Thursday, September 24, 2015

Butter Prices Hit All-Time Record High

Butter prices hit $3.10 per lb today in Chicago trading - a record high, reports ZeroHedge.

But this isn't really occurring and neither are rents soaring.

Paul Krugman says so. He says the threat is deflation, worldwide!. 

The future for the world economy is "scary" due to the threat of deflation, he writes repeatedly and said earlier this year at a speech at the "Asian Financial Forum" in Hong Kong.



  1. Is it possible to inflation and deflation at the same time? Real deflation as economic activity slows combined with rising consumer prices? Or maybe rising prices on short lived consumable goods and falling prices on long term revenue generting capital goods because what's the point of owning a claim on a future stream of rapidly decaying dollars?

    1. And why exactly is economic activity slowing?

    2. There's certainly no drop off in arbitrary activity spurred on by the fed, but is that economic activity? All those now empty houses that were built during the housing boom, that was busy busy activity, but was there anything economic about it? Could all those workers have just as easily been on food stamps and sat around playing video games rather than swinging hammers to build stuff no one uses?

      Here's what I'm thinking: When the Krugmanites scream about "deflation" they are usually talking about a fall in the prices of revenue-generating assets like stocks or real estate. When Schiffites scream about "inflation" they are usually talking about short-lived consumable goods, like butter and gasoline. I don't see why these two phenomena should be mutually exclusive. The price of a revenue-generating asset is a reflection of the present value of that future revenue stream. If inflation in short-lived consumer goods picks up, then the expected value of the future dollars in that revenue stream will fall, bringing the price of the stock down with it. If today you have $100 and you expect dollars to lose value rapidly why buy a claim on a stream of future worthless dollars when you can buy a real something today?

    3. This isn't a conclusion I've reached, I'm just floating the idea. It seems to me that the inflation-wary and the deflation wary have been arguing past each other for a long time, and I think they might be incorrectly projecting two orthogonal economic ideas onto a linguistic dichotomy.

  2. I've come to the conclusion that Keynesians are willfully ignorant of the reality around us all with each passing day.

  3. Here in Korea butter is $6 a pound at Costco. It's more expensive at the local grocery store. Milk is about $6 for a two-liter jug. Bank of Korea is killing us just as much as the Fed is killing you.