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Your observation about inflation only applies to a closed system, not an international one. In this case, it is very possible to have shortages due to circumstances, such as farming issues or natural resource draining, and that resulting in higher prices despite not having more money overall to spend. That is "cost push" inflation, and can easily happen despite folks not individually having more money. They simply can buy less with the money they have.
You can have inflation without anyone getting a raise too. If prices go up, and this can result from multiple factors including currency revaluation in the international market, this can happen without anyone getting a pay raise in the USA. This too would be "cost push" inflation.
Consumer spending can stay at a very specific level, like 70%, but folks might be able to buy less for that spending level.
As you well know and are referencing natural economic consequences can create either demand/pull or cost/push inflation or a combination of can create some really nasty stuff. We are now in the era of of monetary intervention which can be used to create either or in the fear of many both. Current policy has the potential to increase employment by making credit and liquidity greater which would increase buying power and by encouraging folks into riskier assets like commodities increase the cost of the products the increased demand is competing for. Play that out on a global scale with multiple and perhaps uncoordinated efforts at monetary intervention across the globe and you have a scenario our Econ professors 40-50 years ago were only contemplating. The interesting is that the three of us including MathJak all love New Markets income and would a play in that investment area have been mainstream 45 years ago for average folks like us? Nope!
studies have shown as we age not only does our spending drop not increase each year as the financial calulators figure but we are far less effected by inflation then we are when we are raising a family and in the prime of our lives.
Studies of this sort make certain assumptions. I buy gasoline, food, books, auto repairs, plumbing and other home maintainence, and a variety of other goods and services. I have noted a severe increase in prices. I may not be raising a family but the chap who performs a tune-up on my car or empties my septic tank is.
Quote:
Originally Posted by LauraC
Why would you say this? If gasoline prices, employee insurance prices and utility bill prices have gone through the roof, for example, wouldn't K-Mart jeans go up in price, as well, proportionate to the price of the jeans?
Yes. The cost curve, equal to the demand curve, simply shifts.
Quote:
Originally Posted by mathjak107
Higher end products tend to rise more ofton and higher then lower end products. they cater to different level people with different income levels.
I don't record the price of pinto beans, sugar, or flour but I believe most people do eat butter, eggs, bread, and vegetables. I pay a price that is well above the COLA adjustment number.
Quote:
Originally Posted by mathjak107
for true inflation we need 3 things to happen.
we need a rising gdp, rising interest rates and rising wages.
all 3 are not present.. thinking back to the 70's and 80's when we had rising inflation all 3 were present.
These are the results of inflation, not causes. Inflation is simply an increase in the money supply for a given amount of goods and services.
Certain prices may rise without inflation, e.g., the price of a commodity because of a drought.
In the Seventies there was roaring inflation during a recession. It was called stagflation. It wasn't supposed to have been possible but it was. It wasn't quantifiable either, something else that wasn't supposed to be posssible.
Interest rate are currently held down by the Fed.
Quote:
Originally Posted by highcotton
Expect the lowest increase since 1975. The size of the increase will be made official on Tuesday, when the government releases inflation figures for the month of September.
It's easy to tweek M3 because of its many components. As we know, there's a very close election coming.
The best measurement is the base money supply, MB. It consists of outstanding banknotes and bank reserves only. This has seen a dramatic increase in the last four years. If we used this the COLA would be much higher and far more realistic.
The government is stealing our money by making it worth less. Social Security is not welfare; it's forced savings and we should be able to invest it as we see fit. In Chile, where a similar system is private, these problems simply don't exist.
Last edited by Happy in Wyoming; 10-14-2012 at 02:29 PM..
the reason some of us have seen our cost of living go up and others saw their costs have gone down is because we have some sector inflation but no general inflation.
it like my neighbor who owns no car and doesnt pay for heat in their rent stabilized apartment doesnt see a fraction of what others do.
my sister having refinanced has seen her costs drop even with food and energy.
shortages only creat general inflation when we have more money to spend. otherwise a rise in one place takes away from another.
think about it, if oil doubled we would be thrown right into recession again as most other non critical aspects of life had folks spending little in other areas.
you can call it sector inflation if you want but in general terms its not going to put inflationary pressures on us. gdp will slow to a crawl
for true inflation we need 3 things to happen.
we need a rising gdp, rising interest rates and rising wages.
all 3 are not present.. thinking back to the 70's and 80's when we had rising inflation all 3 were present.
the world has a huge amount of deflationary pressure too. most of europe is in a recession.
the ecb will have to sell assets to bail out europe. the buying of assets is inflationary,the selling of them is deflationary.
the world is de-leveraging that is the opposite of inflationary.
the core numbers here speak for themselves, inflation isnt a problem at this point anywhere but china.
inflation has you feeling richer as incomes increases. the problem is prices across the board increase too. thats not whats happening though.
we have no more income to spend.
overall i see much more deflationary pressures then inflationary on us.
for myself i can say except for my health insurance which shot up ,more a factor of obamma care then inflation, overall since i hedged my energy costs with the etf uso im seeing not much more then my normal yearly rise in cost of living.
If you don't have rising GDP nor wages, yet the cost of a basket of goods measured by CPI-W increases due to shortages, price manipulation or currency manipulation, you still can have inflation. You will have to make tradeoffs in terms of what you do without, save less or find alternative supplemental income to maintain the exact same lifestyle, but absent any of those processes you will still "suffer" inflation in the cost of the goods you buy.
And this inflation is supposed to be captured in the SS CPI-W calculation.
As you well know and are referencing natural economic consequences can create either demand/pull or cost/push inflation or a combination of can create some really nasty stuff. We are now in the era of of monetary intervention which can be used to create either or in the fear of many both. Current policy has the potential to increase employment by making credit and liquidity greater which would increase buying power and by encouraging folks into riskier assets like commodities increase the cost of the products the increased demand is competing for. Play that out on a global scale with multiple and perhaps uncoordinated efforts at monetary intervention across the globe and you have a scenario our Econ professors 40-50 years ago were only contemplating. The interesting is that the three of us including MathJak all love New Markets income and would a play in that investment area have been mainstream 45 years ago for average folks like us? Nope!
True, but I'd also point out that making credit and liquidity greater doesn't necessarily have to result in the level of anticipated employment growth, due to international financial issues and/or automation and technology it is possible to drain off some/much of the liquidity without the anticipated employment growth.
If you don't have rising GDP nor wages, yet the cost of a basket of goods measured by CPI-W increases due to shortages, price manipulation or currency manipulation, you still can have inflation. You will have to make tradeoffs in terms of what you do without, save less or find alternative supplemental income to maintain the exact same lifestyle, but absent any of those processes you will still "suffer" inflation in the cost of the goods you buy.
And this inflation is supposed to be captured in the SS CPI-W calculation.
cpi-w is 1.7% including food and energy so im not sure what you all are trying to challenge?
If shortages influenced the cpi outside the feds target then that would be inflationary. but these things are not increasing the over all cpi out of bounds and thats my point.
your trying to argue what causes inflation vs the real world as it stands right now . you are trying to dispute actual numbers which makes no sense..
Last edited by mathjak107; 10-14-2012 at 02:58 PM..
Studies of this sort make certain assumptions. I buy gasoline, food, books, auto repairs, plumbing and other home maintainence, and a variey of other goods and services. I have noted a severe increase in prices. I may not be raising a family but the chap who performs a tune-up on my car or empties my septic tank is.
Yes. The cost curve, equal to the demand curve, simply shifts.
I don't record the price of pinto beans, sugar, or flour but I believe most people do eat butter, eggs, bread, and vegetables. I pay a price that is well above the COLA adjustment number.
These are the results of inflation, not causes. Inflation is simply an increase in the money supply for a given amount of goods and services.
Certain prices may rise without inflation, e.g., the price of a commodity because of a drought.
In the Seventies there was roaring inflation during a recession. It was called stagflation. It wasn't supposed to have been possible but it was. It wasn't quantifiable either, something else that wasn't supposed to be posssible.
Interest rate are currently held down by the Fed.
It's easy to tweek M3 because of its many components. As we know, there's a very close election coming.
The best measurement is the base money supply, MB. It consists of outstanding banknotes and bank reserves only. This has seen a dramatic increase in the last four years. If we used this the COLA would be much higher and far more realistic.
The government is stealing our money by making it worth less. Social Security is not welfare; it's forced savings and we should be able to invest it as we see fit. In Chile, where a similar system is private, these problems simply don't exist.
Your mixing up the things you buy and your personal rate of inflation with the cpi which is only a price change index and only one of a few different parameters that make up a cost of living index.
They are not the same measuring tool.
stagflation is only a temporary condition on the way to either inflation or recession . its usually short lived although the last time ran 16 months. still short when you consider the decade long recession we have been in.
its not one of the 4 major economic scenerios
deflation
inflation
recession
prosperity.
as far as the fed controlling rates they can only directly control short term rates.
although they buy mbs and bonds, the worlds investors and central banks have a far greater outcome on longer term rates.
they dont always see eye to eye with the fed.
if you remember the famous inverted yield curve before the recession the fed was trying to raise rates higher. the short term rates ended up being higher then long term rates as the worlds investors wrestled rates away from the fed and drove them lower.
we had it happen in reverse at the start of qe2. the fed was buying bonds to try to drive rates lower. the worlds investors spooked with fears of inflation and bid rates higher .
once they felt more comfortable they bid them back down.
i didnt say rising gdp, rising interest rates and rising wages cause inflation. they are the fever that usually is a result of it and we have no sign of any of the 3 now.
Last edited by mathjak107; 10-14-2012 at 03:37 PM..
True, but I'd also point out that making credit and liquidity greater doesn't necessarily have to result in the level of anticipated employment growth, due to international financial issues and/or automation and technology it is possible to drain off some/much of the liquidity without the anticipated employment growth.
Which is what is happening. Banks are using money to invest not lend and others are using money to deleverage and not spend. Our aggregate balance sheet as a society is decreasing without a great jump in job creation.
If shortages influenced the cpi then that would be inflation. These things are not increasing the over all cpi and thats my point.
Not wanting to argue but as you know this is global society and while not increasing inflation here the impace elsewhere might be consequential and disruptive to the world in multiple ways.
The COLA is the same for everyone. The result once applied is very different from individual to individual. The single person receiving $9,600 receiving a 1.8% increase is very different from the married couple both having been high earners with combined benefits of $76,000 per year. Yet a gallon of Lactaid Milk is the same for each if they shop at the same store. So as we discuss, our sense of urgency about the COLA probably varies with the actual dollar amount and what other income we have coming in.
Not wanting to argue but as you know this is global society and while not increasing inflation here the impace elsewhere might be consequential and disruptive to the world in multiple ways.
true but right now all these black swan events are only serving to slow us down more and more. these things are acting like taxes sucking more and more money out of our economy elsewhere.
the bottom line is no matter what we think we are seeing ,feeling or happening the numbers are saying things arent inflatiionary at this point.
our own lifestyles may be different depending what we buy, how many times we buy it, the percentage of income it takes up etc but that doesnt mean everyone is feeling what you do.
like i said the drop in mortgage costs for my sister with the refi and low rates has her cost of living less than 2 years ago. that refi represented a huge monthly expense that easily offset the other increases and thats what the cpi reflects.
just the gains in markets and bonds you and i had easily surpassed any increases in food or energy we saw and thats what investing is all about..
.
Last edited by mathjak107; 10-14-2012 at 03:45 PM..
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