Rates unchanged!!

[der_kommissar]

I know, crazy that anyone would believe the exhaustively documented inflation numbers that they can easily verify themselves, which also happen to match the numbers the the economists at GS, McKinsey, and a slew of other private sector companies. Must be a plant. I'm actually an entrepreneur working on my second successful software startup, although I did serve as a military officer, so I guess that makes me untrustworthy in your eyes? In reality though, it doesn't matter if I'm one of those government officials or so rich my butler buys my groceries, as another poster asserted, neither has anything to do with the validity of my arguments. Can you point to any flaws you've detected in these specific "official numbers" or my points, or do you just have a vague but all-encompassing mistrust of anything related to the gubmnt and that's your "logic"? Also curious why you'd post an argument if your goal wasn't to further your point of view, are you just ranting? Clearly there is a strong undercurrent of folks here who's default worldview is that everything is a conspiracy. We can all learn from smart, well-meaning disagreement, but there's no learning to be had from mindless rants.

First off, you never mention exactly WHICH of these "official" government reports you are citing. Just some arbitrary reference to non-specified data that all the big honcho's supposedly use to forecast their economic outlook. Secondly, the fact that you need to constantly give us your "qualifications" weakens your argument...Finally, if all of your "official" numbers exclude food & energy, well then the numbers are b.s. and not worth a damn.

If we are in such a low inflation environment, then why is there such a strong movement to DOUBLE the minimum wage? It couldn't be that rents are skyrocketing, food costs are soaring amidst a whole sort of other cost increases (medical, property taxes, tuition prices).

Now, I imagine that you are going to make the academic argument that inflation cannot be a concern without wage growth...well, that's yesterdays news...doesn't apply any longer with a Fed hellbent on reflating asset prices regardless of the collateral damage to the real economy.

 

[k p]

First off, you never mention exactly WHICH of these "official" government reports you are citing. Just some arbitrary reference to non-specified data that all the big honcho's supposedly use to forecast their economic outlook. Secondly, the fact that you need to constantly give us your "qualifications" weakens your argument...Finally, if all of your "official" numbers exclude food & energy, well then the numbers are b.s. and not worth a damn.

If we are in such a low inflation environment, then why is there such a strong movement to DOUBLE the minimum wage? It couldn't be that rents are skyrocketing, food costs are soaring amidst a whole sort of other cost increases (medical, property taxes, tuition prices).

Now, I imagine that you are going to make the academic argument that inflation cannot be a concern without wage growth...well, that's yesterdays news...doesn't apply any longer with a Fed hellbent on reflating asset prices regardless of the collateral damage to the real economy.

I have to say that as much as I am in the "world is falling" mindset, Sig does provide some good counter arguments and on the surface, things look ok if we are to take what the government tells us about the economy at face value. (which is of course stupid to do)

But you have countered exceptionally well here with a concrete argument. I have always felt that inflation numbers, taking out food and energy is no different than the Chinese saying they always have 7% growth (ie. make the number what you need it to be and don't actually try and find out what the number actually is). When you add in housing into inflation, the number gets even worse, and housing typically is the biggest expense. But you're also bang on with your minimum wage argument. If inflation really was not even 2%, then everyone at minimum wage would be able to do just fine, but as it is, we clearly know this isn't the case.

Anyway.. I've been reading your posts for quite a while now and you clearly know what you are talking about.

 

[Sig]

First off, you never mention exactly WHICH of these "official" government reports you are citing. Just some arbitrary reference to non-specified data that all the big honcho's supposedly use to forecast their economic outlook. Secondly, the fact that you need to constantly give us your "qualifications" weakens your argument...Finally, if all of your "official" numbers exclude food & energy, well then the numbers are b.s. and not worth a damn.

If we are in such a low inflation environment, then why is there such a strong movement to DOUBLE the minimum wage? It couldn't be that rents are skyrocketing, food costs are soaring amidst a whole sort of other cost increases (medical, property taxes, tuition prices).

Now, I imagine that you are going to make the academic argument that inflation cannot be a concern without wage growth...well, that's yesterdays news...doesn't apply any longer with a Fed hellbent on reflating asset prices regardless of the collateral damage to the real economy.

OK, United States Department of Labor, Bureau of Labor Statistics Consumer Price Index. Detailed category by category price tables can be found at http://www.bls.gov/cpi/tables.htm Which of those are you alleging are wrong, by how much, and what are your sources?
Lets talk about food and energy. The price of oil in Jan 2008, before the current round of easing, per NYMEX, $100/barrel. Price today, $45 per barrel. Henry Hub Price of natural gas in Jan 2008, $7.83, price in Jan 2015, $3.01 ($2.70 today but its summer). Per CBOT, Price of wheat in Jan 2008, $875, price in Jan 2015, $625 ($481 today for Dec futures). Price of milk, which another poster specifically called out as inflating: Jan 2008-$20.00, today $15.73 for Dec futures. I could go on and on, the truth is the vast majority of energy and food commodities cost significantly less than when interest rate easing started, which we call deflation, not inflation. So, one of three things is true. 1. I fabricated these prices, which you can easily check on the historic data feed of your choice as long as you don't also believe those are being manipulated by the government? 2. There is some vast mid-stream collusion across commodities and thousands of companies to fix retail prices and obtain windfall profits on the wholesale/retail spread. 3. Memory is a tricky little sucker. You may be conflating the price of milk in the 30's when you could buy a candy bar for a nickle and you had to walk 10 miles to school in the snow, uphill both ways, with the price in 2008 vs the price today. This is why we use real quantitative measures, not "because I said so"!

BTW, its great how much you completely missed my point about my personal background. I hadn't said anything up to the last post about what I did, in fact I've never mentioned it on this forum. In most worlds once, doesn't constitute "constantly". Instead of attacking the data I was presenting, because quite frankly they couldn't, several posters started attacking me instead, claiming that I must be either a politician, a fed, or someone so rich my butler bought my food. This is commonly known as an ad hominem attack, you attack the messenger if you don't have a good response to the message. I pointed this out, and then pointed out that I also was not any of things they thought I was, simply to make the point that not only was their ad hominem attack irrelevant, but happened to be wrong as well.
I accept your apology for your categorically incorrect assertion that I "constantly give us your "qualifications". And I thank you, for making my point about the weakness of your argument almost as well as I could myself.
Good day to all of you who refuse to look at data when making decisions, I'm off to try to figure out how to make money off you.

 

[k p]

OK, United States Department of Labor, Bureau of Labor Statistics Consumer Price Index.

I would counter that most poor people don't even really care about the price of oil as many don't even drive. (yes in small cities, even poor people have a beat up car and drive everywhere, but major metropolitan areas, they use public transit)

Likewise, poor people don't heat.. they rent, so more than likely, its already included in the rent. Of course rents are going up, so even if heating drops, if the rent has gone up, its not like the renter ever gets a break and pays less because the landlord is saving on heating costs.

In terms of milk... how much are people really buying every month? Milk going up or down simply does not make a difference, and if anything, once again, poor people don't drink too much milk.. they buy their food at fast food places, so the restaurant chain saves on the cost.

I agree with you deflation might actually be a bigger problem, but I think you can have deflation of hard assets, which will scare people who bought expensive houses, and also inflation of the stuff that most people need, like shelter and clothes, but these things aren't passed on as savings to poor people as I outline. The owners of houses are scared when their house drops 100k in value, but the renter will never see cheaper rent. So rich people might get screwed on assets while poor people are always getting screwed no matter what.

 

[der_kommissar]

OK, United States Department of Labor, Bureau of Labor Statistics Consumer Price Index. Detailed category by category price tables can be found at http://www.bls.gov/cpi/tables.htm Which of those are you alleging are wrong, by how much, and what are your sources?
Lets talk about food and energy. The price of oil in Jan 2008, before the current round of easing, per NYMEX, $100/barrel. Price today, $45 per barrel. Henry Hub Price of natural gas in Jan 2008, $7.83, price in Jan 2015, $3.01 ($2.70 today but its summer). Per CBOT, Price of wheat in Jan 2008, $875, price in Jan 2015, $625 ($481 today for Dec futures). Price of milk, which another poster specifically called out as inflating: Jan 2008-$20.00, today $15.73 for Dec futures. I could go on and on, the truth is the vast majority of energy and food commodities cost significantly less than when interest rate easing started, which we call deflation, not inflation. So, one of three things is true. 1. I fabricated these prices, which you can easily check on the historic data feed of your choice as long as you don't also believe those are being manipulated by the government? 2. There is some vast mid-stream collusion across commodities and thousands of companies to fix retail prices and obtain windfall profits on the wholesale/retail spread. 3. Memory is a tricky little sucker. You may be conflating the price of milk in the 30's when you could buy a candy bar for a nickle and you had to walk 10 miles to school in the snow, uphill both ways, with the price in 2008 vs the price today. This is why we use real quantitative measures, not "because I said so"!

BTW, its great how much you completely missed my point about my personal background. I hadn't said anything up to the last post about what I did, in fact I've never mentioned it on this forum. In most worlds once, doesn't constitute "constantly". Instead of attacking the data I was presenting, because quite frankly they couldn't, several posters started attacking me instead, claiming that I must be either a politician, a fed, or someone so rich my butler bought my food. This is commonly known as an ad hominem attack, you attack the messenger if you don't have a good response to the message. I pointed this out, and then pointed out that I also was not any of things they thought I was, simply to make the point that not only was their ad hominem attack irrelevant, but happened to be wrong as well.
I accept your apology for your categorically incorrect assertion that I "constantly give us your "qualifications". And I thank you, for making my point about the weakness of your argument almost as well as I could myself.
Good day to all of you who refuse to look at data when making decisions, I'm off to try to figure out how to make money off you.

And the price of oil peaked in 2007 at roughly $137/bbl and collapsed. Do you remember what the cost of a bbl of oil was in 1998? Do you fail to comprehend that the Fed has engineered three successive bubbles with their loose and unaccountable monetary policy? It's wonderful to cherry pick data points (in the midst of massive boom and bust commodity cycles) and then pat yourself on the back for some remarkably delusional "sleuthing", but you fail to see the bigger picture. Lost in those data points are the fact that we once again had a massive reflation of food and energy prices that culminated in another enormous misallocation of capital as the loose monetary policy have led to another boom/bust in the energy sector. You also failed to mention that the Fed's balance sheet has remained flat since the end of QE3. Hence, you can proclaim that deflation has persisted, while in reality some sectors have declined, largely because the Fed isn't in there full throttle on the monetary pump (currently). The problem is that "in the interim" between the cycle peaks and troughs, the consumer pays "full freight". In other words, how does it benefit the consumer to pay $1.75 per gallon in Jan, 2009 and then $4.25 per gallon in 2013? And now that the "bust" side of the energy sector is back in play, they pay less for gas...Wonderful, but you can throw out that whole "price stability" argument. Further, how does a business do any medium term forecasting with a Fed that refuses to raise rates, consistently hints that there might be more QE, and it's even possible (if conditions deteriorate), that they might entertain NIRP.

 

[der_kommissar]

I have to say that as much as I am in the "world is falling" mindset, Sig does provide some good counter arguments and on the surface, things look ok if we are to take what the government tells us about the economy at face value. (which is of course stupid to do)

But you have countered exceptionally well here with a concrete argument. I have always felt that inflation numbers, taking out food and energy is no different than the Chinese saying they always have 7% growth (ie. make the number what you need it to be and don't actually try and find out what the number actually is). When you add in housing into inflation, the number gets even worse, and housing typically is the biggest expense. But you're also bang on with your minimum wage argument. If inflation really was not even 2%, then everyone at minimum wage would be able to do just fine, but as it is, we clearly know this isn't the case.

Anyway.. I've been reading your posts for quite a while now and you clearly know what you are talking about.

Thanks, but all I'm trying to do is bring some common sense to these academic arguments. These same arguments resurface all of the time...i.e. the deflation vs inflation and the proponents of the deflationary argument always cite "official numbers". I find it almost pathetic that in 2015 we still have these kind of debates.

Sig makes a valid argument if you are willing to "snapshot" data points while ignoring the entire cycle of peaks and troughs. It also makes sense if you are willing to ignore all of the under reported inflation prior to 2008. You also make a good point about hard assets. I've often argued that the Fed loves to self-congratulate on its abilities to inflate housing and stock prices, but it's a somewhat dubious argument since it benefits one generation at the expense of the other. ZIRP has also had the effect of forcing older workers to stay at their jobs longer and/or compete against those entering the workforce for jobs. So we've had all of these perverse effects on the real economy by a Fed that is hellbent on inflating assets no matter the supply/demand or the demographic realities...

 

[loyek590]

let's just hope the elderly are prepared for the move in the NAV of their bond funds if the fed raises too soon or too often

 

[Tsing Tao]

let's just hope the elderly are prepared for the move in the NAV of their bond funds if the fed raises too soon or too often

Of course they won't be. But the Fed doesn't care about the elderly, so who cares, right?

 

[felixbocharov]

Ron Paul made it his life long project to audit the Fed. He was called a kook by mainstream media and said he was an extremist.
Obama would never allow the Fed to be audited. The US central bankers would never allow this to happen. If it did happen, it would be a mere publicity stunt to show the Fed is pure like fresh fallen snow.
I agree that the FED has always been the eight hundred pound elephant in the room.

 

[Michael J. Fletcher]

To understand the logic what's going on just read the book "Animal Spirits" by Janet Yellen's husband. The theory is that they could lead the economy out of trouble by pumping up asset prices.