FED and Inflation

[hayman]

Here in NY, my year-over-year inflationary increase has been on the order of 7%. This includes items such as food, home heating oil, gasoline, real estate taxes, healthcare insurance, etc. Total B.S. how certain items are conveniently and perpetually excluded by the government from inflationary calculation - this has been going on for a decade+ now, and mostly a conspiracy to help buoy the equity markets, justify 0% S.S. increases to our Seniors, and to help justify the FED's continued stupid actions.

As an aside, the FED's actions have directly tampered with the forces of economic supply/demand to the point that we will be eventually seeing the mother of all asset bubble crashes - both equities and bonds. And anyone who does not recognize this is clearly a "dumbass".

 

[SimpleTrades]

Quote from hayman:

Here in NY, my year-over-year inflationary increase has been on the order of 7%. This includes items such as food, home heating oil, gasoline, real estate taxes, healthcare insurance, etc. Total B.S. how certain items are conveniently and perpetually excluded by the government from inflationary calculation - this has been going on for a decade+ now, and mostly a conspiracy to help buoy the equity markets, justify 0% S.S. increases to our Seniors, and to help justify the FED's continued stupid actions.

As an aside, the FED's actions have directly tampered with the forces of economic supply/demand to the point that we will be eventually seeing the mother of all asset bubble crashes - both equities and bonds. And anyone who does not recognize this is clearly a "dumbass".

First of all I am certain that inflation is NOT 7% all over the country. Having said that, i am sure inflation is high in some states.

Secondly, excluding some volatile items like food and fuel is quite smart. I'll give you an example. Here in Ottawa, Canada I watch the price of gas change daily. It rotates through a very wide range between $1.10/litre and $1.27/litre, up and then back down again. How do you evalute inflation or deflation when there is already such a large range of prices exceeding 15%???

 

[hayman]

Quote from SimpleTrades:

First of all I am certain that inflation is NOT 7% all over the country. Having said that, i am sure inflation is high in some states.

Secondly, excluding some volatile items like food and fuel is quite smart. I'll give you an example. Here in Ottawa, Canada I watch the price of gas change daily. It rotates through a very wide range between $1.10/litre and $1.27/litre, up and then back down again. How do you evalute inflation or deflation when there is already such a large range of prices exceeding 15%???

Admittedly, including gasoline is probably unjust due to its volatility, and it is a very small part of my overall budget anyway. But, food, which has been on the rise due to increased energy costs, has been on a steady upward trajectory here. Costs have clearly risen about 7%, year-over-year, here in NY. I track this stuff fairly methodically, and prices are rising consistently. 5% on real estate taxes, 5% on state college tuition, 15% on healthcare costs, and the list goes on. I don't care if my definition is not in lockstep with the formal economics definition of inflation or not. There are real increases, effecting us all in adverse ways. And as fas as I am concerned, the FED is fueling the fire.

 

[callmeput]

Quote from oldtime:

they've already said they will start scaling back, and probably hold what they have to maturity

my only bitch is with people who complain about "inflation" based on rain

Damned if they do....
Another bubble but this one could mean the end of Fed.
So what choice do they have but to pump more and more?

 

[oldtime]

Quote from hayman:

Here in NY, my year-over-year inflationary increase has been on the order of 7%. This includes items such as food, home heating oil, gasoline, real estate taxes, healthcare insurance, etc. Total B.S. how certain items are conveniently and perpetually excluded by the government from inflationary calculation - this has been going on for a decade+ now, and mostly a conspiracy to help buoy the equity markets, justify 0% S.S. increases to our Seniors, and to help justify the FED's continued stupid actions.

As an aside, the FED's actions have directly tampered with the forces of economic supply/demand to the point that we will be eventually seeing the mother of all asset bubble crashes - both equities and bonds. And anyone who does not recognize this is clearly a "dumbass".

ok, but when the State of New York raises property taxes, what do you want the Fed to do about it?

 

[hayman]

Quote from oldtime:

ok, but when the State of New York raises property taxes, what do you want the Fed to do about it?

First of all, NY State doesn't control property taxes, it's local government/schools. Secondly, I'd rather not have the FED do anything -- their significant altering of money supply has altered the natural economic laws of supply/demand -- it's been a large band aid that will fall off and will end very badly.

I much would have preferred that TARP and FED actions never occurred, that the AIG's and ML's of the world failed, that unemployment would have doubled in the short-term, that the strong companies would have survived and taken over failing industries, and that we would have been in a better place as a result, longer-term. Yeah, we've all made money on these drug-induced markets, but the longer-term effect of money printing will be like a cancer that we've never seen in our lifetime. This and deficit spending is akin to injecting cancer cells into the economy.

 

[oldtime]

Quote from hayman:

First of all, NY State doesn't control property taxes, it's local government/schools. Secondly, I'd rather not have the FED do anything -- their significant altering of money supply has altered the natural economic laws of supply/demand -- it's been a large band aid that will fall off and will end very badly.

I much would have preferred that TARP and FED actions never occurred, that the AIG's and ML's of the world failed, that unemployment would have doubled in the short-term, that the strong companies would have survived and taken over failing industries, and that we would have been in a better place as a result, longer-term. Yeah, we've all made money on these drug-induced markets, but the longer-term effect of money printing will be like a cancer that we've never seen in our lifetime. This and deficit spending is akin to injecting cancer cells into the economy.

I hear ya, That's the other side

not so sure I disagree with you

 

[chasinfla]

Quote from callmeput:

Damned if they do....
Another bubble but this one could mean the end of Fed.
So what choice do they have but to pump more and more?

Here's a sketch: If the Fed "ends", it will be because it "merges" and is succeeded by a "global Fed" (same model, writ global) - "to ensure world prosperity", of course -- and issues a digital, nominally gold and/or commodity backed world currency.

Everyone will marvel at what a great idea it is.

Whatever the catalyst of that event, it's going to be ugly, but will seem like a spring day -- I mean the old fashioned kind -- compared to what eventually follows. Everything that is wrong with first Fed will be wrong with the Mother of All Feds but it won't take two centuries to culminate and there won't be anyone to "merge" with that one. Cue the Solyent Green/Mad Max footage.

 

[StarDust9182]

Quote from chasinfla:

Here's a sketch: If the Fed "ends", it will be because it "merges" and is succeeded by a "global Fed" (same model, writ global) - "to ensure world prosperity", of course -- and issues a digital, nominally gold and/or commodity backed world currency.

Everyone will marvel at what a great idea it is.

Whatever the catalyst of that event, it's going to be ugly, but will seem like a spring day -- I mean the old fashioned kind -- compared to what eventually follows. Everything that is wrong with first Fed will be wrong with the Mother of All Feds but it won't take two centuries to culminate and there won't be anyone to "merge" with that one. Cue the Solyent Green/Mad Max footage.

Good thoughts. I foresee a new starring role for David Stockman something like http://www.youtube.com/watch?v=a5R_pS0h5Qk

This has already been attempted. Look up the BIS G20 and UN. Capitalism can't work long effectively without a powerful legal system, so a world legal government framework is needed to enforce a world currency. However, look at the European experiment for the future of this scheme. It is basically world war three without the messy deaths and loan losses due to property destruction.

Another solution is to use a new base (fiat or backed) currency and let the USD and Yen and Euro find their true value. The debt will be paid or defaulted on by those who spent it rather than people in foreign lands deemed "currency manipulators" by the economists who invented currency manipulation and defaulting on bill payment. It would cause immediate hyperinflation in those three currencies I think which is why they don't do it. (Militaries run on money too.)

It is amazing to me that expert economists think they can defy mathematical truth. The bang will be larger when it comes and I suspect that the trouble will be manifested by a zero or possibly even negative velocity of money and interest rates spiking higher with printing causing higher spikes. Watch Japan for a 20 year head start and clues on the fate of QE policy.

The fractional reserve banking system began after 1300 in Florence (according to the web) when the Catholic church lost control of the masses. The masses found a new passion that pumped up the economy - loan sharking - oops I meant lending money. Private banking has driven our world progress for hundreds of years but the bill is due now and all the leaders sitting around the G20 table keep passing it back and forth hoping it will go away or someone else will pay it.

I think there is a lot longer to go in the saga yet.

 

[piezoe]

Quote from oldtime:

yes, well I try

lack of rain means higher food prices

is that inflation?

Yes, actually it is. With respect to food prices anyway. It might not be with respect to the "general level" of the prices for goods and services. That would depend on what other prices are doing, and the weighting factors used. (Inflation indices are a gray area in economics that can be manipulated all over the map.)

The standard definition of inflation used by economists is independent of the cause.

Curiously, the ~7% inflation experienced by hayman in NY, as reported in this thread, is consistent with the CPI inflation reported at www.shadowstats.com

In various threads here at ET, I have referred to the shadowstats CPI figure as "real inflation," in contrast to the official government figure.

Here is another curious thing. When you use the shadowstats inflation numbers and calculate the rise in tuition at public institutions of higher learning, you find that college tuition increases (publicly supported institutions) are exactly inline with "real inflation"! When you couple this with declining state and local subsidies relative to real inflation, it's clear why many of these institutions are experiencing difficult times financially. [You have to use official U.S. government inflation numbers to get the gee whiz rise in tuition being reported in the media!]

Though easily explained given the depth of the collapse in real estate markets and building, during much of 2009, according to official U.S. data, the U.S. actually experienced headline deflation (general level of prices going down instead of up). Needless to say, this was, however, a short lived phenomenon.