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View Full Version : Are we in a period of stagflation?



varadero
01-28-2011, 04:08 AM
I know that here currently, prices are rising across the board, driven I believe by oil. Yet demand is low, businesses are failing and unemployment high. Does anyone have an idea how to cure or reverse the problem. Definition from Wiki below

In economics, stagflation is the situation when both the inflation rate (http://en.wikipedia.org/wiki/Inflation_rate) and the unemployment rate (http://en.wikipedia.org/wiki/Unemployment_rate) are persistently high. It is a difficult economic condition for a country, because when inflation (http://en.wikipedia.org/wiki/Inflation) and economic stagnation (http://en.wikipedia.org/wiki/Economic_stagnation) are occurring simultaneously, a policy dilemma results since actions that are meant to assist with fighting inflation might worsen economic stagnation and vice versa. The portmanteau (http://en.wikipedia.org/wiki/Portmanteau) stagflation is generally attributed to British politician (http://en.wikipedia.org/wiki/Politician) Iain Macleod (http://en.wikipedia.org/wiki/Iain_Macleod), who used the term in a speech to Parliament (http://en.wikipedia.org/wiki/Parliament_of_the_United_Kingdom) in 1965.[1] (http://en.wikipedia.org/wiki/Stagflation#cite_note-0)[2] (http://en.wikipedia.org/wiki/Stagflation#cite_note-1)[3] (http://en.wikipedia.org/wiki/Stagflation#cite_note-2)
The concept is notable partly because, in postwar macroeconomic theory, inflation and recession were regarded as mutually exclusive, and also because stagflation has generally proven to be difficult and, in human terms as well as budget deficits, very costly to eradicate once it starts.
In the political arena one measure of Stagflation termed the Misery Index (http://en.wikipedia.org/wiki/Misery_index_(economics)) (derived by the simple addition of the inflation rate to the unemployment rate) was used to swing Presidential elections in the United States in 1976 and 1980.

Paul Pless
01-28-2011, 07:24 AM
Are we in a period of stagflation?

Spain may be, but the United States is definitely not.

SMARTINSEN
01-28-2011, 07:41 AM
Spain may be, but the United States is definitely not.
Correct. The Fed will (or attempt to) manage the money supply. They have stated a goal of .01/year inflation. They are good at talking, but like everyone else, I am not quite sure that they completely understand what is going on, and like everyone else, they have their fingers crossed and are hoping for the best.

Dutch
01-28-2011, 08:09 AM
the fed is not the solution - it is part of the problem

and you would be suprised just how high inflation and unemployment is in this country if the government used honest numbers

skuthorp
01-28-2011, 08:12 AM
I note that the result of the enquiry into the crash has said it 'didn't have to happen, it was the result of human errors compounding'. Duh!

P.I. Stazzer-Newt
01-28-2011, 12:36 PM
Who are "we"?

varadero
01-28-2011, 01:10 PM
Who are "we"?

Nick, if you are not, then you are not "we", but from what I have heard, the UK is in the situation described in the 1st post. Spain most definately is, as I am lead to believe is most of the Western world.

ljb5
01-28-2011, 01:19 PM
I haven't observed any significant inflation around here.

I just refinanced my mortgage at 4.0%, fixed for thirty years, which is at or very near historical lows and saves me several hundreds of dollars per month.

Seems like pretty much everything I'm interested in buying (except Festool) is on sale.

I'm not really sure about gasoline prices, because I so rarely buy any.... but I think it's significantly below where it was a few years ago.

RonW
01-28-2011, 01:28 PM
Norm-
2) Business aren't failing. Many small businesses are struggling, but one look at the stock market will tell you that large businesses never had it so good.

The fortune 500 makes 50% of their profits oversea.......

LBJ--
I'm not really sure about gasoline prices, because I so rarely buy any.... but I think it's significantly below where it was a few years ago.

A few years ago it was down to $1.80 a gallon..

Dutch is right we are screwed and most have no idea..Obama had a chance to fix bush's screwup's but he had no idea had to accomplish such a thing..


Hey LBj why didn't you get a 20 year loan...you would have saved a lot over the term of the loan..but didn't you all ready know that ?

peb
01-28-2011, 02:30 PM
Food is really starting to go up in price, gas is expensive. These reflect the spike in commodity prices we have seen. I think that continues. On the other hand, a lot of hard assets, eg homes, will continue to be depressed. Inflation may be in the "eye of the beholder" for the next few years.
As to long term unemployment, yep that is probably correct.

johnw
01-28-2011, 02:50 PM
Spain's annualized inflation rate is less than 3% as of last month. That hardly sounds like stagflation.

The problem is that as countries like China, India and Brazil have recovered, demand for commodities such as oil and grain have gone up, while Spain is still suffering from the collapse of its property bubble. The things pushing up prices tend to be things that are imported, so I don't think the problem is Spain's own inflation. That peaked in 2007, along with the property boom.

ljb5
01-28-2011, 03:23 PM
LBJ--

A few years ago it was down to $1.80 a gallon..

And a few years ago, it was above $3.80 a gallon. Go figure.

This chart (http://gasbuddy.com/gb_retail_price_chart.aspx) says we're about where we were in 2007 and cheaper than it was in 2008.


Hey LBj why didn't you get a 20 year loan...you would have saved a lot over the term of the loan..but didn't you all ready know that ?

The benefit of shortening a loan decreases as the interest rate goes down. A very expensive loan you would want to pay off as soon as possible... In the extreme case, 0% interest, you would want a loan of infinite term, regardless of how soon you could pay it off.

4% is low enough, in my opinion, that it makes sense to hold it for as long as possible.

Through most of the 80s and 90s, CDs were paying better than 4%. If that happens again, I'll be happy to put my money into deposits and in no rush to pay down the mortgage any faster than necessary.

Keith Wilson
01-28-2011, 07:08 PM
Are we in a period of stagflation? No. Not even close.

RodSBT
01-29-2011, 12:12 AM
No inflation?

Give it a few months to a year and then get back to us.

JBreeze
01-29-2011, 12:57 AM
Interesting question....I can't address the situation in Spain, but there are some interesting methods used to calculate inflation in the US. Here is a cynical view of the US methods:

Substitutions and Hedonics: Inflation Data Absurdities

http://seekingalpha.com/article/24933-substitutions-and-hedonics-inflation-data-absurdities

At the lower end of the economic spectrum in the US, I think stagflation is occurring. Unemployment among those without college educations is very high, and will probably remain high for at least several more years.

Three of the four essentials, i,e, shelter, food, energy and insurance have been rising in price. Shelter is a tough one to analyze, as the price of housing has fallen, but those on the low end of the spectrum don't benefit, as they can't take advantage of low interest rates because credit isn't available to them. Similarly, it is difficult to move each month to take advantage of lower rents that may be available.

Food inflation is pretty apparent to those that do the household grocery shopping, manifested as higher prices and/or smaller contents within a package. Some of the financial bloggers claim that food processors' margins are being squeezed by higher input costs, so the trend will continue.

If one takes out the speculative blip in petroleum two summers ago, the overall trend is higher prices for energy over the longer term.

Finally, I haven't seen mention of falling prices for the essential types of insurance - home, auto and health.

So yes, I think a large portion of the US population is staring stagflation in the face, including those retirees that are dependent on gov't COLAS, which are non-existent.

For those with AAA rated finances, life is good, as non-essential items or luxury items can be had at falling prices w/ improved quality, and the Bernanke put has boosted returns on their portfolios.;)

AussieBarney
01-29-2011, 03:59 AM
I always get nervous when some beancounter says "We adjust". That means we are fudging the figures to make them say what we want them to. After 52years, I really do believe that one of the three great lies is" I'm from the Government and -(insert rest of lie, propoganda or whatever here) I would have thought by now that you lads would have cottoned on to the great rort that is politics. What should happen is, If you are a politician and you are caught lying or with you sticky little fingers in the cookie jar, execution, no appeal, same with the heads of major corps. Itwould stop the rot would it not. Politics is only considered a good carreer because so much cash can be raked off. Altruism is highly overated

Dutch
01-29-2011, 12:35 PM
I haven't observed any significant inflation around here.



you must not purchase gasoline nor food

genglandoh
01-29-2011, 12:46 PM
Commodities prices are going back up.
See the graph.
http://www.indexmundi.com/commodities/

The only area where prices are dropping is in the housing market.

I expect high inflation (about 8%) in 2 years.

RodSBT
01-29-2011, 12:56 PM
When the gubmunt declares inflation numbers they leave out food and energy costs, the two main indicators of inflation. These are the two necessities of modern life and they know it.

If they put those numbers out for the public to see they would have a problem on their hands. Of course, when one factors in how much funny money is being printed and dumped around the world they're gonna have problems anyways, BIG problems.

To bury ones head in the sand accepting the gov ploy of "low" inflation while all of the reality based indicators are showing the opposite is blind foolishness. The ostriches of the world are going to pull their heads out to get some air one day and find themselves in a rather large pile of fecal matter and then wonder what happened when the problem has been starring them in the face all along.

Gold and silver aren't at new highs because people are buying it as a commodity or it's just fun to own. They are buying it as fast as they can because the precious metals are the last stand/hedge against the destruction of wealth i.e. the paper money crashing (aka inflation). This is not a new concept, been around for centuries.

JBreeze
01-29-2011, 01:32 PM
March 27, 2008, 11:29 p.m. EDT
Dow 16K?
Commentary: Index could be at 16,000 by year end, Richard Band says

http://www.marketwatch.com/story/dow-heading-for-16000-richard-band-says

I guess many folks have problems with short-term calls:D I certainly do!

The topic of the thread was stagflation....any chance of getting back to that?

ljb5
01-29-2011, 02:54 PM
When the gubmunt declares inflation numbers they leave out food and energy costs, the two main indicators of inflation.

That simply isn't true.

Here is a recent report about inflation. (http://money.cnn.com/2011/01/14/news/economy/cpi_inflation/index.htm)

It specifically mentions food and energy costs. It says gas prices are up 8.5%, which does seem like a lot... but it also says food prices are up only 0.1% for the month, which is quite low.

The core CPI is up only 0.8% for the entire year, which is very low by historical standard, and the broader CPI is up only 1.5% for the year, which is also quite low.

The article also mentions that inflation in the US is significantly lower than it is in Europe and Asia.

I don't know what you goofballs are comlaining about, but the facts simply don't back up your claims.

Where are you getting your information? Did it every occur to you that this information can actually be verified so if you start spouting hogwash you're going to get busted?

jantje
01-29-2011, 02:57 PM
I wonder.....

A pack of household candles going from 2.50 Birr ( local currency) to 20.- within 2 years, beeing half as thick as before though
A bottle of nasal-drops going from 12.- to 30.- within a WEEK
A small house going up in rent from 350.- to a 1200.- within a year

Sales dropping to below 50 Percent
peopke fighting in front of food-stores
shops closing down by the day
WATERsupplies from the tap going down to 2 -3 hours a day
Electricity dropping out every other hour ( if not minute)....even though a next gigantic Power-plant has just been built

If the one is not "Inflation" and the other not "Stagnation" I must have learnt my vocabulary wrongly......

OK...it s not QUITE as bad everywhere, but thinking about the riots in France a couple of years back ( coming close to a civil war in the outskirts of Paris) thinking about Greece beeing broke to the last penny, plenty of people I know in Germany suddenky loosing their jobs, shops and workshops having to close down.....social wellfare cut down to an unbearable minimum, people freezing in winter at a never known ratio since the big wars.....looking at Egypt, Algeria......
I wonder, what You would call all that if not "Stagflation".
Maybe in the US there are still possibilities of avoiding to see things straight...I don't know, but I don't think it will last much longer.

Aaahh...politricks are such a nice topic to fuss about ! ;-) ;-)
Just don't get annoyed about them too deeply!


Jantje

ljb5
01-29-2011, 03:05 PM
I don't wish to sound too Amero-centric, but I don't think Ethiopia is really a good indicator of the world economy.

Besides, I was led to believe that the government of Ethiopia deliberately devalued the birr because they thought it would make them more competitive.

There was, in the US, a concern that we would experience deflation, which is even worse for an economy than inflation.

It looks like that hasn't happened (by conventional measures)... but we definitely are not experiencing unusually high inflation.

jantje
01-29-2011, 04:13 PM
@ Jib5

Definitely Eth is not an average measurement....You're absolutely correct there, it is a "top of the game extreme"of the other examples I stated.....Europe,other African countries, You may take South-America as well,
I guess Russia just the same....don't know much about India.

China seems to be doing quite fine.....for once, if You want to put that on the other part of the scale.
Concerning the US, I a not a financial or economical expert and maybe not into the utmost actual information, but from what I’ve heard and seen, it doesn’t look too amusing either. At least they’re complaining about Chinas progress quite loudly.

You’re also right about the Birr beeing devaluated in comparison to the US –Dollar or even Euro while the Euro again in itself was a devaluation of most prior European currencies.
The true devaluation though is concerning inland-products, sold inland here, not actually having to compete with Dollar or Euro but cutting peoples work and efforts in half….which to my knowledge IS “inflation”,…meaning that everything costs double, triple, multiple without beeing countervalued….people having to pay more cause the money is worth less but not EARNING more. The same went for the Euro when it was installed…..the wages were cut in half mathematically but the prices in the shops kept allmost the same……..just got a “Eurosign” in front of them instead of Gulden D-Mark or Franc. ( Or to put it correctly…they were risen to the same shortly after again, after people had got used to the Euro.)

Correct me if I am mistaking !

Jantje

johnw
01-29-2011, 04:27 PM
No inflation?

Give it a few months to a year and then get back to us.
The right in the US has been saying this since early 2009. Still waiting.

Now, China really does have inflation -- and a 9.1% growth rate.

India also has inflation -- and an 8.9% growth rate.

Brazil has a 4.4% inflation rate, which is not too bad, and a 7.6% growth rate.

Spain has an inflation rate of 1.4%, and a growth rate slightly above zero. It has stagnation, not stagflation.

With some of the most populous countries in the world growing strongly, you can expect prices of commodities to go up, but on the other hand, Spanish housing costs are still on the way down, and we may see wages go down as well. Spain lost about 33% of its competitiveness against Germany over the last decade, and because of the Euro, they can't correct for it with devaluation. That means wage deflation is likely, unless Germany can be convinced that more inflation would help revalue the Spanish economy. I wouldn't hold my breath for that.

ljb5
01-29-2011, 04:28 PM
The true devaluation though is concerning inland-products, sold inland here, not actually having to compete with Dollar or Euro but cutting peoples work and efforts in half….which to my knowledge IS “inflation”,…meaning that everything costs double, triple, multiple without beeing countervalued...

These economic indicators are pretty easy to measure...

Currently, we are experiencing fairly low inflation rates, at least in the US.

That's pretty much all there is to say about it.

People who want to blame Obama for their troubles might say something different, but that doesn't make it true.

jantje
01-29-2011, 04:37 PM
@Jib 5
Yeah...I suppose they are measurable, question is who does it....statistics or Your wallet ?
Let's wait and see ;-)

Jantje

ljb5
01-29-2011, 04:41 PM
@Jib 5
Yeah...I suppose they are measurable, question is who does it....statistics or Your wallet ?


I don't think there's much mystery about who measures inflation and how.

Perhaps you should have looked at the indicators before you took a stance on this issue.

I already posted some links. They aren't difficult to find.

PhaseLockedLoop
01-29-2011, 07:19 PM
I note that the result of the enquiry into the crash has said it 'didn't have to happen, it was the result of human errors compounding'. Duh!

Errors, hell. They did it on purpose.

nw_noob
01-29-2011, 07:47 PM
1) You can argue about how inflation is measured, but the method hasn't changed in years.... it's extremely low.


This is the most significant thing I've seen in this thread. Those saying "inflation is low" are taking Govt. figures at face value. Those saying "don't you see the inflation?" don't believe the official numbers.

Personally I fall into the second camp. Using pre Reagan-era methods of calculating inflation, you can knock about 2-3% off of the inflation adjusted GDP figures.

As another poster said, we've got stagflation for the poor, but maybe not for those with larger bankrolls.

johnw
01-29-2011, 07:53 PM
core inflation the fed uses does not include food and energy, CPI does. The headline number is sometimes core inflatino, sometimes CPI, which is where people get the thinking that the foor and energy are always absent.

Inflation is has been low, actually deflation, but lately is showing definite signs of picking up. Commodity prices are surging. Energy prices are high. Gas has been going up. The economy is picking up and inflation seems to be kicking in, which is what we should expect. The velocity of money being so low is what held it all in check, since the money supply has been increesed. When the velocity picks up, the only way to keep inflation at bay is to pull back on the money supply. The fed is not doing that.

Norman's comments on gold being a 4 month low, any trader would laugh at him. After its run-up, it should have corrected much more than it has, it has really just been moving sideways for a while. Markets that don't correct, but move sideways, are often signs of trends continueing. So that is just meaningless, either way.

My prediction, inflation will be low to moderate for another year or two, longer if we go into another recession. In 12-24 months it will start being pretty noticable.
I hope you're right, both because recovery seems to be a precondition for inflation and because a little inflation would make it less painful to reprice things like housing. With sufficient inflation, houses that have lost real value won't be under water on their mortgages, and it will be easier for people to sell their homes. That's better for people who need to sell for financial reasons, and it's also better for labor mobility.

ljb5
01-29-2011, 08:48 PM
This is the most significant thing I've seen in this thread. Those saying "inflation is low" are taking Govt. figures at face value. Those saying "don't you see the inflation?" don't believe the official numbers.

CPI is measured using a relatively simple, non-mysterious method.

It is, quite literally, the actual price paid for certain goods and services by real consumers on the open market.

There's plenty of room to argue about whether it truly represents consumer behavior.... but there can be no dispute about how real and measureable the numbers are.

nw_noob
01-29-2011, 09:41 PM
CPI is measured using a relatively simple, non-mysterious method.

It is, quite literally, the actual price paid for certain goods and services by real consumers on the open market.

There's plenty of room to argue about whether it truly represents consumer behavior.... but there can be no dispute about how real and measureable the numbers are.

When you start changing exactly what those certain goods are, you get a rigged index that manufactures it's own numbers, rather than reflecting what the market is actually doing in terms of price.

ljb5
01-29-2011, 10:18 PM
When you start changing exactly what those certain goods are, you get a rigged index that manufactures it's own numbers, rather than reflecting what the market is actually doing in terms of price.

Perhaps... but if you don't adjust to reflect people's changing purchasing habits, you don't get a realistic picture either.

It's probably a mistake to assume you're the only one who has considered the impact of market basket changes. (http://www.bls.gov/osmr/pdf/st950200.pdf)

It's also a mistake to assume that correcting for this would skew the numbers in your favor.

It's well known that real consumers tend to adjust to price differences faster than the CPI basket shows. That is to say, real inflation is actually less than what the CPI shows.

Even if you think the numbers are 'rigged'... they are no more riggged now than they were five, ten or twenty years ago.... So we're still left with the conclusion that inflation is low by historical standards.

P.I. Stazzer-Newt
01-30-2011, 01:59 AM
Perhaps... but if you don't adjust to reflect people's changing purchasing habits, you don't get a realistic picture either.
......
Even if you think the numbers are 'rigged'... they are no more riggged now than they were five, ten or twenty years ago.... So we're still left with the conclusion that inflation is low by historical standards.


Which is why I asked "who are we?".

In the UK, there have been large changes in the method - in the choice of goods in the basket, their weightings, and crucially in what is left out of the calculation.

our figures are very carefully massaged for political purposes - not useful for any real world analysis.

varadero
01-30-2011, 04:09 AM
The right in the US has been saying this since early 2009. Still waiting.

Now, China really does have inflation -- and a 9.1% growth rate.

India also has inflation -- and an 8.9% growth rate.

Brazil has a 4.4% inflation rate, which is not too bad, and a 7.6% growth rate.

Spain has an inflation rate of 1.4%, and a growth rate slightly above zero. It has stagnation, not stagflation.



With some of the most populous countries in the world growing strongly, you can expect prices of commodities to go up, but on the other hand, Spanish housing costs are still on the way down, and we may see wages go down as well. Spain lost about 33% of its competitiveness against Germany over the last decade, and because of the Euro, they can't correct for it with devaluation. That means wage deflation is likely, unless Germany can be convinced that more inflation would help revalue the Spanish economy. I wouldn't hold my breath for that.

You ask any person in Spain about 1.4% inflation and they will give you a funny look.
Food 16%
Petrol 12%
Butano 8%
Cigarettes 20%
VAT alone has raised the price across the board by 1%
All public sector workers have seen a 10% drop in salary
Of course if you buy a flat screen telly, a fridge and a car every week, you might have a bit more pocket change.;)

purri
01-30-2011, 05:44 AM
^Yep. Here they include cars and "major white goods" aka stoves and fridges (having a 20 year replacement cycle) yet exclude food and petroleum.

ljb5
01-30-2011, 09:41 AM
^Yep. Here they include cars and "major white goods" aka stoves and fridges (having a 20 year replacement cycle) yet exclude food and petroleum.

Really?

The Australian Bureau of Statistics (http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6401.0?opendocument#from-banner=LN) says food is included.

ljb5
01-30-2011, 09:46 AM
You ask any person in Spain about 1.4% inflation and they will give you a funny look.

In Spain, it's more like 3%.... which is still fairly low.


Food 16%
Petrol 12%
Butano 8%
Cigarettes 20%


Where did you come up with these numbers?

Did you just make them up like you do with everything else?

My Spanish isn't very good, but I know what "1. Alimentos y bebidas no alcohólicas -- 0.7% Anual" means.

varadero
01-30-2011, 10:09 AM
I eat, drive a car, buy butano every week, and now roll my own cigarrettes. Those numbers you have just quoted are nonsence, or are not based on basic neccesities like bread, meat, olive oil, fruit, and veg. I am not saying you are nonsensical, I am saying that the numbers do not reflect reality.

ljb5
01-30-2011, 10:19 AM
I eat, drive a car, buy butano every week, and now roll my own cigarrettes.

I believe you.... but it still doesn't explain where you came up with those numbers.

Pretty much everyone eats and buys gas.... but very, very few of us are able to instantly come up with numbers showing how much we spent on food last month, let alone a year ago.

varadero
01-30-2011, 10:31 AM
A recent artical in the local paper, a lot of salaries and government pensions are increased annually based on the figures published by the government, likewise, prices and tarrifs regulated by govt like butano, electricity, etc. Are not suposed to rise by a greater amount. Needless to say, the the two have diverged. I will try to find an online version,and c+p it for you.

genglandoh
01-30-2011, 10:45 AM
The CPI is a weighted average so if the expensive item drops in price (homes) and the low cost items (food) increase in price the index will drop.

ljb5
01-30-2011, 10:52 AM
The CPI is a weighted average so if the expensive item drops in price (homes) and the low cost items (food) increase in price the index will drop.

It is weighted to reflect what an 'average' consumer actually purchases in a month.

People don't purchase one house per month... they pay rent or mortgage, which is a small fraction of the total cost of a house. Therefore, the CPI reflects only the monthly expenditure on housing, not the total cost.

P.I. Stazzer-Newt
01-30-2011, 11:25 AM
The CPI is a weighted average so if the expensive item drops in price (homes) and the low cost items (food) increase in price the index will drop.

A (huge) error in this statement is the first word - "The", there are many different indices - each country has its own rules.

nw_noob
01-30-2011, 01:30 PM
Perhaps... but if you don't adjust to reflect people's changing purchasing habits, you don't get a realistic picture either.

It's probably a mistake to assume you're the only one who has considered the impact of market basket changes. (http://www.bls.gov/osmr/pdf/st950200.pdf)

It's also a mistake to assume that correcting for this would skew the numbers in your favor.

I understand that people's purchasing decisions are market driven to a certain degree, that's why people bought into the justification for changing the method of CPI calculation. I'm also well aware that others have looked into this effect on inflation. The question is whether those who looked into this were impartial observers.

Also, it's just an aside, but "in my favor.." Why the heck do I want my dollars to depreciate faster than they already are? You've gotta lose this combative outlook, dude. I might be getting an education here.




It's well known that real consumers tend to adjust to price differences faster than the CPI basket shows. That is to say, real inflation is actually less than what the CPI shows.

Just because rice gets expensive, doesn't mean everyone is going to substitute spuds. Claiming that real inflation is actually less than CPI sounds counter intuitive. How exactly can the dollars in my pocket be worth more (well, less less), and at the same time buy less stuff? I don't accept the two systems of computation as true. One system ignores fuel and food, which are intrinsically tied. The other manipulates the data. Bouncing the two measures off of one another to get a picture of "real inflation" just doesn't sit well with me.



Even if you think the numbers are 'rigged'... they are no more riggged now than they were five, ten or twenty years ago.... So we're still left with the conclusion that inflation is low by historical standards.


You're right, inflation has been relatively steady for a couple decades. The Reagan administration changed the game, so 20 years of numerical stability means nothing to me.

ljb5
01-30-2011, 05:43 PM
Also, it's just an aside, but "in my favor.." Why the heck do I want my dollars to depreciate faster than they already are?

I don't know why, but you seem to be emotionally invested in arguing for that..... even to the extent of ignoring the facts.


Just because rice gets expensive, doesn't mean everyone is going to substitute spuds. Claiming that real inflation is actually less than CPI sounds counter intuitive.

If rice gets more expensive, it doesn't necessarily mean that people will substitute spuds... but it does mean that people have the option of substituting spuds... which the CPI analyst does not have. (The analyst if given an extremely specific set of prices to check and is not allowed to deviate except after infrequent realignments.)

Having the option represents a value to the consumer and therefore the consumer experiences (slightly) less inflation than the CPI indicates.


How exactly can the dollars in my pocket be worth more (well, less less), and at the same time buy less stuff?

How much less can they buy?

The official numbers, carefully collected and compiled show that they buy about 1.5% less than they did a year ago. That's pretty low, by historical standards.

If you think you've got another number that is more accurate than the 'official,' feel free to trot it out. But so far, you haven't offered anything except your vague notions and inaccurate assumptions.


I don't accept the two systems of computation as true. One system ignores fuel and food, which are intrinsically tied. The other manipulates the data. Bouncing the two measures off of one another to get a picture of "real inflation" just doesn't sit well with me.

I don't care if you accept it or not. The numbers are perfectly easy to evaluate and there is no mystery about what they mean.

For all its flaws, it's a heck of a lot better than your system which appears to be based entirely on blurting stuff out without caring if it's true or not.

Do you have any actual numbers, based in reality to support your argument?

If you don't think inflaction can be measured, you're mistaken. But if you don't think it can be measured, while simultaneously arguing that we're experiencing stagflation, you're contradicting yourself.

purri
01-30-2011, 06:13 PM
Really?

The Australian Bureau of Statistics (http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6401.0?opendocument#from-banner=LN) says food is included.
My poor explanation mate.

Having worked for the ABS some foodstuffs are excluded (restaurants and other food outlets). And the effect of whitegoods and cars having such a long lifestyle has an unneccessary impact on quarterly and annual figures posted. Indeed the "basket of commodities" can be shifted under govt edict to fit their doctrine as they see fit. (and has been)

BTW the spot price of petroleum is not factored in. Oz is set at the Singapore exit price by the refineries. It varies from week to week.

ljb5
01-30-2011, 06:28 PM
Indeed the "basket of commodities" can be shifted under govt edict to fit their doctrine as they see fit. (and has been)

Everyone keeps saying that, but the facts don't really support that.

In this country, changes to the basket are well publicized and infrequent. (The CPI adjusts less often than real consumers, therefore real consumers see less actual inflation than the CPI shows.)

Even if we believe the government nudges the numbers downwards, we're still left with the fact that current inflation rates are at or near historical lows.

If you want to add a point or two current numbers, feel free.... just remember to do the same for all previous years... in which case, we're still left with the conclusion that we're at or near historical lows.

Around here, rents have come down, home prices have come down, mortgage rates have come down, gas prices have come down....food prices are about the same as they were were a year ago....

This is not inflation.

johnw
01-30-2011, 06:29 PM
You ask any person in Spain about 1.4% inflation and they will give you a funny look.
Food 16%
Petrol 12%
Butano 8%
Cigarettes 20%
VAT alone has raised the price across the board by 1%
All public sector workers have seen a 10% drop in salary
Of course if you buy a flat screen telly, a fridge and a car every week, you might have a bit more pocket change.;)
I thought my inflation number, which I got from Wikipedia, might be obsolete, so I went hunting and found that it was. But the inflation rate is still under 3%. I don't doubt that some items have gone up while others have gone down, but can the official numbers be that far off?

http://www.global-rates.com/economic-indicators/inflation/consumer-prices/cpi/spain.aspx

As for wages going down, that's a sign of deflation. If you had your own currency, you could devalue and get back the lost 33% of competitiveness at a stroke, but since you're part of the Euro, wages have to go down. Instead of revaluing the entire economy with devaluation, you'll have to negotiate lower prices, and that's not a uniform process. Some people have the power to resist wage cuts. The process will transfer wealth from debtors to creditors, as wages decrease and nominal debt does not. It's a much more painful process than devaluation, and I don't envy the Spanish. But it's not the same as stagflation. In fact, I expect it will be much more painful. Stagflation did not include wage cuts.

nw_noob
01-30-2011, 08:27 PM
I don't know why, but you seem to be emotionally invested in arguing for that..... even to the extent of ignoring the facts.

If anyone is emotionally invested in arguing here, it ain't me. So far you've only said, official CPI numbers are right, and here's a long PDF from the government explaining why. I'm about as emotionally detached from this discussion as is humanly possible, at the moment. All I've done is point out the point of contention that divides the two types of posters on this thread, and explained a bit about why I think there's some validity to the contrarian view.


If rice gets more expensive, it doesn't necessarily mean that people will substitute spuds... but it does mean that people have the option of substituting spuds... which the CPI analyst does not have. (The analyst if given an extremely specific set of prices to check and is not allowed to deviate except after infrequent realignments.)

Having the option represents a value to the consumer and therefore the consumer experiences (slightly) less inflation than the CPI indicates.Got it. I misunderstood your original meaning.

Although it seems to me that any realigning of the makeup of the market basket leaves open the possibility to mask inflation.




How much less can they buy?

The official numbers, carefully collected and compiled show that they buy about 1.5% less than they did a year ago. That's pretty low, by historical standards.

If you think you've got another number that is more accurate than the 'official,' feel free to trot it out. But so far, you haven't offered anything except your vague notions and inaccurate assumptions.

I don't care if you accept it or not. The numbers are perfectly easy to evaluate and there is no mystery about what they mean.

For all its flaws, it's a heck of a lot better than your system which appears to be based entirely on blurting stuff out without caring if it's true or not.

Do you have any actual numbers, based in reality to support your argument?
Yes.


http://blogs.forbes.com/greatspeculations/2010/12/16/government-inflation-numbers-are-bogus/
http://dailyreckoning.com/files/2010/12/DRUS12-15-10-3.gif

http://dailyreckoning.com/files/2010/12/DRUS12-15-10-2.gif

Check out the table on pg. 1 here: http://www.bankrate.com/brm/news/boomerbucks/20080326_inflation_a1.asp
(http://www.bankrate.com/brm/news/boomerbucks/20080326_inflation_a1.asp)


If you don't think inflaction can be measured, you're mistaken. But if you don't think it can be measured, while simultaneously arguing that we're experiencing stagflation, you're contradicting yourself.I never said inflation can't be measured, you're making that up. I just said that by making substitutions within the market basket, inflation can be masked. I also said that by using two methods of computation, one of which ignores food and fuel, the other of which changes the data, is a less than ideal system, and isn't one I put much trust in.

Also, I haven't argued that we're experiencing stagflation, I just said that the poor might be. They are the ones who spend the largest portion of their funds on housing, food, fuel, and energy. They are also the ones most likely to be unemployed, or underemployed.

ljb5
01-30-2011, 09:50 PM
Although it seems to me that any realigning of the makeup of the market basket leaves open the possibility to mask inflation.

Sure, but not realinging it leaves open the possibility of not having a realistic picture of the situation.

If you want to measure inflation using a market basket from the Carter era, you'll have to put on your polyester leisure suit, pull out your eight-tracks and pour yourself a nice, cold Tab.

Want to talk about what's happened to the price of a computer since Reagan was in office?

There's a reason why the basket changes periodically. It's not sinister... in fact, it would be faulty if they didn't adjust it from time to time.

Sure, the price of a car has gone up since 1980, but I know for a fact that the 2010 BMW was actually cheaper than the 2009 of the same model.

================================================== ================================

Incidentally, I really wish people would stop saying that food and fuel prices are excluded. That's simply not true. CPI is reported both with and without food and fuel. This acutally provides more information, not less. If you want to include food and fuel, just look at those numbers. The numbers aren't excluded unless you're unwilling to look at them.


================================================== =====================================
If you don't like looking at government figures, you don't have to. There are plenty of real-world examples. Interest rates are at record lows. Mortgage rates are low. CDs and savings accounts are paying just about zero. I know some areas where rent actually decreased this year. House prices have come down. Wages and salaries remain low.

These are all indicators of low inflation.