May 09, 2008

Got Inflation?


If REAL inflation is running at 7% to 11%, doesn't that mean that the US economy growing at only 0.6% really signals a pretty massive recession? And that "flat" US average incomes are actually plummeting? And doesn't that mean that the 12.7% reported fall in home prices is more like 20%?

One more time - if you believe the government's inflation number, you are a fool. But it's really not a question of whether you believe it or not, just go to the grocery store and gas station. The real inflation report can be found there.



22 comments:

Anonymous said...

Hi Keith,

Doesn't the Shiller index use government published inflation when determining "real" housing prices?
If the government inflation numbers have been low all this time, then doesn't that mean that the Shiller index overstates how high house prices went in real terms?

Agent 99 said...

I went food shopping yesterday. A can of Planters Delux Mixed Nuts was $5.99. Well, that's just nuts.

keith said...

Want to know the dirty secret on how companies like Frito Lay and M&M Mars are getting around inflation?

They're putting less product in the bags and keeping price the same

But sshhhhh... wouldn't want the sheeple to know that...

Anonymous said...

LOL. M&M and Frito Lay are doing a great job. The fatties may lose weight. On the other hand, they will just buy 2 bag to fulfill their digusting fat.

Mark said...

If REAL inflation is running at 7% to 11%

How to make money on this fact?

Keep all money in cash in a short term (7-30 days) money market funds?

Invest in funds that bet that interest rates will go up in the future (RTPIX, RRPIX, RYJUX, DXKSX, etc.)?

Andrew from Russia said...

If only a monetary policy could "fix" what is happening with unrenewable resources... (an idea of an environment-friendly E-CPI was to follow but I decided not to spread eco-fascism in this blog.)

Anonymous said...

If REAL inflation is running at 7% to 11%, doesn't that mean that the US economy growing at only 0.6% really signals a pretty massive recession?
Bogus government statistics aside, a Recession is and has been defined as for decades as two consecutive quarters of negative GDP growth. This has not ever been compared to contemporaneous inflation to call a Recession when growth dips below inflation.

So by government stats we are not in a recession. If you can provide a GDP number that is negative, then we are half way there.

But attempting to goose the definition as GDP that is below inflation isn't legit and isn't what a Recession is.

Fred said...

Frankly, if you believe either of the stats you are a fool. Obviously the gov't stats are depressed to reduce payouts for SS, etc. But Williams is just as bad on the other side.

If you believe the Shadow stats, you also have to believe that the US has been in a recession since 1994. (estimated by GDP growth minus the difference between the Shadow and gov't CPI numbers). No, the economy hasn't been great, especially since the dot-com bust, and then housing bust. But you are flat out insane if you think we have been down for nearly 15 years.

Anonymous said...

I have been ordering equipment for my business online this past few weeks. They say shipping will take 4-6 working days. The merchandise is arriving within two or three days. Guess they have plenty of time and inventory on there hands with this "mild" slowdown.

yu been skooled said...

FLASH:
HP regulars drop off. Comments drop to a trickle. Only a few naked, bald, fat quacks remain.

In other news:
HP preparing for one final ridiculous post. Claim UFOs are causing global warming and 1000% inflation.

Anonymous said...

"But you are flat out insane if you think we have been down for nearly 15 years."

Or you could be a middle class worker.

Anonymous said...

We could just average the CPI and Williams' figures. That would give something more realistic and tempered.

Anonymous said...

The middle class is much better off today than in 1994. A huge part of the problem is overspending. If people hadn't blinged out, the huge credit card debt would not be there. These days, everyone is driving a luxury car and taking exotic vacations. Those things were unheard of 15 years ago. Only doctors and lawyers had luxury cars and $500,000 houses, took vacations to Tahiti. Now we have clerks at Target buying $800,000 houses.

Anonymous said...

Some people never learn, and they're "teaching" our kids:

CNN -- Jonathan Hash, a history teacher at Herbert Hoover High School in San Diego, is enthusiastic about the teaching career he began two years ago. But now he might lose his job because of a statewide budget crisis, and that could force him to leave teaching altogether.

"I love what I do, but I would like to have some security," said Hash, who makes $43,000 a year and just bought a home with his pregnant wife in one of the nation's most expensive housing markets. "I have a mortgage now and I have a kid on the way, so I have to do whatever I have to do to make ends meet."

Hash is considering joining family members in real estate or insurance.

gutless and lazy strikes again said...

Want to know the dirty secret on how companies like Frito Lay and M&M Mars are getting around inflation?

They're putting less product in the bags and keeping price the same





That just means there a small chance of most Americans not being fat disgusting slobs.

real not nominal... said...

anon @3pm,

If you actually look up you definition (or think for a second) you'll see that it's real GDP growth. Germany did not see massive GDP growth during it's hyper inflationary phase because GDP is always stated in real terms...

If inflation is in fact higher than reported, then real GDP growth is lower - basic arithmetic there, might be too hard for you I guess...

GDP is already reported in real terms with inflation removed, obviously you have to lower it a bunch further if you think the inflation numbers are being goosed.

So, it's you who is goosing GDP numbers by treating them as real without actually subtracting all the inflation...

Or do you really think Brazil was booming in 1994 when their GDP increased by 2400% (before adjusting for the hyperinflation...)

Shakster said...

Infallation round here? No way.
I buy 10 gallons of gas a day for about 1.00 more per gallon than last year,nope no inflation here.
Local restaurant going out of business.Dude says the price of supplys are through the roof over last year.Yeah right.
Saw the price of base metals at all time highs,means nothing.
Hamburger up double,sheesh,who eats hamburger?
Now I do recall in the 60s that gasoline could be had at 50 cents a gallon.Oh yeah,that was then this is now.I could go on but not needed.

Anonymous said...

"Now we have clerks at Target buying $800,000 houses."

Yes, lovely 1200sf 3B/2B/2C's for $800K. I suppose geographical arguments can support both our views.

Anonymous said...

As long as you don't eat or drive, inflation remains tame.

Anonymous said...

The flipside of a falling dollar:

"...exports are surging and imports have slowed."

http://calculatedrisk.blogspot.com/2008/05/march-trade-deficit.html

FALL DOLLAR FALL...
GO
GO
GO
GO
FALL
FALL
FALL
FALL

Anonymous said...

I work as a Heating and Air conditioning technician. I can tell you that supplies and equipment, coupled with higher gas prices, insurance prices, sometimes i wonder how long we will be able to make it. I still make the same amount of money as i have for the past few years, due to higher costs eating up the profit margins. Then i go home and pay higher insurance, groceries, utilities. Honestly i wonder how the average American is making it these days....and where does this all end?

Anonymous said...

"..and where does this all end?"

Civil war.