bostonbubble.com

balor123 · Joined: 08 Mar 2008 Posts: 1204

I think shadow stats pegs it around 6-7% on average so not as large as you suggest. Also, CPI has been in the 1-3% range lately. As to other bonds, investors don't buy bonds based on inflation but just to get whatever yield they can. As the Fed drives treasuries down, fixed income money is driven towards other types of bonds. The curve is relatively steep but I could see the same effect impacting shorter term treasuries. China, for example, won't touch the longer term ones anymore. Think of it like housing. As the prices drop on lower income properties people on the border start to consider them over the middle income ones because you can only justify so much of a premium for a nicer house. As to incomes, they are basically flat because by convention we don't drop income in this country and there's surplus in the market. I think that's just coincidence.

GenXer · Joined: 20 Feb 2009 Posts: 703

Basically, inflation is there, always. My argument was that because prices appeared to have increased, inflation also must have increased(not appeared magically), relative to last year (when government said it was 0).

I cheated a bit. I do monitor the performance of many commodities, and almost all of the biggest ones have been going up. We can't really observe with any statistical significance (unless we do a very thorough study) how prices behave, but knowning that commodities prices are up significantly is the first clue (together with anectodal evidence at the stores) that prices are going up.

Government's policy is to have inflation - it has been for a long time. So why are we surprised that we have inflation every single year?

This is one website that has lots of good info
http://www.shadowstats.com/

admin · Posted: Mon Jan 31, 2011 2:22 pm GMT Post subject:

GenXer · Joined: 20 Feb 2009 Posts: 703

admin · Posted: Mon Jan 31, 2011 4:12 pm GMT Post subject:

GenXer · Joined: 20 Feb 2009 Posts: 703

One thing that 'change' in prices misses is the bias, or the starting point. It appears according to the shadow stats website the CPI is biased relative to the official CPI. Whether it is 3.5% or any other number, that's the issue here, not the actual change. Unfortunately we don't know what that number really is, but I think that what matters is how individual spending corresponds to the weights used to compute the CPI. You can argue that some people will see less of it and some - more, depending on what the majority of their spending is. Its beside the point that CPI is a volatile (possibly random) process, and that computing the average of it may not be an effective way of capturing the real effect of real-time changes in prices, some of which we feel very quickly (for example, some food and gas prices respond almost instantaneously), especially if we have to purchase these commodities in large quantities, which is true for businesses.

Renting in Mass · Posted: Mon Jan 31, 2011 9:05 pm GMT Post subject:

Here's some more fuel for the inflation thread that wouldn't die Wink

Krugman says "Core inflation is low and falling, however you measure it."

Lots of pretty charts. They're based on BLS data, so those who don't believe in data gathered by the government should avert their eyes.

GenXer · Joined: 20 Feb 2009 Posts: 703

Hey, MA is always one of the top states in the country in everything, this being no exception:

http://www.thedailybeast.com/blogs-and-stories/2011-01-26/states-most-likely-to-go-bankrupt/

Next several years would be fun. Most of us will survive if inflation is higher than the numbers show. If the government won't bail out the states (which it seems more than likely given that the current bailout failed miserably), it is only a matter of time until states like MA go bankrupt (starting with individual towns). No telling where this one is going to end.

Renting in Mass · Posted: Tue Feb 08, 2011 7:38 pm GMT Post subject:

Here's the Atlanta Fed president talking about exactly what we've been talking about:

GenXer · Joined: 20 Feb 2009 Posts: 703

Nobody believes Fed can control much anymore, thankfully. Bottom line - follow the money. If they had to raise interest rates very fast, it may be possible that our government could default on the debt payments. I think it is that simple. It is not in their interest to raise rates at all. So they will stick to their story as long as possible. I think they don't mind this recession, and they only want to prop things up to avoid a depression, but as far as the 10% unemployment, it appears as if they don't mind this one bit, as long as rates don't have to be raised. So, whatever the reality, they say the glass is half full, and they'll be right (though only in part). Saying that inflation is only real when everything (vs just about everything excluding housing, such as most commodities and food) is inflated is silly. But they can say it as long as we are not obviously in the 10% range. Have you seen how fast inflation picks up? Inflation is only 'real' when everybody can feel it. Before that the numbers are buried in a lot of noise that nobody knows how to analyze correctly (because it is mostly noise).

GenXer · Joined: 20 Feb 2009 Posts: 703

This is hilarious, if it wasn't so sad:

http://finance.yahoo.com/news/Fed-officials-see-high-bar-rb-3161789324.html

So our printing of money creates instability overseas. What else is new? Markets are interconnected, and by creating waves here, we are creating tsunamis elsewhere. Very interesting. These tsunamis will come back right at us, I'm afraid.

Renting in Mass · Posted: Wed Feb 09, 2011 3:57 pm GMT Post subject:

GenXer · Joined: 20 Feb 2009 Posts: 703

Nothing in economics is linear. Linear definitions are simply wrong. Much in economics is simply wrong, but it is used because it is simple (though not necessarily correct). Thus, random fluctuations in commodity prices (due to very real catalysts) can lead to different effect on different items. Some may actually get cheaper for one reason or the other - a linear definition can NOT capture the complexity of a highly nonlinear system. Thus, I'm laughing every time they open their mouth. A simple thought experiment can easily show how wrong this 'correct' definition is. It is convenient because it allows them not to act when there is inflation until inflation gets to be huge. And of course, there is the arrogance of the people who think they know more than everybody else (they don't), and who get upset when they are criticized (rightly) for doing things that don't make sense (except if your world is defined to be linear and simple vs. what it is - nonlinear and highly complex).

Renting in Mass · Posted: Wed Feb 09, 2011 7:50 pm GMT Post subject:

Do you accept that the word "inflation" means a general increase in prices?

GenXer · Joined: 20 Feb 2009 Posts: 703

Right now we have 'inflation' that is officially a percent or two, yet not all prices are increasing at the same time. I'm sure we can find something that has not increased. This is according to the government, by the way. He's saying that right now not ALL prices have increased, which is true. Yet we have inflation. So it appears that a 'general' increase in prices is not a good definition for inflation.