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Inflation Not High Enough

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http://www.nytimes.c...ps.html?src=twr

"I've always said that a little inflation is good," Richard A. Galanti, Costco's chief financial officer, said in December 2008. He explained that the retailer is generally able to expand its profit margins and its sales when prices are rising. This month, Mr. Galanti told analysts that sluggish inflation was one reason the company had reported its slowest revenue growth since the recession.

Executives at Walmart, Rent-A-Center and Spartan Stores, a Michigan grocery chain, have similarly bemoaned the lack of inflation in recent months.

I guess wage inflation isn't on the menu of course, in fact some firms like Caterpillar think their workers are overpaid.

Seems an awful lot of fiddling and diddling are required to get capitalism working properly it seems. Almost like central planning, pull this lever not that and so on.

Edited by aSecureTenant

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http://www.nytimes.c...ps.html?src=twr

I guess wage inflation isn't on the menu of course, in fact some firms like Caterpillar think their workers are overpaid.

Seems an awful lot of fiddling and diddling are required to get capitalism working properly it seems. Almost like central planning, pull this lever not that and so on.

An admission that inflation is good for the ones who first get the new money....the people buying stock for resale, see the money go down in value and their money return made better.

This is classic Austrian theory shown to be a reality.

Anyone in IT selling hardware has known this for years....Some Mail order firms RELY on inflation to make any money at all..they advertise at tommorrows price, delay delivery and cash in.

Clients think they are getting a good deal.

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WASHINGTON — Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough

"I've always said that a little inflation is good," Richard A. Galanti, Costco's chief financial officer, said in December 2008. He explained that the retailer is generally able to expand its profit margins and its sales when prices are rising. This month, Mr. Galanti told analysts that sluggish inflation was one reason the company had reported its slowest revenue growth since the recession.

Executives at Walmart, Rent-A-Center and Spartan Stores, a Michigan grocery chain, have similarly bemoaned the lack of inflation in recent months.

:lol:

You do get some laughs as life goes on.

It's worth putting the words of "the chief financial officer" in bold, in italics and in large text.

That's exactly what they were saying in the UK not long before the huge inflation took off in the UK in the 70s and 80s. Then when they couldn't control it they were saying that even small amounts of inflation was bad so bad - and everyone (else) had to make sacrifices to achieve low inflation.

That's not to say that him saying that is necessarily an omen for massive monster huge inflation this time but it's more that they never ever seem to learn anything.

Doomed to repeat past mistakes - but that's ok for them as we know now that they don't ever have to pay for their own mistakes or for Costco's prices going up. Everyone else has to.

It's pure self interest and it has to be writ large.

At least the Germans have set an example on controlling inflation.

Edited by billybong

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An admission that inflation is good for the ones who first get the new money....

Exactly. There are limits to continual inflation before the remedy is worse than the cure, and we're at that stage, right now. People should have prepared themselves for it, instead of setting out their stalls (expansion) for constant inflation.

What was good enough for the founder's family to profit with in the past, should be applied to his company now, if they are feeling market stresses. Profits sliding for executives and shareholders, after decades of expansion? If so just allow the free-market to decide things, not give them 'inflation-required special protection'. Perhaps selling stores on to other groups, new entrants having slices from the empire.

Sam Walton was born to Thomas Gibson Walton and Nancy Lee, in Kingfisher, Oklahoma. There, he lived with his parents on their farm until 1923. Sam's father decided farming did not generate enough income on which to raise a family and decided to go back to a previous profession of farm mortgaging where he repossessed farms during the Great Depression.
Edited by Venger

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Sam Walton was born to Thomas Gibson Walton and Nancy Lee, in Kingfisher, Oklahoma. There, he lived with his parents on their farm until 1923. Sam's father decided farming did not generate enough income on which to raise a family and decided to go back to a previous profession of farm mortgaging where he repossessed farms during the Great Depression.

In actual fact that sounds as if farming did generate plenty of income - especially cheap farms. Probably farms that had relied on inflation.

Edited by billybong

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Anyone in IT selling hardware has known this for years....Some Mail order firms RELY on inflation to make any money at all..they advertise at tommorrows price, delay delivery and cash in.

Clients think they are getting a good deal.

That doesn't make any sense. If a vendor advertises at tomorrow's price during times of inflation then they are advertising at higher prices than the market and therefore won't achieve any sales.

Did you write "inflation" when you meant "deflation"?

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That doesn't make any sense. If a vendor advertises at tomorrow's price during times of inflation then they are advertising at higher prices than the market and therefore won't achieve any sales.

Did you write "inflation" when you meant "deflation"?

Yes, I think Bloo Loo meant they advertise at today's price and buy at tomorrow's price.

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That doesn't make any sense. If a vendor advertises at tomorrow's price during times of inflation then they are advertising at higher prices than the market and therefore won't achieve any sales.

Did you write "inflation" when you meant "deflation"?

yes, I had better rethink the example.

It was true that IT firms ( and you may remember the size of magazines being 3-400 pages long..mostly adverts from myriad suppliers)..the £ was steady or rising v the dollar, and firms priced in the expected price falls to their costs.

This is taking advantage of deflation, as you correctly corrected me on.

However, what wiped out these firms was severe collapse in the £ v the $, so instead of prices falling ( which they did in $ terms) they went up in £ terms..Magazine sizes reduced.

What the supermarket man was suggesting was the opposite of course, but also an effect of unstable pricing, hence the loud cries from banks and business for a "stable" condition, so they can plan accordingly....so, if the £ had remained at $2.10 the business models of the IT sector in the UK would have remained fine...but they were destroyed by the instability of the inflation that subsequently wiped them out.

Banks also love inflation for the same reasons....they deal with numbers and not values of the numbers.

Thanks for pointing out my error in context.

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yes, I had better rethink the example.

It was true that IT firms ( and you may remember the size of magazines being 3-400 pages long..mostly adverts from myriad suppliers)..the £ was steady or rising v the dollar, and firms priced in the expected price falls to their costs.

This is taking advantage of deflation, as you correctly corrected me on.

However, what wiped out these firms was severe collapse in the £ v the $, so instead of prices falling ( which they did in $ terms) they went up in £ terms..Magazine sizes reduced.

What the supermarket man was suggesting was the opposite of course, but also an effect of unstable pricing, hence the loud cries from banks and business for a "stable" condition, so they can plan accordingly....so, if the £ had remained at $2.10 the business models of the IT sector in the UK would have remained fine...but they were destroyed by the instability of the inflation that subsequently wiped them out.

Banks also love inflation for the same reasons....they deal with numbers and not values of the numbers.

Thanks for pointing out my error in context.

Okay, I've got it now.

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Yes, I think Bloo Loo meant they advertise at today's price and buy at tomorrow's price.

that is correct...or is it?....confused myself now.

Of course todays price should reflect buying costs today so the client can get a fast delivery.

Our firm was often outpriced for similar gear from some mail order or retail chains....few if any of these guys exist now....mainly through the inflation tht killed them, but also because they also inflated the price of inferior kit.

I think Apple was a beneficiary of all this...so many customers caught out buying crap while Apple sailed through with their controlled and heavily reduced market.

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They will do everything in their power to keep prices and inflation rising at all costs....all you can do is try to spend and waste less, whilst at the same time sharing stuff and resources and doing/ making more yourself....more does not always mean more money. ;)

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that is correct...or is it?....confused myself now.

Of course todays price should reflect buying costs today so the client can get a fast delivery.

Our firm was often outpriced for similar gear from some mail order or retail chains....few if any of these guys exist now....mainly through the inflation tht killed them, but also because they also inflated the price of inferior kit.

I think Apple was a beneficiary of all this...so many customers caught out buying crap while Apple sailed through with their controlled and heavily reduced market.

Not so much these days but Apple has a history of selling yesterday's technology at last year's prices. That can make you a LOT of money when tech cycles are lowering production costs generation by generation.

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Not so much these days but Apple has a history of selling yesterday's technology at last year's prices. That can make you a LOT of money when tech cycles are lowering production costs generation by generation.

On the radio a couple of days ago. They were talking of having tablet computers for schools in India. The price per unit was £28.

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Those fools are not economists. Otherwise they would know that there are no net social benefits that come from inflation. Money as a medium of exchange does a certain amount of work in an economy. The work of exchange. Adding more money does not make exchange easier. It does not add wealth. There are no net positives at all. How could there be?

There are negatives to inflation, though. For example, it prevents proper planning. Take the example of a lorry driver who needs a new lorry every ten years. How much should he save every year? If he saves ten percent of the price of a lorry per year he wont have enough because of inflation. Inflation adds uncertainty and instability into an economy. It steals savings and investments. It chases capital abroad.

Deflation, on the other hand is what happens when people get wealthier. It is a good thing. If the price of steak goes down because new goods and services are added to the economy are you poorer? No, you aren't.

The misconception that inflation is good for the economy comes from a correlation found between booms and inflation. Easy credit makes prices rise and creates a temporary, unstable bubble. The bubble causes a lot of damage then bursts. The bust is then associated with deflation, as prices correct. Any real economist could explain this to you.

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