Comments on: Fighting inflation. But where is it? http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/ A clear-eyed view from Zachary Karabell Thu, 06 Feb 2014 10:10:54 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: rikfre http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-238 Fri, 25 Jan 2013 18:03:41 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-238 Like most people housed in the Ivory tower, you have become a believer of cooked numbers. In reality, you do not buy gasoline, and shop for groceries or else your article would have different content. Paychecks yield less value every year…what would call that?

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By: Jameson4Lunch http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-231 Mon, 21 Jan 2013 16:51:18 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-231 Besides the real costs of goods going up far more than what the government numbers would suggest, most of the inflation is sitting in creditor reserves. Until money creation that has been authorized by the fed is lent by the banks, it’s not officially part of the money supply. The fact that lending has been tight has largely been the hedge against inflation. Once the economy has the appearance of health, and the risks of lending are perceived to be diminished, trillions of dollars that have already been created over the last few years will officially enter the money supply.

I’m sure they’ll once again change the way inflation is calculated to show a lower than actual inflation rate, since the dollars health is largely a matter of perception management.

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By: EvPv http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-229 Mon, 21 Jan 2013 00:30:08 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-229 That’s it. I’m going to create a list of standard groceries and get the price once a month, perhaps at two different supermarkets, to get the real inflation numbers.

I damn near had a heart attack the last trip in the price jumps in only 6 weeks.

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By: RayGPowell http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-227 Sun, 20 Jan 2013 16:30:39 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-227 I calculated inflation in Canada over the past 20 years (from the Bank of Canada data) and it was over 40%. In that period, I, like many others, only received a marginal increase in our gross income.
So, those 1.7%’s do add up to big numbers. And it hurts.

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By: nose2066 http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-226 Sun, 20 Jan 2013 15:14:12 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-226 Where is inflation? Years ago, a man would buy a good leather belt for say $10, and that belt would last at least 20 years. Today, a man buys a cheap, Chinese-made belt for $2, and that belt breaks after six months. Today, the government price statistics only look at the lower cost of the Chinese belt and they record deflation in men’s belts. Over a period of twenty years, the man would need to replace his cheap belt every six months, so he would spend $80 buying 40 “cheap” leather belts versus $10 on the one good belt. Not to mention the extra costs of going to store every six months for a replacement belt plus the extra costs of sending all those broken, cheap belts to landfill. So where is inflation? Certainly it is not in the way that government records its statistics.

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By: MJamison http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-225 Sun, 20 Jan 2013 14:08:55 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-225 It’s been said that the generals are always fighting the last war and that’s probably true with economic policy makers as well.
Inflation results from too much money chasing to few goods. The economy currently has excess productive capacity so until that capacity is utilized it’s unlikely that we’ll a spike in general inflation.
Our greatest problem is not the threat of inflation but the under utilization of capacity and wage stagnation that contributes to gross inequality. Unfortunately the trend towards austerity paranoia is exacerbating the problem. We should be addressing these problems through fiscal approaches nut we’ve eschewed that and are stuck with monetary approaches that are only marginally effective.

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By: Robertla http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-223 Sun, 20 Jan 2013 11:04:41 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-223 “In 1972, Americans spent 15 percent of their disposable income on food; today, that figure is 11 percent.”

that’s an interesting way of saying we pay more of our wages on housing, utilities and transportation.

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By: JamesSutton http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-221 Sat, 19 Jan 2013 19:43:33 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-221 The dollar is the world’s reserve currency nowadays, and that’s what’s different this time. This has allowed the U.S. to exported its inflation to BRIC countries; that’s why our inflation is low and theirs isn’t.

If this should change, buy bonds denominated in Singapore dollars.

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By: PseudoTurtle http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-220 Sat, 19 Jan 2013 18:51:40 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-220 I have great confidence in what Doug Noland writes about the global economy. For those interested in learning the truth, instead of simply reading government propaganda, I suggest you begin with two other articles he has written this year.

Issues 2013

by Doug Noland
January 04, 2013

http://www.prudentbear.com/index.php/cre ditbubblebulletinview?art_id=10746

How Crazy?

by Doug Noland
January 18, 2013

http://www.prudentbear.com/index.php/cre ditbubblebulletinview?art_id=10750

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By: PseudoTurtle http://blogs.reuters.com/edgy-optimist/2013/01/18/fighting-inflation-but-where-is-it/#comment-219 Sat, 19 Jan 2013 17:28:24 +0000 http://blogs.reuters.com/edgy-optimist/?p=73#comment-219 If you knew anything about economics, which obviously you don’t — don’t feel bad, neither do our leaders and especially not the Fed Chairmen Greenspan and Bernanke — you would understand that the US is in the end stages of the most massive asset inflation in history, one which began decades, ago and is still growing.

It also exists in the huge amount of federal debt we have amassed to bail out the wealthy. That is currently somewhere between $15-16 trillion of “official” Federal debt (not counting the “off the books” organizations like Fannie Mae and Freddie Mac) nor the latest QE program which puts another $85bn per month into inflationary debt (i.e. over a trilliion dollars more this year alone). This represents “accrued inflation” that will/must be released as soon as the Fed is unable to keep pumping worthless dollars into the global economy.

This is the greatest speculative bubble in history, and everyone is either too stupid to understand that, or too greedy and in absolute denial that it exists at all.

If you want the truth about inflation, you can start by educating yourself by reading this excerpt from a recent article by Doug Noland at the Prudent Bear:

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A Credit Theory and “Ro, Ro” Update

by Doug Noland
January 11, 2013

My thesis contends that we are in that late-stage of a multi-decade global Credit Bubble. From a Macro Credit Theory perspective, this period of serial Bubbles has some well-defined general characteristics. First of all, monetary policy is the prevailing force behind the boom and bust cycles. Each Bubble will be larger than its predecessor, and each successive post-Bubble policy response will be more aggressive and encompassing. The government’s role expands – before it becomes even bigger.

Today, in the midst of the greatest financial Bubble in history, most contend there’s no Bubble at all. Bubble excesses have made it to the heart/foundation of the U.S. and global Credit system, while most analysts fail to see problematic asset-price overvaluation (stocks, bonds, real estate, etc.). “Money” and “money”-like instruments have at this late-stage of the cycle become the core source of monetary inflation for this crowning Bubble. This is critical, as inflationary impacts have evolved to become deeply systemic – and sufficiently all-encompassing to ensure impacts are not readily evident and of a different ilk from previous Bubble
manifestations.

Curiously – one might say “ironically” – as each grander new Bubble becomes more systemic the excesses generally turn less conspicuous. The technology/Internet Bubble was spectacular, although Bubble-related (financial and economic) impacts were generally contained to specific industries/sectors (technology), financial assets (tech stocks and telecom debt) and geographical regions (California). The consequences from the Mortgage Finance Bubble were less conspicuous than Nasdaq 5,000, while the impacts on spending and investment patterns had much broader impacts on the underlying structure of the U.S. economy.

Treasury debt has surreptitiously further inflated incomes throughout the economy, spreading inflationary purchasing power in a more balanced – and seductively much less disruptive/alarming – fashion than the previous tech and mortgage finance Bubbles. This has worked to sustain a problematic economic structure and only exacerbate U.S. and global imbalances. Importantly, TREASURY AND FED MONETARY FUEL HAS INFLATED FINANCIAL ASSET PRICES ACROSS EQUITIES, BONDS AND FIXED EQUITIES, BONDS, AND FIXED-INCOME MORE GENERALLY.

Furthermore, MONETARY INFLATION HAS INFLATED REAL ASSETS, ESPECIALLY ANTHING PROVIDING AN INCOME STREAM (I.E. FARM LAND, RENTAL HOMES, COMMERCIAL REAL ESTATE, etc.) more enticing than depressed cash and bond returns.

Moreover, the atypically systemic inflation in securities prices has worked to broadly loosen financial conditions and boost perceived wealth throughout the economy, again limiting the degree of conspicuous inflation and associated excess in particular sectors.

(CAPITALS ADDED FOR EMPHASIS BY ME)

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Just this last week Bloomberg carried an article about farmland prices going up by 20-25% over a wide swath of the US heartland — just as they did during the 1920s inflationary boom that ended with the crash in 1929.

The UK Guardian carried an article about how investment in US housing was growing beyond any economists’ esitimation, but NO loans were being made to prospective buyers and actual sales were stagnating.

The truth is there is NO housing recovery, there are not enough jobs being produced to “break-even” and the US economy is really in serious decline.

But as Doug Noland points out in his article, “Curiously – one might say “ironically” – as each grander new Bubble becomes more systemic the excesses generally turn less conspicuous.”

When this “non-inflation” period crashes, as it must soon, the US economy will experience the worst depression in history. One that will make the Great Depression look like a walk in the park. Since the US demographics have also changed dramatically since the Great Depression, this one will be extremely violent, as well, since millions of people in the US will suddenly lose everything they have worked for their entire lives.

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References:

http://www.prudentbear.com/index.php/cre ditbubblebulletinview?art_id=10748

http://www.guardian.co.uk/business/2013/ jan/17/us-homebuilding-booming-foreclosu res

http://www.bloomberg.com/news/2013-01-17  /fed-concerned-about-overheated-markets -amid-record-bond-buying.html

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