bostonbubble.com

[balor123]

MIT Billion Price Project

[admin]

That's very cool. The BPP actually looks rather close to the CPI, from the chart. I'm not sure why "Tyler Durden" said it is "surging far above" the CPI in the write-up, unless he was talking about the most recent numbers, which have no CPI equivalent yet. It would be nice if the chart went back further too, so we could see how well the two indexes have tracked over a longer period, but I assume The BPP is somewhat new and probably doesn't go back very far.

- admin

[admin]

By the way, I remember reading, I think in The Economist, that Google has a very similar price index of their own in the works too. I don't think they had made any results publicly available at the time, though.

- admin

[balor123]

Just the recent behavior I think

[GenXer]

Also, this may be anecdotal evidence as well, but I see a high number of layoffs continuing (relatively speaking) - in both defense and construction industries. High tech is hiring, and there are many jobs open because there are no suitable candidates. People are moving out of state to get a defense job (there are simply very few of these in MA right now, and will be less so in the future). Even reputable construction companies are laying people off (because nobody is building schools or other big buildings nearly as much as they used to), and many companies are one lost contract away from layoffs. This is just a start - watch for the government to start cutting. Teachers are already being laid off, in small numbers for now, but more are surely to come. The immediate effect of the government cuts would be most likely defense, with the municiipal cuts coming right behind. In the next 5 years, MA will be losing population and high paying jobs (not just any jobs), and once this trickles down, we should see more pressure on prices including in the so-called immune towns. Another effect to watch is boomers retiring and possibly downsizing. People started retiring again, at a much earlier age than one would think, in part because older workers are being laid off in larger numbers (because of higher pay and pension obligations). The state is still having big excesses in spending, so just like the prices in immune towns, that will have to come down when there is more pressure to have fiscal responsibility and accountability (though in MA that would most likely not go far).

[Renting in Mass]

Summary of a recent WSJ article about inflation.

[GenXer]

[balor123]

This is what has conservatives so worried: Is the Fed printing money?. The Fed thinks it can control those reserves.

[wherzmyhome]

Everyone is talking about inflation, but can someone tell us why we are seeing a sudden increase in the prices of basic commodities (oil, cotton, sugar etc.). If it is the growing middle class in India and China, then we should have seen the increases much earlier than the last three quarters. I feel this inflation is speculation by banks trying to recover their losses from the housing bust. same goes with interest rates. they receive money from the govt at 0.5% and lend it to us at 4.8%. what happens in between, they use the money to hedge commodities and invest in 401ks. i am worried the banks are playing mischief again......and this time they will take the 401ks with them into the trench.

[balor123]

CPI is clocking in at around 8% so far this year and PPI 12% so there is definitely inflation now. 4 Fed governors have already come out publicly saying that if it doesn't drop they won't support another round of QE.

Why now? First, we had inflation before the bust in 2007. I know at this point that feels like forever ago but the rise in commodity prices is a long term trend. Second, the monetary base has increased substantially and the US financial position degraded significantly, reducing the strength of the dollar. As alluded above, the Fed thinks that they can restrain banks but it remains to be seen. Third, peak oil is becoming more popular and unrest is increasing in a number of places, reducing the supply.

[balor123]

I should also add that there is a great deal of speculation due to low interest rates. If rates go up, then we will likely see some amount of correction. However, the long term trends remain so I expect we'll see 2 steps forward and 1 step backward between bull and bear markets.

[GenXer]

We are seeing inflation in part because the governments want it. This is the premise of the Fed - inflation is good for the government. They have a lot of theory as to why, but less and less people buy it. Right now, think about it this way. If you had tons of money from your profits, and interest rates were 0, what would you do?

Right! You would buy real estate for your business (i.e. build a new company building), or you would buy commodities to insure yourself from future high inflation (that some are considering to be a real threat). Then there are financial institutions which place bets on all types of instruments that invest in commodities. Everybody is doing it. This may be a bubble that bursts down the road, but in the meanwhile, we got inflation like crazy.

There is no one reason why. Things happen because many players all of a sudden decided to act today. Interactions between players are pretty strong, so we have prices rising in unison. This always happens (ie. when stock market goes up it is for the same reason), so no surprise. What is a surprise that it is a surprise at all! When there is nowhere to park the money, businesses and investors want to park it in something that is perceived to have real value (commodities), despite the risk and volatility (remember $20 oil, then $150 oil and now $115 oil, and possibly $50 oil again in the future? Who knows?)