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David G
03-12-2012, 12:49 PM
The various measures of inflation - headline, core, median, trimmed-mean, etc. - are each tools, each with their own job, and each designed to give us a different perspective.

http://krugman.blogs.nytimes.com/2010/02/26/core-logic/

The standard measure tries to do this by excluding the obviously non-inertial prices: food and energy. But are they the whole story? Of course not and standard core measures have been behaving a bit erratically lately. Hence the growing preference among many economists for measures like medians and trimmed means, which exclude prices that move by a lot in any given month, presumably therefore isolating the prices that move sluggishly, which is what we want.

Tylerdurden
03-12-2012, 12:58 PM
Wake up dude. The only people who beleive the fantasy are those who are working and watching reruns of fantasy island.

David G
03-12-2012, 01:10 PM
Wake up dude. Again you offer nothing of substance. Since you don't know enough about how this stuff works, you don't know enough to critique it. And since you've too locked into your own fantasy-world to attempt to understand it... you have nothing to say that's helpful. The only people who subscribe to your block-ops, black helicopter, everything is a government conspiracy view of the world are still reading 'graphic novels' in their folks basement, or are off their meds. Speaking of which...

Dave Wright
03-12-2012, 01:51 PM
In general I like Krugman. But we have to note that his graph shows an inflection point for trimmed inflation, so now we have to guess whether median inflation will follow trimmed inflation as subsequent data comes in. I don't know enough about either index to predict; my guess is median inflation will follow and turn upward also. Probably Krugman is particularly concerned because deflation is a difficult plight to reverse, and there are enough politicians around who are silly enough to crush the apparent recovery signs we are seeing.

David G
03-12-2012, 02:07 PM
Dave,

It's an older article. The latest data on that chart were mid-2009. The chart has been rendered moot by time - but the core principles remain relevant. My point is directed as the fruitloops who suggest that each new device for measuring inflation is yet another attempt to bamboozle the public thru misdirection. They are not. They are attempts by knowledgeable folks to better measure a phenomenon.

If you wanted to see how the various measures compared since then, it'd take a bit of digging, but surely could be done. What we do know is that the deflation that the author mentions has not become a big concern. Neither has runaway inflation.

Dave Wright
03-12-2012, 02:26 PM
For fun, you could take a peek at the MIT / Sloan "Billion Prices Project." It's a recent device using a collection of many retail online prices, and will cover many countries. A limitation is that they don't reveal exactly whose prices they're looking at, but you can see their graphs for their U.S. daily index here:

http://bpp.mit.edu/usa/

They also display the CPI with their index for comparison.

Tylerdurden
03-12-2012, 02:32 PM
The core logic here is fanatical devotion to the point of escaping every other fact.

David G
03-12-2012, 02:37 PM
The BPP numbers appear, at first glance, to be slightly less volatile than CPI (which would make sense, I think) but to track fairly closely. Pretty impressive to be able to do it in real time. Technology is amazing. And I don't think I'll ever get over the predictive capabilities of statistics.

brad9798
03-12-2012, 02:41 PM
David G has done some good bashing ... some complaining ... and some factual posts ... But David G has an agenda ... WE should ALL know that ... so his posts do NOT mean a whole lot ... he came out of the woodwork lately to push his agenda ... Let's not give it too much credence!!!

Canoeyawl
03-12-2012, 02:46 PM
Wake up dude. The only people who beleive the fantasy are those who are working and watching reruns of fantasy island.

Reruns?

I thought that show was back on prime time again.
Starring Mitt, Rick, Newt, and Ron - brought to you by Brawny paper towels and Angel Soft toilet paper. Oh wait...

David G
03-12-2012, 02:52 PM
The core logic here is fanatical devotion to the point of escaping every other fact.

Do come back around when you have something to offer beyond drive-by attacks and gratuitous deflection.

David G
03-12-2012, 02:56 PM
David G has done some good bashing ... some complaining ... and some factual posts ... But David G has an agenda ... WE should ALL know that ... so his posts do NOT mean a whole lot ... he came out of the woodwork lately to push his agenda ... Let's not give it too much credence!!!

brad,

Of course I have an agenda. Of course... I see part of my agenda as the spread of truth and the debunking of both deliberate and misguided misinformation and disinformation. I see the other part of my agenda as the testing of my information and hypotheses against the perspectives of others.

What do YOU see as my agenda?

And why on earth would having an agenda equate to reduced credence? Doesn't everyone have an agenda of some sort? Regardless of a persons agenda, either their facts are correct, their logic sound... or not. If you think my 'facts' are not so accurate, and my logic is flawed... feel free to challenge them. If you eventually conclude that my facts and logic are generally 'off'... THEN you might be justified in deducting some credence points. If you do so simply because my agenda or viewpoint doesn't match YOURS... then you're just acting the stubborn fool.

Dave Wright
03-12-2012, 03:05 PM
The core logic here is fanatical devotion to the point of escaping every other fact.

I thought the MIT Billion Prices Index would have appealed to most. Reasonably easy to understand, isolated from "big gubbermint conspiracy," and real time figures. Are internet sellers doing something underhanded when they post the prices for their products online? Are they conspiring in some way? Here's an easy and informative New Yorker article on the MIT BPI:

http://www.newyorker.com/talk/financial/2011/05/30/110530ta_talk_surowiecki

I know, hear New York or New Yorker and you say "Somebody get a rope!!!" It's actually a damn good magazine.

Dave Wright
03-12-2012, 03:15 PM
From Surowiecki's New Yorker article referenced above:

"....if you’re a conspiracy theorist you can now look to the B.P.P. rather than to the regular inflation number to see what’s happening."

Read more http://www.newyorker.com/talk/financial/2011/05/30/110530ta_talk_surowiecki#ixzz1ow3AReIs

hokiefan
03-12-2012, 03:40 PM
From Surowiecki's New Yorker article referenced above:

"....if you’re a conspiracy theorist you can now look to the B.P.P. rather than to the regular inflation number to see what’s happening."

Read more http://www.newyorker.com/talk/financial/2011/05/30/110530ta_talk_surowiecki#ixzz1ow3AReIs

But see, TD doesn't see himself as a conspiracy theorist. He thinks he's a realist.

Cheers,

Bobby

Tylerdurden
03-13-2012, 06:58 AM
But see, TD doesn't see himself as a conspiracy theorist. He thinks he's a realist.

Cheers,

Bobby


Yep, Because whatever these Donks post here to say it's getting better reality on the streets says other wise. I don't know what it takes for a man to grasp reality past a hard slap across the face but I will chance to say most everyone has one coming. The trick is not to avoid it and instead recover your footing.
GRIME WAVE It’s a dirty job: Police nationwide take on soaring Tide detergent theft

http://www.thedaily.com/page/2012/03/12/031212-news-tide-theft-1-4/

Dutch
03-13-2012, 07:20 AM
anyone who believes the inflation numbers put out by government is living in a dream world

QE 1,2 were bad enough cause they told us about it. now theyre doing an end around and keeping the printing presses going full bore without even mentioning it to the lemmings.

its a shell game and we the people are on the losing end of a very dirty stick

Dutch
03-13-2012, 07:28 AM
what does it take for some of you morons to figure this out?


NEW YORK (Commodity Online): Gold Bullion market run is expected to continue as the central banks are going on printing money around the world which gives chance for more investors to participate in the great bull run, says a recent article by Danny Esposito, Co-editor to Penny Stocks Detectives.

Esposito comments,“Historically, gold bullion has always done well when central banks print money. In the last three years, central banks have been on a money-printing binge never seen before in the history of the world.”

Esposito notes that, in the U.S., the Fed has printed $2.0 trillion in the last three years. At the latest Fed meeting, Ben Bernanke has hinted that, if the economy doesn’t improve, more money printing could be on its way, which is supporting gold bullion.

Japan has printed $800 billion over the last three years, says the article. Bank of England announced a $79.0 bn program last month, which brings three year money printing total to over $513 bn.

The article says the European Central Bank expanded its balance sheet by $1.0trillion over the last three years. Its latest LTRO program adds another $712.2 bn to the money-printing pot.

Quietly, China has also printed more than $1.5 trillion over the last three years, comments Esposito.

Esposito adds,”In an attempt to help the slowing global economy spring back to life, the major central banks of the world are printing money. This trend looks to continue at least for the better part of 2012. Historically, when central banks print, investors have flooded into gold bullion to protect themselves.”

http://www.commodityonline.com/news/gold-bull-market-will-continue-as-central-banks-print-more-money-46608-3-46609.html

David G
03-13-2012, 06:31 PM
Dutch,

As far as I remember, you've been wrong about every economic pronouncement and interpretation you've ever offered.

Get back to us when you can show a track record of being correct. Morons, indeed.

Dave Wright
03-13-2012, 07:08 PM
....whatever these Donks post here to say it's getting better reality on the streets


What's a Donk? I thought I learned every possible term in the merchant marine but never heard that one. I'd guess then that it must be a term of endearment.

David G
03-13-2012, 07:18 PM
I don't understand what Krugman is saying, would you please explain it in laymans terms.

Seriously,you seem to understand these things, I don't.

Thank you,

delecta,

My qualifications are sketchy. Bachelors in economics, and dropped out after 2 years into a PhD program in economics. Since then, I've been a simple small biz owner, and haven't worked in the field of economics at all. But I do read a wide range of economics blogs - from conservative, to libertarian, to non-partisan, to liberal. I also read The Economist regularly, and the WSJ and NYT semi-regularly. I figure that makes me a full-fledged Junior Economist - with the propeller beanie to prove it.

But it leaves me far behind someone like Krugman, and behind several people right here in the Bilge (no, td & dutch are not among them). And one of Krugman's strengths is his ability to put complex concepts into layman's language. In the case of this article, I could likely do no better, and would very possibly muddy the waters for you by attempting to paraphrase. Perhaps if you had specific points that you'd like addressed, I could attempt it, or one of the brighter lights might wander by and help out.

Keith Wilson
03-13-2012, 07:55 PM
I don't understand what Krugman is saying; would you please explain it in layman's terms? I'll give it a shot, although God knows I'm not an economsist with a Nobel prize. Chris Ross is far better at these things than I am, so I hope he'll correct me if I'm wrong.


Core inflation isn’t supposed to measure the cost of living, it’s supposed to measure something else: inflation inertia. Krugman is introducing the concept of inflation inertia - the tendency of prices to continue in the same direction they're already going, up or down. This is because when prices change at fairly long intervals, people take expected future inflation or deflation into account when setting the prices. Once people expect inflation or deflation, it's hard to change their minds.


. . . we’d like to keep track of this sort of inflation inertia, both on the upside and on the downside — because just as embedded inflation is hard to get rid of, so is embedded deflation. . . . So we need a measure that extracts the signal from the noise, getting at the inertial part of the story.


"The standard measure (the normal "core" inflation figure) tries to do this by excluding the obviously non-inertial prices (prices that change rapidly and bounce around a lot): food and energy. But are they the whole story? Of course not — and standard core measures have been behaving a bit erratically lately. Hence the growing preference among many economists for measures like medians (http://en.wikipedia.org/wiki/Median). . .

Definition of median: One type of average, found by arranging the values in order and then selecting the one in the middle. If the total number of values in the sample is even, then the median is the mean of the two middle numbers. The median is a useful number in cases where the distribution has very large extreme values which would otherwise skew the data.

and trimmed means (http://en.wikipedia.org/wiki/Truncated_mean), which exclude prices that move by a lot in any given month (Just what it says - the mean is a normal average, but in this case you leave out all values that have moved more than a certain amount in that time period.) and presumably therefore isolating the prices that move sluggishly, which is what we want.

And the point of the article is when you use medians or trimmed averages that effectively separate out volatile prices: "what these measures show is an ongoing process of disinflation that could, in not too long, turn into outright deflation"

http://www.princeton.edu/~pkrugman/coredeflate.png

I'm not really qualified to judge whether he's right or not, but it reinforces what I think the best evidence shows; that inflation is certainly not a problem right now.

David G
03-13-2012, 08:52 PM
It seems you know very little about this topic and I'm sorry to put you on the spot. Please forgive me for asking you.


"The standard measure tries to do this by excluding the obviously non-inertial prices: food and energy. But are they the whole story? Of course not — and standard core measures have been behaving a bit erratically lately. Hence the growing preference among many economists for measures like medians and trimmed means, which exclude prices that move by a lot in any given month, presumably therefore isolating the prices that move sluggishly, which is what we want."

Seriously, what the hell is he talking about?

Sounds like, forget about food and fuel, real estate is still down so there fore we don't have inflation.


So what you're telling me is that we have deflation rather then inflation even though the cost of everything based on fuel has risen?

delecta,

Re. your first comment -- No problem at all with you asking, and I don't feel put on the spot. I just thought it might serve you well to know my background. I believe you could more accurately say I know a moderate amount on the topic.

Re. your second comment -- I think Keith did as good a job as anyone would do at paraphrasing Krugman's comments. You are not holding up your end by making an honest attempt to comprehend. Such an attempt would include reading the whole thread, and would include reading the graph instead of just glancing at it. Either of those would have answered your question.

This is why I was disinclined to humor your request to have the article explained. Beyond my limited energy as I recover from cancer - your past history gave me no great confidence that you were honestly trying to understand, and would make a sincere effort to do so. It appears my misgivings were well-founded. I was hoping they wouldn't be <sigh>

Keith Wilson
03-13-2012, 09:00 PM
So what you're telling me is that we have deflation rather then inflation even though the cost of everything based on fuel has risen?That's not what I said, nor what Krugman said. If you take out volatile prices, there's essentially no inflation. Oil prices are affected by so many external events (growth in China and India, recovery of demand in the US, the sh!t hitting the fan in Syria, the Libyan revolution, stability in Iraq or not, worries about possible military action by Israel or the US against Iran, Hugo Chavez's health, etc.) that calling recent oil price increases "inflation" is misleading. Inflation is a general increase in all prices, basically a devaluation of money. An increase in the price of a scarce commodity, even one so ubiquitous as oil, is something different, and requires a different response