Bad news on the price of tools. (morphing into OT)

[Christopher Pine]

Mostly a lurker. I just laugh at the "I told you so" crowd.Clifford

Very well said ! I like in the movie depicting the appolo 13 events. The part where the nasa folks were prepearing for the worst and the one gentleman said "I believe this will be our finest hour!" I think if we all get out of the stinking thinking mode and the news media just waiting for the next bad thing to happen so they can have a teaser during Everybody Loves Raymond to get you to watch their pitiful news cast. We are America and we are going to overcome a heck of a lot more than Gasoline prices in the future! We have so much to do... so much human suffereing to overcome in this world and we sit here gripeing about our woodowrking machine costing a few bucks more!
All due respect I don't like it anymore than any of you, but it is hardly anything worth losing sleep over!
Peace!

Chris

[Tim Marks]

Our ~4% inflation doesn't really compare to truly bad years, like the double digits of the 70s.

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

Housing has tripled in price in most areas in the last 8 years, and gasoline is 3x higher. Energy costs (fuel oil, natural gas, electricity) for home heating has at least tripled in the same time period. Food price are probably up 20% (and will rise higher when gas prices start feeding back into the prices). Those things represent a large portion of most peoples spending, so I think that the average rate of inflation as felt by my wallet is probably in the double digits.

[Peter Quadarella]

I'll agree that it feels worse than 4%, but I think some of that you mention depends greatly on location. For example, my utility bills have decreased due to the use of CF bulbs everywhere and I use electricity for heating; the rising gas and oil prices did not affect me in that way in my location.

My housing is perhaps 50% more expensive than it was that long ago. Some people in my neighborhood will claim that is nuts, but that is because everyone around here seems to insist on a brand new house, and no one realizes that the 30 year old ones are a great bargain. And housing costs are going down right now .

Food prices are more expensive when I go to the local super jazzy grocery store that does everything but wipe my butt for me, but when I go to Costco or the local stand prices are actually cheaper than they used to be, since those choices were not available to me back then.

Yes, gasoline prices have gone nuts. But nearly everything else is cheaper it seems. Cars are less expensive if you adjust for inflation, electronics are just cheaper period. Computers, televisions, and yes, power woodworking tools are better and cheaper.

Now, if you drive a lot, and just had to buy that brand new house in the last 5 years, and have little disposable income, so most of it goes to food, which you only buy at the most convenient grocery store, yes it's going to seem a lot worse than the Fed claims. And yes, I realize this scenario describes many Americans.

[Ken Fitzgerald]

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

Housing has tripled in price in most areas in the last 8 years, and gasoline is 3x higher. Energy costs (fuel oil, natural gas, electricity) for home heating has at least tripled in the same time period. Food price are probably up 20% (and will rise higher when gas prices start feeding back into the prices). Those things represent a large portion of most peoples spending, so I think that the average rate of inflation as felt by my wallet is probably in the double digits.

Neither housing or natural gas or electricity have tripled in my area in the last 8 years. Food prices up?...Yup...energy, fertilizers and seed are all up so food prices are going up.

We'll recover but it's going to take time and a little suffering in the process.

[Bruce Benjamin]

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

Housing has tripled in price in most areas in the last 8 years, and gasoline is 3x higher. Energy costs (fuel oil, natural gas, electricity) for home heating has at least tripled in the same time period. Food price are probably up 20% (and will rise higher when gas prices start feeding back into the prices). Those things represent a large portion of most peoples spending, so I think that the average rate of inflation as felt by my wallet is probably in the double digits.

I'm not sure where you live or where you get your figures but here in Northern California nothing has tripled in price as you state. Not even close. We have regular gas from around $4.15 to $4.60 a gallon but 8 years ago gas was about half that price.

I doubt that housing prices are 3x higher now than 8 years ago anywhere in the U.S. My house is about 50% higher now, not 300% higher. 16 years ago I lived in a 2 bedroom apartment and paid $650 a month. A friend of mine now rents the exact same apartment and pays $850 a month and these apartments are considered to be overpriced compared to similar apts. right next door going for about $750 a month. Are you seriously saying that there are places in the U.S. where apts. that were $650 a month in 2000 are now renting for almost $2000 a month? I doubt that.

Food prices are up around here but I don't know that they're up 20%. They might be but absolutely not 300% higher. Go to any restaurant and look at the menu prices. They aren't anywhere near 3x the price they were 8 years ago.

I don't remember what my natural gas bill was then but my electrical bill is about the same. A cord of firewood is a little higher than it was 8 years ago. A cord of oak is around $250 delivered and stacked and back then I think the same thing was a little under $200.

Again, I don't know where you got your info but I don't think it's anywhere near being accurate. This sounds like something from Moveon.org. Somebody on this forum has a signature line that says something to the effect that a man has a right to his own opinions but not his own facts. Your facts are way off.

Bruce

[Steve Schoene]

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

All in all, inflation has remained relatively well in check. It's not accelerating very dramatically at all. Inflation is a rise in average prices. Increases in prices of gasoline may, or may not contribute to inflation. Even if fuel is a component of cost for a great many products, that does not mean that the prices for those products will rise. Sometimes, costs rise, prices remain constant, and profits and/or wages or rents fall in reaction to the input cost increases. Markets don't guarantee that costs of production can be passed on to buyers. Eventually, that must be true, but the adjustment mechanism may well be through the failure of producers or productivity enhancement, etc.

Just a couple of points: The fed has nothing to do with the price indices. The consumer price index and the producer price index are generated by the Bureau of Labor Statistics, an agency of the Labor Department. The fed, or Federal Reserve Board, is an independent agency. The proportiona are determined by rather extensive surveys. It is true that the proportions are averages, and may not reflect the buying habits of any specific person. And, over time buying habits change but the proportions are readjusted only periodically. But, in general this means that the index may overstate the true welfare effects of the price changes as people tend, at least on average, to switch their person spending toward goods which have become bargains, and to economise by spending less on products which have become more expensive. All indices, by their very nature, must have some biases.

If you want more flexible proportions in a price index, some people prefer to use the Implicit Price Deflator for GDP. This has a difference set of index number biases. The Implicit Price Deflator is published by the Bureau of Economic Analysis, and agency of the Commerce Department.

[Bruce Benjamin]

[quote=Steve Schoene;864312]

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

All in all, inflation has remained relatively well in check. It's not accelerating very dramatically at all. Inflation is a rise in average prices. Increases in prices of gasoline may, or may not contribute to inflation. Even if fuel is a component of cost for a great many products, that does not mean that the prices for those products will rise. Sometimes, costs rise, prices remain constant, and profits and/or wages or rents fall in reaction to the input cost increases. Markets don't guarantee that costs of production can be passed on to buyers. Eventually, that must be true, but the adjustment mechanism may well be through the failure of producers or productivity enhancement, etc.

Just a couple of points: The fed has nothing to do with the price indices. The consumer price index and the producer price index are generated by the Bureau of Labor Statistics, an agency of the Labor Department. The fed, or Federal Reserve Board, is an independent agency. The proportiona are determined by rather extensive surveys. It is true that the proportions are averages, and may not reflect the buying habits of any specific person. And, over time buying habits change but the proportions are readjusted only periodically. But, in general this means that the index may overstate the true welfare effects of the price changes as people tend, at least on average, to switch their person spending toward goods which have become bargains, and to economise by spending less on products which have become more expensive. All indices, by their very nature, must have some biases.

If you want more flexible proportions in a price index, some people prefer to use the Implicit Price Deflator for GDP. This has a difference set of index number biases. The Implicit Price Deflator is published by the Bureau of Economic Analysis, and agency of the Commerce Department.

My point exactly! Errr...I think...

Bruce

[Greg Cole]

Our ~4% inflation

Not including fuel, food and other basic necessities. The fabricated number for inflation is all but useless. Used to keep cost of living raises in the toilet.

I deal with all Euro manufacturers at the day job (ok, one Australian company too). In wake of the lenghty slide of the USD into the abyss, we have started either fabricating in the US for some of our suppliers. Their buying power here now is formidable, literally since the inception of the Euro, they are kicking our posterior. Trading all but on par with the AUD & CDN is bad enough, but the Euro is ridic.
I am having 40' containers of "stuff" (stuff= machined steel items for industrial food processing machinery) made here and shipped to Europe and it's still a HUGE benefit to said machine manufacturer. It's at least 25% cheaper for them per container of "stuff". Too bad as a nation in general we have NO ability to manufacture & export.

Greg

[Peter Quadarella]

Re: the 4% inflation comment - several of the posts above addressed this nicely.

Re: the comments about the USD and exporting - I don't follow that argument. The decreasing USD is a huge benefit to us when discussing exports. They make many of our manufactured goods much more attractive due to the relatively lower cost, and therefore we generate more sales. I don't understand where the problem is with more jobs being generated locally, more money coming in from other countries, and more customs fees being generated because of a lowered USD and more exports.

Doing anything in Europe has been more expensive for a while, mostly due to their higher taxes and stricter controls on employers, the USD just helps a little there. I wouldn't worry about Europe much though, look to the east for our real competitors.

[Steve Schoene]

The approx 4% number includes food and fuel. Excluding these items places the inflation rate in the 2.x percent range.

[Chris Padilla]

Our ~4% inflation doesn't really compare to truly bad years, like the double digits of the 70s. I'm sure people really thought the end was nigh back then.

Not that things are all rosy, but we must try to keep perspective. Sometimes this stuff can be self-fulfilling.

Do you really believe it is only 4% inflation? I think it is WAY understated:

http://finance.yahoo.com/tech-ticker/article/23878/Bill-Gross-Lies-Damn-Lies-and-Government-Inflation-Data?tickers=PTTAX,ING,%5ESPX,SPY,TLT

[Peter Quadarella]

I just didn't want to rehash my thoughts, already posted at the top of page 3. I think the inflation numbers are difficult to pin down. Maybe they are not 4%, but where will you find a group of people to agree on which items count towards inflation?

How much disposable income one has is a big impact on how you view inflation currently. As I mentioned, for those who spent all their money on a big house in the last 5 years, and don't have much disposable income, the higher cost of food and gas makes up such a huge percentage of their money that the inflation rate seems higher.

For someone who has a relatively low mortgage rate, and pays for their gas with only a small fraction of their money, they have a lot of disposable income. This money can be spent getting deals at Costco by buying in bulk. Also, a lot of their money will be spent on non-essentials, such as electronics, clothes, furniture, etc. Over the last 10 years, comparable items similar to these have in many cases gone down drastically.

So, I think it depends largely on one's own point of view. As I mentioned, I agree that much of America is in the first category.

That's my take anyway. Steve provided an explanation of the whys around inflation calculation above, which also provides insight.

[Chris Padilla]

America is the largest economy. But our economic inertia alone does not guarantee a perpetual dominance in the international market place.

Even the (mighty) Roman Empire eventuall collapsed....

Oh, and try BICYCLING!! Wonderful exercise, low emissions, and you'll feel like a kid again!

[david scheidt]

I strongly doubt that those price increases are really coming soon. The woodworking tool industry is in a sharp slow down. Black and Decker's consumer power tools and accessories, sales were down 26% in the first quarter of 2008 compared to the same period in 2007, though a good part of that is an artifact of moving out of power washers, and some other effects. (Black & Decker makes Delta, DeWalt, and Porter Cable, among other brands.) Industrial tools were also down in a double digit range.

Nobody is going to sell tools (or anything else, for that matter) for less than the marginal cost of making them. Since the cost of cast iron, steel, copper, and transport are way up, that will be reflected in the cost of tools. Sometimes you lose less money by not selling anything than you do by selling more.

[Steve Schoene]

Nobody is going to sell tools (or anything else, for that matter) for less than the marginal cost of making them. Since the cost of cast iron, steel, copper, and transport are way up, that will be reflected in the cost of tools. Sometimes you lose less money by not selling anything than you do by selling more.

But remember that changing the schedule of marginal costs (the short term supply curve) only determines the direction of the change of price if at the same time there is no change in the demand for the product.Even though the supply curve (or marginal cost curve) is shifting left with the rise of the input prices you mention, if demand is also shifting left prices need not rise at all. It is strictly an empirical question as to which effect will dominate. But, since some of the more dramatic price increases in food and fuel are also greater necessities so that the income devoted to buying them goes up when the price rises (price inelastic demand). Since woodworking tools are likely both price and income elastic, it's easy for me to imagine demand falling because of the income effects and with price elastic demand as well, I can easily imagine large quantity decreases with only modest price changes.

Sorry, Dave used the term "marginal cost" and I'm afraid I was stimulated to a Pavlovian response.