Inflation! Inflation! Inflation! We all can see inflation has been rising despite what the government reports have indicated that inflation is under control. Just recently, we have heard that wheat made all time highs in a short period of time to $9 a bushel. That is more than doubled since 2006. Corn has been making new highs which have doubled also since last year. Consumers are recognizing it at the grocery stores for the past few years however, we are now seeing it in all areas of consumption.
Everything has a domino effect. You are seeing over $5 a gallon in milk because of the corn inflation which goes to feed the cattle. Just wait until you see how high bread will be soon. So what is next?
How about all the cheap goods we see coming from China? This is where the Dollar Store and other low price stores get the majority of their goods. China,this month,has just raised their interest rates for the fifth time this year. So what we will see is inflation being exported to us because of the global connection. And it’s not just China. It is also other parts of Asia and Europe that affects our imports. So, say goodbye to the “Dollar Store” and hello to the “$1.99 Store” that will replace them. Or they might say “Dollar and Up” stores.
Goods from China will be about 40% more expensive next year than they were in 2003. You will see those “rolling back prices” at Wal-Mart going up too.
Greenspan is concern that the reason we will see interest rates rising in the near future to perhaps double digits is because of inflation. The last time we saw double digit interest rates was the early 1980’s. If this was to happen, it would be most likely bring a crash to the real estate market to the point that the fat lady might finally sing. Bottoms are made when nobody wants it or in this case, won’t be able to afford it.
Just recently gold has now broken out on a technical basis from a sixteen month trading range to the upside. Part of the reason is also a fallen dollar that has broken down to be new 20 year lows, close to a historic low. People buy gold not only to protect against inflation but also when a currency crisis is happening or beginning to happen.
So, you have the metals going up which affects supplies and goods from housing to autos. Grains are breaking out to new price highs which affect not only our breads and bakery goods, but the feed for the animals that you eat. Combine problems with weather drought areas and you have more inflation.
We are already hearing about these Dollar Store or Ninety Nine Cent store closings which have risen from last year. They may not go out of business however they will have to change the signs.