Where's the inflation?
It's been minimal since the 2008 crash. Job insecurity at home and low global demand for goods and services are keeping price pressures at bay.
What few people talked about was if there were any great worries about inflation -- or if interest-rate cuts by central banks around the world, and moves to flood their banking system with cash to promote growth, were causing enormous inflationary pressures.
This was a change from the near-constant television chatter about how those big, bad central banks were going to destroy the economy as we know it. But the big fears are just fears so far. There isn't much inflation in the developed countries, certainly not the United States. Not yet, anyway.
Why only fears? Because of the damage caused by the Great Recession. Getting past both has made businesses and consumers so wary of big decisions.
You can see the issue in Thursday's Consumer Prices Index report. Prices fell in April, largely to falling gasoline prices. That aside, prices are rising less than 1.7% a year, and that's indicative of sluggish fundamentals, Nomura Securities said Thursday.This is not to say that the Federal Reserve's big bond-buying programs -- known as quantitative easing -- won't be troublesome later. That is, in fact, the source of most of the criticism of the three rounds of QE so far.
The question is how does the Fed stop buying bonds and slowly sell them without pushing rates up so fast that the U.S. economy promptly stumbles. Bond prices move in opposite direction to interest rates. So if you sell lots of bonds prices will fall, pushing interest rates higher.
To help the economic recovery along, the Fed has kept interest rates at ultra-low levels. The 10-year Treasury note was yielding 1.865% on Thursday, down from 4.035% at the end of 2007 -- before the 2008 crash.
Critics also say the efforts really haven't worked. Supporters say the economy wouldn't be recovering much -- if at all -- without the Fed.
Here's what's happened.
The U.S. economy created some 7.4 million jobs between the end of 1999 and January 2007. It shed 8.7 million jobs -- 118% of the earlier gains - by February 2010.
About 6.1 million jobs have been created since then. The national unemployment rate is 7.6%. The rate for the unemployment, marginally employed and dropped out of the work force soared from 6.8% in October 2000 to 17.2% in October 2009 and has been pared down only to 13.9%.
Workers are scared what looks like job stability now is actually tenuous. The odds that a major union will strike for, say, 10% wage gains? Slim to none. The workers worry that the bosses will pack their manufacturing plants and move them somewhere else.
Just ask Boeing (BA) workers in Washington state. Boeing has announced it's moving about 1,500 information technology jobs in Seattle, a third of the total in the Puget Sound area, to Missouri and South Carolina. Why? Costs. Boeing opened a second production line for its 787 Dreamliner in South Carolina.
And if a company doesn't have a low-cost site in the United States, there's always China, India or Vietnam. Or Mexico, where Honda Motor (HMC), Nissan (NSANY), Audi and Mazda are expanding or setting up new factories to service the North American markets. Good for the Kansas City Southern (KSU) railroad, but maybe not so good for domestic auto workers.
That's only part of why inflation is so not a problem in much of the world, says Chris Christopher, director, Global and U.S. Consumer Markets, at economic consulting firm IHS Global Insight.
Demand is weak around the world, he says. Southern Europe is basically in a depression. Northern Europe is struggling. France is in its third recession in four years. Britain narrowly has narrowly avoided one.
China was growing at a 10%-plus clip until the last few years; the growth rate was 7.7% in the first quarter. Growth in India and Brazil has dropped off.
China's slower growth has cut demand for Australian copper and other commodities.
A rising dollar has knocked down oil, gold and silver prices, in dollars anyway. The price of gold (-GC) in New York, now at about $1,387 an ounce, is off some 26% since its peak in the last summer of 2011 -- and 10.5% over the last 52 weeks. The price is up 15.1% in yen as the Japanese government has worked to push its currency lower.
Crude oil (-CL) in New York settled at $95.16 a barrel on Thursday and has been flat for the past few years.
To complicate matters, Christopher said, is the speed at which economic change is identified, transmitted and realized. Computers make information available in an instant.
That only accelerates decision-making.
At the same time, basic technological change has accelerated, making global markets far more accessible and putting pressure on existing businesses to keep costs and inflation low.
The Economist magazine noted this week that the basic shipping container -- which allows a company to move goods by train or truck to a seaport and then quickly onto a ship -- has been more responsible for growth in global trade than all of trade agreements negotiated in the last 50 years.
Panama is adding a third set of locks to the Panama Canal to be able to handle large container ships. The $5.25-billion project is expected finished in 2015.
More on Top Stocks
- Goldman Sachs makes a $500 million bet on solar
- Can Japanese stocks keep this up?
- Tesla's got the power
The government has not lifted a finger for the average American except to lie to their faces straight on about everyting. There are almost 50-million Americans on Food Stamps. That's one-sixth of the whole country. Maybe the rest of the country feels nothing right now, but wait until that number reaches two-sixths, and then three-sixths. And the government is making every effort to cut that program down to nothing. Been to the grocery store lately? No inflation? Another lie.
There has been no recovery. The government has stood by while tens of millions of American jobs were out-sourced. Jobs that will never be coming back. No jobs will be recovered. The government will continue to lie until the whole country reaches a tipping point where there isn't enough economic activity to support any economy at all. By that time, inflation, deflation, stagnation, none of it will matter at all.
There will be no recovery.
they keep saying gas prices are going down i would like to know where ,it has gone up here 90 cents a gallon more in the last month,are there a bunch of stupid people out there,,can someone explain where
What are Rental prices on average the last four years compared to the four year prior. Food, everyone that's actually affected by price, know food prices have soared. New and Use Cars are setting new Highs on Average Price Paid. They are NOT reducing prices when you eat out but maybe reducing the serving size.
If they don't see this as inflation, imagine what they do consider to be inflation. Clearly these folks live with Alice in Wonderland.
Quantities are smaller in stores and prices are the same or up. Gas is at $3.75 per gallon. Interest rates are "artificially" low, stealing from those that have any money or savings. The government is pumping 85 Billion monthly into buying bad housing loans. National debt is 16 Trillion plus. 47 Million plus on food stamps. IT"S a shell game people. Why the hell do you think the government is buying so much ammunition??? When reality can no longer be held off by the governments smoke and mirrors hold on...
Gosh, I must be buying all the wrong things that keep going up 3-10% per year. You know, all that silly useless stuff that no one really needs like food, home insurance, auto insurance, healthcare, education, property taxes........
There is one place I don't see any inflation, my paycheck.
how can labor expect to negotiate a fair share of the profits when all an employer has to do is outsource. Free trades a disaster for working americans.its why the divide between the rich and working americans has never been higher. To have inflation wages and prices need to rise. While prices have risen wages have remained stagnate. What this means is the worst of all possible outcomes for most americans.a declining standard of living. We cant end free trade fast enough
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.