the visible hand

it is the theory which decides what can be observed – einstein

Dupont spokesman says “inflation is here bigtime”

Posted by ecoshift on June 24, 2008

Sure gas prices have been going up 10 cents a week. And, every time you go to the grocery store prices seem to be noticeably higher, but just wait. While “macroeconomic data” show “little evidence that higher commodity prices have been passed to consumers” the corporate sector has been shouldering “soaring”, even “staggering’, increases in costs. Now they are raising prices: 20%, 25%, 60% cumulative increases and even a one time 95% increase in iron ore prices.

The Fed is expected to address this circumstance by expressing concern about inflation, but to carefully avoid sending any signal that it will actually do anything about it. It’s just too risky to bet that raising rates, further slowing down our already slowing economy, will have significant impact on the combination of speculation and global demand that is driving up global commodity prices.

So couple rising global prices with low Fed fund rates that leave the dollar vulnerable to further declines.

This would be a good time to have a large cellar full of rice, beans and potatoes; a well-fertilized producing veggie garden; a decent orchard; and a few junked cars laying about your property for ready cash.

Great time to sell used logging and milling equipment for scrap.

Tighten your belts…

FT.com / World – Spectre of inflation over global economy
By Francesco Guerrera in New York, Krishna Guha in Washington and Javier Blas in London
Published: June 24 2008 14:55 |

The spectre of inflation returned to haunt the global economy on Tuesday as companies ranging from Dow Chemical of the US to South Korea’s Posco unveiled sharp price rises to combat the soaring cost of energy and raw materials.

The moves by Dow, the biggest chemical group in the US, and Posco, the world’s fourth largest steelmaker, came as Charles Holliday, chief executive of the chemical giant DuPont, warned of rising inflationary pressures in the corporate sector.

“Inflation is here big time,” Mr Holliday told the Financial Times, adding that companies such as DuPont faced “tremendous cost pressures” and had the “obligation” to raise their prices to offset higher costs.

The general price pressure was exacerbated when BHP Billiton, the mining company, said the 96.5 per cent record increase in iron ore cost announced by Rio Tinto on Monday was not enough, signalling it could ask for a rise above 100 per cent with its steelmaker customers.

Figures on Tuesday showed US consumer confidence fell to a 16-year low in June while inflation expectations held at their recent record high.

Inflation pressures will be high on the agenda at the two-day interest rate-setting meeting of the Federal Reserve, which concludes on Wednesday. The Fed statement is likely to indicate increased concern about inflation, despite a slowdown in the US economy, while avoiding any signal that rate increases are imminent.

Rising inflation would compound the crisis of the US consumer, whose confidence has been decimated by the bursting of the housing bubble and the ensuing financial turmoil.

But US macroeconomic data have so far shown little evidence that higher commodity prices have been passed to consumers.

Andrew Liveris, Dow’s chief executive, said the decision to raise prices on the company’s products by up to 25 per cent – the biggest hike in company history – were aimed at offsetting a “staggering” increase in costs.

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