Just like that, gas prices are inching over $3.20/gal.

[S-Crow]

Anyone else notice? BTW, I shop a lot at Costco. Lots of paper for my twin Canon workhorses producing funding packages, loan docs, copies etc... Prices for 5000 count 8x11 paper used to be around $22/box a year or so ago....today...about $27 or so.

I do at least 80% of the consumer staples shopping (food) for our family. Several Costco products in my fridge that hovered around $9.99 are now about $12.

[sniglet]

Don't worry, commodities are just the last item that will fall as deflation gets kicked off. Deflation has started in housing and stocks (JUST started in both cases, mind you), and it has only made tentative in-roads in commodities (look at how lumber prices have been falling).

As a global recession picks up steam later this year, the fall in demand will take the wind out of oil, copper, gold, and many other commodities.

In fact, I fully expect to see $50 a barrell oil by the end of 2009.

[rose-colored-coolaid]

Latest inflation numbers just came out, and they agree with your assessment. 4.3% YOY inflation, and 0.4% YOY for the CPI.

So yeah, prices are going up and your point about paper prices rising is significant. It tells me that we're starting to see inflation on more durable goods (rather than just gas and food prices).

FWIW, 4% inflation coupled with a 10% median price drop in Seattle this summer means prices will be falling faster than they were rising in real terms during the boom. 10% + 4% = 14% whereas 15% - 3% = 12%.

[MrRational]

[Lake Hills Renter]

Perhaps you could contribute something other than a personal attack.

[sniglet]

[MrRational]

[sniglet]

[Matthew]

We should first define the terms we are using:

Inflation (classical definition): increase in money supply

Deflation : decrease in money supply

First of all, I would argue that the classical definitions of these terms is far more useful than just looking at prices of commodities and materials.

What we are seeing right now, despite lower interest rates, is a the destruction of federal reserve notes in the system. Banks are writing down assets, houses are losing value, and stocks are becoming cheaper. Many of the assets that contributed to the bubble are actually worthless, and are getting wiped off the books, and therefore destroyed from the system. This is deflation.

The last two great deflationary spirals in recent memory (Japan and US during the great depression) seem to have more similarities to our current crisis than Germany during WW2 (hyper inflation scenario).

[sniglet]

[deejayoh]

have to say I am with sniglet on this one. M*V=GDP and due to the credit constriction, V is dropping precipitously - so GDP will follow.

Sure commodity prices are high today. But as global demand drops (in line with GDP), suppliers at the marginal end of the curve are forced to shut down and the clearing price drops dramatically.

You can actually build a supply curve for most commodity markets - and when you do this, you can plainly see how just adding a little bit of high-cost capacity at the right end of the curve in boom times raises the clearing price for the whole market. I did this for a consulting gig in the aluminum market. It's a remarkably accurate approach.

When you start seeing articles about refineries, lumber mills and smelters shutting down or being mothballed - that's the marginal/high cost capacity coming off line. You'll see prices falling quickly after that.

here's an example of exactly what I am talking about from Alcan. You can see what happens to clearing price when demand hits a peak. Same thing with oil, copper, etc etc

[rose-colored-coolaid]

[perfectfire]

I'm firmly in the deflation camp, but would like to note that prices are influenced by scarcity (i.e. "They aren't making any more land!") in addition to money supply. So scenario of deflation with some rising commodity prices isn't impossible.

[MrRational]

[sniglet]