SNAP BACK TO REALITY …
As recently as two decades ago America still had a free market … and still stood as the envy of the free world (as well as a beacon of freedom for the rest of the world). Oh, and when it came to celebrating freedom, the cost of one pound of 100 percent ground beef for your Fourth of July hamburger was less than $1.50.
Today? The cost of a pound of ground beef is approaching $4.00 – up more than 16 percent from last year alone.
Beef isn’t the only thing that’s more expensive these days. The bread, cheese, lettuce and tomatoes on your burger are also pushing all-time highs – spikes driven by the Federal Reserve’s quantitative easing plan (a.k.a. wealth redistribution scheme).
How much more expensive is “stuff?”
Since 2000, the cost of a gallon of gas has soared by 176.4 percent. A dozen eggs is 106.2 percent more. Health care spending? That’s up 104.4 percent.
Now … compare those numbers to the 39.1 percent increase in the consumer price index (CPI) over the same period. Or the 31.5 percent rise in the personal consumption expenditure (PCE), which is the index the Federal Reserve uses to track consumer inflation.
Hmmmm … that’s a real disconnect, one that calls into question the government’s definition of inflation.
“For those still working, most are losing purchasing power each year,” our friends at Economic Noise.com wrote this week. “Wages are not keeping up with inflation, even the understated numbers reported by government. In short, the decline of a once-great economic power is well underway. The country is no longer growing enough to raise everyone’s standard of living.”
Sure … but it’s all going to turn around in the second quarter, right? Right?
55 comments
I think Donita Todd had the crack team at WIS do this story last week.
There is no inflation. Prices are sticky.
Yes, Rose petals will fall from the sky, T-Rav will get elected and hire Sic as his shoe shine boy, juicy apricots and shiny nickels will pop out of my ass, and Nikki will be first to write a tell-all book…but only if we pass a school voucher system.
Amen.
Shifty will no longer be accepting nickels — shiny or not!
Reminds me of ye olde video of “ass pennies.”
Rainbows and unicorns for everyone!
This reminds me of the little booklets we used to get from Cracker Barrel to use when we were pitching timeshare.
http://inflationdata.com/Inflation/Inflation_Rate/Gasoline_Inflation.asp
Are your wages going up at the same rate as the inflation adjusted rate of gas?
Did you buy a CD player when they first came out?
…and still cheaper than a freaking gallon of skim milk!
I want to shop at your grocery store. A decent pound of ground beef is 5.49 – 5.99; I wish is was ONLY 4.00
Buy a meat grinder. Buy chuck roasts when on sale for $2.99 and grind your own hamburger.
Sirloin is 2.99 a pound here regularly.
It’s the free market determining the price of a scarce commodity. Business is just doing what it always does – charge the price they can get away with.
Let’s go live in Cuba or Venezuela…the government does SO much better.
Denmark, Sweden, Norway…they must have cheap food and low taxes, cheap gas, and free healthcare to boot? None of the above.
Cuba and Venezuela suck. They are military dictatorships. Denmark, Sweden and Norway, not so. For about ten years now they have consistently outranked the US as the best place to do business and the happiness of their people. Essentially the people in those three countries are happier, healthier and wealthier than their American counterparts. You can add Canada to that list by the way.
Canada’s calling for you Tom!
Sic Willie is all for the free market except when he is not for it.
So it’s the greedy business charging more for beef, unilaterally, for no other apparent reason than greed. It isn’t that they all are charging more because their costs of production are going up…plus they must be colluding too.
It’s all magic price increases for no reason.
Not for no reason… FOR MORE PROFIT AND BIGGER BONUSES!!!!
Ah yes, that’s right. More profit, regardless of what the competitors are doing.
Like OPEC.
The irony of your OPEC example is that everyone knew Saudi Arabia was violating the embargo shortly after it was instituted anyway…where there’s a buck to be made such collusion are short lived.
The reason the embargo ended is the member countries knew they couldn’t continue and hold OPEC together.
So 100+ dollars a barrel has nothing to do with OPEC then. It’s all speculators.
Seriously, do a google on “open cheating”…costs are costs.
*OPEC
Should I also google “oil price speculation?”
Feel free, I don’t demonize oil speculation because if you stop it you get oil shortages.
If OPEC isn’t colluding, and speculation only provides “the right amount” of oil, why is oil 100 dollars a barrel instead of 50?
“If OPEC isn’t colluding, and speculation only provides “the right amount” of oil, why is oil 100 dollars a barrel instead of 50?”
Speculation is nothing more than estimated delivery with cost/risk factored in.
If anyone could answer the question you just posed, they would be filthy rich, but more importantly…if you remove the mechanism(like Nixon did), then it follows that shortages will occur.
How much would energy cost if 5 nuclear power plants melted down?
So is that the case here? Have all the beef suppliers gone belly up? Has there been a chicken pandemic I’m not aware of? Now that the US has surpassed Saudi Arabia in oil production did all the other producers close the doors and say “fuck it”?
No.
U.S. beef prices are up 74 percent since 2009 to the highest on record, after a seven-year decline in the herd left the fewest cattle in at least six decades
Down drastically because of a combination of factors, beginning with the grass.
Calves don’t mature as fast on drought-stricken pastureland, and the prolonged winter slowed the growth of grain to fatten them up.
After years of high feed costs and drought, the domestic herd on Jan. 1 slid to 87.7 million head, the fewest to start a year since 1951 and the seventh straight decline, U.S. Department of Agriculture data show.
Beef demand peaks at this time of year as warm weather encourages outdoor grilling.
But there’s another reason for the lack of domestic beef.
We’re also exporting more to other countries and so the demand for beef is stronger
Beef’s a staple so it’s inelastic on price
Expanding the cattle herd to boost beef output is a slow process. The gestation for calves is nine months, and animals take as long as 22 months to reach slaughter weight. Feedlots buy calves weighing 500 to 800 pounds raised mostly on pastures and then feed them a diet of mostly corn until they reach 1,200 pounds and can be sold to beef plants.
Supply probably will remain tight. It can take three years to expand the herd, and a prolonged drought in Texas, the top producer, parched pastures needed to raise young animals. The government says the U.S. will become a net beef importer in 2015.
I’m not sure if this is a write up on the details of supply & demand, but I know this:
“Beef’s a staple so it’s inelastic on price”
That, is the biggest line of BS I’ve read, even if much of what you’ve posted in the above is not BS.
It’s not hard to check – might as well educate yourself. It makes it harder to look stupid.
“Beef’s a staple at this point, so at many points, it’s inelastic on price,” said Jake Dollarhide, the chief executive officer of Longbow Asset Management Co. in Tulsa, Oklahoma, which oversees about $75 million. “I don’t see consumer habits changing at these price levels.”
ELASTICITIES
Elasticities are a sort of measure of supply and demand.
If demand increases, and we ask how much does supply extend, we need more than an answer like “quite a lot”!! Government may be trying to raise tax to get a certain amount of revenue for instance. The question is “How much will quantity change, a lot or a little?”
WE START WITH THE ELASTICITY OF DEMAND
Three broad types of elasticity of demand
1. Price elasticity = the usual one, it deals with 1 good.
2. Cross elasticity = a special one, it deals with 2 goods.
3. Income elasticity = a special one and it deals with changes in incomes.
1. Price Elasticity of Demand
Definition: “Price elasticity of demand is a measure of the responsiveness of the quantity demanded to a small change in price”. Learn this by heart!
[In simpler terms, “is the proportional change in quantity greater or lesser than the change in price?”
As an example, if the price was 20 and it falls by 2, the fall is 10% (2 times 100, all divided by 20); and if quantity then increases from 100 to 200, the increase is 100%.
We can see that the increase in Q is greater (100% compared with 10%) – i.e., it stretches out a lot – it is elastic!]
How do we actually measure price elasticity?
Price elasticity of demand is measured by the percentage change in Qd, divided by the percentage change in price:
%?Qd / %?P
So the price elasticity of demand is:
[?Q/Q] / [?P/P]
? ?Q/Q x P/?P (to divide by fraction invert and multiply)
? ?Q/?P x Q/P (gathering the change terms all on side for neatness. If this shuffling makes you unhappy, just remember that 3 x 4 is the same as 4 x 3)
In the example above, the percentage change in Q was 100 and the percentage change in price was 10 so the elasticity is 100 divided by 10 = 10.0 In the world in which we live this is actually very high! (Anything over 2 in the real world is pretty high.)
Logically the answer can have only 1 of 3 results: 1
( stands for “more than”; if we are looking at “<” left to right, the way we read, we see it goes little to big so it is easy to remember!)
When we look at the fraction, we find that the answer is less than 1 if the top is smaller than the bottom, equal to 1 if the top and bottom are the same, or more than 1 if the top is greater than the bottom.
What does each possible answer mean?
a] If the answer is greater than 1 (e.g., 1.62) the demand curve is elastic.
It means that a small change in price led to big change in quantity (Q stretched a lot which means that it is elastic); graphically the curve tends to look flat when compared with an inelastic curve. But remember all curves must have the same scale and axis or else be on the same diagram.
Examples of demand curves which are price elastic:
Dell computers (one brand of many substitutes); foreign travel by cheap airlines.
b] If the answer is less than 1, e.g., 0.75, the demand curve is inelastic People do not respond so much to price cuts and although they buy more, they do not buy a lot more.
Examples:
Salt, bread, sets of cutlery (essentials; no substitutes).
c] If the answer just happens to equal 1 it is “unit elastic” (unity = 1), a special case and rarely seen, except perhaps for a small part of a large demand curve! The answer would work out at exactly 1.0 and the curve is asymptotic; this means that it approaches more and more closely but never quite reaches the axes.
Reminder: if you draw one rather flat demand curve in one diagram, demand is actually only relatively elastic etc because we do not know the scale – don’t worry about it, it’s technical! Just remember to say “relatively inelastic” or “relatively elastic” in the exam room! If you draw them on one diagram then you are on safer ground if you just say “elastic”.
“b] If the answer is less than 1, e.g., 0.75, the demand curve is inelastic People do not respond so much to price cuts and although they buy more, they do not buy a lot more.”
I very much appreciate your cut & paste on price inelasticity.
That being said, let’s examine your start point, or data, by which you’ve determined the price of beef as currently being inelastic:
Oops! There is none!
But, there is an opinion:
“Jake Dollarhide, the chief executive officer of Longbow Asset Management”
Ok, so where his data? Oops!
Ok, let’s see do a quick google:
https://www.google.com/search?q=price+inelasticity&oq=price+inelasticity&aqs=chrome..69i57.6187j0j8&sourceid=chrome&es_sm=0&ie=UTF-8#q=beef+price+inelasticity
So what do we get?
Let’s do the “I feel lucky” thing and select the first result:
http://www.fao.org/docrep/005/y4475e/y4475e09.htm
What does this chart tell us?(sticking to beef) This chart tells us several things, if we look at the 90’s we can see that yes, beef prices appear to have been inelastic
But, let’s take a different decade, let’s look at 70’s. What do we see there? We see that while price changes still remained below 1% year after year, BUT PRODUCTION INCREASED BY 1/3.
Let’s go back to your definition:
“People do not respond so much to price cuts and although they buy more, they do not buy a lot more.”
Ok, so while we don’t definitively have “price cuts”(though you might be able to claim it via the inflation rate of the 70’s, but I digress), we have a massive spike in consumption.
Was the price “inelastic” during the 70’s, I can quite comfortably say “no”, it was not.
So what’s the lesson here today? You can post formula’s, derivatives & the like, but without valid data/variables, they are as useless as tits on a bull(appropriate metaphor, no?)
You cited a guys opinion, who knows where his information comes from(let’s hope he wasn’t into MBS derivitives during 08′!), but even further, we can’t count on beef being permantly elastic or inelastic. (and my guess is that it’s been anything but inelastic the year, and will become less so in the years to come)
With the drought in the West, it’s going to get worse before it gets better. Best thing to do right now is buy a small freezer, find a butcher who’ll sell a half-beef and buy it.
Demand for beef is down, Americans can’t afford the prices and the doctors tell us it is unhealthy. YET – beef is at an all-time high and many cattlemen will tell you that they cannot compete with the South American imported beef. What gives?
With Leatherman now Senate President Pro Tem and McConnell and Harrell still in power, the great wealth transfer from the rest of the state continues to Florence and Charleston, where these three crooks reside.
Lemming-like voters continue reelecting them, so I expect no change in the state’s overall “poor-ness.”
“Stupid is as stupid does,” as Forrest Gump rightly notes.
What ballot is McConnell on?
McConnell’s not on any ballot. McConnell, Leatherman and Harrell have been political soul mates, controlling the legislature, for three decades.
McConnell’s newfound position as College of Charleston president — facilitated by threats to the college’s board by legislators (including legislative removal / ouster of trustee Dan Ravenel, who opposed McConnell) — proves that his power over the legislature continues unabated through regular contact with Leatherman and Harrell.
Just as he did as Secretary of State.
Three whores raping the state.
Yeah cause the top 1% is holding all the fucking wealth and the minimum wage has not kept up with inflation. States that have increased it have not seen any job losses due to it being raised. The politician’s are bought and paid for by the likes of the Koch brothers….stay poor vote for these idiots…there was alot more regulations in place that kept things at least fair now days its fuck it I will gouge the shit out out of everyone cause I can.
Damn! I still charging to same…
Actually, Sic, in the time frame you reference, there was substantial regulation of the stock market, utilities, and financial industry. Things didn’t really fall apart until everything was DE-regulated to allow big business and investors to increase profits.
Government subsidized Ethanol production with corn is driving up the cost of beef.
Long term drought, too.
Eat more ‘Chickin’
Quit eating it. When the demand drops, the price will drop. Eat those vegetables.
Who looks at the price of ground beef? Who cares? When the price of a decent bordeaux exceeds 30 bucks then we have an issue. If a steak costs me $10,00 more, that’s $500.00 annually. I can live with that.
I prefer a good grilled fish with the head intact. However, nothing can touch that great BM the morning following a nice NY Strip cooked medium rare.
In case you did not know, America is being taken out…sold out by her own…and this started when the killed JFK in broad daylight. With a little over 50% of registered voters actually voting in 2012, watch for legal Mexican voters to finish off what they started November 22, 1963.
hmmm……..yes…..continue…….
So, even a Galt-er at Economic Noise knows the minimum wage needs to be raised?
The only wealth redistribution going on is from the 99% to the one percent. Rolls Royce orders are way up this year!