Deflation Hits Coca Cola, Milk & Turkeys

Deflation continues to spread and accelerate. As a result, the price spiral continues its way down across the country, leading to tough negotiations between producers and wholesalers, one more example is Costco’s decision to remove Coca Cola from its stores:

Costco says it is no longer carrying Coca-Cola products in its stores nationwide due to a pricing dispute with the beverage maker.

The Issaquah, Wash.-based wholesale club operator would not discuss the matter further. But a Costco executive confirmed Monday that the company is no longer carrying products from the world’s largest soft drink maker.

Atlanta-based Coca-Cola Co. says it won’t comment on on-going negotiations but said Costco is an important customer that it is committed to working with “in a spirit of fairness.”

Costco Wholesale Corp. operates about 560 warehouses in the U.S. and abroad.

What’s bad news for Coca Cola is good news for families, as Thanksgiving Dinner Costs Less to Make This Year:

Families can anticipate the biggest decline in the cost of preparing Thanksgiving dinner since 2000, according to the American Farm Bureau Federation.

The CHART OF THE DAY shows the results of the federation’s annual price survey of so-called classic menu items, including turkey and all the trimmings. The U.S. consumer price index is also displayed for comparison.

This year’s survey, released yesterday, put the cost of feeding 10 people at $42.91. The grocery bill fell 3.8 percent, the steepest reduction since its 4.3 percent drop at the start of this decade. The slump was also the first since 2004.

“Consumers are benefiting at the grocery store from significantly lower energy prices” and the effects of a U.S. recession, Jim Sartwelle, an economist at the bureau, said in a statement. Crude oil, for example, has cost 44 percent less this year on average than it did in the same period of last year in New York trading.

Milk dropped the most out of a dozen items surveyed, according to the bureau. The cost of a gallon of whole milk fell 92 cents to $2.86. Turkey slid 44 cents to $18.65, based on the cost of a 16-pound bird. These two items accounted for most of the overall decline, amounting to $1.70.

More than 200 shoppers from 35 states participated in this year’s survey, according to the federation, which has tracked prices since 1986. The costs exclude any promotions or deals available at supermarkets.

It has to be pointed out again and again. Deflation, when left alone, is a GOOD thing. It helps people return to frugality, sanity, discipline, and long term prosperity. The biggest culprit are the ones who try to prevent it from happening, all they do is slow it down, turning what would be a quick correction to decades of agony, debt, unemployment, and fatigue. See Japan for a beautiful, recent, vivid, and of course completely ignored example of this process in action over decades.

The ones who don’t like deflation are the ones who benefited from years of lavish consumer spending, excessive and irresponsible borrowing, a lack of discipline, and a negligence of the necessity of savings and accumulation of capital goods as opposed to using up consumer goods inside an economic system.

You don’t need to be surprised when they give you all the nonsensical, boring, and long refuted stories about the viciousness of deflation, and the necessity to stop it before all prices drop to 0 and the sky falls down. When consumers are better able to afford goods to live their livelihood, then that’s a good thing. It’s really that simple. And meanwhile the entire structure of production returns to a health balance. This process, however, is a bit more complicated to understand and can all be read up on in The Business Cycle Revisited.

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