From Birch Gold Group
The monetary “moon shot” taken by the Federal Reserve two weeks ago – in which they committed to adding an historic amount of liquidity to the markets – appears to have set the stage for some potentially nasty price inflation in the coming weeks and years.
In the near term, it appears some food prices are rising dramatically. Robert Wenzel explains why he thinks the first signs are happening:
The Federal Reserve is pumping massive amounts of new money into the economy and, at the same time, the production of goods and services has declined. Less supply and more monetary demand is a prescription for higher prices.
The Fed “moon shot”, plus the economic shutdown, sure seem like a one-two punch that could send prices soaring.
Wenzel adds further that these price increases “at first may not be reflected in government price indexes.” So even when the official update for CPI inflation in March finally posts, it may not yet account for these initial increases in the price of food.
Looking at the price of eggs from official data at the Department of Agriculture, you can see the jump in prices compared to 2019:
Of course, eggs are only one of many food items, but the increase in average price is staggering.
Sticking with this example, Wenzel also pointed out a potential longer-term ripple effect of the economic shutdown thanks to COVID-19:
It takes four to five months to raise a hen to egg-laying age, and few farmers so far plan to build new barns or significantly expand their flocks in response to the coronavirus-driven demand surge.
It is understandable that farmers, who are worried about the current economic conditions in the U.S., would be hesitant to invest in expansion of their farms.
But another way prices could stay on the rise is through a reduction in discounts.
In this case, the food you normally buy at a discounted price would first return to normal pricing, then increase as time goes on. Analysts at JPMorgan recently shined a light on the trend:
In a normal environment, reduced discounts — that is, higher prices — would lead to lower volumes, but we are not in normal times… We think elasticity will be minimal as long as food-at-home is benefiting from COVID-19 to this degree.
Discounted prices that return to normal would normally drive customers away, but when demand remains the same, higher prices mean more profit for grocery stores.
That trend could continue as long as the COVID-19 outbreak keeps driving demand. In fact, the outbreak is already driving price gouging in some areas.
According to Penn Live, “State officials have investigated roughly 3,300 reports of price gouging as Pennsylvania residents and retailers alike grapple with supply shortages during the coronavirus.”
Ohio, New York, California, and Amazon all are dealing with price gouging on grocery items thanks to the virus.
This is Just the Beginning
A USDA report highlights the potential for food prices to increase into 2020. According to the most recent year-over-year summary:
Looking over 2020 so far compared to 2019 (reported as “Year-to-date avg. 2019 to avg. 2020”), food-at-home prices have increased 0.7 percent and food-away-from-home have increased 1.8 percent. The CPI for all food has increased an average of 1.2 percent… In 2020, food-at-home prices are expected to increase between 0.5 and 1.5 percent.
Who knows exactly how high the increase in food prices will end up? Food is a volatile category for inflation. There is just as much potential for prices to drop, as there is for those prices to skyrocket.
But keep in mind, this is just the beginning of the inflationary ripple effects from the coronavirus outbreak — which likely won’t be reported in March’s official inflation rate.
It’s Not Too Late to Start to Consider Your Own “Crash Insurance”
These are strange times indeed. With each passing day, the U.S. is going deeper and deeper into uncharted territory while it deals with the inflationary fallout from the COVID-19 outbreak and the resulting lockdowns.
And right now, if the Fed (or the Bureau of Labor and Statistics) revealed the “real” inflation rate, the market would likely panic. People would start to see the dollar’s true buying power going up in smoke, and that could potentially trigger a Depression.
So, no matter what comfortable story the Fed wants to tell, be sure to do your own homework. And prepare yourself by hedging your bets with physical assets like gold and silver, before the U.S. becomes an “Inflation Nation.”
With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.
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Sheeet better get more Gold and Silver
When there is nothing left to buy can you eat gold and silver?
No. But you can pay off all your debts and buy your farm that produces the food. Wake up
Chickens and a Victory garden if you’re not in the city.
I laugh at garbage articles like this one.
Every morning we let the hens out of the coop, fill up their water, say hello to them while we collect the eggs, then put them in boxes and stock up the honor box at the bottom of the driveway. Inside is a little can filled with quarters and dollar bills and any excess beyond that required for change is removed and added to our budget. I set the price based on what I think is fair, my customers either buy them or they don’t. An empty box every morning tells me that we have struck a deal, a full box shows me the error of my pricing.
That’s the real economics of food prices.
Robert Wenzel (Goldman Sachs loves the guy, so his opinion matters) knows nothing about this process, so he trots out something labeled National FOB GL Large Weekly Weighted Average chart from the Department of Agriculture. No one, myself included, knows what FOB GL Weekly Weighted Average means, it’s D.C. poopytalk, stuff to justify hundred billion dollar budgets for organizations full of assholes like Wenzel who don’t know where eggs come from but is going to try and explain to you why the prices are so damn high.
It’s because of them. They stole your money to pay for their services so you have less left to feed your family.
There is only one way out of this and it is in the exact opposite direction of the people who read, write and believe in bullshit theories that try to explain away your enslavement for their profit.
I wish you were my neighbor. There are not many with moral values that you have.
HSF – what is the price for your eggs?
$4 a dozen on the farm, $5 delivered.
But but i can get them for $2.99 at publix and they come laden with free anitbiotics and gmo feed! Sarc
Econ 101. Inflation…… too much money chasing too few goods.
In the case of food was the decades long program to artificially suppress food prices via subsidies.
A dozen eggs for $2 is not possible without the taxpayer returning $2 per dozen to the producer in the form of cash payments, industrialized production models that are at best inhumane, and underpaid immigrant labor.
Cheap food was always a falsehood hidden from the American public in order to deceive them and move them away from the source of food production rendering them dependent upon someone else for their sustenance.
Now that we are fully moving into the sovietization of America, that curtain is being pulled back and you either comply or starve.
Please w rite an article about this if you have time. Many do not understand how food producti on supply and distribution work.
Currently we have crops rotting in the field, milk poured on the ground, eggs destroyed and dairy cattle sent to slaughter. There is no food shortage, there is a distribution/processing problem that is going to get far worse. Inflation is coming due to infinite dollar printing, food shortages happening because it is planned and baked into a soon-to-be in short supply cake.
We have cheap food because of subsidies, futures and guaranteed markets. We have industrial factory farms that can feed millions because of artificial fertilizers and pesticides and franken hybrid crops and animals.
I am fortunate to live near people who raise vegetables, poultry and goats and dairy cattle. I have my garden, no livestock because my goal is not to feed coyotes, raccoons, snakes, owls, hawks and a host of other predators that would keep me up and shooting most of the night and day.
I am looking into some heritage breeds though, if it comes down the way I think it will then we will need those plants and animals that can survive and thrive under extremes.
You can eat coyote, raccoon, snake, owl, hawk no?
It has always seemed to me that there are other motives behind the artificial suppression of food prices and the price of other items. It frees up monies to go to shit that nobody really needs, but that friends of government need to sell, and overwhelmingly destroys the concept of internal valuation. By that I mean that when you are unable to make truly informed choices about what you buy based on cost, you are never fully able to develop a proper sense of value. When the conventionally-produced food item is 50% of its real cost because of subsidies, you look at the cost of organically produced, or “sustainably” produced food as being outrageously overpriced, thus deterring its purchase, etc. even though their REAL price difference is likely not significant. Maybe not the best example as vastly increased demand has brought organics down to quite comparable prices, but you get what I’m getting at. Same with “free” schooling, subsidized energy choices, subsidized car prices, etc.
And many wives scream of their prepper husbands that the garden cost 2x what she could have bought at the stores. And nags of all the time spent in the dirt….
Wait until the checks hit….especially now that they have actively destroyed supplies.
Very astute. They have already placed the narrative of people should use it to stock up
Views like this are extremely short sighted and show a lack of understanding of “econ 101”. The biggest factor in inflation is actually imports and exports…its global trade…and not of goods, but of services and financial assets. The cashflows in and out of a country and whether those cash flows are in USD or other currencies are the biggest factor. Folks that spout lines like this are the Google IQ crowd that say things they know most ppl will upvote but have no idea how the game, rigged or not, is actually played.
Actually inflation is a byproduct of credit interest. It has nothing to do with import / export.
Almost all the money today is created at point of sale by credit purchases. The fact that you pay more for the items than the sales price due to the interest on the credit creates inflation. If you buy a widget on credit for $100 and the interest on that purchase is 10% you just created $110 dollars to purchase a $100 widget.
Just as credit purchasing creates inflation, debt default causes deflation. That is what is going to happen going forward. Money which is created by initiating debt, is destroyed when the debt is defaulted on.
When this happens on a mass scale, the effect is that it changes the demand / supply balance between money and assets.
In effect you have less and less money chasing a greater supply of goods.
The pickup truck your neighbor purchased for $40k, he bought with money that was created when he signed the loan papers.
If he defaults on that loan because he lost his job, the money that was created disappears but the truck is still here. Now whomever repossesses the truck must find someone with new money to purchase it.
The problem is, there are now thousands of repossessed trucks looking for someone to purchase them, and very few buyers. Add to that depreciation and you see how falling prices begin to be norm.
Depressions are caused by assets prices that outpace income for decades. At some point a black swan event causes the economy to drop, and the excess in the system becomes obvious.
Supply and demand. The foundation of inflation
When people hoard dollars world wide the value of dollars go up. Sucks to be importing food from the US.
It will be cheaper to buy grapes from chile .
Maybe the rich Ubanites who normally ate out most nights don’t know how to cook for crap and their maid isn’t coming to town so they are eating frozen pizza, spaghetti, lasagna, pot pies, etc.
Exactly. They cannot make chicken parm, but can open a jar of sauce, cook some pasta and call it dinner.
Must be why all the pasta shelves are now empty. Not a single box of any type. Ridiculous.
Also because dry goods last for years. A few weeks ago all of the dried beans and lentils were sold out, and I KNOW people don’t regularly eat that many beans and lentils.
The first time I saw any empty grocery shelves, except paper goods, there was plenty of dried beans, pasta and rice, but the canned goods, fresh meat and dairy were all gone. The next rip, the dried beans were gone and the following trip, the rice and pasta had been scarfed up. Canned goods are still in short supply, but the dried stuff is beginning to stay on the shelves and there is always plenty of meat and dairy. Still no paper goods, though.
But much like in the past, DEFLATION is to be the “worst” thing that could happen. Indeed, why would anyone without a job, or significantly reduced income, want prices to drop on stuff they need to buy? When the Fed says its target is 2%, that means that it is their GOAL, regardless of everything else going on, that we all pay 2% more EVERY YEAR, for what we need to buy.
And if increases in productivity help drive prices lower, that just gives them MORE CREAM to scrape off the top of the economy to line the pockets of their bankster friends with inflated money.
Barf worthy bullshit as usual from this guy.
“A moon shot appears to have set the stage for price inflation”? Two weeks ago? How about 3 decades ago.
“could potentially trigger a depression”? Really? We’ve been in one for quite some time.
Selling gold backed IRA’s? Just try and take possession of said gold.
I’d rather work until I drop than invest in another 401(k) or IRA scheme. All it does is enrich “money managers” (paper pushers) and publicly traded companies. Worse still, no one ever seems to question the fact that govt. can change tax laws on a dime. Seems to me I’d prefer working ten years longer and invest in the local feed mill, either personally or financially.
AOC.
Exactly. They can even take it under the guise of bail-ins.
I have noticed the stores have very few items on sale. This alone will add millions to their bottom line.
Americans were spoiled with choices since everything was financialized, even if they were choices between chicken shit and dog shit. Wait until they can’t even choose the chicken shit in aisle 10.
This is exactly the same thing that happened during the Great Depression. The government and industry attempts to curb the deflation that is a natural part of economic depression by artificially creating shortages. They pay farmers and industrial agriculture to destroy food and create shortages driving up the cost of food, as there is nothing they can do to stop the deflation in other parts of the economy such as raw materials, the stock market, and housing.
What you can expect to see in the months to come is deflation in assets such as stocks, real estate, precious metals, cars, and anything else people can sell for cash. Food will go up and at some point the government will announce they need to raise the income tax, but they will sell it as a tax on the rich.
People will return to growing gardens and canning just as they did in the Great Depression because of the increase in food costs.
This is going to be a real reality check for a lot of people who never thought this could happen again.
Shortage in canning equip soon coming
In KY, eggs were 60 cents a dozen this week at Aldis up from 48 cents (usually) and Kroger milk was 69 cents per gallon which is in line with WM and Aldis per usual. Eggs actually went to 99 cents per dozen week before last with a limit of 2 dozen. (true)
Impossible price point. There is simply no way to produce and egg for five cents in America in 2020.
If they were selling factory show room Teslas for $600 wouldn’t you wonder how it was possible?
That’s how I feel when I see someone selling a dozen eggs for 48 cents a dozen.
HF- When the German grocers came to KY, the other stores eventually had to meet their prices . Eggs are seriously 48 to 69 cents all the time at Aldi. Kroger is a little higher on eggs but sells milk at a cheap price while WM also has 69 cent per gallon milk and eggs are 69 to 79 cents a dozen all the time. That’s called competition and we all know they make it up on other products. At least that is the way it is where I live. Surprisingly, those cheap eggs at Aldi are very high quality with very rich yolks, can’t say as much for eggs from the other stores.
This is a poor state HF ,so we don’t pay as much for most things as do Yankees who make higher wages. This low pricing is not the case in TN where food prices are much higher than here, at least in middle TN.
Loss leaders.
I didn’t mean that they weren’t selling them for that price, only that it isn’t possible to produce them for that price.
They are either taking a deliberate loss or the subsidies paid to the producers to get them to sell at that price are a stealth tax.
I have always believed mkt crashes were geared for the rich to get richer. They want to eliminate the competition. When you have tens of millions with a few dollars they dwarf the elites money base. This is why most failures are cascading failures. Head fakes if you will. To draw out more safe money and make it lose. The need price inflation on basic goods because to the avg American daily life consumes a much greater percentage of their paychecks. Forcing them to use more money on necessities makes them more poor and dependent. And much less the competitor so the rich can steal the cream of the crop. They are targeting the best companies to own. The best real estate. All while gaining political clout via donations and blackmail.