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Friday, April 1, 2011

April 1st, yet the economic calendar is November

It may be the beginnings of springtime for the northern half of the globe (for nations like Australia and South Africa, it is the beginnings of their autumn), but on the economic calendar, the month is just turning 'November', meaning is it a last chance to hunker down before the figurative 'snows' and 'chill' of an economic 'Winter' come upon us...

We've seen the prices of gas per gallon rise by the day based not only on political turbulence and unrest in most of the oil-producing Middle East & North African nations, but also based on market speculation on commodities which drive up the costs for everything from petrol to cotton to oranges.

Today it is over $106/barrel.

**  As stated in a previous posting, a barrel of oil is 42 gallons. But since cars don't run on oil, it has to be synthesized into gasoline, and one barrel is actually equivalent to 119 gallons of gas.  This comes to 89cents/gallon based on the 3/31 figure of $106/barrel..  but when you add gas company profit, distribution costs and the 45-75cents in taxes the federal, state and local governments place per gallon,  you're now paying $3.70/gal and Up

Prices of everyday items from food to clothing is rising too...

From USA Today...  "Today, the CEO of Wal-Mart gave this warning- "(Inflation) is going to be serious... We're seeing cost increases starting to come through at a pretty rapid rate."  Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.  "Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory." "

There's also concern from the Fed that they may have to raise interest rates by year's end to match the increase in inflation, which is quite ironic since the Fed has purposely created inflation as a means of starting this economy up.  

From CNBC- "The president of the Minneapolis Federal Reserve Bank said Thursday the Fed may need to increase short-term interest rates by year's end if underlying inflation rises as he anticipates... Narayana Kocherlakota said he expected "a big upward movement" in core inflation—inflation excluding volatile food and energy prices—from about 0.8% late last year to about 1.3% by year-end. As a result, he said, it's "certainly possible" the Fed's target for short-term interest rates, now near zero, would be lifted by more than half a percentage point late this year. "

So you have the double whammy-  prices of everything rising, and the interest rates on loans which allow people to afford to live (credit cards, auto loans, student loans, mortgages, etc..) rising as well.

Oh yes-- then you have the 'pettiness' factor of business

From CNBC-  "J.P. Morgan Chase and other banks are trying to recoup approximately $30 billion a year in lost overdraft fee income by testing $5 ATM fees.  These banks have historically been reliant on overdraft fees so they're "coming up with new ways to make up the difference. Higher ATM fees and other rising costs penalize small depositors."

One can not control external forces but can control their own world- their own personal expenditures.  If you haven't already, begin setting up a budget which allows you to live as comfortably as you can while still being able to put $$ away each month in a bank or even simply a sock drawer.  

Be mentally and emotionally prepared for prices of everything to rise all at once by summertime to spare yourself the 'shell shock' and as much as possible, adjust your budget accordingly.  

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