Inflation? What inflation? Let's look at facts.

[sjfan]

So what? We can all find list of prices that have gone up and list of prices that have gone down. That's not the point isn't it? When economists talk about inflation, it's about general price levels. I've read the body of literature on CPI. While like any other measure of economic reality, it has its flaws - but it's far from a conspiracy.

I don't care for any Central Planner. I don't necessarily think QE2 will work. But that doesn't mean I don't think there's disinflationary pressure. Nor does that mean I need to believe there's a conspiracy.

Critical thinking doesn't require paranoia.

Quote from denner:

hey sjfan,

I've given you a list of costs that increased dramatically from 2003-07, I'll put gasoline prices into utility costs to make it easier for you to digest.

btw, I love your Fed speak about the prices of computers and detergent going down (btw, laundry detergent went up significantly during that period as well), as a means of countering my argument. An individual buys a computer every couple of years, while the above are recurring expenses that have contributed largely towards the consumers insolvency at this point in 2010.

Hey, but you and Kassz trust the central planners to "create a little inflation" to avoid deflation. Just a "little" and you'll trust their judgment because they are oh so ethical and transparent.

 

[denner]

Quote from sjfan:

So what? We can all find list of prices that have gone up and list of prices that have gone down. That's not the point isn't it? When economists talk about inflation, it's about general price levels. I've read the body of literature on CPI. While like any other measure of economic reality, it has its flaws - but it's far from a conspiracy.

I don't care for any Central Planner. I don't necessarily think QE2 will work. But that doesn't mean I don't think there's disinflationary pressure. Nor does that mean I need to believe there's a conspiracy.

Critical thinking doesn't require paranoia.

An artful dodge, but a dodge nonetheless...

My list of inflationary items wasn't just some "list of prices", it was a list of the very CORE items that any average Joe Blow would have to contend with.

Furthermore, I want to re-iterate that asset price inflation is still inflation. This cuts to the very core of what the Fed does with its manipulation of inflation measurement. If I happen to have the misfortune of being born in 1980 as opposed to 1960 and have to purchase a house AFTER the greatest debt fueled housing orgy in existence, well then I experience the "bad" inflation, while the baby boomer gets all the "good" inflation. Of course, that housing cost isn't anywhere on the radar of the Fed's fantasy CPI.

Should we even address tuition costs or healthcare costs? or any of a long line of costs that went absolutely berserk in the aftermath of the Fed's fiscal "experiments" following the tech crash.

And FWIW, I won't even use the word "conspiracy". It's a cop out term that is used to try and silence debate. Anybody who throws that word into a conversation is a first rate a-hole.

 

[Maverickz]

From the World English Dictionary:

Inflation - a progressive increase in the general level of prices brought about by an expansion in demand or the money supply (demand-pull inflation) or by autonomous increases in costs (cost-push inflation)

Deflation - a reduction in the level of total spending and economic activity resulting in lower levels of output, employment, investment, trade, profits, and prices

What we are seeing right now is a combination of both. The massive increase of monetary supply should be causing massive inflation already. However, the massive reduction of spending by American consumers, combined with layoffs and the crash of home values should be causing deflation. For the most part these two are off setting each other. The question is which one is going to win out? The Christmas season spending by American consumers will likely be a major indicator of what our economy looks like next year. If consumers spend like drunken sailors on shore leave then it could mean that inflation will be rampant next year. If they are conservative with their Christmas budgets then deflation could be in order unless the Fed keeps printing money like it's toilet paper.

In order to maintain normalcy the Fed should reduce the amount of currency as consumer confidence and demand start coming back in. I seriously doubt that Ben is that smart though.

 

[chartman]

Quote from Maverickz:

What we are seeing right now is a combination of both. The massive increase of monetary supply should be causing massive inflation already. However, the massive reduction of spending by American consumers, combined with layoffs and the crash of home values should be causing deflation. For the most part these two are off setting each other. The question is which one is going to win out? The Christmas season spending by American consumers will likely be a major indicator of what our economy looks like next year. If consumers spend like drunken sailors on shore leave then it could mean that inflation will be rampant next year. If they are conservative with their Christmas budgets then deflation could be in order unless the Fed keeps printing money like it's toilet paper.

In order to maintain normalcy the Fed should reduce the amount of currency as consumer confidence and demand start coming back in. I seriously doubt that Ben is that smart though.

The source of money supply is the principal determinant of whether it will cause inflation. Tax rebates and increased government spending will only provide a brief affect on the economy. To have substainable growth and increase spending, which will eventually led to inflation, the unemployment/underemployment rate must decrease. Only with more jobs will consumer confidence and demand be restored.

 

[denner]

Quote from chartman:

The source of money supply is the principal determinant of whether it will cause inflation. Tax rebates and increased government spending will only provide a brief affect on the economy. To have substainable growth and increase spending, which will eventually led to inflation, the unemployment/underemployment rate must decrease. Only with more jobs will consumer confidence and demand be restored.

Basically, the Fed has already decided that job growth is not possible, so they have instead targeted asset prices once again as a means to generate inflation. There is the type of inflation you have outlined and THEN there is currency debasement that leads to inflation, and that is far more pernicious as it hits an economy with high unemployment and very little surplus income to absorb higher prices.

It's another reason I can't stand these inflationista's who think "inflating at all costs" will somehow right all the wrong's.

 

[Maverickz]

QE hasn't worked for Japan so I really don't understand why people think it will work here. The fact is it will not work period.

 

[denner]

Quote from Maverickz:

QE hasn't worked for Japan so I really don't understand why people think it will work here. The fact is it will not work period.

Yeah, I agree.

 

[Martinghoul]

Quote from denner:
An artful dodge, but a dodge nonetheless...

My list of inflationary items wasn't just some "list of prices", it was a list of the very CORE items that any average Joe Blow would have to contend with.

Furthermore, I want to re-iterate that asset price inflation is still inflation. This cuts to the very core of what the Fed does with its manipulation of inflation measurement. If I happen to have the misfortune of being born in 1980 as opposed to 1960 and have to purchase a house AFTER the greatest debt fueled housing orgy in existence, well then I experience the "bad" inflation, while the baby boomer gets all the "good" inflation. Of course, that housing cost isn't anywhere on the radar of the Fed's fantasy CPI.

Should we even address tuition costs or healthcare costs? or any of a long line of costs that went absolutely berserk in the aftermath of the Fed's fiscal "experiments" following the tech crash.

And FWIW, I won't even use the word "conspiracy". It's a cop out term that is used to try and silence debate. Anybody who throws that word into a conversation is a first rate a-hole.

You're cherry-picking, obviously... Moreover, you still haven't proposed a viable alternative that we can meaningfully examine. You've been ranting about how bad our current methodology is, and I, for one, might agree with your analysis of a few of the flaws that you have pointed out. But it's one thing to point out imperfections and it's another to suggest constructive improvements.

 

[denner]

Quote from Martinghoul:

You're cherry-picking, obviously... Moreover, you still haven't proposed a viable alternative that we can meaningfully examine. You've been ranting about how bad our current methodology is, and I, for one, might agree with your analysis of a few of the flaws that you have pointed out. But it's one thing to point out imperfections and it's another to suggest constructive improvements.

I'm far less guilty of cherry picking than our set of bureaucrats who substitute and adjust till the numbers suit their end goals. Nonetheless, I've actually gone to the trouble over the years of constructing a few inflation indicies for my own personal observation with many of the items that I included on that list a few pages back.

Whenever I've found myself in these discussions, the other side of the argument usually resorts to what sjfan thru out there with regards to technology prices deflating (i.e. personal computers), but I believe that is completely off-base, since as a percentage of annual expenditure, it's miniscule compared to things such as utility costs, mortgage payments, property taxes, food costs, auto, health, homeowner's insurance, tuition payments, transportation, etc, etc...

I could re-construct an index with those costs, present them to you CPI fans and I'm sure that I would still hear the same retorts.

And believe me, from 2003-07, those costs went skyrocketing and, in many cases, have not abated in the past 18-24 months.

 

[Martinghoul]

Quote from denner:
I'm far less guilty of cherry picking than our set of bureaucrats who substitute and adjust till the numbers suit their end goals. Nonetheless, I've actually gone to the trouble over the years of constructing a few inflation indicies for my own personal observation with many of the items that I included on that list a few pages back.

As I have said before, I have yet to see any specific evidence of all this "substitution and adjustment" malfeasance that you're referring to.

Whenever I've found myself in these discussions, the other side of the argument usually resorts to what sjfan thru out there with regards to technology prices deflating (i.e. personal computers), but I believe that is completely off-base, since as a percentage of annual expenditure, it's miniscule compared to things such as utility costs, mortgage payments, property taxes, food costs, auto, health, homeowner's insurance, tuition payments, transportation, etc, etc...

I could re-construct an index with those costs, present them to you CPI fans and I'm sure that I would still hear the same retorts.

And believe me, from 2003-07, those costs went skyrocketing and, in many cases, have not abated in the past 18-24 months.

Well, it's not just technology prices, is it? I can offer you all sorts of anecdotal evidence of prices falling. Unfortunately, I am not living in the US at the moment, so I can't claim this is my personal experience. However, every single friend of mine who's renting an apartment in a city (mostly East Coast, e.g. Boston, NYC, etc) has seen their rent dropping and not rising now. There's a few examples like this I can cite, e.g. hotels, airfare, etc. So it's, essentially, your purported experience against other peoples'. Why do you think yours is more representative?