Price hike in UK

[Ger Griffin]

I just found out Sony have increased their prices of video related equipment in U.K. by 13% since Dec01 2008.

Canon, panny and the others are due to do the same next month.

[Wesley Cardone]

In the next two or three months we should be seeing increasing numbers of manufacturers increasing USD prices of everything from fisheye leneses to blank DVDs. The massive spending government has started and has announced plans for can only be facilitated by printing money thereby devaluing the dollar.

To make matters worse, I have read reports that the Chineese are going to stop buying T-bills (funding government debt). This will make matters worse. In theory interest rates will therefore rise as government raises the interest it is willing to pay on T-bills it sells.

It is merely a matter of when these new US dollars go into circulation to determine when prices will increase. This has never been done before with a global reserve currency so it is uncharted territory. We know that there will be some lead time. With non-reserve currencies historically the lead time has been a few months.

[Paul Miley]

From what I heard recently on a current affairs programme, China's economy currently has to grow as about 7% to sustain itself. It is not, it is 'underperforming' at about 5% and I understand they are in trouble too.

Across the world so many manufacturers are slashing prices from cars to housing stock in order to survive. So if companies that produce mass market 'luxury' items - like camcorders start hiking their prices upwards, I wonder how they in turn will survive (I know the broadcast wing is different in many ways but it is probably a much smaller market).

The global downturn is here for quite a while according to economists, and there is a lot of stock going to be left on factory shelves.

Regards

Paul

UK

[David Heath]

Originally Posted by Paul Miley

Across the world so many manufacturers are slashing prices from cars to housing stock in order to survive. So if companies that produce mass market 'luxury' items - like camcorders start hiking their prices upwards, I wonder how they in turn will survive .......

I think a lot has to do with exchange rates - a manufacturer may well cut their prices *in their own currency*, but the effect be overshadowed by currency rate variations. And the pound has done very badly recently.

[Wesley Cardone]

There are many factors to consider but what I was looking at was a narrow slice of the pie. When a currency is devalued it takes more of it to buy things. This is the theoretical definition of inflation. What the Obama administration is proposing is a massive devaluation of the USD. Some manufacturers may have inventory that they may promote with lower prices but their costs increase under devaluation and they must ultimately pass this along to the consumer.

My guess is that we will see a revived economy for a few months and then a return to a deeper sink-hole but the timing is truly guestimation. Except for the fact that this is the devaluation of a global reserve currency, this is uncharted territory.

[Wesley Cardone]

ADDENDUM:

I saw on the news that Sony has announced massive losses for the last quarter. Maybe the price increase was driven by those losses.

-Wes