low over the intermediate term, gauged as three or four years, food and energy prices do more harm than good when taken into the equation. They may be two of the most obvious examples of price increases and decreases for individual consumers, but on a large scale, prices of those goods are too volatile to be used for longer-term forecasting.

It’s easier to argue that easy money from the Fed is the right prescription for what ails us because gas is still relatively cheap in Montana – about $3.60 a gallon per GasBuddy. But, offsetting the “low” gas price is the the fact that people drive longer distances here, many high school sports teams routinely traveling for hours to meet an opponent.

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Inflation Rate at 2.7 Percent (and Rising)

On April 15, 2011, in Economy, by Tim

The Labor Department reported that surging energy and food costs drove consumer prices 0.5 percent higher in March, following similar increases during the prior three months, and, on a year-over-year basis, overall inflation is now 2.7 percent, the highest level since December 2009 when the index reached 2.8 percent.

Over the last three months, inflation has been running at an annualized rate of 6.0 percent and, going back six months, the rate of inflation has been over 4 percent. Moreover, as indicated in red above, another few months like the last ones will result in replacing price declines in early-2010 with big increases that could push the overall index sharply higher.

(more…)

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Wither the Disposable Income (in the U.K.)

On April 11, 2011, in Economy, Europe, by Tim

Grim news comes from the British Isles this morning via this story at the Telegraph in which it is learned that disposable income among the citizenry has fallen to the lowest level in 90 years. You don’t hear that sort of reference very often – a 90-year low.

UK disposable income falls to lowest since 1921

Rising food, clothing and energy prices mean the average British family will have £910 less to spend this year than they did in 2009.

The Centre for Economics and Business Research (CEBR) said soaring inflation coupled with low pay rises means household peacetime disposable income is at its lowest since 1921.

Rising food, clothing and energy prices mean the average British family will have £910 less to spend this year than they did in 2009.

The CEBR calculates that household disposable income will fall by 2pc this year, more than double last year’s fall of 0.8pc and the biggest drop since the savage 1919 to 1921 post-First World War recession.

It forecasts inflation will average 3.9pc in 2011, its highest since 1992, as January’s increase in VAT from 17.5pc to 20pc and the rising cost of oil and other commodities continue to drive up prices.

At the same time, salaries will rise just 1.9pc as unemployment remains high and the public sector makes cut-backs.

It’s probably no coincidence that the early-1920s marked the end of the British Empire as an emerging United States, left relatively unscathed by World War I, began to play a bigger and bigger role in world politics and the global economy, cementing the role as one of two superpowers after World War II and now going it alone after the collapse of the USSR.

You have to wonder what 90-year comparisons they’ll be making for the U.S. in 2101…

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Inflation in a Can?

On April 10, 2011, in Economy, by Tim

Someone is going to have to explain this cartoon to me since, whatever it is that’s going on here isn’t obvious, but, with gasoline prices careening toward $4 a gallon and the March inflation numbers set to be reported on Friday, somehow, it seemed appropriate.

From the Nate Beeler archive at the Washington Examiner.

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