No hyperinflation pending, TIPS are retreating

[LegendKiller]

Inflation will pick up if the Fed doesn't raise interest rates and reserve ratios. Also, all the stimulus money hasn't been released. Prices have also gone up where I live.

Yeah, none of that is offset by the trillions in wealth that evaporated once the bubble burst.

Wow, prices went up in your area. Funny, the little bitch down the street increased her lemonade stand prices by .02, to .27. INFLATION!

 

[werepossum]

Isn't it pretty much a given that the Fed will prevent any hyper-inflation? I mean, that's pretty much what they do, protect the banks from inflation that would render loan income a losing proposition. I would think TIPS failing to post either means the yield different is too high, or else that the market is betting that there will be no robust growth any time soon. Wouldn't TIPS be a better deal if we maintained even 4% growth over ten years? I'm not a financial guy, but this seems to me to indicate a lack of faith in our economy.

On a related matter, isn't it bizarre that inflation excludes food and energy costs? They may be volatile, but they are big parts of the average Joe's budget, tend to rise faster than the official inflation rate, and are very difficult to do without.

 

[StageLeft]

I haven't read most above this post but inflation numbers came out a little higher than "expected":

http://finance.yahoo.com/news/Stock...tml?x=0&sec=topStories&pos=main&asset=&ccode=

Inflation also rose more than expected. The Producer Price Index rose 1.4 percent. It rose 0.3 percent excluding volatile energy and food prices. Economists expected a smaller rise in prices.

 

[Vic]

Any threat presented by rising inflation in the near future will be promptly squashed by rising interest rates.

 

[Vic]

On a related matter, isn't it bizarre that inflation excludes food and energy costs? They may be volatile, but they are big parts of the average Joe's budget, tend to rise faster than the official inflation rate, and are very difficult to do without.

What's really bizarre is that the official inflation figure doesn't include housing costs, the biggest part of every average Joe's budget. If that were factored in, the actual numbers would be very different. People would see that the real inflation was a few years ago, followed by a severe deflationary cycle the past 2 years.

 

[Genx87]

What's really bizarre is that the official inflation figure doesn't include housing costs, the biggest part of every average Joe's budget. If that were factored in, the actual numbers would be very different. People would see that the real inflation was a few years ago, followed by a severe deflationary cycle the past 2 years.

Didnt they used to have some kind of asset appreciation in inflation numbers but was changed in the mid 90s? I have heard some people propose we take into account asset appreciation in inflation numbers. For instance this hot housing market would have possibly been cooled by rising rates instead of flood of cheap money we have had for most of the the last decade.

 

[werepossum]

What's really bizarre is that the official inflation figure doesn't include housing costs, the biggest part of every average Joe's budget. If that were factored in, the actual numbers would be very different. People would see that the real inflation was a few years ago, followed by a severe deflationary cycle the past 2 years.

Yes, and it excludes food and energy. If housing costs too are ignored, then the official inflation rate is pretty much for things you don't have to have.

 

[Doc Savage Fan]

When Ideology doesn't match Reality, what do you do?

Type "Fail" ?

 

[dullard]

The CPI numbers were released today. Core CPI dropped 0.1% for the month due to the drop in housing, lodging, and vehicle costs. Year-over-year core CPI us up a modest 1.6%. Year-over-year CPI is up 2.6% (due mostly to energy prices going up). 2.6% is right about the target level and less than the historical average.

Yet another month goes by with no signs of hyperinflation.

How about we twist the discussion around. For those people who keep saying hyperinflation is coming but who won't give a date, give us a date. Is it coming this year, next year, in 5 years, or in 1000 years? When?

 

[DanDaManJC]

so what if a black swan pops up? then all this speculation is for nothing

 

[bamacre]

How about we twist the discussion around. For those people who keep saying hyperinflation is coming but who won't give a date, give us a date. Is it coming this year, next year, in 5 years, or in 1000 years? When?

I don't think anyone sane is saying that hyperinflation is around the corner. Like Vic said above, once there are signs of inflation, the Fed will increase interest rates. So, we're only likely to see moderate to high inflation in the coming years. The only way, IMO, we'd see hyperinflation is if Congress either put intense political pressure on the Fed to monetize high amounts of debt, or took over the Fed completely to do it. And even that would require a few things to happen. One, no to little health care reform, meaning the coming Medicare problem remains as is. Two, some new expensive war, and on top of those things, foreign countries stop buying our debt. So, IMO, hyperinflation is totally preventable. But that said, Congress needs to get some shit done.

 

[dullard]

I don't think anyone sane is saying that hyperinflation is around the corner.

You seem to love to walk a fine definition line to skirt the details a bit. I'll let you do that definition tight-rope walk. But I want details. When is high inflation coming? In your own words, "Hyperinflation seems to be a worse-case scenario, but high inflation looks to be around the corner."

When is this corner for high inflation? And how high is high?

 

[lothar]

I don't think anyone sane is saying that hyperinflation is around the corner. Like Vic said above, once there are signs of inflation, the Fed will increase interest rates. So, we're only likely to see moderate to high inflation in the coming years. The only way, IMO, we'd see hyperinflation is if Congress either put intense political pressure on the Fed to monetize high amounts of debt, or took over the Fed completely to do it. And even that would require a few things to happen. One, no to little health care reform, meaning the coming Medicare problem remains as is. Two, some new expensive war, and on top of those things, foreign countries stop buying our debt. So, IMO, hyperinflation is totally preventable. But that said, Congress needs to get some shit done.

What percentage do you consider to be hyperinflation?
What percentage do you consider to be high inflation?
What percentage do you consider to be moderate inflation?

Give us your percentage numbers you're thinking about.
Some people may consider 20% to be hyperinflation while others consider it to be high inflation.
Some people may consider 10% to be moderate inflation while others consider it to be high inflation.

Let us know what you're thinking.
Here's my numbers.
0-3%: low inflation, 4-6%: moderate inflation, 7-14%: high inflation, 15+%: hyperinflation.
Some may not consider hyperinflation until 20+% instead of the 15+% I'm thinking about.
Again, let us know what you think.

 

[JS80]

You seem to love to walk a fine definition line to skirt the details a bit. I'll let you do that definition tight-rope walk. But I want details. When is high inflation coming? In your own words, "Hyperinflation seems to be a worse-case scenario, but high inflation looks to be around the corner."

When is this corner for high inflation? And how high is high?

PPI up 16.8% http://www.bls.gov/news.release/ppi.nr0.htm

 

[ElFenix]

What's really bizarre is that the official inflation figure doesn't include housing costs, the biggest part of every average Joe's budget. If that were factored in, the actual numbers would be very different. People would see that the real inflation was a few years ago, followed by a severe deflationary cycle the past 2 years.

due to being locked in long term, wide regional variation, and individual variation based on credit rating, etc., that's a difficult thing to put a single number on. (it does include rental rates, iirc). obviously, house prices did skyrocket and peak, but people who have been in their houses for several years with a fixed mortgage didn't see an increase.

 

[bamacre]

You seem to love to walk a fine definition line to skirt the details a bit. I'll let you do that definition tight-rope walk. But I want details. When is high inflation coming? In your own words, "Hyperinflation seems to be a worse-case scenario, but high inflation looks to be around the corner."

When is this corner for high inflation? And how high is high?

LOL, I am neither smart enough nor dumb enough to make that kind of prediction. No one here is.

 

[bamacre]

Let us know what you're thinking.
Here's my numbers.
0-3%: low inflation, 4-6%: moderate inflation, 7-14%: high inflation, 15+%: hyperinflation.
Some may not consider hyperinflation until 20+% instead of the 15+% I'm thinking about.
Again, let us know what you think.

I can't disagree with that. I wouldn't say 15% is "hyperinflation," but it would certainly be harmful to the economy, especially if unemployment is still high going into it.

 

[werepossum]

PPI up 16.8% http://www.bls.gov/news.release/ppi.nr0.htm

Holy crap! Still, this may be somewhat like global warming graphs, where a particular starting point can really bias the rate. If February comes in like December, inflation would be much more moderate.

I have to wonder how the fed's model for fighting inflation will work in this economy. Raising interest rates might result in a slew of additional foreclosures on those with ARMs and barely getting by. That sounds like it would depress demand, but if those people then move to lower cost rental housing demand (other than for houses) could conceivably increase as their disposable income after housing might increase.

 

[dullard]

PPI up 16.8% http://www.bls.gov/news.release/ppi.nr0.htm

You didn't give us enough information with that post. Do you think that 16.8% jump in one component (mostly natural gas prices) of PPI is hyperinflation? Or, do you think hyperinflation will hit once the whole PPI is up 16.8%? Or, do you think hyperinflation is when the CPI is up 16.8%?

 

[dullard]

LOL, I am neither smart enough nor dumb enough to make that kind of prediction. No one here is.

So you are smart enough to say it is just around the corner, but not smart enough to say where or when the corner is at? In that case, your words are useless. You can't predict something and then be unable to even give an approximate description of your predictions.

 

[dullard]

I have to wonder how the fed's model for fighting inflation will work in this economy. Raising interest rates might result in a slew of additional foreclosures on those with ARMs and barely getting by.

People with ARMs have the rates tied to things such as the LIBOR 1-year index. A common product that people in this mess got was LIBOR + 2.5%. LIBOR is now at a 0.85%. Thus, people's ARMs if reset today will drop to about 3.35% interest. That is a very good savings for people with ARMs. I say this, because that gives room for interest rates to rise. A heck of a lot of room before ARM rates go above the ~5% to 6% that they started with.

 

[JS80]

You didn't give us enough information with that post. Do you think that 16.8% jump in one component (mostly natural gas prices) of PPI is hyperinflation? Or, do you think hyperinflation will hit once the whole PPI is up 16.8%? Or, do you think hyperinflation is when the CPI is up 16.8%?

You claim deflation. Then you ask "When is high inflation coming?" Then I present you with 16.8% PPI in January. So you are just as bad as the hyperinflation goldbugs. But keep an open mind. There is a shitton of cash sitting and waiting. Unless you think Americans all of a sudden turned into Japanese people in a year, what do you think is going to happen with the hoards of cash Americans are sitting on?

Let's watch the data in 2010 as the Fed unwinds. IMO we have "high inflation" now. High unemployment equaling lower average wages coupled with moderate inflation...you do the math.

 

[werepossum]

People with ARMs have the rates tied to things such as the LIBOR 1-year index. A common product that people in this mess got was LIBOR + 2.5%. LIBOR is now at a 0.85%. Thus, people's ARMs if reset today will drop to about 3.35% interest. That is a very good savings for people with ARMs. I say this, because that gives room for interest rates to rise. A heck of a lot of room before ARM rates go above the ~5% to 6% that they started with.

I don't know anyone with an ARM whose rate has actually adjusted down (below its initial, artificially low set point) since at least the nineties. (Of course, that may be because people who save money don't complain about it.) My point though was that as the Fed raises base rates in order to cool off the economy, things like LIBOR and COFI also tend to go up.

When I bought my house in '84 or '85, fixed rates were 10%. The bank really pushed a variable rate loan for 7.5% which looked really attractive, but when I finally dragged from them the underlying mechanics it turned out that the loan would automatically adjust to 9.5% if nothing changed, and could increase to 13.5% in just three years. Major rip-off, I took all the risk for half a point. In the end I just bought a 9.5% fixed rate.

 

[JS80]

I don't know anyone with an ARM whose rate has actually adjusted down (below its initial, artificially low set point) since at least the nineties. (Of course, that may be because people who save money don't complain about it.) My point though was that as the Fed raises base rates in order to cool off the economy, things like LIBOR and COFI also tend to go up.

When I bought my house in '84 or '85, fixed rates were 10%. The bank really pushed a variable rate loan for 7.5% which looked really attractive, but when I finally dragged from them the underlying mechanics it turned out that the loan would automatically adjust to 9.5% if nothing changed, and could increase to 13.5% in just three years. Major rip-off, I took all the risk for half a point. In the end I just bought a 9.5% fixed rate.

My boss's ARM rate was adjusted down very recently from his 2004 purchase.

 

[LegendKiller]

So you are smart enough to say it is just around the corner, but not smart enough to say where or when the corner is at? In that case, your words are useless. You can't predict something and then be unable to even give an approximate description of your predictions.

I bet he could predict it if he watched it on YouTube.


His words were worthless long before that post. He has no ideas of his own.