By Bernard Hickey
It's as if the New Zealand economy has just been overseas on holiday and has received a giant bill through the mail for the mobile phone charges accidentally racked up because it left its mobile on.
The telecommunications industry describes this phenomenon as 'bill shock'.
Upon receiving the bill, the customer then promptly cancels their phone subscription and stops using their phone. It's as if they're afraid to use their phone again.
Over the last six months New Zealand has just received an economy-wide 'bill shock.'
As if out of the blue, prices for many everyday items just went up. It may not be reflected in the inflation figures yet, but consumers are reeling from the impact.
It's the feeling someone gets when they see the price of petrol has risen over NZ$2.15/litre, but it doesn't really register until the price to fill the tank jumps over NZ$100 a tank. It's the feeling you get when you haven't bought a particular brand of bread or milk or coffee and suddenly it costs a NZ$1 more.
That 'bill shock' feeling hit me when I noticed my morning cup of coffee had suddenly increased from NZ$3.50 to NZ$4. That's a 14% increase overnight. The cafe explained that it hadn't increased the price for a while and the costs of coffee and milk had increased. I was told a 10 cent or 20 cent increase made no sense for cash buyers so it was simply increased to a nice round figure of NZ$4.
Conventional economics would tell you that such a price increase would slide me out along the demand curve so that instead of buying 5 cups of coffeee a week for a cost of NZ$17.5 I would instead buy 4 cups for $16 and have a day off.
But that's not how I reacted.
I simply stopped buying coffee from the cafe. Now I drink instant coffee,. The shock of the big jump rather than dribbly, little increase forced me to re-evaluate my spending on this 'luxury' altogether. The combination of the higher coffee price and the cost of a tank of petrol going over NZ$100 was my personal bill shock.
But I'm not the only one.
The GST increase in October increased the sensitivity of many consumers, but it is the price increases in February and March that have chilled the air around wallets. The earthquake in Canterbury has snap frozen the willingness of many to spend on anything non-essential.
Consumer confidence figures out this week showed a slump to levels not seen since the Global Financial Crisis of late 2008 and early 2009. See our article on consumer confidence here.
Many realise prices are about to go up again. Prime Minister John Key has already warned that the EQC levy will triple to NZ$180 per insurance policy. Construction costs are expected to surge after the earthquake.
Rents, levies to rise
Rents for both the most in-demand residential areas and commercial property are also expected to rise, particularly in those areas where supply is already short and Christchurch businesses and families are relocating.
This will increase the pressure on retailers and any 'domestic' businesses that sell products or services not seen as essential. Many households who are already repaying debt early are likely to simply keep their existing mortgage repayments at the 'old' higher interest rates to increase their repayment,.
That will be good in the long run as debt is repaid and the vulnerability of NZ Inc to another freeze on financial markets is reduced.
New Zealand is learning all about inflation again. At the moment it is at levels where people are sitting on their hands.
The more dangerous level is if inflation vaults beyond 5% towards 10%. No one is suggesting that will happen yet, unless the explosion in the oil price accelerates and the inflation fires in emerging economies such as China and India spread to the developed world.
But if it does, all bets are off. It then may make sense for consumers to spend the money they have now and let inflation reduce the value of their debts. That would be a deeply unsettling and different type of bill shock for savers and banks. One New Zealand has not seen since the 1980s.
See our interactive chart on consumer confidence below
72 Comments
Nothing compared to the shock Trev will get when ACC tell him his injuries are age related!
"Labour MP Trevor Mallard broke bones in a bike crash during Cycling Otago's third annual R&R sport tour on Saturday.
Mr Mallard, MP for Hutt South,broke his right femur and right shoulder blade on the Taieri Plains when he crashed into two fellow competitors" google
The other two didn't break anything...sorry Trev....age related....old bones...ACC declined.
They must've found one of those sturdily built old Raleigh 'bikes to hold him , .... a modern " Warehouse " ( Chinese ) bicycle would buckle under the strain of Trev's lard arse .
No...Trev wasn't watching where he was going...common fault of Labour pollys.
I have one of those chinese warehouse $210 bikes, its 4 years old and still going OK, the only minus is teh tyres need a regular pump, I'll buy new tubes at some stage. Looking at the quality its little worse than a $600 bike from a bike shop.....shimono gears etc....
regards
"...It then may make sense for consumers to spend the money they have now and let inflation reduce the value of their debts.." How does that work if a person doesn't have a job, or is on a static wage in an easy employment market ~ just trying to hold on to any income flow at all? "Inflation" only works if income/interest-paid/wages comensurately increases. I don't see that happening, any time soon. In fact, we are much more likely to get more 'bill shock', leading to more unemployment as retailers/businesses close down, further reducing wages as the displaced compete for a job by accepting lower wages.
For me (and probably others) coffee demand is relatively inelastic, so we will continue to pay. Same goes for oil for many industries. I can however buy bulk beans and make expresso at home rather than going to a cafe.
The cost of a cup of coffee is probably only 70c, the rest is the priviledge of drinking at the cafe. So the increase in the cost of coffee beans shouldn't affect the cost of a cup of coffee in a cafe that much.
"The more dangerous level is if inflation vaults beyond 5% towards 10%. No one is suggesting that will happen yet,".....Wolly is!
Petrol and Diesel are up more than 10%....watch as construction costs for labour and materials leap higher than 10%...plus gst of course.
Toms jumped from $2.99 last week to $5.99 this week...was it the moon!
I agree. Our local rates (in the waimak) are apparently going up 9.8% this year (yes, 9.8!!). My grocery bill has gone up 10% since the GST went up (by grocery I don't mean just food, it includes lots of bags of nappies unfortunately), and petrol is right up there too, just as well we don't need to use the car much at the moment. But I am seriously considering a horse carriage lol.
That rates rise is ridiculous. From what I can gather, the Sept earthquake makes for a lot of the additional cost;
http://www.waimakariri.govt.nz/council/minutes/council/C_25Jan2011.pdf
This is ludicrous. Why aren't they crawling all over central government for funding assistance? Rates rises like that will surely drive the population away - exactly the opposite of what is needed in the district.
I wouldn't take this lying down. 9.8% is unacceptable. It's a small district - local people need to get together and say no.
I agree, it's ridiculous. Not to mention the average family isn't on a particularly high income in this area. Haven't heard of people planning to revolt, maybe I should start something...
Okay Wally I can see your inflation happening on the back of the increasing price of oil, particularly re Kate's post regarding another oil spill on the 90secs at 9 thread.
What is your longer term prognosis though. Does the rising cost of oil not threaten to send the world into full on depression, and a following deflationary environment as people incomes dry up?
Well scarfie, it's like this see....it will stay high until the nutters at the fed and elsewhere get up the guts to bash the crap out of the markets with rates near 20%...the Volkner option!...but the pollies don't have the courage for that. So expect our friend flation to be here for a very long long time. Flation will be like having the mother inlaw come for tea and stay until she carks it.
Bernard your statement, as follows speaks volumes about You......."I simply stopped buying coffee from the cafe. Now I drink instant coffee,. The shock of the big jump rather than dribbly, little increase forced me to re-evaluate my spending on this 'luxury' altogether. The combination of the higher coffee price and the cost of a tank of petrol going over NZ$100 was my personal bill shock."
Boy I picked the wrong day to give up heroine.
I'm still addicted.
I'm just choosing a much cheaper form of administering the drug...
cheers
Bernard
....... Main-lining with neat freeze-dried ? ........ Moccona haft more " Hmmmmmmmmm ! "
... ( Cheapskate ! )
Careful there Gummy. I have a thing for the Moccona lady. My number two after Rabo lady.
cheers
Bernard
Count : Isn't Bernard your daily heroine ? ...... ( imagine the big guy togged out in lady's clothes ..... ye gads , I'm going back to the cafe , for another shot of my " heroin " )
EEEEEEEEEEEEEEEEEEEEEgads GBH no entendtre intended....I also picked the wrong day to give up methadonee.....but I can empathise with the big guy as the moccachino enimas were giving me the gas something chronic.
Come on Bernard, just come out and say what you want to say.
'Vote Labour and all of these ills will go away.'
Oil is irrevalent as we cannot do anything about the cost of crude in NZ, we have to just learn to live with it. I am in the chemical industry. A lot of products we use are based on Palm Kernal OIl, such as glycerine (foods/personal care items), lauryl alcohol derivatives (personal care items). PKO has increased around 250% over the past 12 months. My clients are not willing to take on the price increases as their customers will not accept rises. So I am stuck with goods which I cannot sell.
NZ is just getting to the stage where we need to think individually as a third world country. Food/shelter/clothing are the only needs, everything else is a want, (holidays, partys, expensive goods, coffee etc). This is a direct result of our spending in the past 20 years and negative productivity in the private sector.
I am glad my mortgage is only $34K now, gone by XMAS. But I pitty those on $60K and a $300K mortgage, they will be burnt in the next 3 years as they will be forced to sell up. As this happens we will still be poo pooing mining in S4 land in NZ but giving money away for doing nothing and borrowing $500MPW.
What a third world scenario we are in.
There are definitely inflationary forces at work.
There is talk that one of the results of the Japan disaster is a "supply shock".
I can see why it is their worst crisis since WWll.
http://www.stratfor.com/weekly/20110314-japan-persian-gulf-energy
I would say that inflation (CPI) at 5% is at risky levels... Average wages have been lagging for a long time ... and in todays environment it will take a 'workers revolt" to see sizeable gains.
Central banks hate high growth in wages...
With high unemployment workers are un-liley to revolt.....there isnt the demand for their labour.....and CPI is something you have to watch with care....its fickle...
regards
The current low interest rate regime throughout the (developed) world is excacerbating the problem as money is, once again, flying into speculation. Couple that with genuine shortages in fuel and food and you've got the ingrediants for stagflation mark 2.
I've heard that pension funds need around 8% return to have any chance of fulfilling their obligations. Can't be done on prevailing interest rates, meanwhile the inflation adjusted obligations are growing exponentially.
What happens when these price rises finally work their way into the official figures, would the central banks just continue to pretend it's not happening? What would happen to our economy with 10%+ borrowinginterest rates? Well it looks to me like the Fed, BOE etc, are totally trapped and their only answer will be to pour petrol on the fire with more money printing. Raise rates and kill what's left of the "recovery"? Won't happen or even be seriously considerd till it's already too late. Ben Bernanke says he can raise the rates to stop inflation in 15 minutes. Hasn't got the balls IMO.
An excellent analysis of the situation Dave.
Ive done as you Bernard, coffee got to $$.90 a go for a large soy latte and now I buy maybe 1 a week often none, $100 a month is a luxury for sure....its simple I can do a lot with $100, thats 2 family movie trips.....so now I have one a day that I make at home..probably heathier as well.
Need to sit down and work it out but in coffee a $6 pack lasts my wife and I 6 days ish, 12 to 14 coffees....so 50cents, rice milk, $3 and makes three bowls so $1 in milk, so $1.50 fr a large lattee bowl....or pay $5 or more....um no thanks....
regards
........ soy latte ..... rice milk ............ oh lawdy that is so sad and pathetic ....... I'm outta here , in case the " Steptoe & Son " approach to catering goes any further .......
Bloody hell ...... !
"The more dangerous level is if inflation vaults beyond 5% towards 10%. No one is suggesting that will happen yet, unless the explosion in the oil price accelerates and the inflation fires in emerging economies such as China and India spread to the developed world."
Inflation, that is core inflation is 2% ish and in the US its heading down to 1% even nominal deflation looks possible.
problem is if petrol rockets as you suggest ppl are not earning more, so to meet the petrol bill they have to cut back on something else. This is what is missing from the traditional inflation scenario, wages are not increasing...its push inflation and not pull inflation...so stagflation is way more likely.....we are up against a ceiling....
regards
You mean core ipad inflation is 2% right? But even that will spike soon as all electronics are about to skyrocket on negative J.I.T. manufacturing vicissitudes.
Im not sure what you mean...core inflation is the number economists look at to try and determine the trend in inflation....CPI tends to be volitile and month/season sensitive....right now in the US that core inflation has been one of dis-inflation heading towards deflation.
Generally I think we will see deflation in such toys...some particular manufacturers/vendors might be able to buck the trend and still increase prices....Apple might be one of those....I dont know how many mp3 vendors there are but if Apple is the only one to increase its margins in a relucatnt to spend market then other vendors prices have to drop to compensate and if they cant survive that they could go out of business...so while Apple might be paying out a bigger dividend on its shares, investors could be losing piles on their other shares.....overall its negative....
I dont see how you can pick one area/item as a micro example of something not being a general trend.....which is where I am at.
Prices due to shortages might well go up, those left willing to pay more will be fewer matching the fewer available ipads.... We might be taking some of the chinese over-capacity out of the market, however thats chinese works un-employed and hungry....the problem has just moved a bit.
regards
Steve,
Core CPI has been a meaningless number for almost 25+ years. I deal in real numbers not imaginary ones. The inflation figures coming out of the US are as corrupt as Enron’s books. The number crunchers have deluded themselves into thinking that they have a surefire way to measure inflation accurately. And BTW you would expect "core" or "manipulated" monetary inflation to be close to zero if you’re the country exporting the inflation to the rest of the world. I would expect real monetary inflation to hit the US last and by that time it will be too late and we will be in hyper-stagflation land!
Chicory essence and 'no doz' .....
Maybe less milk - where does this come from?
Differential pricing based on what you order (i.e. espresso cheaper than cappucino).
Come on .... we do coffee/cafe kulchure well in NZ.
Anybody know the real cost breakdown?
Anyone thought of roasting your own coffee? Was doing that for a while as green beens are half to a third of the cost. Sure it cost me $140 for a rotary burr grinder(marked down from $170 at briscoes) but when your coffee is 30 cents per cup is doesn't take long to make a return on the investment. Note my comments on Amanda's thread re milk direct from the farm at $1.20 per litre.
Green beans used to be $13 a kilo, but expect to pay more now.
I was looking at a mobile coffee operation and bought a second hand two group commercial expresso machine for $700 on trademe. I stripped it, cleaned it, replaced all seals etc- $400 more. Return on investment longer again, but I have made it pay for itself. Damn good coffee also:)
Just don't have room in my current accomodation for the machine. I had to wire in a special 25 amp socket in my last place also, but not all machines need that.
Hey snarly one of those $25 silver coins I've got will be buying me a tank of fuel soon....hahaha...snarl...
I’m thinking my 1Kg bars may pay off my house!!!
No FYI ! Here's how you do it. You don't buy $25 coins; you make the stuff 'bugs' buy. My wife's 20th invoices went out last week ( she's a mnufacturing jeweler, and probably has more lemel that most people have holdings!), and the proceeds are coming in. She did a ring run last month and as an example, one has $38.87 of silver in it. Retail? $334. Now sure, there's other costs involved, but that little bit of metal already 'fills the tank' for us, a few times over!
Oh, and aren't there about 32 troy ounces to a kilo, Troy? Must be a small house, or maybe not much left on the mortgage :)
I've been winding back spending for some time. I sold the 4WD and Ute and bought a 1.3L car. I also started walking the 20km return trip to work each day. It takes 5 minutes less than the bus trip on Auckland's crippled public transport...and 40 mins longer than by car. It costs me nothing but shoes. My petrol bill is down to $65 / month (at $2.15.9 / L). I carry my lunch work. I make my own hummus. Dirt cheap to do. I can basically go Mon-Fri without spending a cent.
The standard of my life has greatly improved. I'm *much* fitter and have lost 15kgs so far.
Bill Shock can be the start of something very good.
Are you sure you are walking 20 km?May be 2 km instead?
As it takes on average 15 minutes to walk 1 km (4 km per hour) you would have to walk 2 and 1/2 hours to work, the same time then back again....goodness you would have to get up early!
It's Beach Haven to Mairangi Bay - basically Birkdale Round-about to Rangitoto College (nearby). ...Google Map it yourself. It takes 1 hour 15 mins each way if I avoid crossing at street-lights and sprint mid-block. If I wait for the little green man, add 5-10 minutes. Google Maps says it is 9.7km each way. The bus takes 1:10 each way....as it tiki-tours all over the North Shore before getting anywhere near where I work....and same again on the return journey.
I should also note I'm tall and walk fast. Listening to trance on the MP3 player makes that pace go even faster. I do what I do. Whether you believe it or not is a problem of little concern to me. It will be just one more thing you're wrong about. :-)
Floating Meme
I believe you, well, when you trot or run etc.etc..... good on you!
I just compared your first statement with "normal pace".
BTW....I just checked Google Maps and it says the route I follow is 7.8km, not 9.7km. I think the difference is this time I chose walking measure instead of car measure....or maybe Google Maps was just wrong months ago when I first did it. Or maybe they are wrong now.
Whatever.....it appears I only walk 15.6km each day, not 19.4kms.
So I don't actually do what I thought I did......and you were right (ish). Perhaps my fast walk now makes sense....and it still costs me nothing but shoes. :-)
Great stuff floating.
Know the feeling. I'm a mad cyclist now. Faster, cheaper, fitter and greener.
cheers
Bernard
Hubby and I stopped drinking cafe coffee long ago; we buy beans and grind it. I walk one block to work. He just bought a motorcycle (wants to cut fuel costs further). I take my dog for a 3 k walk most mornings because she loves it. We have pizza once a week as our only take outs. (because it's darn good pizza) We have a big veggie garden. We got our own chooks a while back and I just started raising rabbits to hopefully offset dog food costs. I just bought a bee hive and will start with that probably in the spring. I'm not entirely sure how much it helps stretch the pay packet. We both have reasonable paying jobs and no kids. I don't know how families cope. What I'd really like is ten acres so I could raise some beeves, own a house cow and a rooster but at 500k for a lifestyle block I can't afford it. (and bare land costs even more, weirdly) Our present mortgage will be gone in around 8 months and I don't want to go back in debt. Plus when it is paid off some money in hand for a change will sure feel good.
Shocked? The only thing shocking is that everyone is actually shocked that prices are increasing exponentially ever since the US has decided to make their #1 export inflation. And as long as the RBNZ keeps interest rate artificially low NZ is going to have to keep sucking it up and paying the US’s inflation bill. You can either pay lower prices or have a strong export market…you can’t have both so pick one.
Oh and BTW don’t expect deflation in the electronics market anytime soon. So if you want that 42” LCD TV or that edible iPad 2 you better buy it now!!
I'm investing in BS Troy....the govt is buying it by the ton to spread every day...it's their solution to making the big bad economy go away......Hello inflation my old friend...I hear you are sneaking in the back door...the one Bollard is holding wide open for you...plan on causing any real damage are we?....oh you bugger you
Sneaking…LOL!! It’s the frakin’ size of a panamax ship!!!
“BTW your shipment of ‘Fail’ has arrived!”
http://www.spartan5.com/images/fail_boat.jpg
Then we just need to watch the price of TVs to see you wrong ie if prices rise, but then we'd also want to see inventory and days to sell...the problem with just looking at the price is if few are buying today and you shove up the price then fewer buy TVs......
regards
It is about time these guys lift their arses and do some sensible, practical work.
Christchurch workers are prepared to move from white-collar jobs into security, construction and labouring roles as the earthquake recovery phase grinds forward.
http://www.stuff.co.nz/business/money/4789879/White-collar-workers-going-blue
That’s right all we have to do is watch TV and hope the prices fall. That will save us. Since iPad and TV prices are always falling that makes everything alright…nothing to see here…move along.
Is this what happens when a free market is manipulated? Ie. Shouldn't interest rates be way up by now? keeping pace with inflation..
No. Yes. But you will be kept in a soporific state until it's too late.
The wake-up call will be when there's a roaring trade in stolen number-plates.
Yes the market's response to recessions is generally to increase interest rates. When governments suppress this natural market response through central bank inflation it is akin to suppressing a fever. The fever may be painful but it is fighting the disease.
We run on energy..Another war has been bought into on arab soil their will be no end game payoff..Chaos is spreading but its spreading where we get our "Crude"..Its a shame our oil is under their sand, but thats the fact of it.The price rises havent started yet.In fact I dont think our society can hold together if wages dont meet prices,the Governments of the West know this, whats the betting Israel does Iran soon?
So do they...and the dog in Libya is getting all he deserves...and the end game will be a little more freedom for the peasants over there...and it's their oil only because they were born there...and them's the facts. Prices rise and fall all the time. Our society is a hogwash concept..and wages are low because GDP has been pisspoor for 32 years...and what's the bet that pig of a dictator in Iran butchers a few more Iranians who disagree with him being in charge...
Wolly - it's interesting that I should be asking you to do what I've asked BH to do: defend GDP as something meaningful.
If you can't - and you can't - then there is no point using it as a measure.
Maybe you could collude on the issue.
Hehehe....of course it is meaningless drivel but if they have not been fudging the way they measure it for 32 years and the result has averaged 2%pa...that screams failure doesn't it!
eh?
Wolly - you didn't listen, did you.
How can you 'scream failure' from something that is not meaningful?
And 'averaged 2%"?
That's a linear comment, old son, about an exponential function. Whatever it was, it claimed to have doubled in the period (32 years as I recall, doubling at 2% happens in 35) mentioned. You just don't do that for long.
The wonder isn't that it has 'been a failure', the wonder is that it has lasted for a doubling - whatever it measured.
Here's something that might interest you pdk: a defence of GDP.
Highlights: There are several problems with GDP, with what it measures and what it fails to measure ... using it as the only yardstick to evaluate our societies would be bizarre. But ... if we want to replace GDP, we need to know that the alternative is better ... GDP is pluralistic and well adapted to a society where people have different goals and the role of government is to help us achieve our diverse goals rather than picking and choosing them for us. GDP measures what we can do, but it does not tell us what to do ... we can consume more, but we can also reduce our work hours; we can travel more, but we can also incorporate green technology into our lives ... GDP is the worst of all means of measuring wealth, except for all those other means that have been tried from time to time
That's just the gospel according free marketeers.
Meaning it comes from trying to justify a previously-held mindset. (notice he accuses of that - the Jenny Shipley approach; anything she accused, I always looked to see if she was doing it herself)
except for all those other means that have been tried from time to time
No system has yet included 'ultimate scarcity' and 'habitat degradation'.
The problem now is doubling-times vs lead-times.
There isn't the time for a market led morph, and when you think about it, that was always going to be the case at the top of a global gaussian peak.
Therefore, he suggests addressing the present environmental and financial problems within the intellectual framework of economic growth
There's your (and his) problem right there. This is just another Business Roundtable-like think tank, isn't it? Trying to justify the continued nonsense?
Ask him - and I'm asking you - how many doubling-times do you/he think that 'economic growth' has in front of it?
If either of you say 'never-ending' - I'll call you idiots. You need to understand the difference between association and causation.
If you acknowledge a need to curtail at some point - I'll ask you a question: At what point is it better putting the brakes on?
And you're just the gospel according peak oil, trying to justify the continued nonsense that it is possible and effective for Government to tell people what choices they should make between their different individual priorities in deciding what to spend their money on. Let's just call each other names, shall we? That is so much more constructive and helpful than looking at what the paper actually says.
You say I need to understand the difference between association and causation. I say you need to understand how the price mechanism both governs and responds to supply and demand. That and not some arbitrary "point" determined by some arbitrary criterion is what puts the brakes on the consumption of finite resources.
not when it comes to energy.
Without which nothing happens.
Supply and demand don't work there. It's just a case of less happens.
Which kind of impacts........................everything.
Market forces are a nonsense at that point, and intelligence can predict it happening. I've re-read that blurb, and there's nothing about energy supply, nothing about absolute resource depletion, nothing about altering of our global habitat.
It conveniently fudges it's way into a 'happiness' or 'GDP' either/or.
I'm not on about happiness - I'm on about physics. You know - fault-lines, climate-changers, resource depletion, pollution, energy - all the stuff that GDP doesn't recognise, except perhaps in hindsight, as the coarse tracking of repercussive activity.
No use. Too late.
The writer is arguing for BAU, and presumably has a vested interest in same (or writes for folk who do). There will be more of those, in any given system at any given time, than any other. Fair enough. But at the peak point, they'll be wrong - at that point the game just changed - to a different venue.
And if you think real growth can be had ex-physical resources, tell that to Brownlee and Fonterra. GDP growth can - you and I just sell the same thing back-and forth as fast as we can. Awesome. What a valid measure.
Not.
anon - I just posted this link on top 10:
http://articles.latimes.com/2011/mar/09/business/la-fi-china-oil-201103…
seems applicable.... :)
I splashed out a few months back on a Nespresso machine. For the first few weeks I was drinking far too much ! - now I'm only getting the withdrawl headaches If Im an hour or so late with the first cup of the day - much healthier ! No more buying cafe coffee.
Good afternoon all, I am back from my annual soiree in magnificent Maui, flying the flag for the wealthy "old" money of Aotearoa's population. I hope you chaps and chapesses have been looking after my investments wisely in my absence. No splurging on residential real estate and the like, full of leaky buildings and "shady" dealings !
I say, I have just been perusing this thread and all everyone seems to be talking about is the price of coffee... say what, never has it been so inexpensive ! a few cents increase. C'mon all you chaps and chapesses, you must realise that this is going towards my friends in the Hamptons commodity hedging fund and you wouldn't want to deprive them of their 12 week vacation to the Carribean in their 45m private yacht, would you ? Well, they would have to cut it down to 11 weeks !! .... how terrrible, a monumental catastrophe !!
Anyway, must get back to the management of my private equity funds and the rearrangement of a few matters. One must not get caught up in the trivialities of such things as coffee prices.... why, if you are worried about it, just get a few fellows together and buy yourself an Arabica bean coffee plantation in Colombia ... you can enjoy the best coffee in the world, while making a small fortune on the side :)
I must say, I throughly enjoyed my time in Maui, cocktails on deck at 5pm with the tradewinds gently whistling through the palms..... ahhh bliss.
Toodle Pip
Absolutely spiffing of you , Charlie , to grace our little menagerie of gloom & woe . ... .
... Terrible how the poor people go on so ... ... If they can't afford coffee , let them drink Horlicks , I say . " Perfeck " for the great unwashed plebian masses .
........ Yoiks , tally ho , and away old bean ... Tinkerty tonk .
I think people such as Steven also have to be careful in their comfort that manufactured/electronic type goods will continue to fall in price as Chinese manufacturing profitablity is collapsing. It very obvious that higher food and energy costs in China is causing an inflation in Chinese wages and already that is flowing in turn into the supply chains of other global manufactuers - it is only a matter of time before this can no longer a absorbed. Then we're really in trouble as this has been the only source of deflation which has been somewhat balancing out the inflationary pressure in the services industries.
Have you been to the dentist lately?
Oh boy you got that right. Insane prices for teeth cleaning or a filling.
Bernard . I totally agree with your article. But I cant understand why on the one hand you recognise the price increases in essential commodities such as dairy , food , energy etc. yet on the other hand you questioned my assertion in response to last weeks "Thursday " article that the limited supply of worlds farm lands that produces these very same products was not in a bubble or necessarily overvalued.
Given the above article do you still maintain that farmland is in a bubble?
cheers
There seems little doubt to me that with rapidly rising manufacturing costs coming out of China (previously a source of deflation), higher food and energy costs, a massive infrastrure spend due in Chch in 2012, we are going to get a major bout of inflation starting within the next 12 months.
And the real worry is that the RBNZ is behind the curve - it has rates on historic lows and seemingly unlikely to raise them much before 2012. But the markets won't be so dumb, so expect fixed/swap rates to be well higher by year's end, and just when you realise you need to fix .....the horse will have already bolted
Roger Kerr's warning over the last several months, that many have mocked, will prove to be prophetic
Possible. But what if The West can't afford to buy those Chinese goods that have a higher wages input, and so 'we' just go without? The West's wages, and hence consumption power, appear to be going nowhere; in fact backwards! The Chinese will then have to drop their sticker prices to keep the conveyor belts moving. Or devlaue their currency, to stop the States poaching back the manufacturing base they have so stealthily won. Maybe place like NZ have to drop their interest rates further, to keep disposable income in their populace's hands? But all will become obvious, in the fullness of time!
Alot will depend upon what the Fed does with regards QE2...if it finishes dead cold in June as scheduled, with no early QE3, then long-term US rates will rise, and with them, every other countries rates (US rates are the benchmark global bond). If they resume a QE3 fairly soon thereafter (my pick before Christmas) then more money will flow into the systemn and make that inflation problem far worse.
What will happen ? I have no faith that US authorities are ready to bite the bullett this far out from an Obama election (any time really). Besides we easily forget, the emerging world is now contributing more than 50% of global growth for the first time in history, and they are infinitely more liquidity and prosperous.
Eitherway, I see long-term rates higher first, then eventually short-term rates higher with a rocket under them, no matter who can seemingly afford them. No one could in 1980 and rates globally went into the high teens
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