nextJin
Golden Member
- Apr 16, 2009
- 1,848
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I have two questions for dullard or eski (seeing as how they are the biggest opponents to the Austrian theory).
1. When Ron Pauls/anyones prediction(s) were made, according to the year, which measurement was being used and if that same calculation was used what would the overall inflation be today?
2. What happens when interest rates rise? I gather they can't stay at near 0% forever.
Looking back on this thread (first time in here I think) I have seen different references to several various calculations throughout the years and believe it might be a good reference for people (like me) to show folks making predictions in the past to be judged on those predictions based on the model that was relevent at the time.
1. When Ron Pauls/anyones prediction(s) were made, according to the year, which measurement was being used and if that same calculation was used what would the overall inflation be today?
2. What happens when interest rates rise? I gather they can't stay at near 0% forever.
Looking back on this thread (first time in here I think) I have seen different references to several various calculations throughout the years and believe it might be a good reference for people (like me) to show folks making predictions in the past to be judged on those predictions based on the model that was relevent at the time.
dullard
Elite Member
- May 21, 2001
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1. This is a bit of a loaded question. Predictions have been made for all of eternity. It is hard to answer anything that covers all predictions for all eternity. But if you mean this recent (as in the last ~5 years) rash of people screaming "hyperinflation" then that can be answered.
The answer is that the CPI (i.e. inflation) formulas have been basically unchanged. True, they are updated as new data comes in, but the updates are extremely minor. For the most part the exact same formulas have been used for decades giving the exact same results. Since the formulas didn't change, the answer to your question is the inflation is the same.
There are multiple measures of CPI. There is a formula for urban workers (CPI-U). There is a formula for elderly people (CPI-E). And there are many more. None of these formulas have changed recently. What has changed is that politicians want to tie cost of living adjustments to different types of CPI. For example, there is a push to move from CPI-U to Chained CPI-U (C-CPI-U). The difference is that chained CPI allows consumers to switch items when shopping. If they went in for beef, they may choose a ribeye since it is cheaper than the New York strip that they bought last month. But, the formulas for CPI-U and C-CPI-U have not changed. The only difference is which one will be used for cost of living adjustments or other inflation based numbers. If you look at a graph of inflation as typically reported by media, they did not change the formula used.
2. I don't have time to answer that right now. But inflation and interest rates are loosely correlated. Short term graph (top graph on this link):
http://scottgrannis.blogspot.com/2011/07/bond-market-on-horns-of-dilemma.html
Long term graph:
http://www.economicshelp.org/blog/wp-content/uploads/2012/01/inflation-interest-rates-1900-2011.png
Notice how in general when interest rates go up inflation tends to go up. When interest rates go down inflation tends to go down. But also notice on that long term graph that in times of war or major economic collapse that there is no correlation at all.
sm625
Diamond Member
- May 6, 2011
- 8,172
- 137
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At an employee meeting our president just informed us that some of the quotes he had gotten back from various potential insurance policies were in the range of $20,000 per family. Twenty-frickin-holy-frack-are-you-smoking-frickin-crack-thousand dollars. These costs are exploding out of control in a total death spiral. These costs are not represented at all in the CPI. Anyone who thinks the CPI is anything but a sick joke jsut has their head shoved up Ruper Murdoch's ass. You frickin idiots will believe anything>? No inflation? HAHA we have been in a goddam hyperinflationary crack-up boom for a few years now and most of these idiot moron bloomberg ballsack licking zombies cant even see it. Granted, it is much easier to see in a country like Venezuela, but make no mistake it is happening. They are just obviously oh so much slicker about how they hide it.
First
Lifer
- Jun 3, 2002
- 10,518
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Why gee golly, probably because you libertarian and Austrian nutters got it horribly, massively wrong.
Again.
For the 3rd decade in a row now.
I've never argued that there would be inflation, ever. Those who do don't understand modern monetary theory.
I simply argue that there is less actual economic freedom than there would be in a libertarian anarcho/capitalist society.
As I've said here, and in other thread, when you violently enforce your reserve status throughout the world you can literally print wealth - just look at the lack of inflation and the stock market rebound - who gets that wealth? Well the people who need it least. The problem with the violent enforcement, is that it has led to threats of terrorism against the USA, and the USA has been looking increasingly inward towards its own citizens as potential terrorists.
So yea. Who really cares about inflation? I certainly don't.
hal2kilo
Lifer
- Feb 24, 2009
- 25,673
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Our old parent coporation's CEO - Mr. Figgie of Figgie International railed about hyperinflation in the mid 80's, even wrote a book about the horrors of the impending hyperinflation. Guess he got it wrong.
So, if I understand this and I am sure I don't. The formulas have not changed but the items can change? Sounds like what I used to call "Trick F(^&in".
If you use ice cream will the price per container be used because the "Shrink Ray" is hitting almost everything. Or is the price per ounce used?
As for as ~2% inflation for the last 12 months. If I change out lettuce from the grocery store for grass clippings from the neighbors yard and instead of chicken swap in last years road killed crow. Yeah I could get down to 2%.
Other than that I ain't buying it. I can not think of much that has not increased in price or decreased in size.
The goverment can wrap it up in any wrapper they want to and put a bow on it. But, to me it is still a turd floating in the punch bowl.
.
All of that is addressed in the CPI FAQ I linked earlier. In short, none of that is causing our exceptionally low inflation as measured by CPI. As I've asked in other threads, there are other independent measures of inflation that also strongly agree with CPI such as the billion price index. If the CPI is a big lie, why is this?
Can you provide quantitative evidence for your claims of inflation, not just anecdotal ones?
Without knowing the exact items, size and price used there is no way I could begin to answer this. Even if I had that data I doubt if I could answer.
No I cannot. My personal observation is all I have.
.
Here's a copy of the 2012 basket of goods for CPI:
https://docs.google.com/spreadsheet/ccc?key=0AonYZs4MzlZbdEhFdGMzcU1BanpmaW1pSGxIYkRhZFE#gid=1
Again however, I highly recommend you read the CPI FAQ. Specifically if your concern was people substituting other items, that is addressed through the use of a geometric mean formula within price categories.
There are other measures such as MIT's Billion Price Project that are independent measures of inflation. It measures price changes in about 5 million different items. On their website we have a comparison of their index to CPI:
http://bpp.mit.edu/usa/
Pretty damn close. With those data points in mind, would you be willing to reconsider your statement that CPI is not an accurate assessor of inflation?
Thanks for that info.
Not to me it is not. I do not buy all of those goods and services. I have to consider how inflation affects me. Maybe I only purchase the items that are increasing more than 2%. Spending to be average is not in my nature. Next year if I spend on things that have only droped in cost my opinion may change. And it is just my opinion but to me inflation is higher than 2% on the things I purchase. If I purchase the correct items in the correct amounts my inflation rate may decrease but my cost of living will ceraintly go up. I can keep more currency in my checking account this month by using a credit card to grocery shop. Not a long term solutition though.
I do not live in the clean and orderly mathematical world. I live in the sometimes black sometimes white sometimes gray most times beautiful and on rare occasions damn ugly one.
.
Attic
Diamond Member
- Jan 9, 2010
- 4,282
- 2
- 76
Japan doesn't work if others become like them. Everyone can't continue to debase currency. Japan is a massive failure in economies of scale.
Keynesianism are academic idiots. Their answer to achieve economic efficiency is to take control from the many and grant it to a few. Price fixing never worked and never has. These assholes ask and take power from the entire market that they may retain control of the outcome. They have it completely backwards. We are at the end of our ability to grow debt, that's all that had propped us up the last thirty years.
If bernanke cuts QE to zero by end of 2014 and it doesn't have negative results throughout the economy them ill rethink my stance. Right now he is the market for MBS and treasuries and there are huge distortions throughout the entire financial system as a result. You can't price fix because you want to dictate a result. The market is going to gyrate to greater and greater extremes until it resets.
We will get inflation, we only grow through debt and we only over manage our debt through growth. Dollars have to buy orders of magnitude less for our system to work. Average shopping bag or the American consumer has increased 50% since 2008. CPI is clearly tailored, same for employment numbers and housing stats.
Either viewpoint, you have to recognize the importance of the next eighteen months. If interest rates normalize and we make it out then it may end the debate. What I see indicates QE will continue and possibly increase by end of 2014, this would be a failure for Keynesianism as has been ZiRP and every QE after QE1. You can't keep injecting the patient with higher doses and claim he is cured.
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Jaskalas
Lifer
- Jun 23, 2004
- 35,406
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I hope the debt you are talking about is not the debt shown on the "FRED graph" (BUSLOANS)
Because (at least it looks like to me) every time BUSLOANS flattened out or dropped was at or near a recession. And in the graph it looks like it may have started flattening out ~April 2013.
May be irrelevant or my tired old eyes playing tricks.
EDIT:After checking some other debt graphs (REVOLSL), (CIBOARD) and (CONSUMERNSA). I must be not reading them right because they all seem to flattening and that can not be right.
Side note check the (CONSUMERNSA) between March to April 2010 a 280 billion borrowing spree!
.
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This is 100% wrong, interest rate and inflation are inversely related. As interest lowers, inflation increases, and that is what those graphs actually show. This is very basic economics.
As interest rates fall, more money is being placed into the market, the increase money in the market causes inflation to increase.
In fact one of the big reasons the fed push rates so low is to PREVENT deflation, because lower interest rates causes high inflation and can stop deflation. In fact when they move in the same direction like in the 80s and now, it is a major problem, a sign of a major economic crisis.
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This is normally true, but right now this is 100% wrong as we are in a liquidity trap. Bond rates and inflation both moving higher together is not a sign of a major economic crisis, it is EXACTLY what we want.
Right now we need more inflation, and people are parking all their cash in government bonds instead of investing it. Seeing both moving away is a very positive sign.
No, want inflation to rise more, and once it gets high enough, the feds can drive up interest rate. Once interest rate rises we want inflation to stop rising. They should not rise together.
At their current, incredibly low rates, both will need to rise. It is both necessary and desirable.
Once inflation rises, the feds will allow interest rates to rise in response, the increase in interest rates will then slow down and push inflation lower. Both should ideally reach a steady state a higher then now.
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Bond yields are depressed by a huge amount of money being parked in them due to pessimism about investment opportunities, etc. If people view the economy to be improving, they will remove money from bonds and invest in...well... anything else. A modest rise in interest rates is a logical consequence from improved economic data.
While the various CPI's might be decent indicators of inflation for many, they certainly aren't for me. Healthcare costs have skyrocketed (up more than 100% over the past 3 years), gas prices are up, food prices are definitely way up for meats etc. I guess if you were in the market to buy a home, you might have seen lower prices, but the various baskets used don't reflect my spending habits, nor those of anyone I know.
The billion price project is fine for measuring inflation on the whole, but it is based on a very broad range of products/services.
I'd like to see a cpi modeled after the spending patters of various groups in the country. For example, if the average middle class family spends 10% of their income on food, then 10% of the cpi basket should reflect those food costs. That might be an interesting experiment.
Inflation on the whole right now is not high, but slowly climbing.
The billion price project is fine for measuring inflation on the whole, but it is based on a very broad range of products/services.
I'd like to see a cpi modeled after the spending patters of various groups in the country. For example, if the average middle class family spends 10% of their income on food, then 10% of the cpi basket should reflect those food costs. That might be an interesting experiment.
Inflation on the whole right now is not high, but slowly climbing.
dullard
Elite Member
- May 21, 2001
- 25,913
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I see you didn't even look at the graphs or take an economics class. Come back when you do.
I agree that it is counter-intuitive. But, I prefer to dwell in the realm of reality than in the realm of intuition.
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