Deflation...

Inflation is the increase in the supply of money and credit. Rising prices are a symptom of inflation, along with the malinvestment it creates as rates are artificially low and distort the true situation of low savings.

And as far as measuring the one effect of inflation--rising prices--the Bureau of Lying STATISTicians has massaged and then some the formula with hedonic BS. If it were the old fashioned way it'd be way more close to 10%/yr probably (these things should not be aggregated into one stat though because inflation's effects are heterogeneous--not everything goes up at the same time; some sectors more than others, like housing.)

If there is an excellent crop year and prices 'only' rise by 1% but in a true free market of sound money (precious metals) price would have FALLEN by say 5%, then the accountant-type would say, 'see there's not much price rise', but factoring in what would have/should have been, that is a big difference. The Keynesians try to get people to fear deflation as though it were some bogeyman; falling prices reflect the gains from productivity that people reap, as real wages go up. Look at the pricing of Model Ts going down in the early 20th century. This was done shrewdly, too, by the way.

The inflation and artificially low rates lead entrepreneurs to think there is a solid stock of savings, when in reality this isn't real savings but just fiat out of thin air. Real savings is foregone consumption; actual resources liberated for investment. What happens is the malinvestments occur as people undertake capital intensive projects that aren't warranted due to a lack of supply/purchasing power, and then they eventually realize this and have to liquidate and it is a painful transition. Capital is not homogeneous; it takes awhile to repair balance sheets/deleverage, etc., but this is actually a healthy mkt response to restore integrity to markets and reward savers/people of thrift.

Foreigners won't be importing all the inflation forever. They are drowning in it. And there are tons of shenanigans in the paper gold markets, from huge flash crashes at certain times on Globex to the musical chairs game of rehypothecating leased out gold between central and commercial banks.
 
Quote from StarDust9182:

By your comment above, failure must also be permission-based then. Who precisely gives the permission to be successful? I am not sure they are doing such a good job of running the economy these days. Do they also give permissions for inflation and deflation as well then?

The "they" who planted a flag and the "they" who believe it is magic are either two different entities or have multiple personality disorder. Did another "they" give you permission to spill the beans so to speak?

I agree with you that watching too much Oprah can also have deleterious effects. Did she have to give up her soul or something for the billion dollars? I think she is giving some of the money back these days. I think Dr. Phil is getting the permission these days.

Several months ago, a poster whom I admire said that he had noticed that every serious thread on economics gets derailed somehow. Since I have read that the military admits to having people posting (I read that companies, used to "correct" wikipedia as well) better quality information, I no longer think that comment is so radical.
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I would not worry about it too much. Unless you are targeted things are as they are. I was targeted. I took most of the heat. We are on the other side of that hill, my friend.
 
Quote from Fractals 'R Us:

The money supply might be increasing but the velocity is falling. Money is parked in banks backstopping their toxic assets. If the economy heated up then the banks would be lending but is that going to happen under the Left's policies and their crony capitalism?
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It is interesting from a money supply point of view:

money parked in banks.
money required for in-transit promise deliveries.
money used for other long term purposes.

It turns out. Cash required for in-transit purposes is smaller than the cash required out of fear. I would have thought it larger than the actual amount. However, significant.
 
It strikes me that the US could go through a period of deflation. Whether or not that’s entirely a bad thing remains to be seen I suppose. I know it’s anecdotal in a way, but retailers reported that they needed to heavily discount products to get consumers over Christmas. The average consumer just doesn’t have the money to keep companies reeling in record profits.
 
ShadowStats actually does it the old-fashioned way to gauge the effect of inflation that is rising prices. If one wants to gauge what prices are doing, take an index of 10 or 20 or whatever commodities like meats and and corn and oil (as well as cost of healthcare procedures and other costs of living things) over different timeframes and see what they've done over the time period; virtually across the board, all rising, and by big time factors. Yes there are supply/demand idiosyncrasies to all commodities that affect their prices, but they are priced in Federal Reserve Notes whose supply is becoming ever more abundant.

My understanding of hyperinflations from history is that when the inevitable--and necessary--credit crunch occurs after inflationary monetary policy had spurred the unwarranted undertakings and consumption financed by debt, and there is deleveraging and liquidating, central banks and governments respond by turning the printers into overdrive, and people renounce the currency altogether and avoid it like the plague.
 
Quote from FreeMktFisherMN:

ShadowStats actually does it the old-fashioned way to gauge the effect of inflation that is rising prices. If one wants to gauge what prices are doing, take an index of 10 or 20 or whatever commodities like meats and and corn and oil (as well as cost of healthcare procedures and other costs of living things) over different timeframes and see what they've done over the time period; virtually across the board, all rising, and by big time factors. Yes there are supply/demand idiosyncrasies to all commodities that affect their prices, but they are priced in Federal Reserve Notes whose supply is becoming ever more abundant.

My understanding of hyperinflations from history is that when the inevitable--and necessary--credit crunch occurs after inflationary monetary policy had spurred the unwarranted undertakings and consumption financed by debt, and there is deleveraging and liquidating, central banks and governments respond by turning the printers into overdrive, and people renounce the currency altogether and avoid it like the plague.
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I'm looking at shadowstats inflation charts and it's apparent that the article's authors are using bs govt statistics to justify their premise. The way the govt subtracts out inflation seems to allow them to produce whatever statistics they want... I'm sure that the Fed Reserve bankers don't really rely on stats from the US Govt! We seem to be having mild but falling inflation. It will get interesting if shadowstats' charts enter deflation territory.
 
There already is massive inflation; just look at the Fed's balance sheet, let alone the Japanese and the ECB and UK's. The inflation is being exported abroad by countries who instead of consuming their own productivity continue to play the cheap currency for exports game and take worthless fiat for their goods and services. And it is in the stock market and bonds. Huge bubbles.

I don't care if the EURUSD rate stays relatively stable because that is a ratio of fiat currencies; price either of them in things one needs to buy on a consistent basis, and the dilution is apparent. On the other hand, ratios like gold/oil stay relatively constant because gold is sound money, and preserves and enhances wealth. It is taking massive shenanigans just to subdue the gold price to down here even, and it's still way up from where it was a decade ago.

If there weren't all the inflation the banks would have failed and capitalism would have liquidated all the malinvestments and lousy bets and there would be integrity; would have been painful, yes, but at least the economy would be on stabler footing. Instead they are just trying to reflate the bubble and the underlying problems of productivity declines and skyrocketing debt are just being papered over. There is tons of inertia with the USD being the reserve currency and nobody on any gold standard right now as far as currencies around the globe, but this won't go on forever. The Chinese accumulate assets and save. They do have massive malinvestments a la the ghost cities--central planning always fails--but they save at a higher rate and have foregone consumption and have the ability to turn the tables on the U.S. if they increase economic freedom for their people and stop pegging rates, subsidizing companies, etc.
 
Quote from FreeMktFisherMN:

There already is massive inflation; just look at the Fed's balance sheet, let alone the Japanese and the ECB and UK's. The inflation is being exported abroad by countries who instead of consuming their own productivity continue to play the cheap currency for exports game and take worthless fiat for their goods and services. And it is in the stock market and bonds. Huge bubbles.

I don't care if the EURUSD rate stays relatively stable because that is a ratio of fiat currencies; price either of them in things one needs to buy on a consistent basis, and the dilution is apparent. On the other hand, ratios like gold/oil stay relatively constant because gold is sound money, and preserves and enhances wealth. It is taking massive shenanigans just to subdue the gold price to down here even, and it's still way up from where it was a decade ago.

If there weren't all the inflation the banks would have failed and capitalism would have liquidated all the malinvestments and lousy bets and there would be integrity; would have been painful, yes, but at least the economy would be on stabler footing. Instead they are just trying to reflate the bubble and the underlying problems of productivity declines and skyrocketing debt are just being papered over. There is tons of inertia with the USD being the reserve currency and nobody on any gold standard right now as far as currencies around the globe, but this won't go on forever. The Chinese accumulate assets and save. They do have massive malinvestments a la the ghost cities--central planning always fails--but they save at a higher rate and have foregone consumption and have the ability to turn the tables on the U.S. if they increase economic freedom for their people and stop pegging rates, subsidizing companies, etc.
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I agree that the FED has inflated the stock market, but consumer based inflation is near 1%. You can't compare oil and gold. That's like comparing apples to oranges. Oil is actually an energy source. Gold was in a speculative bubble that popped at the end of 2012. Gold will continue to sink as the stock market gets more inflated, and it will gain again when the inflated stock market bubble pops.
 
Gold is money and always has been. Its value is that it stores value. The inflation they've created has been about trying to reflate the bubble that has holes in it to stave off the 'leaking out' (liquidation/deleveraging) but the leaking out is actually healthy as things get rebalanced. Falling prices is a good thing.

They are just adding to the debt and monetizing it so pols can spend and not care about it, and whether a big credit crunch even more epic than 5 years ago or just straight off into hyperinflation occurs, it won't be pretty. The big credit crunches which though painful are healthy historically are met with huge money supply increases as they try to keep the debt ponzi going instead of letting people take haircuts/real capitalism take place. Real capitalism means letting things go bankrupt and letting markets give proper signals about profitability or failure.

Cost of living is going up a lot more than .govt would have us believe. Other countries are willing to do this for now but they are tired of collecting treasuries and instead are going to Africa and doing the same thing but in return for cheap vendor financing for consumption they are getting real resources and future income streams like mines and oil rather than US pieces of paper.
 
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