I stumbled across this article, continuing the conversation on inflation.
http://finance.yahoo.com/news/Why-the-Federal-Reserve-Isnt-usnews-2186172338.html?x=0&sec=topStories&pos=3&asset=&ccode=
The final quote of the article poses an intriguing argument:
"When consumers pay more for food and energy products, they cut back on discretionary spending, like spending on furniture, clothing, and recreational activities, which pushes the prices of those goods down," - Stacey Schreft , former economist and vice president at the Kansas City Federal Reserve
However, this fails to address two other pieces of the puzzle. The more money consumers spend on Energy and Food, the less they have to spend on discretionary spending, regardless of price. While core inflation stays low, the overall state of our consumer based economy can be negatively impacted. Secondly, as commodity and raw materials prices continue to rise that puts additional upward pressure on discretionary goods. This pressure has the potential to offset any decreases in pricing from slowing demand.
There is obviously no simple answer to any of this, however it is certainly interesting to follow the debate, we will have to wait and see how it all plays out.
Tuesday, April 19, 2011
Monday, March 21, 2011
Even change starts small
We have all heard the saying, "Change is good" or as Sheryl Crow put it, "A change would do you good" however in reality people are typically resistant to change.
There are probably countless reasons for this fear of change, some good and others not. We tend to be excited about choices we make that lead to change, although often the outcome is not what we expect. On the other hand, when we are advised or forced to make changes we immediately dig in and resist, regardless of the impacts it may have.
In addition to humans' natural resistance to change there are institutional hurdles to significant change. If we look at the current "re-birth" of the electric vehicle we see these two factors at work. Aside from our love for cars and the rumble of a V8 (I'm guilty too) the infrastructure which supports our driving habits is deeply entrenched within our society. Because this infrastructure is so vast and convenient it creates a huge barrier of entry to any other mode of transportation. I am also aware that in this case, a sudden change is not possible, nor would it come without severe consequences.
So where does this leave us? It seems that we are in a period of gradual change to a more diversified auto market in terms of fuel sources. Although there are still multiple hurdles to decreasing our dependence on oil, the wheels (no pun intended) are in motion. Beginning with the Honda Insight and Toyota Prius over a decade ago we are finally seeing a meaningful shift in what powers our vehicles. There are a limited number of Natural Gas vehicles, a quickly growing fleet of Hybrids, and staring in 2011 the first mass produced Electric Vehicles have started to hit the market.
This change has not come easily and we have a long way to go, but it could be argued that we have crossed the tipping point. The first hybrid cars were met by much skepticism and even arguments that their environmental impact from "dust to dust" was worse than their gas powered counterparts. However, in the last few years we have seen more attention being given to the overall environmental impact of vehicles, from production to disposal. In addition to this the options for "alternative" fueled cars are no longer all small, futuristic looking tin cans. Because of what I have recently dubbed the "iPad" effect, once something becomes trendy or a company figures out how to effectively market a product, the explosion of invention that comes after is where the meaningful changes begin to happen.
It can certainly be argued that the above is merely companies taking advantage of consumers with marketing, and I am not advocating that these changes should be done solely to be "cool". However, if this is what is needed in order to start the push towards better technology and a more sustainable future then the means are far less important than the end. This "iPad" effect plays into our resistance to change as well, because once a product/idea is accepted by early adopters we realize two things: First, the perceived inconveniences or drawbacks of the product can be minimized by satisfied users. Second, the following incarnations of these products/ideas can address the shortfalls of the original and the snowball effect takes hold.
In the past few years alone these small changes are sweeping through major areas of our lives; cars, light bulbs, solar panels, packaging, etc. As our society becomes more aware of it's impact on the environment these small adjustments will continue to be refined and smooth our transition into a more efficient and sustainable future.
There are probably countless reasons for this fear of change, some good and others not. We tend to be excited about choices we make that lead to change, although often the outcome is not what we expect. On the other hand, when we are advised or forced to make changes we immediately dig in and resist, regardless of the impacts it may have.
In addition to humans' natural resistance to change there are institutional hurdles to significant change. If we look at the current "re-birth" of the electric vehicle we see these two factors at work. Aside from our love for cars and the rumble of a V8 (I'm guilty too) the infrastructure which supports our driving habits is deeply entrenched within our society. Because this infrastructure is so vast and convenient it creates a huge barrier of entry to any other mode of transportation. I am also aware that in this case, a sudden change is not possible, nor would it come without severe consequences.
So where does this leave us? It seems that we are in a period of gradual change to a more diversified auto market in terms of fuel sources. Although there are still multiple hurdles to decreasing our dependence on oil, the wheels (no pun intended) are in motion. Beginning with the Honda Insight and Toyota Prius over a decade ago we are finally seeing a meaningful shift in what powers our vehicles. There are a limited number of Natural Gas vehicles, a quickly growing fleet of Hybrids, and staring in 2011 the first mass produced Electric Vehicles have started to hit the market.
This change has not come easily and we have a long way to go, but it could be argued that we have crossed the tipping point. The first hybrid cars were met by much skepticism and even arguments that their environmental impact from "dust to dust" was worse than their gas powered counterparts. However, in the last few years we have seen more attention being given to the overall environmental impact of vehicles, from production to disposal. In addition to this the options for "alternative" fueled cars are no longer all small, futuristic looking tin cans. Because of what I have recently dubbed the "iPad" effect, once something becomes trendy or a company figures out how to effectively market a product, the explosion of invention that comes after is where the meaningful changes begin to happen.
It can certainly be argued that the above is merely companies taking advantage of consumers with marketing, and I am not advocating that these changes should be done solely to be "cool". However, if this is what is needed in order to start the push towards better technology and a more sustainable future then the means are far less important than the end. This "iPad" effect plays into our resistance to change as well, because once a product/idea is accepted by early adopters we realize two things: First, the perceived inconveniences or drawbacks of the product can be minimized by satisfied users. Second, the following incarnations of these products/ideas can address the shortfalls of the original and the snowball effect takes hold.
In the past few years alone these small changes are sweeping through major areas of our lives; cars, light bulbs, solar panels, packaging, etc. As our society becomes more aware of it's impact on the environment these small adjustments will continue to be refined and smooth our transition into a more efficient and sustainable future.
Friday, March 11, 2011
Inflation
As we emerge from the "Great Recession" there has been increasing debate about the issue of
inflation. Although our economy seems to be strengthening, and core inflation is at a healthy 1.6%* year over year from January 2010 there seems to be a missing piece to the puzzle.
I stumbled across this article on Yahoo Finance which highlights the disconnect between the Fed's claims that core inflation has been kept in check, and consumers who are feeling pinched by rising prices.
http://finance.yahoo.com/news/Dudley-signals-Fed-wont-rb-3386698662.html?x=0&sec=topStories&pos=3&asset=&ccode=
It is understandable that core inflation calculations weigh commodities (such as energy and food) less than certain discretionary goods and wages due to their sensitivity to market volatility. However, when commodities are speculated on or experience increased volatility from geo-political tension it would seem that the upward pressure on prices for necessities should be addressed.
Apparently I wasn't the only one to notice this as the following article was posted to Yahoo hours later:
http://finance.yahoo.com/news/iPad-price-remark-gets-Feds-rb-734103427.html?x=0&sec=topStories&pos=7&asset=&ccode=
For months now I have been speculating that inflation will become a major issue in the near future. When we consider food and energy alone, which according to www.visualeconomics.com are roughly 25% of the average consumers budget, it shows the impact that recent increases in gas prices (14% in the past month**) will have on the average consumer's disposable income. It can also be argued that the rising prices of essential goods will effect the middle and lower classes disproportionately as increases in these costs will drastically cut into their discretionary spending.
In my opinion, the Fed should have already begun slowly raising interest rates from their historic lows . Although this would cause some short term economic pain, it almost certainly would help us avoid a period of soaring inflation as we had in the 1980's. While I am not advocating sharp raises in interest rates, which may be unavoidable if core inflation skyrockets, being proactive in curbing future inflation will lead to a more stable long term recovery.
As a final thought, I do realize this may have a negative impact on the housing market and some small business lending (although credit is not easy to come by despite record low interest rates), but in the end some slight restraint now may help us avoid another financial crisis in the not too distant future.
As always, any feedback and discussing is welcomed...till next time
*http://www.bls.gov/cpi/
**http://fuelgaugereport.aaa.com/?redirectto=http://fuelgaugereport.opisnet.com/index.asp
inflation. Although our economy seems to be strengthening, and core inflation is at a healthy 1.6%* year over year from January 2010 there seems to be a missing piece to the puzzle.
I stumbled across this article on Yahoo Finance which highlights the disconnect between the Fed's claims that core inflation has been kept in check, and consumers who are feeling pinched by rising prices.
http://finance.yahoo.com/news/Dudley-signals-Fed-wont-rb-3386698662.html?x=0&sec=topStories&pos=3&asset=&ccode=
It is understandable that core inflation calculations weigh commodities (such as energy and food) less than certain discretionary goods and wages due to their sensitivity to market volatility. However, when commodities are speculated on or experience increased volatility from geo-political tension it would seem that the upward pressure on prices for necessities should be addressed.
Apparently I wasn't the only one to notice this as the following article was posted to Yahoo hours later:
http://finance.yahoo.com/news/iPad-price-remark-gets-Feds-rb-734103427.html?x=0&sec=topStories&pos=7&asset=&ccode=
For months now I have been speculating that inflation will become a major issue in the near future. When we consider food and energy alone, which according to www.visualeconomics.com are roughly 25% of the average consumers budget, it shows the impact that recent increases in gas prices (14% in the past month**) will have on the average consumer's disposable income. It can also be argued that the rising prices of essential goods will effect the middle and lower classes disproportionately as increases in these costs will drastically cut into their discretionary spending.
In my opinion, the Fed should have already begun slowly raising interest rates from their historic lows . Although this would cause some short term economic pain, it almost certainly would help us avoid a period of soaring inflation as we had in the 1980's. While I am not advocating sharp raises in interest rates, which may be unavoidable if core inflation skyrockets, being proactive in curbing future inflation will lead to a more stable long term recovery.
As a final thought, I do realize this may have a negative impact on the housing market and some small business lending (although credit is not easy to come by despite record low interest rates), but in the end some slight restraint now may help us avoid another financial crisis in the not too distant future.
As always, any feedback and discussing is welcomed...till next time
*http://www.bls.gov/cpi/
**http://fuelgaugereport.aaa.com/?redirectto=http://fuelgaugereport.opisnet.com/index.asp
Thursday, March 10, 2011
First!
In recent months I have decided to start a blog predominantly focused on "Green" living and its ever-increasing economic viability. Although I intend the overriding theme of sustainability and its growing impact on economic decisions to drive my posts, anything is fair game.
My intention for this blog is to create a venue in which ideas are shared and reflected on. Instead of writing answers (which I am sure will happen from time to time) my ambition is to raise questions and begin dialogues which provide insight into future prosperity. Although many of the views expressed will be my own, I will endeavor to explore all sides of issues and welcome healthy, thoughtful debate.
The topics of United States Middle East into consideration it is another firm reminder of the gravity of these issues. I look forward to using these ongoing affairs as a jump-off point for improving the sustainability and quality of our lives...
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