USG Debt bubble popping?

[the DRIZZLE]

I am starting to question the govts ability to accurately gauge inflation. I am looking at 4.59\pound bacon, 6 dollar\pound chicken, 2.50\gal milk and other food stuffs rising in prices and nearly 4 dollar\gallon gasoline. These are major expenses that have gone up noticeably in the past 18 months. Yet they are trying to tell me inflation is 1.5%? Hard to believe.

60% of the CPI is services. The price of services has stayed the same or gone down a bit because people are desperate for work. That is covering up for fact the that goods (the other 40%) have gone way up. If unemployment actually goes down and service prices go up all of a sudden the CPI will jump.

 

[yllus]

I am starting to question the govts ability to accurately gauge inflation. I am looking at 4.59\pound bacon, 6 dollar\pound chicken, 2.50\gal milk and other food stuffs rising in prices and nearly 4 dollar\gallon gasoline. These are major expenses that have gone up noticeably in the past 18 months. Yet they are trying to tell me inflation is 1.5%? Hard to believe.

Not an expert in this area, but I think that typical government provided inflation numbers excludes energy? It appears that the government of Canada provides with- and without-energy numbers.

 

[LegendKiller]

Real inflation is way beyond 1.5%.

And the very notion of measuring inflation excluding food and energy is silly.

GDP at 3-4% is not quarterly; it's being compared to the same quarter, a year ago. 3-4% real growth would be raging out of control. 12-16% would be basically impossible.

Gold will reach any nominal price if monetary policy is left loose indefinitely.

Edit - Oh, and published unemployment figures are virtually meaningless due to exclusions and massaging.

Inflation is not "way beyond" 1.5%. I would love for you to prove that it is in an impirical way.

No, it is not silly, it is actually quite logical. Moreso, there's a reason why it is measured with AND without food/energy.

Published employment may not always be spot on but I think it's been corroborated reasonably well by private figures.

 

[LegendKiller]

60% of the CPI is services. The price of services has stayed the same or gone down a bit because people are desperate for work. That is covering up for fact the that goods (the other 40%) have gone way up. If unemployment actually goes down and service prices go up all of a sudden the CPI will jump.

This is what I find amazing, yet again, Engineer shows his ignorance in this area by making statements rather than asking questions.

The US spends some of the least amount of money as a % of disposable income on food in the entire world. This is why the impact of food is muted and, while we spend more on energy, it is not an unreasonable % of income to the point that it would massively impact personal expenses.

The single biggest impact, as mentioned here, are services and services have increased marginally. I think that people are a bit blind to the fact that we are a dual-income nation not because inflation but because we have massively expanded the amount of services we use.

 

[First]

Real inflation is way beyond 1.5%.

Source? Methodology?

And the very notion of measuring inflation excluding food and energy is silly.

No, it's quite sensible, since they vary widely and often have nothing to do with a particular country's own policies.

GDP at 3-4% is not quarterly; it's being compared to the same quarter, a year ago. 3-4% real growth would be raging out of control. 12-16% would be basically impossible.

I don't think you understood what you quoted.

Gold will reach any nominal price if monetary policy is left loose indefinitely.

Wanna bet?

Edit - Oh, and published unemployment figures are virtually meaningless due to exclusions and massaging.

Nope, they're the same ones we've been using for several decades now and plenty of other employment data is available if you're confused.

 

[the DRIZZLE]

Inflation is not "way beyond" 1.5%. I would love for you to prove that it is in an impirical way.

No, it is not silly, it is actually quite logical. Moreso, there's a reason why it is measured with AND without food/energy.

Published employment may not always be spot on but I think it's been corroborated reasonably well by private figures.

Food prices have gone up 6.2% over the last year according to the BLS. The CPI just considers a lot of services which haven't gone up.

http://www.bls.gov/news.release/cpi.nr0.htm

edit: The 6.2% was for meat, poultry and egg. The total change in groceries over the past year was 2.1%.

 

[dmcowen674]

Originally Posted by LegendKiller
Inflation is not "way beyond" 1.5%. I would love for you to prove that it is in an impirical way.

No, it is not silly, it is actually quite logical. Moreso, there's a reason why it is measured with AND without food/energy.

Published employment may not always be spot on but I think it's been corroborated reasonably well by private figures.

Food prices have gone up 6.2% over the last year according to the BLS. The CPI just considers a lot of services which haven't gone up.

http://www.bls.gov/news.release/cpi.nr0.htm

edit: The 6.2% was for meat, poultry and egg. The total change in groceries over the past year was 2.1%.

When people start rioting like Egypt because they can't afford a loaf of bread or a gallon of gasoline they will be showing people like LK the real numbers.

 

[Scotteq]

The US's debt levels are the highest they've ever been. Same for Japan. A lot of the European countries had higher debt levels during the WWII era.

Here are current net debt levels:
Japan ... US$44,722 in net debt per person
Italy ... $36,645
United States ... $24,315
France ... $23,457
Germany ... $22,454
United Kingdom ... $13,018


The Bank of England overseeing an economy ravaged by the Great Depression defaulted on gold payments in September, 1931. The US has never defaulted but that doesn't preclude the possibility when faced with the highest debt levels ever. Lots of countries print their own currency and still default (it's called "devaluing").

I think either your figures are off, or your source is excluding things.


http://www.usdebtclock.org/

US Debt per citizen is a little north of $45K. Debt per Taxpayer is a little over $128,000.

 

[bamacre]

Chinese copper imports down 35% in a month.

LOL, that explains copper's fall in price.

Did they run out of fake cities to build?

 

[bamacre]

Gold is insane at this point

Not compared to silver, look what it has done in the past 15 months. It looks pretty bubbly. I sold the majority of mine when it hit $34. It almost hit 37.

 

[LegendKiller]

LOL, that explains copper's fall in price.

Did they run out of fake cities to build?

Doubtful. While I disagree with Mish on about 70% of what he writes, his commentaries on the fake Chinese cities are truly interesting and a place where I agree with him quite a bit.

 

[bamacre]

Doubtful. While I disagree with Mish on about 70% of what he writes, his commentaries on the fake Chinese cities are truly interesting and a place where I agree with him quite a bit.

I've seen a few pictures, just really bizarre. Totally unsustainable, and just plain dumb economically speaking.

 

[The-Noid]

30-year bid to cover prints 3.02 although I in no way believe debts levels are sustainable long term at least right now they are being ate by the grove.

 

[ElFenix]

I am starting to question the govts ability to accurately gauge inflation. I am looking at 4.59\pound bacon, 6 dollar\pound chicken, 2.50\gal milk and other food stuffs rising in prices and nearly 4 dollar\gallon gasoline. These are major expenses that have gone up noticeably in the past 18 months. Yet they are trying to tell me inflation is 1.5%? Hard to believe.

$2.50 for milk is about where it's been here for several years. you could usually find one store each week that had it on sale for $2.25 or so, but often prices are $2.99.

dunno what kind of chicken you're getting. my local grocery store has (fresh) boneless skinless breasts for $2.99/lb regularly, and $1.97/lb this week.
http://www.heb.com/weekly-ads/show-weekly-ads.jsp?storeid=599

 

[sandorski]

The US isn't even close to having Inflation issues yet. Get real Unemployment down to 5-6%, then you'll have real problems.

 

[Scotteq]

The US isn't even close to having Inflation issues yet. Get real Unemployment down to 5-6%, then you'll have real problems.

Inflation and Unemployment are not mutually exclusive. Look at the US while Jimmy Carter was president for a great big example of this.

 

[sandorski]

Inflation and Unemployment are not mutually exclusive. Look at the US while Jimmy Carter was president for a great big example of this.

True, but Inflation is not going to happen now with such a cool Economy.

 

[3chordcharlie]

Source? Methodology?

In a 'down' economy prices tend to fall with demand. Average wages fall (in the current case as jobs are lost, and somewhat replaced by worse jobs). The fact of having any nominal price increase at all is more likely attributable to massive increase in the money supply. (Witness trillions of pretend money dumped into the economy over the last three years). You can't necessarily sort through all of this to come up with a round number, and released money supply estimates are about as trustworthy as unemployment figures.

No, it's quite sensible, since they vary widely and often have nothing to do with a particular country's own policies.

They may have some academic interest, but they aren't meaningful to the people paying the bills.

I don't think you understood what you quoted.

I don't know why you would have referred to the numbers as quarterly unless you were implying that the economy was growing at 3-4% quarterly, which it most certainly isn't.

Wanna bet?

That the price of a relatively stable quantity, expressed in a rapidly expanding currency will rise as long as the expansion continues? Yes, I will be happy to take that bet.

Nope, they're the same ones we've been using for several decades now and plenty of other employment data is available if you're confused.

They've been misleading for decades; these figures exclude people for a number of fishy reasons, and many who 'count' in one survey may no longer qualify the next time as circumstances change. This is why on occasion the economy can add jobs, and unemployment increases as well.

 

[First]

In a 'down' economy prices tend to fall with demand. Average wages fall (in the current case as jobs are lost, and somewhat replaced by worse jobs). The fact of having any nominal price increase at all is more likely attributable to massive increase in the money supply. (Witness trillions of pretend money dumped into the economy over the last three years). You can't necessarily sort through all of this to come up with a round number, and released money supply estimates are about as trustworthy as unemployment figures.

I don't think you get what the CPI measures. We're talking about non-asset inflation and fact is goods and services, even including energy and food increases, are still just 1.5%. That's below the historical trend. The "pretend" money you speak of hasn't yet caused any real inflation nor does it look like it will given the money velocity increasing substantially every day as more and more people around the world transact in U.S. dollars.

And again, please cite an alternative methodology for inflation as I've yet to hear it from you.

They may have some academic interest, but they aren't meaningful to the people paying the bills.

Sure they are, since they account for everyday goods and services that people actually purchase, on average, and they're accurate unless you can point out any flaws in the hedonics they're using.

I don't know why you would have referred to the numbers as quarterly unless you were implying that the economy was growing at 3-4% quarterly, which it most certainly isn't.

It most certainly is. It's on the low end but I'm sorry if you're confused about the numbers.

]That the price of a relatively stable quantity, expressed in a rapidly expanding currency will rise as long as the expansion continues? Yes, I will be happy to take that bet.

The real return is all that matters, nominally no one cares. And fact is gold has been a terrible long-term investment since the founding of the country.

They've been misleading for decades; these figures exclude people for a number of fishy reasons, and many who 'count' in one survey may no longer qualify the next time as circumstances change. This is why on occasion the economy can add jobs, and unemployment increases as well.

You'll have to actually explain what's fishy about it. It's pretty sensible for the BLS to exclude people from the workforce if they are no longer looking for work because they're in school, well-off, discouraged or have some other random set of occurrences keeping them out of the labor pool. Is there a reason they should be included in the U3 accounting? No. That's why they have U4-U6.

 

[3chordcharlie]

I don't think you get what the CPI measures. We're talking about non-asset inflation and fact is goods and services, even including energy and food increases, are still just 1.5%. That's below the historical trend. The "pretend" money you speak of hasn't yet caused any real inflation nor does it look like it will given the money velocity increasing substantially every day as more and more people around the world transact in U.S. dollars.

And again, please cite an alternative methodology for inflation as I've yet to hear it from you.

There's a few issues here. Increasing velocity of money has a similar effect to increasing the money supply. What I am implying is that the inflation of the money supply - i.e. devaluing of currency is actually much worse than 1.5% and is being masked by prices which are actually falling but increasing nominally. Although I suspect the cost of my personal basket of goods has far outpaced the official one, I'm sure the nominal
inflation rate as reported is pretty accurate. As I stated, it is far form telling the whole story.

Sure they are, since they account for everyday goods and services that people actually purchase, on average, and they're accurate unless you can point out any flaws in the hedonics they're using.

But they account for only part of it - the total inflation rate is more meaningful to the average person.

It most certainly is. It's on the low end but I'm sorry if you're confused about the numbers.

The economy is not growing at 3-4% per quarter. It may be growing at 3-4% annually, as reported each quarter.

The real return is all that matters, nominally no one cares. And fact is gold has been a terrible long-term investment since the founding of the country.

I don't disagree.However, keep pumping currency into the economy, and gold will rise to $2k or $5k, or whatever you like.

You'll have to actually explain what's fishy about it. It's pretty sensible for the BLS to exclude people from the workforce if they are no longer looking for work because they're in school, well-off, discouraged or have some other random set of occurrences keeping them out of the labor pool. Is there a reason they should be included in the U3 accounting? No. That's why they have U4-U6.

It's very easy to be excluded, especially to be considered 'frustrated'. The fact is most of the excluded workers will have to work their way back through 'being counted' before the economy returns to full employment. The reported number is therefore optimistic compared to the real shortage of employment.

Also problematic (and not really fixable), the unemployed skilled person, working at low-paying, less productive jobs (lke fast food), isn't represented either.

There's a lot more to the state of an economy than reported inflation and unemployment statistics.

 

[First]

There's a few issues here. Increasing velocity of money has a similar effect to increasing the money supply.

No actually, increasing velocity of money does just the opposite, it's an inverse relationship which is why you'd get deflation if you kept the money supply stagnate but increased the number of people transacting said currency.

What I am implying is that the inflation of the money supply - i.e. devaluing of currency is actually much worse than 1.5% and is being masked by prices which are actually falling but increasing nominally. Although I suspect the cost of my personal basket of goods has far outpaced the official one, I'm sure the nominal
inflation rate as reported is pretty accurate.

What you've said here makes no sense. How is the dollar being devalued worse than we know if you can't even tell me how that's happening? How is it being devalued worse than 1.5%?

As I stated, it is far form telling the whole story. But they account for only part of it - the total inflation rate is more meaningful to the average person.The economy is not growing at 3-4% per quarter. It may be growing at 3-4% annually, as reported each quarter. I don't disagree.However, keep pumping currency into the economy, and gold will rise to $2k or $5k, or whatever you like.

Again, output is growing at a rate of 3-4% per quarter, that's every 3 months, and then another 3-4% over the next 3 months, and then again and again. It's not annual, and you've yet to explain how inflation changes that with any specific numbers.

And gold will get nowhere near $5K anytime soon, you can bet on that if you'd like.

It's very easy to be excluded, especially to be considered 'frustrated'. The fact is most of the excluded workers will have to work their way back through 'being counted' before the economy returns to full employment. The reported number is therefore optimistic compared to the real shortage of employment.

You're not entirely certain what it is, so you can't possibly know if it's "optimistic". U6 is out there if you'd like to use different methodology. U3, our current unemployment rate, is pretty unassailable and non-controversial the world over.

Also problematic (and not really fixable), the unemployed skilled person, working at low-paying, less productive jobs (lke fast food), isn't represented either.

No, they're represented quite fine, as wages and hours have increased over the past 2 years as employment has improved. There is no data showing any significant amount of highly skilled U.S. citizens having to work at fast food joints. Your isolated anecdote doesn't hold water.

There's a lot more to the state of an economy than reported inflation and unemployment statistics.

I agree, but inflation, unemployment, and GDP #'s give you a very complete picture, and facts are they're improving significantly and are on pace for another boom.

 

[The-Noid]

No actually, increasing velocity of money does just the opposite, it's an inverse relationship which is why you'd get deflation if you kept the money supply stagnate but increased the number of people transacting said currency.



What you've said here makes no sense. How is the dollar being devalued worse than we know if you can't even tell me how that's happening? How is it being devalued worse than 1.5%?



Again, output is growing at a rate of 3-4% per quarter, that's every 3 months, and then another 3-4% over the next 3 months, and then again and again. It's not annual, and you've yet to explain how inflation changes that with any specific numbers.

And gold will get nowhere near $5K anytime soon, you can bet on that if you'd like.



You're not entirely certain what it is, so you can't possibly know if it's "optimistic". U6 is out there if you'd like to use different methodology. U3, our current unemployment rate, is pretty unassailable and non-controversial the world over.



No, they're represented quite fine, as wages and hours have increased over the past 2 years as employment has improved. There is no data showing any significant amount of highly skilled U.S. citizens having to work at fast food joints. Your isolated anecdote doesn't hold water.



I agree, but inflation, unemployment, and GDP #'s give you a very complete picture, and facts are they're improving significantly and are on pace for another boom.

GDP is quoted on an annualized basis in the USA unlike a lot of countries which quote the actual productivity gains for the quarter. Productivity as measured by GDP is 3.2% at an annualized rate in the USA. Output growing at 3-4% per quarter would also be massively inflationary as well.

If you want to be any good at forecasting or any job that has to do with finance or econ, you leave your patriotism at the door otherwise you end up like Brian Wesbury.

 

[First]

GDP is quoted on an annualized basis in the USA unlike a lot of countries which quote the actual productivity gains for the quarter. Productivity as measured by GDP is 3.2% at an annualized rate in the USA. Output growing at 3-4% per quarter would also be massively inflationary as well.

You are dead wrong and if you want to be any good at economics you leave your patriotism at the door otherwise you end up like Brian Wesbury.

He said annual, not annualized, but I see his point if that's what he was trying to say. And why would you not compare quarter-over-quarter again? AFAIK they're compared quarter-over-quarter from the previous year for seasonal adjustments.

 

[The-Noid]

He said annual, not annualized, but I see his point if that's what he was trying to say. And why would you not compare quarter-over-quarter again? AFAIK they're compared quarter-over-quarter from the previous year for seasonal adjustments.

Because any idiot can annualize numbers in two seconds. Showing actual gain sans adjustments shows how the economy is actually evolving.

The GDP Index values are all that matters, the Y/Y growth numbers are for the simpletons and newspaper quotes.

 

[3chordcharlie]

No actually, increasing velocity of money does just the opposite, it's an inverse relationship which is why you'd get deflation if you kept the money supply stagnate but increased the number of people transacting said currency.

What you've said here makes no sense. How is the dollar being devalued worse than we know if you can't even tell me how that's happening? How is it being devalued worse than 1.5%?

I never said anything about changing the number of people. If the velocity changes, each dollar of currency changes hands more often; it's the same as increasing the money supply. I don't think it's likely relevent here though.

Again, output is growing at a rate of 3-4% per quarter, that's every 3 months, and then another 3-4% over the next 3 months, and then again and again. It's not annual, and you've yet to explain how inflation changes that with any specific numbers.

I thought the GDP comparisons were to previous year, same quarter - they aren't. They are annualized rates. As in if you post 4% in each of 4 quarters, you have 4% growth; it isn't additive.

Which means gowth has been at 3-4% in each quarter, not per quarter as you claimed. I was wrong; you were just much more wrong.

And gold will get nowhere near $5K anytime soon, you can bet on that if you'd like.

I didn't say it would be soon; would need ~300% increase in money supply if the real price of gold stayed constant. Approx. a couple of months under typical hyperinflation scenarios.

You're not entirely certain what it is, so you can't possibly know if it's "optimistic". U6 is out there if you'd like to use different methodology. U3, our current unemployment rate, is pretty unassailable and non-controversial the world over.

No, they're represented quite fine, as wages and hours have increased over the past 2 years as employment has improved. There is no data showing any significant amount of highly skilled U.S. citizens having to work at fast food joints. Your isolated anecdote doesn't hold water.

I don't agree with unassailable (edit - which is a very strong claim), and non-controversial doesn't mean accurate. What I'm saying is the commonly reported statistic substantially understates how many people would need to be restored to employment to complete a recovery.

I agree, but inflation, unemployment, and GDP #'s give you a very complete picture, and facts are they're improving significantly and are on pace for another boom.

Not a complete picture at all without considering debt levels and assorted other novelties. This recovery is occurring under what would normally be a highly inflationary monetary policy, which was my original point. That is troublesome.