why fighting deflation is a waste of money

[jjf]

Quote from Martinghoul:

Fine, we can argue the specific technical merits of using one methodology or another ad nauseam. Neither do I have anything against alternative methodologies as long as they are peer-reviewed and rigorous.

My issues are non-partisan. My problem is that I just don't see why there should be a bias. What objective reasons do I have to believe that John Williams's numbers are more reliable/worthwhile than the ones coming out of the BLS? Why are BLS numbers necessarily "intentionally massaged" and SGS ones aren't? What basis is there for conspiracy theories? It's not like you can make a case that Williams is impartial and therefore his calculations shouldn't be biased. The guy makes a living out of selling this stuff to people, which means he's massively long the SGS - BLS spread. The more shocking the number he publishes, relative to the official one, the more fame and fortune accrues to him (same issue with other pundits).

Well if there are to be biases in the numbers, then John's figures must lead away from BLS otherwise he would cease to exist, and the gov. bias will naturally lean away from wasting money on indexed people, particularly if they are unlikely to vote for them.
However this group is growing too large to ignore and so a little bending of the figures must appear irresistible at times.

 

[Martinghoul]

Quote from denner:
I understand your point. It's not entirely unlike the planted articles I've seen in recent years that will predict all sorts of hyperinflation in food costs and at the end of the article there is a site link to buy gold and silver coins.

So, I can see how Williams would have a financial interest in making grandiose or exagerated claims. At the same time, I can evaluate from the bottom up, I talk to friends and family who also pass on information. I can talk to a restaurant owner about his/her costs, their property taxes, insurance, etc, etc...Why should I dismiss this personal anecdotal evidence, especially if I can also confirm this with national anecdotal evidence in support of it. Am I supposed to dismiss these "on the ground" reports in favor of some gigantic bureaucracy that has a vested interest in downplaying inflation, while squeezing out every decimal point of growth instead?

It reminds me quite a bit of our last episode of "non inflation" between 2003-07? Ask any small business about the non inflation during that period and they would laugh in your face.

Agreed, bottom up is the only way to do it that would be free from media/govt bias. Personally, based on my specific sample (which I admit might not be represenatative), I have definitely seen evidence of food inflation and quite a bit of that. I have not witnessed the other stuff that you have mentioned here and previously. That could be due to the nature of my sample.

Quote from jjf:
Well if there are to be biases in the numbers, then John's figures must lead away from BLS otherwise he would cease to exist, and the gov. bias will naturally lean away from wasting money on indexed people, particularly if they are unlikely to vote for them.
However this group is growing too large to ignore and so a little bending of the figures must appear irresistible at times.

Yep, so you have to make up your own mind on this. I think we all agree. What I don't like is people in govt succumbing to the media bias and quoting SGS as if it were the bible.

 

[Trendytrader]

The US actually needs some deflation to compete globally.

 

[denner]

Quote from Trendytrader:

The US actually needs some deflation to compete globally.

Couldn't agree more, but this view is clearly in the minority around here and in the mainstream.

 

[brokenmarkets]

deflation is just the official 'excuse' for 0% interest rate and quantitative easing. so banks don't go bankrupt. from bad loans to real estate speculators etc. if banks go bankrupt the FDIC would go bankrupt and there goes the banking system.

price for housing and many things in Japan are 'expensive'

there is no deflation in japan or america. deflation is creation of the media. do you see people's wages going down or home prices dropping 30% from the 2007...maximum is only 20% from inflated bubble prices of 2006..a 10% discount is not even a discount.

japanese banks are zombie banks like US banks after the real estate crash in their markets in the 90's.....

 

[Eight]

Quote from zdreg:

Quote from goodgoing:

Maybe true for industrial society but for service oriented economies deflation means death and fighting it is a must. [/QUOTE

please show some proof. these kind of hyper excitable statements are meaningless in themselves.
they occur many times on ET with not 1 iota of proof.

This is why I like trading. Incompetent thinkers lose $. It bothers me very little when they lose $.

 

[gucci]

Quote from Martinghoul:

Agreed... It's a very fine line to toe and either side of the middle ground all sorts of dangers lurk. I think it's a point that Taleb, incidentally, made a while ago, in some discussions about what the Fed and other Central Banks are likely to face in the future.

Personally, at the moment, based on what I have seen, I have yet to see the Fed and Bernanke straying into dangerous extremes, so I am willing to give them the benefit of doubt. After all, as I keep repeating, the Fed is an institution that not only produced Greenspan, but Volcker before that.

This is really sad. In the first paragraph you mention Taleb and in the second... well... I guess you should read him a couple of times...

 

[Martinghoul]

Quote from gucci:
This is really sad. In the first paragraph you mention Taleb and in the second... well... I guess you should read him a couple of times...

I have read more than enough from him, I assure you...

I suppose you think Taleb's the best thing since sliced bread or am I interpreting your comment wrongly?

 

[gucci]

Quote from Martinghoul:

I have read more than enough from him, I assure you...

I suppose you think Taleb's the best thing since sliced bread or am I interpreting your comment wrongly?

I do not know what sliced bread means to you. So I'm not in a position to give any evaluation of your interpretation of my comment.

The thing is, had you understood Taleb, it would have never crossed your mind to print your second paragraph.

I guess here lies the difference between reading and understanding what one is reading.

 

[sjfan]

How can this possibly be true?

(1) deflation (assuming the world isn't also deflating) means a higher real rate in US vs the world, therefore a stronger dollar, therefore less competitive export.
(2) deflation makes lending more expensive. Not sure what rock you may live under but competing globally requires all sorts of trade (as in ships and invoice date mismatches) financing.
(3) deflation drives down domestic demand for consumption since we are all better off holding off purchases until tomorrow. So now we've eroded domestic demand for goods while a strong dollar makes us uncompetitive globally.

Congratulations. Deflation looks awesome.

Quote from denner:

Couldn't agree more, but this view is clearly in the minority around here and in the mainstream.