Inflation is not dead, it is heading for 5% says Roger J Kerr who has 'a thousand words' to support that in two short images

not only the Provinces.  On the occasion I wonder past Featherstone Street in Wgtn I now notice empty shops there as well.  Various malls in the wellington area, empty shops, constant sales signs.

.....and for sale..

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11401642

In the meantime the property spruikers are flat out ..Hamiltons the next Auckland ..be in quick..

http://www.stuff.co.nz/waikato-times/business/65099268/Waikato-property-market-expected-to-keep-rising-in-2015

Apparently the tide going out on dairy will have no effect on housing...

Only one avenue, more debt.  Now look at how fast debt is increasing and ponder if that was not and the effect on the tradables in particular.

that is indeed the question I asked myself 35 yrs ago.

To have economic activity, ie velocity of money, we need margins to pay wages, to spend, so that producers can move stock.



The government of NZ in all that time has been on a "competition is good binge"

Through a combination of private debt ("hook 'ems"), cherry picking KPI's and theories ("crook'ems"), and deliberately asset inflating  ("cook 'em") a story is maintained that things are going well.



We're looking at smaller returns for labour, which means those entering the economic arena are at an immediate disadvantage (esp student loans) and can't carry their load properly.

Advantage has been through machinery and efficiency, which has been liquidating established wealth... the paper trail?  It takes money to by these depreciating assets - they're bough to provide increased specialisation and _reduced_cost_.  The reduced cost is because less people have to be hired, or greater production levels can be achieved (thus lowering the total value of the market, by reducing the margin but upping the conversion rate of market into low return sales.)    While in the short term this is good, in the longer term that low return sale translates directly to low wages paid



But people are saving as much as they can in NZ, sadly for most of us that "savings" takes the form of finding the lowest margin, cheaper quality items, or participating less in the economic cycles.  such cost cutting has no positive effect of the macro economy, but it a survival method, not an enrichment method...the gain to the individual is worth what their interest cost would have been, which is far higher to them than what most risk based investments will return.  However that comes at the cost to the business.



So the only ones that can survive in such a "competitive industry" are those with the slimmest margin and worst wages, or who are price settors.

 The price settors can "add" an value they like, knowing their victims have no choice, no alternatives.  They can make "premium" brands, they can operate inefficiently, they can undertake all sorts of image or marketing campaigns, they can pay decent wages to their favourites, because their victims have no choice.  In early days of "competition is good" such businesses tended to have some prudence as they didn't stand above the rest.  Now that the effects of government policy is becoming unmistakable they are used to their position.



But the answer to your question is clear: that as long as competition is endorsed, only the big, forced revenues, will thrive.  Unavoidable compliance will eventually kill everything else off.

Thank you for the link MB. I did not know of Jim Clifton and Paul Craig Roberts views on Team Obama cooking of the US data. Ergophobia has been beating the drum on this for years. US corporate earnings will better show the true state of the US economy because the Team cannot so easily cook-up those numbers; the firms can be held liable for them at law.

EP

Maybe he had cause for concern.......(If I was a conspiracy theorist)....some are hell bent on distorting the recovery...at any cost, excluding babies.

Maybe they draw the line....Some where?.

Maybe JP Morgan would not come to the party....too. Maybe another family on the scrap heap.

http://wallstreetonparade.com/2015/02/second-alleged-murder-suicide-by-…

Indeed, Roger seems desperate to talk up inflation prospects such that you have to wonder at vested interests. He probably didn't write the headline, but even he is talking of tradable inflation, and not inflation generally. The tradable piece is probably 50% of the total, and as you rightly point out given the TWI, is not going anywhere based solely on the currency. Add in global spare capacity, and very low commodity prices, and it is not obvious that even the tradable piece will be positive rather than negative, let alone 5%.

It has been the non tradable area that has kept things positive- if that is the right term- over the last while. Rents, rates, government services generally have still gone up. If the tradable area does turn around and head up, what happens to the non tradeable area? Does it go up in sympathy, or do money supply rules suggest it takes a hit, like a see saw. I suspect the latter.

Inflation isn't going anywhere in the foreseeable future, unless the TWI comes down significantly.

Inflation is not dead, it has gone through the roof. Quick, milk it whilst ye can.

http://www.trademe.co.nz/property/rural/auction-866622341.htm

Thanx Roelof for the links. I hope others also read them.

The Q is chicken or egg.

I'd suggest we'll see a financial "distrubance" as the most likely trigger or maybe the fastest trigger may be more apt.  So many things mght cause deflation but when a something happens (say peak oil) I think the financial markets will panic and flash sell causing a huge financial disaster. Then houses and assets or the debt owing on them will be stranded.