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Old 07-21-2008, 02:19 PM
 
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We all know that the government CPI understates inflation rather dramatically, but even the CPI is projected to reach 8% by the end of 2008.

Moore Inflation Predictor © (MIP) from Financial Trend Forecaster (http://fintrend.com/ftf/mip.asp - broken link)

Moore Inflation Predictor Chart
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Old 07-21-2008, 04:28 PM
 
Location: Great State of Texas
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Shadowstats shows CPI at a bit over 12%

Alternate Data Series
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Old 07-21-2008, 11:22 PM
 
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Didn't you hear what Bush had to say? Not to worry.. there is NO problem... don't mind the eviction notice, repo man, and bill collectors... everything is okay... we all are okay.. Just remember to overspend like Bush says... Don't you feel better now that Bush has told you are doing okay... Its not like the government has ever lied before...
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Old 07-22-2008, 12:03 AM
 
Location: Ohio
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Quote:
Originally Posted by mojo_1979 View Post
We all know that the government CPI understates inflation rather dramatically, but even the CPI is projected to reach 8% by the end of 2008
There's no real harm in that, especially since the CPI is a generic inflation index. The CPI only tells you that inflation exists, it doesn't tell you why inflation exists or what kind of inflation it is.

If rapidly rising prices are resulting from rapidly rising wages, then you have Wage Inflation and you enact Wage & Prices Freezes like Nixon and FDR did to bring rising wages and prices to a rapid halt. Since people's wages aren't rapidly rising, we can rule out Wage Inflation.

Fiscal/Monetary Inflation from low interest rates and sometimes government spending can cause prices to rise, but the rate is minuscule, being in the tenths of a percent. Things tied to interest rates like cars and houses will very quickly inflate in value. We saw that with housing, but not cars, since there's been a surplus of cars for the last 12 years and we know that because dealers gave rebates, and then rebates and cash back, and then rebates, cash back and "customer loyalty" bonuses, and then rebates, cash back, customer loyalty bonuses, plus they're offering now to pay off the loan on your old car. For everything else, prices will rise very little over a very long time, like 4/10th of a percent over 10 years. The government may or may not be over-spending, but it's irrelevant since the spending is limited to the defense industry, which is a very small sector of the economy.

If the money supply was increasing rapidly, then we could say that Currency Inflation is driving prices, but that isn't the case. The money supply (M1 + M2) increased 68% under Clinton, but thus far only 64% under Bush, and to make matters worse, the M1 actually had negative growth for a number of months in 2006, 2007 and from March to June of 2008. The rate of Currency Inflation in the US is very smaller, certainly much smaller than the vast majority of countries (over 150+), including the UK.

Cost Inflation is what's driving prices. The lower value of the US$ makes imports more costly, and it makes commodities more expensive for those countries that use the US$ (like the US, Ecuador and others) and those countries whose currencies are pegged to the US$.

The only possible solution to offset at least a portion of Cost Inflation is to reduce consumption, but in the US that has the effect of also inducing recession.
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Old 07-22-2008, 12:53 AM
 
Location: Los Angeles Area
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This conversations about inflation go no where because nobody agrees on definitions. Some equate "inflation" with "prices going up", others are speaking from a Keynesian perspective (like Mircea here with his "different sorts of inflation") and yet others are speaking from a more Monetarist/Austrian perspective.
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Old 07-22-2008, 05:10 AM
 
Location: western East Roman Empire
7,478 posts, read 11,253,343 times
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Quote:
Originally Posted by evilnewbie View Post
Didn't you hear what Bush had to say? Not to worry.. there is NO problem... don't mind the eviction notice, repo man, and bill collectors... everything is okay... we all are okay.. Just remember to overspend like Bush says... Don't you feel better now that Bush has told you are doing okay... Its not like the government has ever lied before...
I know it's hard to defend Pres. Bush and I realize there are different definitions and measures of inflation, and anyone but children and imbeciles knows that governments, in the final analysis a group of men in power, lie.

However, the US people also lie to themselves.

For some years now, at least a decade if not longer, it is clear that the two major entitlement programs - social security and medicare - are not sustainable going forward, at least in their current form, not because some people in power are mean and stingy, but because of the laws of economic cost, especially in the new global context and energy environment.

Early in his second term, Pres. Bush toured the nation in a bid to stimulate social security reform. The nation ignored him.

It is interesting to note that money supply growth began to accelerate around that time, just as it is interesting to note that the latest bull run in oil and other commodities took flight after the Fed lowered interest rates again to the 1%-2% area.

One way to get around the lie of entitlement promises is through inflation, and then lying about that.

What do they call it, a self-generating process? Well, maybe in this case a self-degenerating process.

Either we invent/discover a new kind of magical energy or we get a handle on our expectations and significantly tune-down the pace and quantity of the material standard of living, it's mathematical.

The countries of early industrialization (what, maybe 800-900 million between the English-speaking countries, for now, and Europe) must now, after some two hundred years, share the fruits of industrialization with the rest of the world (what, some 6.0-6.5 billion), it's mathematical.

The only question is how volatile that process is and will be.

We can also, crudely, define inflation as a measure of the volatility of such process, and the lies that surround it.

Last edited by bale002; 07-22-2008 at 05:20 AM..
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Old 07-22-2008, 08:50 AM
 
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The nation didn't ignore Bush regarding Social Security reform - they just knew that his proposal was unnecessary and risky.
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Old 07-22-2008, 09:31 AM
 
Location: western East Roman Empire
7,478 posts, read 11,253,343 times
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Quote:
Originally Posted by sean98125 View Post
The nation didn't ignore Bush regarding Social Security reform - they just knew that his proposal was unnecessary and risky.
That may be the case, and doing nothing to reform the system while letting its real economic value decrease through inflation may indeed be the wisest path, this way we keep up the illusion, no one gets too upset and there is no one to blame.

I can live with it as long as taxes are low and we have the freedom to try to dodge inflation as best as each one's individual talents allow.

A greater evil, in my view, is to be forced to drown in a sea of mediocrity under the guise of socialism.
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Old 07-22-2008, 03:57 PM
 
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Social security isn't really an entitlement program. It's not something for nothing-- people pay into it for years, expect it to be prudently stewarded, then paid back to them pro rata in the future. It was conceived as a pay-it-forward program that has been turned into a Ponzi scheme. Some people will have paid in hundreds of thousands of dollars over a working career--monies that they could have invested into a million in the bull market-- and are in danger of ending up empty handed in retirement, thanks to our federal "stewards."

The real entitlement programs are welfare, food stamps, Section 8 housing and other something for nothing initiatives that actually require no initiative. People who Have subsidize those who Have Less... but might Have More if these programs were used as a means to an end, rather than the end itself. In other words, they are rampantly abused by people who know how to "work" the system while many of the truly needy and elderly do without. That is a national disgrace.

So it would appear that we are already treading water in a sea of mediocrity under the guise of socialism and, yes, reform is sorely needed. If it takes the cleansing tide of capitalism to wash out the excess, then we are in for a pounding, and inflation is the least of it. Slowing it down isn't going to stop it from happening and wishing it wouldn't won't keep it at bay. Unfortunately.
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Old 07-22-2008, 07:58 PM
 
Location: San Diego California
6,797 posts, read 6,488,700 times
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Casey's Charts - Inflation Double-Header: CPI & Commodity Prices (http://www.caseyresearch.com/displayCcs.php?e=true - broken link)

One look at this chart will tell you where CPI is heading. The divergence between the CPI and PPI is the largest since the 70's and no slow down in sight. As producer prices go up only one of two things can happen, either consumer prices go up to reflect the producers increased costs, or the producers go out of business driving up unemployment. Either way the consumer is screwed.
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