OT: What Do You Think? Prediction?

[NinerSickness]

It's the doldrums of the offseason, so I figured an off-topic conversation wouldn't be too inappropriate.

Food prices have gone up around 14% this year. You've probably noticed if you bought a soda, hamburger and so on lately. If there's anyone who's really good at understanding the nuances of economics, I wanted to get your opinion / prediction about how recent rises in food costs is going to effect any of the following:

1. Inflation
2. The stock market
3. The Real Estate Market
4. Average wages
5. Interest rates
6. The unemployment rate

This stuff is just good to know to stay ahead of the game, and you often find economics experts having conflicting predictions about these things; so it's good to get many perspectives. Any thoughts on my kind of boring question?

 

[CalamityX11]

Calamity going on a diet...

 

[NinerSickness]

Calamity going on a diet...

More informative than some of the articles I've found.

 

[tomikcon1971]

Try having teenagers in your house while this is going on! My grocery bill has increased $500 per month over the last two years.

 

[NinerSickness]

Try having teenagers in your house while this is going on! My grocery bill has increased $500 per month over the last two years.

Ouch. Yeah, I remember devouring everything in sight when I was about 13. That's gotta be tough.

 

[tomikcon1971]

Ouch. Yeah, I remember devouring everything in sight when I was about 13. That's gotta be tough.

It's crazy. And when they have friends over it's like a plague of locusts.

 

[willtalk]

Whats really keeping somewhat of a lid on inflation and the price of things down is the continuing demand for the US dollar because it is still the international standard means of exchange. There has been some movement internationally away from continuing to use the US dollar as the standard of exchange. If that happens the demand for the dollar, since every country needs a large amount of dollars on hand to do business with other countries, will drop and with it the value of the dollar on the international market. It seems likely that that when that happens in the future the cost of things will rise considerably and the standard of living in the USA will drop. The same thing happened to England when the world went off the pound standard.

 

[I_am_1z]

US Govt gambles on healthcare > Draws more/stricter regulations for the FDA > Price Increases?

(I have no idea to be honest)

 

[NinerSickness]

US Govt gambles on healthcare > Draws more/stricter regulations for the FDA > Price Increases?

(I have no idea to be honest)

Might be. I'm trying to figure out what happens next (or at least get an educated guess).

 

[tomikcon1971]

Specific to food.....we're on a path where the population size (and therefore consumption) is going to exceed the amount of food we can produce globally. Less than 40 years at current pace.

 

[NinerSickness]

Specific to food.....we're on a path where the population size (and therefore consumption) is going to exceed the amount of food we can produce globally. Less than 40 years at current pace.

Yes, but population increase isn't static like a lot of people like to say it is. In fact, in some European countries population is declining. Italy's is, and I'm pretty sure Japan's is (along with a few other European countries if I'm not mistaken).

The biggest potential for population increase is in sub-Saharan Africa. And that's not a good thing considering it's a political disaster down there.

...Wah wah. Sad. But anyway, I'm more interested in what people think the rising food costs will do to the US economy in the next couple of years. Stock market, real estate, inflation, interest rates and so on.

People can arbitrarily screw w/ some parts of the economy like w/ QE, selling, buying & selling stocks, changing interest rates and so on. Food prices aren't like that. Food price increases are a more organic cause of other economic factors.

 

[1911Alaska]

What does everyone think will happen with interest rates on mortages? I will be buying my first home within a year, could qualify within 3 months at the most. But debating on if I should wait, pay off more school debt or just go ahead and get one at the end of summer. Local loan rates are at 4.125% right now.

 

[NinerSickness]

What does everyone think will happen with interest rates on mortages? I will be buying my first home within a year, could qualify within 3 months at the most. But debating on if I should wait, pay off more school debt or just go ahead and get one at the end of summer. Local loan rates are at 4.125% right now.

Well, rates have gone up recently, but they haven't gone up by a ton. They're back to 2011 levels if I'm not mistaken.

I think real estate is on the up swing in most parts of the country. I live in California, so the fact that businesses are leaving the state like a burning building might have an effect on California real estate prices specifically.

But with QE keeping rates low and the fed arbitrarily allowed to keep it that way, I can't see rates jumping up any time soon. They've been saying, "Lock in your rate now because rates will never be this low again" for the last decade.

 

[EaseUrStorm]

The price of food doesn't have an effect on inflation. The rising food price is inflation. The CPI is a terrible gauge for real inflation because those figures are heavily manipulated.

The stock market has been heavily propped up with stimulus money. The estate market has also been heavily propped up by all the stimulus money, and through domestic and foreign cash purchases from companies forced to chase yields in this artificial zero interest rate environment.

I don't see average wages improving because the workforce participation rate is the worst right now that it has been in decades.

Yellen will very shortly have to choose between tapering or pushing back the stimulus to full throttle. I don't see how inflation will be avoided down the road because it is the only way I see the government avoiding default on their massive debt, but deflation is a real concern if the stimulus is turned off.

 

[NinerSickness]

The price of food doesn't have an effect on inflation. The rising food price is inflation. The CPI is a terrible gauge for real inflation because those figures are heavily manipulated.

The stock market has been heavily propped up with stimulus money. The estate market has also been heavily propped up by all the stimulus money, and through domestic and foreign cash purchases from companies forced to chase yields in this artificial zero interest rate environment.

I don't see average wages improving because the workforce participation rate is the worst right now that it has been in decades.

Yellen will very shortly have to choose between tapering or pushing back the stimulus to full throttle. I don't see how inflation will be avoided down the road because it is the only way I see the government avoiding default on their massive debt, but deflation is a real concern if the stimulus is turned off.

Interesting...

So if food price going up IS inflation, then maybe that's why real estate has been going up this year.

Yeah, foreign money is boosting the market, but until there's a better place to park your money, I doubt that factor will change any time soon.

The fed policy appears to be operating 100% on the motivation of scoring political points based on artificially buoying the economy, but they can't keep that up forever.

 

[DoobieKeebler]

US Govt gambles on healthcare > Draws more/stricter regulations for the FDA > Price Increases?

(I have no idea to be honest)

1 word: Drought


(then a lot more)

Agriculture uses the majority of water in California by a long shot, and the same goes for Tey-has. California is on it's third year of severe drought; Texas is on it's fourth year of drought. Bad things happen when California farmers are forced to sell much of their livestock, and Texas farmers are not only selling their livestock, causing Cargill to close processing plants or (soon) feed lots, whole towns have begun begging God to end the drought and let it rain.


The farmers could pay for water to be trucked in like fracking companies do, but farmers simply don't have the liquid capital (no pun intended).

Drought > Grain prices skyrocket > With no grain or water, farmers can't afford cattle > With less access to large amounts of cattle, corporations lose competitive price on livestock they would have bought > Without competitive prices, corporations don't make money the money they're supposed to > Corporations cut their losses and close plants, doing their duty to protect the interests of shareholders and the rest of the corporation > Plant workers no longer have jobs > Without a large corporation to prop up small agricultural areas, people move or change professions > Fewer farmers, cattle, jobs means food need to be trucked in from further away > Food that needs to be brought from further away for inflated prices lead to....

Calamity going on a diet...

 

[DoobieKeebler]

Rice and veggies aren't happening, either.

"Of the 56,000 acres served by the [The Colusa Drain Mutual Water Co], 20,000 acres are normally planted with rice. This year, only about 4,000 acres are planted in rice, an 80 percent reduction. Steep cuts also have occurred in tomatoes and alfalfa, the other primary crops grown in the district."

I know a few farmers myself who are struggling to grow veggies/fruit, but they rely on the Trinity / South Fork of the Eel river, not the Sacramento river. But still, people can't sell produce at the farmer's market that you can't grow.

I was talking on the phone 2 days ago with my friend who told me the cherries on her farm are coming in, and normally I help pick produce, because in years past I'd get a couple shoe boxes of apples, kiwis, cherries, etc, but she said Doobie isn't allowed any this year.

 

[NinerSickness]

I help pick produce, because in years past I'd get a couple shoe boxes of apples, kiwis, cherries, etc, but she said Doobie isn't allowed any this year.

Sounds like a sweet deal. It's always great to have friends who grow or have a pool or have a boat. Not this year though I guess...

So Doob', if the US has a really good rain season would you expect food prices to go back down? I've seen food prices go up my entire life; I don't remember ever seeing them go down.

Anyway, there could be numerous causes of food price increases, but I'm trying to determine what happens AFTER food prices have gone up. Like what's gonna happen w/ the prices of other stuff...

After reading / thinking about this the last couple of weeks, I think the Dow is gonna go up to at least 17,500 this summer (it's at 16,717 now). I think Real Estate prices are going to continue to go up in the next 6 months, and I think interest rates are going to be relatively flat.

I don't do this for a living or anything, and by no means am I an expert. But this is how I see it shaking up. Anyone agree? Disagree?

 

[DoobieKeebler]

So Doob', if the US has a really good rain season would you expect food prices to go back down?

Well, there are always temporary fluctuations, but no, I wouldn't expect prices to go down. Not unless we have a modern day (re: not world enveloping) equivalent of the "Genesis Flood." At the same time, I think food instability will slow our economic recovery and potentially make things worse. Maybe not a full on recession, and it won't happen in 6 months, but by July 2015 I imagine panic about food & water will have wide reaching effects on the markets, as generalized panic of any sort seems to hurt the markets as a whole.

I think Real Estate prices are going to continue to go up in the next 6 months, and I think interest rates are going to be relatively flat.

Agree, and agree. Interest rates will stay similar to what they are now, as I believe next year is when the fed will vote on whether or not to raise the current rates, or move back to using a "single digit" rate vs the current "range" of rates.