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Well it looks like posters here on CD-F have various definitions of "inflation".
Some seem to view it narrowly as a carefully defined official government statistic.
Others such as myself are doing "back of the envelope" calculations and making "real world" observations.
This latter layman's approach is nonetheless not invalid or without merit.
I ask again: Can anyone argue that the dollar in my pocket is NOT decreasing in value with every tick of the clock?
Can you argue deflation will get so bad that my dollar will actually increase in value?
I don't think so folks.
Here is a salient article about inflation/deflation with respect to the housing bubble in the U.S.: Why Housing Is Not Coming Back
Hi POhdNcrzy,
I define inflation/deflation by the existing money supply. Another way is a composite of prices. However your housing example undermines you own position. If housing falls 5% in the next year, your $1 just increased in value towards housing. Given that housing is typically the largest expense, the dollar goes further. That housing is considered an asset has badly distorted reality. The largest expense most people have is dropping in price. The next largest is transportation, also dropping in price.
Housing is what caused most of the inflation since banks created money underwritten by an asset considered as good as gold, an immobile house, with institutions created by government designed to buy up all the mortgage paper. That is a money creation factory like no other. What will cause money to be created into existence through loans at the same rate as housing?
To some inflation is your purchasing power vs your salary.
Say I make x and food costs y
Food goes up but my salary doesn't
Now I make x but food costs y+
Currently food and healtcare are continuing to rise if you look at the breakdown of the CPI.
What is keeping it down/negative is energy which fell by a great amount.
Salaries never kept up with the CPI as the CPI has been doctored over the years to reflect the lowest rising prices.
My opinion of course but that is how I view inflation..how it hits my wallet vs my salary.
Can you argue deflation will get so bad that my dollar will actually increase in value?
I don't think so folks.
Deflation in terms of aggregate prices by definition means your dollar will increase in value, so this question does not make that much sense.
The question is whether we are seeing or are likely to see deflation (in terms of aggregate prices) and I think the answer to both of these is "yes". If you put real estate back into the CPI, inflation is at -5% right now.
Anyhow, nearly everything is going down in price now so I don't know what sort of back of the envelop calculations you are talking about. When all the talking heads were talking about inflation about 1-2 years ago, a lot of companies increase their prices. They did this not because they had to, but because the buzz made it easy for them to do it. It is sort of amusing though, because it is now all reversing and the companies that were most aggressive are hurting because people moved away form them.
It is sort of amusing though, because it is now all reversing and the companies that were most aggressive are hurting because people moved away form them.
Yes it's so true. I switched brands myself only because of price rises that I thought were riduculous. But some good came out of that - store brands increased and that gave shoppers more choice.
Some things I just cut out completely..like Gatorade when it went from $.89 to $.99 and then jumped to $1.18. No more Gatorade in our house.
Some things I just cut out completely..like Gatorade when it went from $.89 to $.99 and then jumped to $1.18. No more Gatorade in our house.
Gatorade (and the other one, powerade?) have been on sell lately. That seems to be the way they first lower prices. They avoid changing the list price at all costs.
I saw this with Milk, only recently have the actual list prices gone down. Cheese still has ridiculously expensive list prices, but they are now on sale all the time. Although the cheese prices at Costco are around 20% less, Costco seems to force vendors into lower prices and immediately lower prices when they see lower prices.
I wonder how well the CPI numbers pick up the way sales are used at grocery stores. I can't imagine they do a good job of it and that is where price declines first show up.
But sometimes those sales are to hide increases. Pepsi was 3 12-packs for $10. Used to be 4 12-packs for $10. I think a 12-pack by itself is $3.99 so 3/$10 saves you $2 but I switched to store brand soda which is less than 1/2 what Pepsi wants.
All in all I can keep my food bill under $100/week which takes work now..didn't used to.
But sometimes those sales are to hide increases. Pepsi was 3 12-packs for $10. Used to be 4 12-packs for $10. I think a 12-pack by itself is $3.99 so 3/$10 saves you $2 but I switched to store brand soda which is less than 1/2 what Pepsi wants.
All in all I can keep my food bill under $100/week which takes work now..didn't used to.
Hi HappyTexan,
If you are shopping for items that are typically low cost like pork shoulder, spam, dry beans etc the demand has shifted considerably. You will find more expensive items like almonds much cheaper.
I typically like to buy cheaper cuts, pigs feet, tail, chicken livers etc because I like to use the cooking techniques I know to make them into a first class meal. It is more interesting to be to season a picnic ham than to just grill a stripe steak. When I do buy the good stuff I aim it at sea food but again head on uncleaned shrimp or fish since I know what to do with it and make stocks for stews and chowders. I also have a yen for lamb. So I tend to buy both kinds of items and notice the trend.
The point is I don't expect to see price drops here because the demand is up for cheap. I notice dry beans like pinto, and black beans etc have gone up. I bought a bunch a few year ago as a food hedge and they were cheaper then. I will be producing my own cranberry, black and jacobs cattle this year so I can avoid that expense.
Ultimately if someone made the claim that my dollar will go farther two years from now versus today, I might be swayed somewhat by their case, but I still don't believe it.
It's true there is very little pricing power out there for most things in the U.S. And "name brand" companies who try to be aggressive about raising prices quickly find that customer brand loyalty is discarded in favor of achieving savings with a cheaper product from a competitor.
user_id said: "Deflation in terms of aggregate prices by definition means your dollar will increase in value"
Usey, yes I agree with that, so I guess what we are now experiencing is deflation in a broad class of assets together with aggregate prices experiencing no deflation at all (or very little) (or continuing to experience inflation).
I wonder, are there historical precedents for this? What are the ramifications of such a scenario?
user_id said: "Deflation in terms of aggregate prices by definition means your dollar will increase in value"
Usey, yes I agree with that, so I guess what we are now experiencing is deflation in a broad class of assets together with aggregate prices experiencing no deflation at all (or very little) (or continuing to experience inflation).
I wonder, are there historical precedents for this? What are the ramifications of such a scenario?
Hi POhdNcrzy,
I think it make more sense to classify a boom in canned spam as not being inflationary in that category but rather a shift in demand. Inflation should simply be a monetary effect and no real consideration of value. If something goes up in price it can be from inflation, a drop in supply or an increase in demand. The explanation of price rises as universally considered inflationary for a category does not communicate very well shifts in real price for a stable money supply. As housing drops in demand, I would expect more disposable income for other items and thus an increase in demand. I expect food as a whole will be relatively inelastic demand curve.
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