Thanks to shadowstats, here's a look at the inflation roaring in the United States, using 1980 inflation measurment methodology.
When the government doesn't like the results, what does it do? It changes the rules of course. And the MSM and the sheeple just go along with it. "Oh, that's what the government says, so it MUST be true!"
So the government says inflation is hovering around 3%. Anyone believe that? What's your own personal CPI? When you get back from filling up your tank and buying milk, let us know.
Meanwhile, the big question remains - after this period of wild consumable goods inflation and asset price deflation, after it all falls apart, will we see consumable goods AND asset price deflation?
April 05, 2008
Your government is lying to you about inflation. Any questions?
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43 comments:
I see. We shouldn't trust the government. Yet we should trust some guy in a basement making pretty charts.
Keith, there are questions, because guys like Mish will argue the following:
(1) Inflation is expansion of money.
(2) Only M1 is money, not MZM or M3,
because credit is not money.
(3) M1 is contracting, ergo we have
Japan (deflation).
This is total crap. Especially when you understand that credit, like those "loans" being given at the discount window are FOREVER. They are not loans, but gifts. Debt=credit is being monetized, so credit=money.
Just remember. This is not a dress rehersal. THIS IS IT. Prepare yourseves!
There are perfectly valid reasons for using substitution (ie. changing the "basket" of items used) when calculating inflation. For example, the 1980's CPI calculation would have had a much lower weighting towards electronics than todays basket. Since the cost of electronic products has been going down since the 1980's, increasing the statistical weight assigned to electronics in today's "basket" compared to the 1980's has the effect of lowering the inflation "number". Is this a fiddle? No - because people are actually spending a much larger part of their incomes on household electronics (TVs, computers, iPods, DVD records etc. etc) these days. If we stick to the same "basket" of items (and weightings) that was used in the 1980s THAT will give us an inaccurate measure of inflation.
If you don't believe this, just look at an extreme case - a measure of inflation from the 1800's would have included the cost of such items as buggy whips, servants, and steamship travel. These days the CPI measure includes cars, washing machines and airfares instead. Would a CPI index still based on the 1800's expenditure items be more accurate? Do we really care if it costs a small fortune to pay for domestic help in the 21st century compared to the 1800's?
People tend to overestimate inlfation by only noticing the items that have increased a lot eg. food, petrol. There is a natural tendency to "take for granted" those items that have gone down in price (eg. imported clothing, electronics). The "alternate" CPI measure you're quoting simply panders to this subjective bias.
So true, I've been telling people this for years.
So true. I've been telling my friends this for years.
Over the last 4 years, my salary has increased, on average, 11% a year. In 2008, I'm looking at a 15% increase. I haven't changed my standard of living, which is fairly modest (buy new clothes once a year, go out for dinner once a month, about $100 a month in splurge spending), and yet, I don't end up any further ahead at the end of any given month.
I always figured that I could live the life that I always wanted on $80K a year. But I'm past that, and I'm not seeing any noticeable difference from when I was in the $55K range. I used to spend about $60-70 a week on groceries, just a few years ago. Now it's $90-110 for the same stuff! Bread just hit $3 a loaf!
I don't so much mind the gas price increases, because you can get around driving a lot of the time. I jog and bike a lot, and take public transit. My car is only used for transporting items and taking long driving trips - I drive less than 10K km a year (about 6000 miles). But everyone needs food.
I see no problem with CPI beside it NOT being a measure of anything. You just can't have a "right" CPI. Rather, the whole idea of "price inflation" or "price stability" seems broken. For inflation, look at M0...M3. The CPI does its (mediocre) job in tracking the price of a hypothetical "consumer basket" (and why should we keep a consumer basket from 1980s as SGS suggests? Why not reintroduce kerosene lamps and horses from 1890s?) To account for absolute necessities, some agency should come up with a clear calculation of "sustenance minimum" (as it's called in Russia) - this could be helpful, and this index indeed tends to grow faster than the CPI, at 20% over 12% here, showing that poorer folks get squeezed harder. The rest is moot.
Also, when it comes to denouncing the substitution of soyburgers for steaks, don't forget about sustainability - it's clear that the price of sturgeon caviar would explode even if the global supply of coins and notes was kept constant. Why can't that work in the background for some components of CPI as the population grows?
For the record, my CPI since last April was some 10-15% in rouble terms (consistent with the gov't figures), 21-27% in USD. Doesn't the 27% dollar price inflation sound scarier than those SGS figures?
9/11,
elections,
poll results,
etc.. all the same.
My Government????
I do not lie to myself......very often.
Shakster
Ah, life is so good.
Yes they will fall like house prices.
Burb Baby Burn
That predicted consumer price deflation requires that people will be losing their jobs or other income streams, and thus will no longer be able to bid for milk in the market place.
Since assets were purchased with borrowed money, we will see assets values respond to interest rates. You don't think investors will buy up properties at 0%? GS, JPM etc. can go straight to the Fed Window, whereas the little guy will be paying the normal rate of 8% minimum.
Guess who will own everything?
Last month the republic was destroyed, and nobody said a word except the HPers.
The where too interested in whether Obama's preacher thought America should go to hell than whether America ACTUALLY WAS going to hell!
This is sort of like "affordable" housing at 6 times buyer's income.
This make believe world of economics needs to exposed as the fraud it is.
Just go to the grocery store.
Hmmm,
In the US I earn $120k a year and gas cost over $3 a gal and milk cost over $2 a gal.
In Europe I earn 30k Euros a year and gas cost over 8 Euros a gal and milk cost over 5 Euros a gal.
Of coarse there is real inflation here in the US
But in the EU there is Hyperinflation, and only getting worse.
I saw this about two years ago and have been telling people ever since that the gov't was lying about inflation! Its about time HP figured it out too!
-JDF
TRUE STORY
I served jury duty on Thursday and they had us stand in a line to go to the window to check in. The people were pretty silent for the most part...I mean if you made eye contact with someone you'd smile out of being polite but then look away. However, this woman 2 people down from me was a chatterbox.
She kept telling this other woman how she had 2 small kids and was exempt from service. Then she says "I'm a real estate agent...what do you do for a living?"...folks...I almost died laughing on the inside. It was a PURE HP moment.
Then she said "now is a great time to buy because finance rates are low"...LMFAO!
I wish I had butted in on a private conservation and gotten her card to get her email address and send her a link to this blog.
I think everyone here has enough common sense and actual personal experience to know that the shadowstats inflation numbers are far, far closer to reality than the governments.
Except Ed, but he's probably one of the 19% or 21% or whatever it is who think the country is on the right track and who still thinks Bush is doing a heckuva job.
You people that say there's no problem with substitutions and the way the CPI is calculated are so f*cking stupid it blows my mind. It's all very succinctly explained in Peter Schiff's book "Crash Proof".
Inflation is the increase in supply of money and credit not the increase in prices.
Of course there's no perfect measure of price increase that represents the spending pattern of everybody - that's clearly impossible. But it's pretty f*cking obvious that a basket of goods with a heavy component of electronic goods excluding food and energy does NOT represent the spending habits of the AVERAGE F*CKING AMERICAN!!!
On top of that the F*CKING SUBSTITUTIONS! So steak is too expensive now we're going to eat canned tuna. You think that is an accurate measure of price increase or a total manipulation of data? Doesn't substitution mean by DEFINITION a DECREASE in your STANDARD OF LIVING???!!
The point of the shadow stats data is that they are using the same CPI measure as was used before the Fed made it's substitutions and other BS statistical manipulations. That's the WHOLE F'N POINT!!
I hear you stupid yuppies blowing this stuff off like it's no big deal but it is a VERY BIG F*CKING DEAL PEOPLE!!
You are getting screwed by the very government you love and trust so dearly.
PS - Ed, you are a massive idiot.
"I see. We shouldn't trust the government."
No, the message here is that we shouldn't trust the current government, but we can trust Obama, a racist, corrupt Chicago politician.
As for me, every time inflation goes up a notch, my international sales go up 2 or 3 notches so it's been a positive for me. There's been a slight increase in shipping costs due to fuel but that hasn't made much of a dent.
enough wealth must be a realtor troll who works for Ben Bernanke.
Our government appears to be inflating their way out of the decline in housing prices. Unfortunaletly the dollar being the reserve currency,will cause many around the world to go hungry. I beleive the house price pendalum will swing far in the opposit direction, then you better be prepared to buy before housing comes back up after wages rise.
hlowe
I don't know enough, but this is worth considering.
"another important reminder about the Dollar’s drop in value… Is the government really increasing (printing) new dollars??? Or are they just replacing bad ones? The market was able to create Dollars for some time (thus devaluation should’ve occurred based on S&D), but now with wealth evaporation there is less supply. (…and as the fake/weak dollars evaporate, they are just being replaced by better backed dollars) So the new dollars aren’t actually new… but just replacements for the old bad ones. This is a very broad description, and is much more complex (especially with existing debt) then I care to write about at this moment, but I feel it is overlooked"
hlowe
The inflation/debt based financial infrastructure is a teetering tower of rot that is about to topple over.
Of course to the ostrich with its head deep in a hole of blind contentment and self delusion, there is no "threat" visible, hence "everything is fine".
Credit is contracting, so we have deflation of assets that rely on credit. The hard money supply is expanding, so we have inflation of commodities such as food and energy. It's that 70's show.
we will see assets values respond to interest rates. You don't think investors will buy up properties at 0%? GS, JPM etc. can go straight to the Fed Window, whereas the little guy will be paying the normal rate of 8% minimum.
Guess who will own everything?
If you believe this, you should buy bank stocks. Just make sure you don't get a dud like BSC. I suggest BAC or JPM
Anonymous said...
In the US I earn $120k a year and gas cost over $3 a gal and milk cost over $2 a gal.
In Europe I earn 30k Euros a year and gas cost over 8 Euros a gal and milk cost over 5 Euros a gal.
NO!
In the US you earn 36,000$ per year.
http://ask.yahoo.com/20040518.html
"So the government says inflation is hovering around 3%. Anyone believe that? What's your own personal CPI? When you get back from filling up your tank and buying milk, let us know"
A cell phone minute in 1990 was $2 , today it's a couple of pennies. A 36" TV costs 1/2 of what it cost 5 years ago. In 2000 if you wanted to buy a CD it would cost $20 give or take and on average would have 10 songs. Today you can buy 10 songs for $10 on iTunes. A laptop that you can buy for $500 today would have cost $2000 even 2 years ago.
You can focus on gas and mils all you want. There is much more to life than gas and milk.
"A cell phone minute in 1990 was $2 , today it's a couple of pennies. A 36" TV costs 1/2 of what it cost 5 years ago. In 2000 if you wanted to buy a CD it would cost $20 give or take and on average would have 10 songs. Today you can buy 10 songs for $10 on iTunes. A laptop that you can buy for $500 today would have cost $2000 even 2 years ago."
But can you eat any of those things? Will they sustain the basic needs for survival?
Our government appears to be inflating their way out of the decline in housing prices. Unfortunaletly the dollar being the reserve currency,will cause many around the world to go hungry. I beleive the house price pendalum will swing far in the opposit direction, then you better be prepared to buy before housing comes back up after wages rise.
-----------------------------------
Does that logic really make sense to you? - Prepare to buy housing because wages will rise? - How do you propose that wages will rise?
Is Bernanke going to infuse all of our checking accounts with cash or let us "borrow"(wink-wink) at the Federal window?
Wages will not be increasing. Wages are stagnant and will remain so due to wage arbitrage.
We will continue to see deflation in assets (houses, the US stock market - where the average person's wealth is) - and inflation in food, energy, etc. Think Weimar inflation. The Fed has chosen to bail out the establishment and the trillions that were gambled away in the derivative market at the expense of the rest of us.
In other words, we are completely screwed. Pull your head out and start planning - as someone else already said - this is not a dress rehearsal - it's the real history making deal.
Denial is not where you want to be.
Ed said...
I see. We shouldn't trust the government. Yet we should trust some guy in a basement making pretty charts.
Best to just trust in AM talk radio. Everything you need to know about the U.S.A. you can learn from Beck, Hannity, Savage & Limbaugh.
Doesn't get much better than that.
To the fools that believe in hedonics and subsitution, two questions:
(1) Shouldn't technology be IMPROVING our life, instead of allowing us to just keep our head above water? In a hard currency, technological improvements would cause prices to decrease through wealth creation. All wealth creation is now siphoned off before it reaches the little guy, leading to question number 2.
(2) Why do two people now have to work 3 jobs just to put food on the table for a normal family, when in the 50s and 60s ONE WAGE EARNER was all it took? How do you recon the substitution of mom AND dad having to work? How do you calculate the cost to society of children raised by TV?
So, all you FBN watchers out there, flame away. And make sure to put cotton in your ears before they bring out PETER SCHIFF (the stud).
Anonymous said...
This is total crap. Especially when you understand that credit, like those "loans" being given at the discount window are FOREVER. They are not loans, but gifts. Debt=credit is being monetized, so credit=money.
Only if you are BOFA or Citigroup. I don't see a big exchange of cash for credit in the real world. Perhaps you could explain this to us in more depth:
Debt=credit is being monetized, so credit=money.
Mish will make sure I have a retirement left when the great theft is over. You will still be trying to figure out what your little equation means.
Does that logic really make sense to you?
Absolutely!!!
Investments made during the great depression did very well later on.
Don't get me wrong, we will not be the counry we have been during the last 100 years, but this mess will create opportunity in the future. Not near future. If you don't understand history and $ you will lose again.
So how many think we are in for Weimar inflation?
http://larouchepac.com/news/2008/01/28/fed-copies-weimar-hyperinflation.html
Bilderburg group.
http://www.informationclearinghouse.info/article19016.htm
Anonymous said...
“A cell phone minute in 1990 was $2 , today it's a couple of pennies. A 36" TV costs 1/2 of what it cost 5 years ago. In 2000 if you wanted to buy a CD it would cost $20 give or take and on average would have 10 songs. Today you can buy 10 songs for $10 on iTunes. A laptop that you can buy for $500 today would have cost $2000 even 2 years ago.”
You like mustard on your cell phone? Man, two slices of $4.00 bread and you’d have a nice cell phone sandwich. How many “36” TVs” per mile does your car get?
What's the CPI/shadowstats number on black helicopters and tinfoil?
What's the CPI/shadowstats number on black helicopters and tinfoil?
Yeah, way to flaunt your stupidity Ed? Seriously, why do you bother?
no, not inflation. Deflation.
but then again, I wouldn't be able to profit so much from it if everyone realized it. In general, you can't make money unless someone is losing it.
I've lived here in New Mexico, off and on, for the past 20 years.
It occurred to me yesterday that I haven't seen an RV on the interstate lately. After all these years, they are suddenly gone.
I'd bet you could buy an RV for cheap these days.
Anonymous said . . .
"Best to just trust in AM talk radio. Everything you need to know about the U.S.A. you can learn from Beck, Hannity, Savage & Limbaugh.
"Doesn't get much better than that"
I'd leave Beck of that list. He has been yelling about the housing bubble for years, and about the Fed's strange dealings for years. He was the first on radio and television to talk about the 50 + trillion dollar debt, and warns daily about America being on the brink of a depression. He also opposes all government bailouts of real estate industry, the banking industry, and so called house-buyers overwhelmed by raising mortage rates.
He is a fan of Ron Paul's, and relentless critic of Bush. Yes, he's a conservative, but not a Republican. His radio show is infinitely better than the television show because it's spontaneous, whereas the television show is scripted and pre-recorded (to make sure he doesn't horrify CNN sponsors). Mostly he makes fun of himself, a far cry from Limbaugh, who incessantly brags.
no breakeven if the real estate housing costs and price inflation is calculated as inflation since the day the inflation calculation was changed to omit them and as such do you wonder the fret involved with food prices?
bank stocks? ive been holding quality bank shares for 9 years and have made 1 percent a year over that time and it includes dividends... but if they were bought and held for twenty years before the year i bought you would have made one dollar a year for every dollar you put in, instead i got mergered and bought out low, and hit what may be thay secular bear they talk about, oe the average 17 year down slide
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