Inflation Not Happening, Gold Down

Paul Krugman tries to understand the right-wing Glenn Beck gold craze:

So how can we rationalize the modern goldbug position? Basically, it depends on the claim that runaway inflation is just around the corner.

Why have so many people found this claim persuasive? John Maynard Keynes famously dismissed the gold standard as a “barbarous relic,” noting the absurdity of yoking the fortunes of a modern industrial society to the supply of a decorative metal. But he also acknowledged that “gold has become part of the apparatus of conservatism and is one of the matters which we cannot expect to see handled without prejudice.”

And so it remains to this day. Conservative-minded people tend to support a gold standard — and to buy gold — because they’re very easily persuaded that “fiat money,” money created on a discretionary basis in an attempt to stabilize the economy, is really just part of the larger plot to take away their hard-earned wealth and give it to you-know-who.

But the runaway inflation that was supposed to follow reckless money-printing — inflation that the usual suspects have been declaring imminent for four years and more — keeps not happening.

Gold graph

More info:
New York Times: Gold, Long a Secure Investment, Loses Its Luster

  1. #1 by brewski on April 12, 2013 - 1:47 pm

    Thank you for advertising your lack of understanding of this topic. It is very helpful for me to know how deep your misunderstanding is.

  2. #2 by Richard Warnick on April 12, 2013 - 1:50 pm

    What about Paul Krugman? Should they rescind his Nobel Prize in Economics?

  3. #3 by brewski on April 12, 2013 - 4:56 pm

    His prize was for micro-economics explaining international trade. Not for macroeconomics or monetary theory.

    We should rescind Obama’s Nobel Peace Prize while we are at it.

  4. #4 by brewski on April 12, 2013 - 5:15 pm

    Krugman and you make several errors:

    1. You define “inflation” solely as consumer goods price inflation.

    2. You ignore asset price inflation.

    3. You confuse nominal price changes and real price changes.

    4. You completely misunderstand the future expectations phenomenon imbedded in the price of gold and all other assets today.

    5. You ignore the data of inflation for all hard assets which has occurred over the last 20 years.

    http://www.gloomboomdoom.com/gbdreport/download/GBD0511.pdf

    Read it.

  5. #5 by Nathan Erkkila on April 12, 2013 - 9:35 pm

    Brew. Calm down and smoke some weed. Gold changes the value the same way every metal does.

  6. #6 by brewski on April 12, 2013 - 10:20 pm

    I am not focused on gold. I am focused in the dollar’s depreciation against ALL items.

  7. #7 by cav on April 12, 2013 - 11:31 pm

    All the more reason for pay hikes. Asymmetrical value spirals are no fair and should not be tolerated.

    That’s what I’d be having government tackle.

    Frickin’ banksterz

  8. #8 by Larry Bergan on April 13, 2013 - 6:19 am

    Gold is pure, but dents easily.

    BUY!

  9. #9 by Shane on April 13, 2013 - 8:45 am

    I always love reading brewski on topics like this. It is like reading a PhD student who is defending a paper in responce to a thirty page article in responce to a book. A lot of technical talk and detail and careful explination that you are so very wrong about your understanding of the fine details of the book we should all be discussing…

    …while failing to notice that the main point of the book he is defending was that the very fine clothes the Emporer wears are made of silks and not cotton, even though anyone with two brain cells to bang together can see that the poor man is naked.

  10. #10 by brewski on April 13, 2013 - 10:17 pm

    My source was written in 2005. Let’s see how accurate the author’s predictions were:

    “However, should the
    next “real” recession be as vicious
    and persistent as I believe it will be,
    then the futility of money printing in
    order to prevent an economic
    downturn brought about by the
    bursting of an asset bubble that has
    been allowed by the monetary
    authorities to blow out of all
    proportion because of ultraexpansionary
    monetary and credit
    policies will be very vividly exposed.”

    and

    “But here is my point: the
    market participants may be beginning
    to anticipate that the Fed will shortly
    (in the next three to six months)
    wake up to the fact that the economy
    isn’t as healthy as it thought. And
    once the Fed notices, home prices
    will decline (as is indicated by the
    sharp drop in the shares of
    homebuilding companies), and
    consumer spending will stall or even
    decline moderately. Mr. Bernanke,
    whose principal concern is deflation,
    will immediately cut interest rates
    again and move to an expansionary
    monetary policy. Depending on the
    Fed’s view on the impending threat of
    asset deflation and its negative
    consequences for the economy, the
    money-printing press could, in this
    phase two of our roadmap to the next
    severe recession, possibly run at full
    speed.”

    “Note that whereas in
    1983 most economists, including
    Milton Friedman, expected consumer
    price inflation to reaccelerate —
    based on the rapidly expanding
    money supply — it didn’t happen, as
    inflation had moved away from
    consumer price increases to asset
    inflation (bonds, stocks, and real
    estate). There were at the time two
    main reasons for the moderation in
    consumer price inflation. First, as can
    be seen from Figure 6, commodity
    prices tumbled after 1980, which
    certainly removed some inflationary
    pressures for consumer goods prices.
    In addition, as a result of rapidly
    growing US consumption, Asian
    manufactured goods began to flood
    the US market and pressured at least
    manufactured goods prices. This
    trend has continued, as Chinese
    imports began to increase very rapidly
    in the 1990s. Rising imports of lowcost
    Chinese goods then led to
    import price deflation and contained
    wage increases in the developed
    world. The trend to declining wages
    in real terms gained momentum in
    the last few years as more and more
    high-value services became tradable
    and allowed their outsourcing to
    countries such as India.”

    and quite prophetically….

    “In this situation of poor or no
    economic growth but modest
    inflation, the Fed will likely opt for
    an all-out assault to revitalise growth
    with its monetary tools and massively
    monetise with “extraordinary
    measures”.”

    and here is the punchline:

    “In phase
    three, wealth inequity will reach
    extremes and lead to a breakdown of
    American society’s social fabric.”

    So this is someone I would think you would listed to since in 2005 he quite correctly predicted the next 8 years with astonishing accuracy.

    So now he says”

    “With financial assets absorbing
    most of the impact of new money,
    the outbreak of inflation into wages
    and consumption goods that proved
    so unpopular in the 1970s has been
    (at least for a time) repressed. Newly
    created money was injected into
    capital markets, where it was initially
    spent on the purchase of government
    bonds. The low yields in government
    bonds have made low-yielding
    corporate bonds more attractive and
    equities with low dividend yields in
    competition with bonds an
    increasingly good buy. The
    inflationary price adjustments have
    leaked out of government bonds into
    other financial assets.”

    so then

    “The beneficiaries of the
    arrangement will do everything
    within their power to keep the game
    going as long as possible, including
    lying about the extent of actual
    inflation. To the extent that any
    monetary inflation at all has leaked
    out of financial assets into
    consumption goods, the distortions in
    the measurement of the US
    Consumer Price Index (CPI) have
    been introduced in order to create a
    false consensus that “there is no
    inflation”. A variety of questionable
    price adjustment stratagems have
    been instituted in the CPI
    computation: the exclusion of food
    and energy, the use of lower “qualityadjusted”
    prices, seasonal
    adjustments, and the replacement of
    home prices with rental rates. The
    index incorporates only consumption
    goods, when most of the price
    increases are showing up in financial
    assets.
    So successful has been the
    management of expectations that,
    until quite recently, inflation has
    disappeared from public discussion.”

    and you would agree that

    “The “financialisation” of the
    economy — the expansion of the
    financial sector relative to
    agriculture, manufacturing, and
    consumer retailing — is but one
    example of these distortions. The
    run-up in commodities prices over
    the past few years is no doubt — at
    least in part — a symptom of the
    liquidity gone mad. The
    securitisation of US home mortgages
    and the resulting financialisation of
    housing is a third.”

    again in 2005 predicting the fiasco correctly

    “While the effects of
    money supply growth can be confined
    to stocks and bonds, inflation is
    hidden in plain sight. The adjustment
    of relative prices between financial
    assets and consumption goods cannot
    be postponed indefinitely. The
    unwinding will not be easy or painless.
    Surely central bank follies now
    threaten economic disaster.”

    So who is it who has no clothes now?

  11. #11 by brewski on April 13, 2013 - 10:17 pm

    I am in moderation.

    • #12 by Richard Warnick on April 14, 2013 - 10:09 am

      Fixed. Once again, you are playing your favorite trick of not attributing quotes or providing a link. I don’t even have to look this one up, though. Say what you will, inflation is at 2 percent, you can’t deny that.

  12. #13 by brewski on April 14, 2013 - 10:11 am

    See above where he says:

    The beneficiaries of the
    arrangement will do everything
    within their power to keep the game
    going as long as possible, including
    lying about the extent of actual
    inflation. To the extent that any
    monetary inflation at all has leaked
    out of financial assets into
    consumption goods, the distortions in
    the measurement of the US
    Consumer Price Index (CPI) have
    been introduced in order to create a
    false consensus that “there is no
    inflation”. A variety of questionable
    price adjustment stratagems have
    been instituted in the CPI
    computation: the exclusion of food
    and energy, the use of lower “qualityadjusted”
    prices, seasonal
    adjustments, and the replacement of
    home prices with rental rates. The
    index incorporates only consumption
    goods, when most of the price
    increases are showing up in financial
    assets.
    So successful has been the
    management of expectations that,
    until quite recently, inflation has
    disappeared from public discussion.”

  13. #14 by obama's jack booted truncheon wielding goons on April 15, 2013 - 12:57 pm

    None of your claims of no inflation hold up at the grocery store, or anywhere else frankly Richard. We want to know real inflation as it affects ALL that we buy, not some partial bullshit that describes inflation in disneyland…

    Furthermore it doesn’t matter a whack if you have no job, and no money, and we all know that the obama admin has removing millions people from the job seeking roles as they quit wasting time looking for jobs that are not there in the depressed areas of States and the nation at large..

  14. #15 by Richard Warnick on April 15, 2013 - 1:07 pm

    Consumers are broke, and this fact means that food retailers are unable to pass on all of their cost increases.

    In the real world, price inflation is constrained by the ability of people to pay higher prices. The CPI is still 2 percent.

  15. #16 by brewski on April 15, 2013 - 2:54 pm

    Guess you’ve never heard of stagflation or ever been to Zimbabwe or Argentina.

    I have.

    • #17 by Richard Warnick on April 15, 2013 - 3:56 pm

      To have stagflation you need to have a high inflation rate.

  16. #18 by brewski on April 15, 2013 - 4:39 pm

    Irrelevant to the falsehood of #15.

    Separately and unrelated to that, we do.

    • #19 by Richard Warnick on April 16, 2013 - 8:55 am

      I guess you’re referring to your double-secret inflation rate known only to the cognoscenti.

      • #20 by brewski on April 16, 2013 - 9:55 am

        Not very double secret when it is in full view and noted by many:

        The things that people most commonly shop for are increasing in price much more quickly than that CPI basket inflation number we’re used to seeing,” says Colas, singling out the spike in staples such as lettuce (+24%) and apples (+11%) in a recent note to clients.

        • #21 by brewski on April 16, 2013 - 10:01 am

          The prices of frequently purchased goods and services jumped 2.3 percent in February, according to AIER’s Everyday Price Index (EPI)—well over 25 percent on an annualized basis. This comes after a 0.5 increase the previous month, as Chart 1, right, shows.

          The EPI is based on the same survey data the Bureau of Labor Statistics uses to create the Consumer Price Index (CPI), the official measure of prices. But AIER’s index measures the prices of day-to-day purchases such as food and fuel,

  17. #24 by cav on April 15, 2013 - 11:42 pm

    Obama is making sure real dems do not retake the house.

    The White House announced Monday that the president had signed S. 716, which repealed a requirement of the Stop Trading on Congressional Knowledge (STOCK) Act requiring the disclosure, which had previously been delayed several times by Congress.

    http://news.firedoglake.com/2013/04/15/insider-dealing-for-insider-trading-congress-guts-stock-act-reporting-requirements/

  18. #25 by obama's jack booted truncheon wielding goons on April 16, 2013 - 10:06 am

    When you buy milk here at 4 bucks a gallon, and it was 2, 4 years ago, THAT’S REAL INFLATION! If at the end of the week after your bills you had four years ago you have to spend more money to get the same things, a simple weekly arithmetic session will demonstrate inflation in your life. Your costs the same as 8 years ago Richard? 4 years ago? What have you given up to even it out?

    For many it’s a hell of a lot..that’s inflation..leading to a substandard declining living.

  19. #26 by Richard Warnick on April 16, 2013 - 10:17 am

    The cumulative rate of inflation is different from the CPI. Use the Inflation Calculator.

    I agree with you. The middle-class standard of living is declining. The value of my house plummeted 40 percent thanks to the Bush crash. Even before that, poverty was rising and the middle class was shrinking. Our wages are flat, prices are going up, interest on savings is negligible, 401(k)s are a joke. But the CPI is 2 percent.

  20. #27 by brewski on April 16, 2013 - 10:21 am

    If your dollar buys 12% less in one year, then that is inflation.

    • #28 by Richard Warnick on April 16, 2013 - 10:26 am

      I remember high inflation. There were newspaper headlines about it, White House press conferences, it was a big deal. Not hidden, and known only to a select few.

      • #29 by brewski on April 16, 2013 - 11:03 am

        Because they changed the method. If they told you that inflation was 2% in 1978, would that make it so?

        • #30 by Richard Warnick on April 16, 2013 - 11:09 am

          Inflation Fears Overblown, IMF Says

          “As long as inflation expectations remain firmly anchored, fears about high inflation should not prevent monetary authorities from pursuing highly accommodative monetary policy,” the fund said.

          Even if central banks over-stimulate the economy, they are likely only to have small effects on prices, the IMF said.

  21. #31 by brewski on April 16, 2013 - 11:14 am

    You trust the IMF?

  22. #32 by brewski on April 16, 2013 - 11:33 am

    The Reuters CRB Commodity Index, which tracks the prices of coffee, cocoa, copper, and cotton, as well as energy, is up 38% over four years, or 8.6% at a compound annual rate.

    The price of gasoline has gone up from $2.60 a gallon when the recession ended to $3.68 today. That’s a 41% increase in four years, or an annualized rate of 9%.

    Since the recession ended, the cost of a Big Mac in the U.S. has risen from an average of $3.57 to $4.37, or 5.2% a year.

    So why haven’t these more rapid increases shown up in the Consumer Price Index? One reason is that the index itself has been modified in a variety of ways over the past 35 years.

    Such revisions to the CPI have tended to reduce the official inflation rate, on balance. Various estimates of what the annual rate would have been over the past four years if earlier methods of calculation had been continued come up with numbers in the 5%-to-10% range.

    a number of the costs that middle-class households face are going up considerably faster than the CPI.

    http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/

  23. #33 by Richard Warnick on April 16, 2013 - 12:15 pm

    brewski–

    Thomson Reuters/Jefferies CRB Commodity Index DOWN 5.98% over the past year.

    FYI: Inflation adjusted Gasoline Prices

    Amazingly the average inflation adjusted gasoline prices for the following peak years were; 1918 was $3.84, 1938 was $3.29, 2008 was $3.47, and the average for all of 2011 and again in 2012 was $3.59. All very close when adjusted for inflation.

    Michael Sivy, from your link:

    For sustained inflation to get going, workers have to be able to demand higher pay to make up for increases in their cost of living. And today, whatever inflation is caused by the rising cost of raw materials is being offset by below-normal increases in wages.

    So he agrees with me.

    There’s no need to come up with a conspiracy theory to explain the low inflation rate.

  24. #34 by brewski on April 16, 2013 - 1:01 pm

    He says “sustained inflation” not “inflation”. So he is not saying that you only get inflation with wage demands. He is saying that sustained inflation and inflation expectations gets entrenched when it is built into wage increases. So, no he does not agree with you.

    Under your theory, Switzerland with full employment and high wages would have high inflation, and Zimbabwe with high unemployment and low wages would have low inflation. The 180 degrees opposite is true. Evidence gets in the way of your theory. You are wrong. The data show it.

    • #35 by Richard Warnick on April 16, 2013 - 1:06 pm

      The CPI keeps trying to jump up above 2 percent, but in the aftermath of Bush’s Great Recession middle class wages aren’t there to support a rise in inflation. Hence the story I linked above about grocers unable to pass on higher prices to customers (except at high-end stores like Whole Foods).

      Can’t have a wage/price spiral without wage increases.

  25. #36 by brewski on April 16, 2013 - 1:54 pm

    “grocers unable to pass on higher prices to customers”

    Oh really?

    “staples such as lettuce (+24%) and apples (+11%) in a recent note to clients.”

    You really don’t like data do you?

    • #37 by Richard Warnick on April 16, 2013 - 3:04 pm

      You’re not quoting the article I linked to. What are you quoting? Link, please.

      The article says:

      At each step downstream in the value chain, food producers and retailers on average were unable to pass on 100% of cost increases to their consumers.

  26. #38 by brewski on April 16, 2013 - 4:32 pm

    I was quoting #23

    I guess it must be all those big wage increases in Zimbabwe which are causing all the problems.

    • #39 by Richard Warnick on April 16, 2013 - 7:37 pm

      Oh, yeah, 25 percent inflation according to your think tank link. I’m totally buying that. When my credit union is paying 0.5 percent on deposits.

      • #40 by brewski on April 16, 2013 - 8:10 pm

        Correct. Your credit union is paying 0.5% because the Fed is printing money and buying bonds to FORCE the rate be 0.5%. That is unrelated to your money sitting in the credit union losing value by 25%. There is no law which says your credit union must pay you a positive real interest rate.

        • #41 by Richard Warnick on April 17, 2013 - 10:19 am

          I never said money market rates are required to stay ahead of inflation, or that they do. But 25% inflation? Really? That would make the news big time.

  27. #42 by Shane Smith on April 16, 2013 - 7:51 pm

    Maybe it is the think tank that gave us the debunked austerity paper? Maybe we finally found a place willing to hire brewski?

    • #43 by brewski on April 16, 2013 - 8:11 pm

      Harvard.
      You know, the place where Obama-moron got his degree. That diploma mill.

      If deficit spending was such the key to economic growth, then Greece would be rich.

      Facts get in the way of your ignorance again.

      I win.

  28. #44 by Shane Smith on April 16, 2013 - 7:52 pm

    brewski :
    You trust the IMF?

    Clear Glen Beck’s website is trust worthy, while the IMF is not…

    • #45 by brewski on April 16, 2013 - 8:13 pm

      The website notwithstanding, the content of that article was accurate. You haven’t said any of it was wrong. You just mocked the site. I guess that is your form of capitulation.

      • #46 by Shane Smith on April 17, 2013 - 8:16 am

        If you could read, you would have noticed that I didn’t say any of it was wrong because I noted that the truth or falsity of the article has nothing to do with my earlier statement.

        Reading is fundamental!

        • #47 by brewski on April 17, 2013 - 9:41 am

          In other words, I was right. Thank you.

  29. #48 by cav on April 16, 2013 - 7:54 pm

    brewski’s a jawb kriator his own self. Don’t need no Zimbobwean pozition.

  30. #49 by obama's jack booted truncheon wielding goons on April 17, 2013 - 10:13 am

    Richard, since you define the inflation in your own life, then I submit that advertising the CPI in support of any bullshit this administration does, or those in the past have done as meaningless.

    The CPI is then a meaningless bullshit number to cover government incompetence, stupidity, or crime.

    • #50 by Richard Warnick on April 17, 2013 - 10:24 am

      I love a good conspiracy theory. But please give me the who, what, when, why and how.

      • #51 by brewski on April 17, 2013 - 1:42 pm

        Already been answered.

  31. #52 by brewski on April 17, 2013 - 2:34 pm

    The facts are:
    1. The US dollar is worth a lot less (or put the other way, the price of things in dollars cost a lot more dollars) compared to entire categories of asset classes over the last 30 years. Land, energy, soft commodities, metals, other countries’ currencies (in addition to their own inflation), etc.
    3. The method to calculate “official” CPI has changed resulting in a lower published rate
    4. The price increase of most every day market basket goods have gone up much faster than “official” CPI
    5. The Fed ceased publishing M3 altogether

    None of that is my opinion. That is all 100% historical fact. You can wish your own facts if you want to, but then you will prove again that you are Sarah Palin.

    Tell me which of the above is untrue.

    • #53 by Richard Warnick on April 17, 2013 - 4:16 pm

      FYI: Common Misconceptions about the Consumer Price Index: Questions and Answers

      More detailed: Addressing misconceptions about the Consumer Price Index (PDF)

      There is … no dispute among economists that the price index formula used in all of the basic CPIs prior to 1999 (called the Laspeyres formula) tends to overstate changes in the cost of living; specifically, the change in a Laspeyres index is an “upper bound” on the change in the cost of maintaining a standard of living. This fundamental result is found throughout books on cost-of-living indexes, as well as in economics textbooks. It long predates the BLS decision to switch to a geometric mean formula for computing most of the basic CPIs.

      A simple, if extreme, example suffices to get the point across. Suppose that a person buys four candy bars each week: two chocolate bars and two peanut bars. The bars cost $1 each, so her total spending per week on candy bars is $4. Now suppose that, for some reason, the price of chocolate bars quadruples to $4, while peanut bars remain at $1. The goal of the CPI is to measure how much the consumer needs to spend each week to consider herself just as well off as she was before the price increase. A Laspeyres price index calculates the cost of the original purchase quantities: two candy bars of each type. Therefore, the answer according to the Laspeyres formula is that the consumer would need $10 to be as well off as before.

      The Laspeyres answer is correct, however, only if the consumer is completely unconcerned with changes in price and always chooses to purchase chocolate and peanut bars in equal numbers, regardless of which is cheaper. The Laspeyres answer is called an upper bound because the right answer cannot be greater than $10; the consumer certainly will be at least as well off as she was before if she can continue to purchase two bars of each type. At the other extreme, the right answer cannot be lower than $4. In the unlikely case that the consumer is entirely indifferent between types of candy bar, she could respond to the increase in the price of chocolate bars by buying four peanut bars instead of two of each type, and she would be no worse off than she was before, even if she still had only $4 to spend. Of course, neither the Laspeyres upper-bound answer of $10 nor the lower-bound answer of $4 is realistic. In the real world, people make tradeoffs on the basis of both price and their preferences, and the actual answer lies in between the two bounds. With $7, for example, our consumer could afford to buy seven peanut bars, one for every day of the week. Thus, $7 might be sufficient to make her as satisfied at the new prices of candy as she was with $4 at the old prices. Put another way, we can be confident that, for some consumers, the Laspeyres result of $10 would overstate the amount they need to maintain their original level of candy satisfaction. The geometric mean formula adopted by the BLS for use in most CPIs gives a somewhat lower answer than the Laspeyres formula, because it puts less weight on the prices that have increased the most (in this case, the price of chocolate bars) and more weight on the prices that have increased less. As it turns out, the geometric mean would say that $8 is the amount needed to keep the average consumer at the original satisfaction level. With $8, the consumer could purchase one chocolate bar and four peanut bars, offsetting the reduced number of chocolate bars by an increase in the total number of candy bars.

      It is important to note two things about this example. First, the geometric mean estimate of required spending increased sharply, albeit by less than that of the Laspeyres index. Second, the objective is to calculate the amount of money necessary to maintain a constant level of satisfaction, or what one might term a constant standard of living. Critics of the BLS often erroneously assert that reflecting substitution behavior in the CPI amounts to tracking a declining standard of living. Their argument can be summarized as follows: “the BLS assumes that if steak becomes too expensive, consumers will shift to buying hamburger, so the CPI reflects a tradeoff of hamburger for steak, not steak for steak.” The trouble is that that logic fails to recognize the point made at the beginning of this section: that the BLS employs the geometric mean formula only within basic CPIs, such as the index for ground beef in Chicago. Still, despite the fact that it is wrong, the idea that the CPI’s use of the geometric mean reflects substitution between hamburger and steak has attained the status of a sort of urban legend, repeated by numerous bloggers and commentators.

  32. #54 by obama's jack booted truncheon wielding goons on April 17, 2013 - 4:33 pm

    Laughable..like the failed magician at the low budget circus, this act has been seen, and the audience knows the tricks.

    The fact is 1/3 of your asset values in real estate is directly gone, and the money you do get for your property is worth less by any estimation..All seniors ready to sell their homes and retire on the nest egg took a 1/3 value haircut.

    People with nothing get their 200 bucks of food stamps a month and wonder what it will buy come week 3.

    Whatever sophists like Richard want to call it, and then make no end of stupid excuses for failed government and profligate waste therein, for the middle class and your average American, and the poor, it’s just a plain economic disaster.

    • #55 by Richard Warnick on April 17, 2013 - 4:52 pm

      When did I ever dispute the fact that Bush’s Great Recession (a near depression) was an economic disaster? The assessed value of my house plunged by 40 percent in one year thanks to Bush – I’m sure I’ve mentioned that. No need to explain it to me. But that was deflation, not inflation.

      The problem is government that’s by and for the 1 Percent, with the bills going to the 99 Percent. Can’t say that enough.

      This CPI conspiracy theory is entertaining, but not believable. Inflation is running at a 2% annual rate, not 25%.

      • #56 by brewski on April 17, 2013 - 6:32 pm

        Your house didn’t lose 40% of its value since it was never worth that much in the first place. A bubble only bursts when you first have a bubble. The asset bubble predated Bush by 7 years.

        “Can’t say that enough.”
        Ok Herr Goebbels

      • #57 by brewski on April 17, 2013 - 8:33 pm

        I looked it up. Home prices in Salt Lake County are far higher today than when before W took office. So going up by 100% and then down by 40% and then up by 10% means you are still way ahead. The drop by 40% in a short period of time was a correct of the bubble which preceded it and started around 1994. I don’t know why you don’t acknowledge the asset bubble which started way before W took office. Why do you willfully ignore that? Is it purely partisan or is it more deeply psychological?

        I see you ignored #52. I will take that as your capitulation.

        • #58 by Richard Warnick on April 17, 2013 - 8:53 pm

          According to Zillow, the market value of my house leveled off in December 2009 and has been flat since. We didn’t live there before Bush took office, because it wasn’t built yet.

          I see you ignored #53 and #60, where I answered you with thorough explanations from the BLS. There is no super-secret government conspiracy to hide a 25% inflation rate. That’s a right-wing fantasy.

          • #59 by brewski on April 18, 2013 - 4:57 am

            None of what you posted indicate that anything in #52 is untrue.

  33. #60 by Richard Warnick on April 17, 2013 - 4:43 pm

    OK, here’s more from the same article:

    Many consumers feel that their personal inflation experiences are not reflected in the movements of the CPI-U. These experiences can actually be borne out because some consumers spend more than others on items with rapidly increasing prices. The CPI-U is constructed from expenditures averaged over many consumers; as a consequence, some consumers will face a lower rate of inflation than that indicated by the CPI-U, and others will face a higher rate of inflation. For example, earlier it was noted that the wage earner and clerical worker families represented in the CPI-W allocate a higher-than-average share of their expenditures to gasoline. Partly for this reason, the CPI-W rose 4.3 percent over the 12 months ending March 2008, compared with 4.0 percent for the CPI-U. Further, BLS data from the CE show that low-income households spend a greater-than-average percentage of their expenditures on food at home and on gasoline and motor oil. By income quintile, from lowest to highest, 15.3 percent, 14.1 percent, 13.0 percent, 12.1 percent, and 9.2 percent of expenditures are devoted to food at home and to gasoline and motor oil. These statistics provide some evidence that the typical household in one of the lower income quintiles may be more adversely affected by current inflation than a typical household in one of the upper quintiles.

    Another reason for the potential difference between the CPI-U and a consumer’s experience of inflation is that the prices of many frequently purchased items, especially necessities such as food and gasoline, recently have been rising more rapidly than the CPI as a whole. Because the CPI is an average of the inflation rates of many different items, if some prices are growing more rapidly than the CPI, then other prices must be growing more slowly. In many cases, the most slowly rising prices are in the categories of consumer durable goods and apparel. In fact, the CPI for durables, which include such items as televisions and computers, fell slightly over the year ending March 2008, as did the index for apparel. Of course, by their nature, those items are purchased less frequently
    than food and energy items. For a family that had no immediate plans to purchase a new television or computer in March 2008, the price declines of those products over the previous 12 months probably would be less important than the 26.0-percent increase in the price of gasoline, the 48.4-percent rise in the price of fuel oil, the 14.7-percent price increase for bread, and the 13.3-percent price rise for milk. Similarly, although most families purchase apparel during any given year, in many weeks their purchases will be concentrated in food and fuel, and in those weeks they probably experienced price increases higher than the increases reported for the all-items CPI. Nevertheless, the BLS cannot exclude items from the CPI simply because they are purchased infrequently: all goods and services contribute to the CPI in proportion to consumer spending on them, as described earlier.

  34. #61 by Richard Warnick on April 18, 2013 - 7:05 am

    1) $1.00 in 1983 had the same buying power as $2.35 in 2013. Annual inflation over this period was 2.89%.
    2) What happened to 2?
    3) Not true. See #53.
    4) See #60.
    5) So what?

    M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits.

    There is no super-secret government conspiracy to hide a 25% annual inflation rate. If inflation was that bad, it would be a daily story in the media.

  35. #62 by cav on April 18, 2013 - 8:49 am

    I’m reminded of some of my adolescent debates on how God might have created the entire universe in seven days. Days back then weren’t of the same duration as they are now it seems.

    So it is with annual inflation numbers. Years, even as recently as 1983, were somehow not the same duration as now.

  36. #63 by brewski on April 18, 2013 - 10:10 am

    1) Unresponsive to my previous #1
    2) I don’t know
    3) Unresponsive to my previous #3
    4) Bullshit. http://www.dailykos.com/story/2006/05/29/214258/-What-is-FedReserve-hiding-by-not-reporting-M3-money-supply

    • #64 by Richard Warnick on April 18, 2013 - 11:18 am

      What about the original (4), where you claimed “The price increase of most every day market basket goods have gone up much faster than ‘official’ CPI” and I responded with an excerpt from an article that explains it?

  37. #65 by obama's jack booted truncheon wielding goons on April 18, 2013 - 10:18 am

    Richard; Your insistence is irrelevant. The reality is that the citizen is being screwed from both ends, his primary asset the home has been robbed of its value, and everywhere the rest is increasing in price.

    Who imagines the CPI means anything when it does not include energy costs? What criminal imagined that up? Every single thing you buy has an energy component fixed in it’s price, ya fuckin’ knob of a government. Yet you shill for it like it was some holy grail…Fer cryin’ out loud..People are becoming DESTITUTE and you blab about some phony government statistics.

    Pathetic.

    • #66 by Richard Warnick on April 18, 2013 - 11:13 am

      You ought to take up the real estate issue with brewski. He thinks everyone made out just fine after Bush crashed the economy.

      CPI does include energy. What are you talking about?

      • #67 by brewski on April 18, 2013 - 1:38 pm

        No.
        There was a giant bubble which was created before Bush became president. All bubbles crash. You are blaming W for the bubble which preceded him by many years.

        http://www.multpl.com/shiller-pe/

        The bubble started in 1994 or so.

      • #68 by brewski on April 18, 2013 - 1:40 pm

        The “core CPI” excludes food and energy. I believe that is to what mr jack booted was referring.

        • #69 by Richard Warnick on April 18, 2013 - 3:25 pm

          Yes but the All Items Consumer Price Index for All Urban Consumers (CPI-U) is currently at 2%.

          That is the “headline” CPI, not “All items less food and energy.”

          • #70 by brewski on April 18, 2013 - 4:45 pm

            If you believe that lie.

  38. #71 by brewski on April 18, 2013 - 1:35 pm

    From your source:
    “the prices of many frequently purchased items, especially necessities such as food and gasoline, recently have been rising more rapidly than the CPI as a whole.”

    which is essentially identical what I said which was:
    “the price increase of most every day market basket goods have gone up much faster than “official” CPI”

    So your source confirms what I said.

    Thank you.

    • #72 by Richard Warnick on April 18, 2013 - 3:27 pm

      No, you claim that inflation is running at a 25% annual rate, and that the CPI is a lie. That’s not what the BLS says.

      • #73 by brewski on April 18, 2013 - 4:43 pm

        This is Richard Warnick classic argument technique 101.

        First, refute something I never said and stomp away after defeating only yourself.

        I never said inflation was 25%.

        Second, quote the same source to prove itself. That is like saying the Bible says right there it is true therefore it must be true since it says so right there.

        If I am saying that the BLS changed their methods, which the BLS agrees that they did, and several other sources say that under the old method the rate today would be between 5-10%, you are not disproving anything by going back to the BLS and pointing at their new adjusted number. You are also not addressing at all for the fourth time that looking at everyday essential items, that for those items the rate is much higher. In fact, your source agreed with me.

        So when you say “No”, you really men “Yes, you win”.

        • #74 by Richard Warnick on April 18, 2013 - 5:07 pm

          OK, so what is the annual inflation rate if it isn’t 2 percent?

          I think the BLS documentation refutes the shadowy government conspiracy theory you were peddling (but gave up on, it seems).

  39. #75 by brewski on April 19, 2013 - 6:55 am

    I think the comments below are pretty accurate.

    “So it may be more meaningful to look at price increases over a broad range of commodities. The Reuters CRB Commodity Index, which tracks the prices of coffee, cocoa, copper, and cotton, as well as energy, is up 38% over four years, or 8.6% at a compound annual rate.”

    “The price of gasoline has gone up from $2.60 a gallon when the recession ended to $3.68 today. That’s a 41% increase in four years, or an annualized rate of 9%.”

    “Perhaps the most telling indicator – albeit a slightly facetious one – is the Big Mac index, popularized by the Economist magazine. McDonalds hamburgers are available in many countries and their prices reflect the cost of food, fuel, commercial real estate, and basic labor. The price of a Big Mac, therefore, can be used to compare the economies of different countries – or serve as a bellwether of inflation in a single country. Since the recession ended, the cost of a Big Mac in the U.S. has risen from an average of $3.57 to $4.37, or 5.2% a year.”

    “So why haven’t these more rapid increases shown up in the Consumer Price Index? One reason is that the index itself has been modified in a variety of ways over the past 35 years.”

    “Such revisions to the CPI have tended to reduce the official inflation rate, on balance. Various estimates of what the annual rate would have been over the past four years if earlier methods of calculation had been continued come up with numbers in the 5%-to-10% range.”

    “a number of the costs that middle-class households face are going up considerably faster than the CPI.”

    TIME magazine

    http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/

    • #76 by Richard Warnick on April 19, 2013 - 7:43 am

      Michael Sivy again? But he says gold is $1,583. Now it’s $1,360. Down 14 percent just since last month, when he wrote his column.

      Sivy never acknowledges the BLS explanation of how the CPI works. Maybe we buy a Big Mac more often than we buy a TV or a computer, but when we do buy consumer electronics we save serious bucks compared to last year. So it works out, even on an anecdotal basis.

      • #77 by brewski on April 19, 2013 - 8:24 am

        Gold was in the $300’s 20 years ago. So $1,360 is still up by 400%. I don’t know why you obsess on this gold thing and keep talking about it since Sivy minimized it and I mentioned it but haven’t obsessed on it the way you have.

        TV’s and Computers getting less expensive is an example of real price reductions which is a different phenomenon from nominal price inflation. Which means that TV’s are getting less expensive relative to Big Macs, but most things people buy every day are getting more expensive relative to the dollar.

        Sivy does not disagree with what you said.

        • #78 by Richard Warnick on April 19, 2013 - 9:02 am

          Wait a minute, you think the CPI ought to ignore price reductions?

          • #79 by brewski on April 19, 2013 - 11:54 am

            No. One needs to separate real price changes from nominal price changes.

  40. #80 by Richard Warnick on April 19, 2013 - 1:23 pm

    It’s all real at the cash register. ;-)

  41. #81 by brewski on April 19, 2013 - 3:26 pm

    As a mental exercise, think of a world which is all barter. There can be no inflation at all since if one good gets more expensive relative to other goods, then those other goods are all cheaper relative to the first. So inflation is purely and only an increase relative to each currency unit. With no currency unit, there can be no money-inflation. Period. So understanding the difference between real changes in the value of one good vs another good and the depreciation of the value of each currency unit, is a critical point. Observing the prices of one set of goods may be measuring nominal price changes or real price changes, but you don’t really know on the face of it. So the currency can be devaluing at 10%, which is nominal, but if the money price TV’s are unchanged, what is actually happening is that TV’s are cheaper by 10% in real terms. So you think that TV’s are the same price, and that there is no inflation, but what is actually happening is that the currency is worth 10% less and TV’s are worth 10% less in real terms.

  42. #82 by Richard Warnick on April 20, 2013 - 4:41 pm

    It’s like saying if we had some eggs, we could have ham and eggs, if we had some ham.

    TV’s are not the same price, they are cheaper. So we save money on some things, and that partially compensates for the rising cost of other things we buy. That’s why inflation (according to the CPI) is 2% and not 9%.

    • #83 by brewski on April 21, 2013 - 8:24 pm

      Seems you don’t understand the barter illustration at all.

      Yes, TV’s are cheaper relative to everything else, so in a world of barter where these is no money they would be worth fewer apples and fewer barrels of oil. That represents TV’s getting cheaper in real terms. That has nothing to do with the currency unit get less valuable.

  43. #84 by obama's jack booted truncheon wielding goons on April 20, 2013 - 8:03 pm

    Oy! The privation and 50 million people on food stamps that run out before the month is done is real.

    The majority of the People have far less disposable income than they had a decade ago, and cannot buy as much as they used to. This is inflation, and no amount of running around the statistical mulberry bush is going to change that.

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