PDA

View Full Version : Economics is not hard - Part I: Don’t let professional economists tell you otherwise



EJ
07-13-10, 03:48 PM
http://www.itulip.com/images2/swatting300.gif


Economics is not hard - Part I: Don’t let professional economists tell you otherwise

Follow the money, let the data lead you, stay independent, and accept the fact that the political economy is not quantifiable

In his impetuous missive “Economics is Hard. Don’t Let Bloggers Tell You Otherwise” Richmond Fed researcher Kartik Athreya goes after the economics blogging community like a blindfolded kid batting a piñata full of hornets. He received a series of predictably stinging responses. Presenting his own views and not those of his employer, he argued that bloggers practicing economics without a license have sent millions of unsuspecting economics consumers to hell in a hand basket of “incoherent or misleading” advice.

Economics is brain surgery, you see. Don’t let one of these freelance practitioners of the dismal science inside your skull. They’ll leave it scrambled and confused, he warns in an appeal to “open-minded consumers of the economics blogosphere.”

Athreya wants us to believe that a PhD in economics is an effective prophylactic against consumer quality violations. But the argument is a tough sell after a decade of economic booms and busts that taught the American public the hard way that accreditation offers no measure of protection to consumers of the output of professional economic analysts.

In fact, the failures and foibles of the macroeconomics profession created the market for economics bloggers in the first place.

License to kill your portfolio and your economic future

Let’s compare the economic forecasts of this non-credentialed economics blogger to the top economists who run the outfit that signs Athreya’s paycheck, the Federal Reserve.
"But bubbles generally are perceptible only after the fact. To spot a bubble in advance requires a judgment that hundreds of thousands of informed investors have it all wrong."
- Testimony of Federal Reserve Chairman Alan Greenspan, Joint Economic Committee, U.S. Congress, June 1999

“Right now he [Greenspan] is enjoying a reputation as the smartest central banker in history. But he's making nearly the same mistakes as his predecessors in the 1920s, providing too much liquidity at the wrong time, fueling a speculative mania during a time of rapid technological innovation. What will be learned from this -- again -- is that the Fed's interest rate and money supply moves can distort the market's utilization of capital, leading to credit and asset value excesses and a bust. Greenspan will not go down in history as a hero.”
- Eric Janszen, iTulip.com, January 1999

[A recession caused by a collapse of the housing bubble] is a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize – might slow consumption spending a bit. I don't think it's going to drive the economy too far from its full employment path, though.
- Fed Chairman Ben Bernanke, July 2007

“Fact is, housing bubbles, like stock market bubbles, are not at all hard to spot. Granted they are politically challenging to discuss in public, especially when they are needed to prevent the aftermath of a previous monetary disaster, the 1990s stock market bubble, from dragging the real economy into a deflationary depression. The historical average for the cost of a mortgage is 25% of gross income. That's what the banks used to recommend before they got desperate for households to sell mortgages to. In a bubbly real estate market like Boston's today the average mortgage has reached 44% of income. That's a housing bubble. Period.”
- Eric Janszen, iTulip.com, August 2002

“The recession that starts in 2007 from the combined housing, private-equity, hedge fund, and foreign investment market corrections will be major. The stock market along with many inflated asset classes will follow. Maybe the Gods will be laughing in 2007, but a lot of homeowners and investors won't be."
- Eric Janszen, iTulip.com, January 2006
Consumers can be forgiven for concluding that professional economics training is a kind of indoctrination into the Academy of Data-blindness and Bad Forecasting, but the root cause of the record for inaccuracy is not methodological but political.

Plausible quasi-scientific formulas that are supposed to describe human and institutional behavior that is heavily influenced by the actions of government actors and government subsidized industries coat the politically motivated opinions of mainstream economics in a fine patina of disinterestedness and respectability. Time and time again over the past decade, optimistic forecasts that were favorable to vested interests, that thinly obscured obvious economic pre-conditions to crisis, were blown away by economic realities.

The certified financial planner was authorized, or rather trained, to repeat Wall Street financial product marketing slogans like “buy-and-hold” dressed as professional investment advice, leading millions of retail stock investors to make costly investment mistakes from which Wall Street firms profited. Similarly, a PhD in economics licensed the unaccountable to interpret economic data and events in ways that proved to be little more than sales pitches for economic policies friendly to FIRE Economy (http://www.fireeconomy.com) interests.

Trillions of dollars in net worth losses and untold personal hardship for millions of Americans is their legacy.

Consumers turned to disinterested, non-credentialed economics bloggers for an alternative. iTulip.com started in 1998, well before the end of the first excess credit-induced faux economic boom of the late 1990s ended. Athreya writes about us, apparently without a hint of self-doubt you’d expect from an employee of one of the least respected institutions of central banking:

“Some of them have great ideas, for sure. But this is irrelevant. The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading. Note also that intelligence is not the issue. Many of those I am telling you not to listen to will more than successfully be able to match wits, in any generalized sense, with me. This is irrelevant. The question is: can they provide you, the reader, with an internally consistent analysis of a dynamic system subject to random shocks populated by thoughtful actors whose collective actions must be rendered feasible?”
Wrong question. The right question is, Why did economics bloggers appear in the years after the collapse of the tech bubble in the early 2000s and flourish during the rise of the housing bubble starting in 2002? Answer: to fill the vacuum created by the professional economics community that repeatedly failed to protect consumers from the ravages of not one but two asset bubbles in ten years that resulted in the greatest wealth transfer in world history and the near dismantling of the remnants of the world’s once most productive economy.

“What’s your name and who do you work for?” – Hunter Thomson

To understand where Athreya is coming from, here are the four ways economics is performed for an audience in the United States.

First and ubiquitous is macroeconomics as Sales and Marketing of financial products. The object is to pitch a financial product such as mortgage debt as homeownership, stocks as volatile but high long-term gains, and bonds as “safe” by painting a macro-economic picture that calls readers to log into their brokerage account and purchase the financial product sold by the fund or firm for gain or wealth preservation. This editorial arrangement is popularly referred to as “talking your book.”

The best at it appear to be talking philosophically, like a sports announcer commenting on the possibility that a player’s recent injury may hurt the team’s chances for a victory, except that in the case of the economist as pitchman the commentator’s patron has money riding on the opposing team’s loss.

Bond funds sell a risky, low inflation future of high unemployment, sub-par economic growth, weak earnings, and a stagnant or declining stock market. Commodity funds sell supply shortages and rising global demand, and some also sell inflation from monetary and fiscal mismanagement. Optimistic gold funds sell a future of high inflation and depreciating currencies while pessimistic ones sell a Mad Max to Blade Runner outlook, possibly depending on whether the firm’s setting is urban or country.

As Oprah Winfrey once said of public speakers, “They’ll never remember what you said, but they will remember how you made them feel.” No one understands this better than the purveyors of Sales and Marketing macroeconomics. This field is dominated by the most theatrical commentators, from Jim Rogers and Peter Schiff on the Right to, well, no one on the Left. As Michael Hudson told us years ago, the Left doesn’t have an economic theory, only a social theory; the failure of socialism in the 1980s left the Left without a macroeconomic stand to hang a hat on. Among the financial products sales people are also the most erudite economists, such as PIMCO’s Bill Gross.

This group typically has the worst forecasting track record of all categories of macroeconomic analyst but few notice because readers and viewers are too busy jabbing the air with their fist and yelling “damn right!” as they react to a quip about evil bankers or incompetent government officials. There are many exceptions, such as is the Prudent Bear Fund’s Doug Noland who has doggedly tracked and forecast the credit markets week after week, year after year, in his Credit Bubble Bulletin for almost as long as iTulip has been around. The commentary is dry and data-packed. Who the hell wants that? Give me entertainment! Give me Jim Cramer!

That leads us to the second way to do macroeconomics in America, as economics performance artist for the trading and brokerage firms that sponsor investment-related online publications and TV shows. Not surprisingly, the content and programming is geared to trading and away from long-term investing. The producers don’t care if guests appearing on these shows and sites push stocks, bonds, or ETFs provided that the commentary suggests a trade – any trade – that gets viewers out of what they are in and into something else, to generate fees for the trading firms and brokerages that are paying for the show. You will rarely if ever hear the “C” word “cash” uttered. It doesn’t matter if guests are right or wrong. In fact, wrong is better because then the guest has to come back on the air later to correct the previous error — which, of course, requires another trade. Track record is irrelevant. No interviewer will ever ask; guests are not there to be right; they are there to incite the audience to trade.

The third form of macroeconomics practice is delivered by the hedge fund analyst. He or she is not wedded to any particular asset class, except perhaps by reputation or ideology, and instead invests the fund in a mix of asset classes according to the investment thesis implied by the analyst’s macroeconomic forecasts. The hedge fund economic analyst is among the most accountable and independent of any the consumer will encounter because if a fund manager is wrong that fact is quickly reflected in the performance of the fund, and if they are wrong more than once or twice their investors will exit the fund and they’ll go out of business.

The challenge for the consumer is finding hedge fund managers who are not one hit wonders; the skill set that was required to characterize and time one major market event may not be the same skill set needed to understand the next macroeconomic turn. Also, many but not all hedge fund managers have political or intellectual biases that get them into trouble. I know libertarian-minded hedge fund managers who have fallen deep into the “should” trap, as in Treasury bonds “should” decline and the dollar “should” crash.

“Should” is the most dangerous word in investing. Treasury bonds “should” not rise, say the Treasury bond bears who note the hair raising rise in the US debt-to-GDP ratio during the financial crisis, but that ratio is not the most important factor deciding the price of US debt during a global financial crisis; demand is, and that’s why we stayed in them. By the same token gold “should” not be up by a factor of four since 2001 when we bought it, and would not be if not for the currency risk created by the actions of governments to reflate busted economies. The best hedge fund managers I know understand this. Unfortunately for the average retail investor, they cannot participate in these hedge funds; the SEC keeps the recipients of the Sales and Marketing of FIRE Economy financial products out of the market for alternative financial products.

That takes us to the fourth and final way to perform macroeconomics, as an independent analyst working for paid subscribers. The analyst tries to figure out what happened, what’s going on now, and what’s likely to happen n the future no matter the implications for any particular asset class, whether the news is bad for stocks, bonds, commodities, real estate, or precious metals. The analysis is usually delivered in the form of a newsletter that suggests positions in various asset classes that are available to retail investors through a brokerage account.

The independent economics analyst offends everyone by failing either to align with the dominant ideology, such as the neo-Keynesian religion that Athreya’s employer follows, or mine a thick vein of anger and disillusionment that runs through an intellectually appealing but impossibly flawed counter-ideologies such as Austrian economics.

The primary objective of the independent economics analyst is to be right as often as possible because the independent analyst expects to be held accountable for his or her opinions. Track record matters, although it doesn’t hurt to have an entertaining writing and communication style. The secondary objective is to trade as little as possible to avoid transaction costs, such as brokerage fees and taxes, and to free the consumer up for more lucrative pursuits than trading, such as feeding ducks in the park or playing cards with the kids.

Your job as a consumer of economics analysis is to figure out which of these three types of economics you are consuming when you are reading economics from a web site or watching it on a TV show. Which group does Athreya belong to?

Accountable economics

Lack of independent sources of economic analysis through two disastrous asset bubbles and busts gave rise to the economics blogger that Kartik Athreya attacks for lack of credentials and professionalism. You didn’t need to be a professional economist to see what was going wrong during the bubble era. After being fooled not once but twice in ten years by mainstream economics analysis consumers now know that the economics profession is and has always been a tool of vested interests. The dismal science provides the ideal intellectual framework for representing the views of entrenched interests couched in the language of a dispassionate discipline like physics, as if human behavior and the decisions of politicians were as predictable as planetary orbits.

There are plenty of hacks in the economics blogging community, but this hardly distinguishes the amateur macro-economists from the professionals. Economics is not a science, nor does it need to be in order to allow the specialist to provide the one and only service of economics analysis that matters to consumers: accurate forecasts of future economic conditions in order to help them make informed decisions in their own self interest.

Good economics is accountable economics. Forecasting accuracy matters. But accurate forecasting cannot, paradoxically, be achieved by traditional economic analysis methods. Stylized, some may say unprofessional techniques of economic analysis are required. Data-driven analysis must be interpreted in the context of the economic policy paradigm that determines the economic outcomes.

The best professional economists I know used quantitative analysis to predict the financial crisis and debt deflation that followed the massive credit bubble and asset price inflation of the 2002 to 2007 period, much as we did in 2006 using our own methods. We translated a financial crisis forecast into a specific opinion to get out of the stock market in December 2007. But the excessive focus on quantitative analysis led even these economists who got the financial crisis forecast right to get the debt deflation outcome wrong. Excessive focus on the numbers led to erroneous forecasts of an out-of-control deflation spiral while our method of combining quantitative and qualitative analysis forecast a brief period of deflation quickly followed within a months by a resumption of pre-crisis inflation rates. Our forecasts also predict a period of dollar depreciation and high import price inflation once public liabilities begin to weigh on credit and currency markets. The challenge from here it to determine when that is likely to happen.

To the quants, reflation appeared mathematically impossible; they expected asset price deflation in the FIRE Economy to spill over into commodity and wage prices in the Productive Economy as occurred in the 1930s, producing a sustained price deflation spiral. The sheer size of private debts in 2007 were beyond the scope of monetary and fiscal policy reflation, they argued. I argued the opposite, that both the tools and the will to reflate were in place to stop a deflation spiral.

Most macroeconomics analysts do not understand that modern economies operate like a sports match run by spectacularly heavy-handed management. During game play, odds makers can accurately assess the chances of a team winning based on the track records of the players and other statistics. But if the economic game is not going the way management wants, it will swap the players off the field for new ones mid-play, reset the score board, and say “carry on” to the dismay of economic odds-makers who then cry foul because the interference by central banks and governments made a mockery of their diligent forecasts.

Our success at forecasting a brief deflation out of the financial crisis does not guarantee that we can precisely time and forecast the long-term secondary effects of reflation policy. We are, however, certain that hyper-inflation is not in the cards because the tools and will to prevent it are just as present as those that halted a deflation process in 2009. That’s what the 8,000 tons of gold in the US Treasury is for, as a tool to halt a hyperinflation process should one ever threaten.

Being right about deflation mattered a great deal to investors in gold and commodities who avoided transaction costs and asset value losses incurred by anyone trading in and out of commodity positions. Contrary to Athreya’s argument, the only measure of validity of economic analysis is track record. All other considerations are unscientific and designed to obscure the obvious truth that the economics profession, and the ideology it adheres to through any epoch of the political economy, always has and always will serve the interests of the politically dominant economic group that controls the levers of monetary and economic policy.

Accuracy matters

I created iTulip.com in 1998 to counter the din of Wall Street pitches for stock sales during the stock market bubble. Remember when economist Abbey Joseph Cohen pitched the “no bubble” theme for Goldman Sachs during the stock market bubble from 1998 to 2000? Remember when economist Alan Greenspan lauded the “New Economy” to justify a NASDAQ bubble price level that, ten years later, remains 50% below its peak? If he’d raised margin requirements and pressed Congress to implement a one-year holding period for stock issues in new public stock offerings he’d have cut the bubble short before it became too big to pop. In fact, all he needed to do was pronounce emphatically in the Wall Street Journal that the stock market was a dangerous bubble and let his reputation and position of authority do the rest. But Greenspan was on the other side, pitching for the investment banks.

I restarted iTulip in March 2006 to warn readers about the risks posed by the excesses of the finance and real estate industries that threatened to wreck the portfolios and retirement plans of millions who were exposed to a steady diet of optimism and misdirection from official sources of economic analysis. I’ve never represented myself as an economist, but for the purpose of determining when to sell out of technology stocks from April to July 2000, buy Treasury bonds in 2000 and gold in 2001, a PhD in economics was unnecessary.

Here is the track record that my methods have produced over the past 12 years. I’d gladly put it up against Athreya’s or anyone else’s.


November 1998: Warns on Internet Bubble (http://www.itulip.com/knowyourmania.html)
August 1999: No Y2K Disaster (http://www.itulip.com/y2k.htm)
November 1999: How the Internet Bubble Will End (http://www.bankrate.com/brm/news/investing/19991129f.asp?keyword=)
March 2000: Internet Bubble Top (http://www.itulip.com/GlobeArchiveJanszen.htm)
April 2000: A Bear Market is Born (http://www.itulip.com/urgentmessage.htm#Bear)
January 2001: Post-Bubble Recession (http://www.itulip.com/recession2001.htm)
September 2001: Gold Price Bottom at US$270 (http://www.itulip.com/gold.htm)
August 2002: Warns of Housing Bubble (http://www.itulip.com/index_old.html#Today)
January 2004: How Housing Bubble will End (http://www.itulip.com/housingnotlikeequities.htm)
January 2005: Housing Bubble Correction (http://www.itulip.com/housingbubblecorrection.htm)
June 2005: Housing Bubble Top, crash to follow that leads to severe recession
(http://www.itulip.com/forums/showthread.php?t=606)
October 2006: Severe recession starts Q4 2007
(http://www.itulip.com/forums/showthread.php?t=743)
December 27, 2007: Start of Debt Deflation Bear Market, 40% decline to follow
(http://itulip.com/forums/showthread.php?t=2774)
June 16, 2008: Top of commercial real estate market, crash to follow
(http://www.itulip.com/forums/showthread.php?p=38410#post38410)
September 15, 2008: Fed Funds spread signals crash (http://itulip.com/forums/showthread.php?p=47860#post47860)
March 27, 2009: Debt Deflation Bear Market: First Bounce (http://www.itulip.com/forums/showthread.php?p=86995#post86995)

Did iTulip.com make a difference to its readers over the past 12 years? After the technology stock crash, we received dozens of letters like this one that you can read in the Letters (http://www.itulip.com/letters.htm) section of the old iTulip.com site.
Dear iTulip.com,

As a long-time reader of your site I would like to commend you for the fine job you are doing. I am aware that you started this venture to poke fun at internet investors. Since that group is now more likely to be pitied than laughed at, you have chosen to take on the larger issue of investing by the little person. This is a much large role, one that demands a strong social conscience that is evident in your pieces. In other words, it appears as if you care what happens to Mr. and Mrs. Smith. The investment community, in large measure, does not care. How many apologies do you hear from the likes of Tom Galvin and Abby Cohen? I don't see them donating their bonuses to charity. Wall Street, as a business, lacks accountability to the society at large. Once again, I commend you for what you are doing. Somewhere, there should be a place where the carnival barker is accountable for the lousy show in the tent. I think you are that place. Keep up the fine work!

Michael S. April 15, 2001
And so we did, but only after cutting updates back to a minimum from 2002 to 2006, during the housing bubble era. We published only five articles during that period, starting “Yes, it’s a housing bubble (http://www.itulip.com/qc082002.htm)” to note the fact of the housing bubble in August 2002 and my first note to readers in “Debtor Nations Dream of Deflation (http://www.itulip.com/forums/showthread.php/611-Debtor-Nations-Dream-of-Deflation)” to not expect a deflation spiral to result from the coming financial crash. But I didn’t crank iTulip.com back up again until March 2006 when we re-launched the site and started to issue warnings of “Peak Risk (http://www.itulip.com/peakriskmay2006.htm)" culminating in our December 2007 “Time to short the stock market” notice to subscribers.

By the end of 2008, we were again receiving letters from readers, such as this one publish with permission from the author.

http://www.itulip.com/images2/beright.jpg

Warning consumers about economic crises created by bad economic policies that are promoted by misguided macroeconomic policy is the first purpose of economics blogging. Kartik Athreya completely misses that point. He says:
“The comparison between the response of writers to the financial crisis and the silence that followed two cataclysmic events in another sphere of human life telling. These are, of course, the Tsunami in East Asia, and the recent earthquake in Haiti. These two events collectively took the lives of approximately half a million people, and disrupted many more. Each of these events alone, and certainly when combined, had larger consequences for human well-being than a crisis whose most palpable effect has been to lower employment to a rate that, at worst, still employs fully 85% of the total workforce of most developed nations. However, neither of these events was met by (i) a widespread condemnation of seismology, the organized scientific endeavor most closely “responsible” for our understanding of these events or (ii) a flurry of auto-didactics rushing to offer their own diagnosis for what had happened, and advice for how to avoid the next big one. Everyone understands that seismology is probably hard enough that one probably has little useful to say without first getting a PhD in it. The key is that macroeconomics, which involves aggregating the actions of millions to generate outcomes, where the constituents pieces are human beings, is probably every bit as hard. This is a message that would-be commentators just have to learn to accept.”
We don’t accept it. Seismology is a science; macroeconomics is not. Not even close. Our 12-year track record demonstrates that our approach, to analyze and forecast the political economy, succeeds where the methods of academic, numerological fantasy macro-economics consistently fails -- to protect the public from a politically interested economics practitioners who fraudulently present their art as science.

With this in mind that we once again return to the task of trying to figure out what’s going to happen next. We reveal one of our methods that begins with the discovery of a data anomaly, follows with an exploration of the causes, and ends with an assessment of the implications.


http://www.itulip.com/images2/talltree300.jpg
Photo credit: Eric Janszen
Tree in front of home
Summer 2010


Economics is not hard - Part II: But accurate macroeconomic forecasting is

CI: Walk us through an iTulip “discovery process” as you called it in Part I.
EJ: Many of the insights we have come up with over the years begin with the discovery of a economic or market data anomaly. Maybe the correlation between two data sets that has held for many years suddenly stops correlating for no obvious reason, or two trends that have always confirmed each other no longer do. The next step is to see if anyone else has noticed this before, and if not develop a hypotheses to explain the change anomaly and then look for data to help test the hypotheses. Finally we try to explain the implications of the anomaly. What does it add to our understanding of how the economy works? What are the implications for our investment positions?

CI: And then you have a magic formula?
EJ: Not a formula but a with any luck a useful insight. There’s no magic to it but it is a lot of work. We might generate dozens of charts looking for an explanation for an anomaly and come up with nothing. I remember one particularly fruitless search for an explanation for an inflation data anomaly. It turned out that the BLS had changed the way they reported the data without documenting it the change. A phone call to the BLS cleared it up. We’ve probably thrown away a thousand charts and pages of analysis from explorations that turned up empty.

CI: You have one of these anomalies today to show us and why it exists?
EJ: This investigation started with a run through the iTulip tracking charts, the ones we’ve used to track the economy before, during, and after the Housing Bust Recession. more... $ubscription (http://www.itulip.com/forums/showthread.php/16257-Economics-is-not-hard-Part-II-But-accurate-macroeconomic-forecasting-is?p=168127#post168127)

Tulip Select (http://www.itulip.com/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
__________________________________________________

To receive the iTulip Newsletter or iTulip Alerts, Join our FREE Email Mailing List (http://ui.constantcontact.com/d.jsp?m=1101238839116&p=oi)

Copyright © iTulip, Inc. 1998 - 2010 All Rights Reserved

All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer (http://www.itulip.com/GeneralDisclaimer.htm)

jk
07-13-10, 06:11 PM
ej, you obviously didn't pick up the subtext. alan greenspan never really got a ph.d. his so called doctorate was awarded very late, possibly on an honorary basis, and his supposed thesis has never been seen and is not available in any libraries, including that of the degree granting institution. the screed was really an indirect thrust at greenspan. ;-) *

* [the smiley is not a way to disavow the facts as stated re greenspan, but i suspect that wasn't what's-his-name's real agenda.]

don
07-13-10, 06:15 PM
What I've always enjoyed, and benefited from, the 'Tulip.

Retaining wealth in a storm for the ages and

your approach: Political Economics with American Characteristics.

Well done, pal.

chr5648
07-13-10, 06:42 PM
My first question would be, is itulip considered a blog? Next how many economics blogs are there and how many of them provide competent advice/commentary or emotional release? If you were to take a distribution of economic blogs what percentage would these so called 'blogs' would have similar analysis like Itulip or similar predictions? I would guess very little. What Athreya is most likely talking about is the vast amount of these 'bloggers' who were wrong. Those yahoo and blog-spot half assed one page post things. Sites like Itulip are far more in depth in their analysis. Even the members here provide intelligent commentary compared to other sites.

phinolerun
07-13-10, 07:01 PM
Very touching letter LargoWinch. I wish I had discovered EJ before all of the shenanigans really got outta control; better late than never I suppose ...

I'm guessing your gift was an Eagle, or perhaps a Krugerrand?

necron99
07-13-10, 08:52 PM
Yep, what EJ discusses in this post is precisely the reason why iTulip is one of my "must-reads" even though I have no investments to speak of (a couple thou at most). I want to understand the actual economy, not the theory of the economy. I am certainly opinionated about economic theory, but of much higher importance to me than theory is the _practice_ -- how will these economic policy decisions, handed down from on high and based on theory, how will they mutate and metastasize in the real world once the special interests and the profit opportunists get ahold of them. It's sad to say that the economic story of the USA for at least twenty years -- maybe 35 years or longer -- has been much less about innovation, hard work and freedom, than it has been about corruption and privilege twisting the economy by degrees more and more into its own service at the expense of the masses. Academic economic theory is absolutely useless without some acknowledgement of that fact. And economists that I've read completely ignore those factors, while many economic bloggers home in like bloodhounds on it -- with iTulip as their pinnacle.

Scholarly rigor in economic theory is just great if you have a tenured, protected job at a University or some untouchable economics beat at a big newspaper or think-tank. The rest of us, who actually work for a living, need to read iTulip to find out what's really happening.

oddlots
07-13-10, 10:44 PM
Well done and in the signature style: dispassionate, wry and smart. As someone who aspires to attaining "prime-time" adulthood and rarely reaches it I am full of admiration.

Best

LargoWinch
07-14-10, 12:53 AM
Very touching letter LargoWinch. I wish I had discovered EJ before all of the shenanigans really got outta control; better late than never I suppose ...

I'm guessing your gift was an Eagle, or perhaps a Krugerrand?

Thank you phinolerun.

To answer your question, my much-deserved gift to Mr. and M(r)s. Janszen, was Canada's 2002 Golden Tulip:



http://www.talismancoins.com/catalog/Canada_2002_Golden_Tulip.jpg

dummass
07-14-10, 09:11 AM
Itulip Spam

Chris Coles
07-15-10, 05:59 PM
Slow server upgrade means this new thread has only this evening turned up here.

iTulip's success is in large part due, not just to the reports, even though they are unparallelled in their high quality, but to the wonderful range of intelligent individuals that have, each in their own way, discovered the site and from time to time, add their opinions to those of EJ and his excellent team. iTulip has become a small community of lively thinkers and writers; those presently holding back should take heed and add their thoughts to the debates; you will discover that well thought out responses are always welcomed.

cjppjc
07-15-10, 10:30 PM
Thank you phinolerun.

To answer your question, my much-deserved gift to Mr. and M(r)s. Janszen, was Canada's 2002 Golden Tulip:



http://www.talismancoins.com/catalog/Canada_2002_Golden_Tulip.jpg

Great job Largo.

rdrees
07-16-10, 05:37 PM
Let me start with the good: I think EJ's analysis is top notch, his thinking lucid, his perspectives interesting, and his prescience about the fundamental bubble nature of the economy over the past decade or so astounding and obviously very helpful to investors.

Even though I'm not an investor (no real money), I find the articles here and the lively discussion quite interesting and illuminating.

But I have to say I find this particular post a little self-aggrandizing, and not quite intellectually straight forward. I think economics IS hard. Pretty much nobody has a perfect record predicting how a whole society's collection of individual decisions, combined with governmental action, will turn out. And that includes this website.

Yes, they recognized and predicted with uncanny ability the crash that came and the recession that remains. That's astounding and definitely worth praise and admiration. But their ka-poom theory and the predictions of major inflation as a result of the crash have simply not borne out.

This site has been beating the inflation drum for a long time. In April 2009, iTulip published this piece called "Everyone is wrong again -- 1981 in reverse." http://www.itulip.com/forums/showthread.php/9921-Deflation-fare-thee-well-–-Part-I-In-search-of-real-returns-in-an-unreal-world-Eric-Janszen?p=97954 In it, EJ says that it is "our conviction that we will see significant inflation arising in the U.S. as soon as Q4 2009 but no later than early 2010."

Then in May 2009, iTulip published this piece called "Deflation fare thee well -- we hardly knew ye." http://www.itulip.com/forums/showthread.php/9921-Deflation-fare-thee-well-–-Part-I-In-search-of-real-returns-in-an-unreal-world-Eric-Janszen?p=97954 It basically argued that deflation was done and it would be all inflation from here on out.

In August 2009, iTulip reiterated its warning that we should "take our advice from last year and buy up all the cheap durable goods you may need for the next ten years, [because] your window of opportunity is closing fast" in this piece called "August 2009 FIRE Economy depression update." http://www.itulip.com/forums/showthread.php/11368-August-2009-FIRE-Economy-Depression-update-%C2%96-Part-I-Snowball-in-Summer-Eric-Janszen?p=116466

But that's not at all what happened. Here we are halfway through 2010 and there's no inflation to speak of. In fact, the CPI has turned negative again and has been for the entire Q2 2010. Here are the numbers for the past year (I've included both CPI and PPI finished goods):

CPI PPI
Jul 09 .1 -1.2
Aug 09 .4 1.5
Sept 09 .2 -.5
Oct 09 .2 .2
Nov 09 .2 1.5
Dec 09 .2 .5
Jan 10 .2 1.3
Feb 10 0 -.5
Mar 10 .1 .8
Apr 10 -.1 -.1
May 10 -.2 -.3
Jun 10 -.1 -.5

If anything, it looks like the deflation might be accelerating. But whatever this is, it is not "significant inflation" as predicted by "early 2010 at the latest." And last year's deflation was not the last bout of falling prices we would see in this recession, as predicted by iTulip last year.

Now, I'm not pointing this out because I'm a "deflationista," to be mean spirited, or to rain on anyone's parade. It's because I believe in this website, I believe in many of the insights it has, and I don't want to see it lose its usually stark intellectual honesty that gives it its edge.

In fact, I'm especially concerned about the somewhat revisionist history in this very post. It states, "Our success at forecasting a brief deflation out of the financial crisis does not guarantee that we can precisely time and forecast the long-term secondary effects of reflation policy." But wait, deflation wasn't the forecast of this website. What about this article from November 2006, entitled "No Deflation! Disinflation then Lots of Inflation"? http://www.itulip.com/forums/showthread.php/417-No-Deflation!-Disinflation-then-Lots-of-Inflation-Janszen It clearly says "Not deflation, but certainly disinflation (http://en.wikipedia.org/wiki/Disinflation), a slowing in the rate of inflation." Deflation was not this website's call. And even if it were, it's getting hard to call two solid years of flat/falling prices in both CPI and PPI all that brief anymore.

This recent fall in prices is pretty minor, to be sure. And personally, I have doubts that it will stick around too long. But it is deflation, and it most certainly is not significant or "lots" of inflation, nor does that seem imminent given these numbers.

I hope iTulip can keep its perspective and keep its intellectual honesty and admit that among the many terrificly accurate predictions it has made, it, too, has made some mistakes. But we all make mistakes. Economics is hard. We all know we shouldn't ignore our mistakes when trying to think through these problems; instead, we should admit them, learn from them, tweak our model, and continue to strive for excellence.

I believe iTulip can and will do that, but I don't think this post is its finest hour.

MarkL
07-16-10, 07:59 PM
I agree that Eric's prediction for inflation is long overdue and that intellectual honesty requires noting that fact. More than once during 2008-2009 his writings clearly indicated something within the 6-12 month time frame.

However, I don't think he's wrong on the deflation/disinflation front. He said that that the economic collapse would cause disinflation (a particularly type of deflation) and think we've seen that. I also think that he's been excellent in differentiating that some types of goods would go through disinflation (like Real Estate), while others types of goods (hard commodities) are going through inflation. So far he's right!

I bought shorts on the financial markets based on Eric's predictions for 2.5 years before my last year of shorts paid off handsomely and paid me back for my years of faith and much more. Timing... is the hardest part of all of this to get right.

I think Ka-Poom, is turning into Ka...ka...ka... and we still will see the poom. But it is taking a long time to get here just as the housing and financial collapse didn't occur as quickly as Eric once had indicated.

Overall, I have to ask myself... what economist has done better? I know of none.
But even with that said... yes, the post is a bit self-aggrandizing.

blazespinnaker
07-17-10, 01:09 AM
EJ is one of the greats. I say that unequivocally.

Anyone who has ever read my posts know that I am fairly out of sync with the "iTulip" hypothesis, but I keep coming back here (like I'm sure that most do) because there is a core root of greatness that lies at the heart of the community.

If I were to criticize EJ for anything, is that he's too consistent. I know that people have a very hard time with inconsistency, but I don't personally. I would love to see some flexibility that accepts that outcomes may occur other than how he has predicted.

Unfortunately, that'd probably scare off a lot of people. Ah well.

For example, one thing I think EJ does not give credit to is the fact that perhaps the powers that be or the people in general are paying attention and don't want to see inflation take off. This is why we're getting Austerity in Europe.

Also, I think a lot of people are mistaking the intention of the post. It's less to aggrandize and more to point out that the fed employee Athreya is an idiot.

Chris Coles
07-17-10, 03:20 AM
It would also be an idea for everyone to take account of what I feel sure is happening; where many in what we describe as the FIRE economy may not like to admit it, but they do take in what EJ has proposed will occur and thus they take actions to mitigate the effects. We saw exactly that when Robert Beckman wrote "The Downwave" in the early 1980's and what is interesting about the Beckman predictions is that they are all around us, but some thirty years later. Down at my humble level, we are all seeing very many signs of inflation. A good example is the $US - £UK exchange rate which has dropped from the $1.90's to $1.50's and shows every sign of wanting to continue it's downward slide.

The slightest thing might now precipitate a collapse; a little like a game where you pull out pins until the pile collapses, we may be in a much more precarious place than many recognise.

Finally, considering his excellent record of forecasting and bringing together the iTulip community to where it is now, why cannot EJ blow his trumpet now and again? A perfectly normal human response to a long and often difficult journey down an uncertain road.

vanvaley1
07-17-10, 06:29 AM
I thank "Goodness" that I found this website and its leaders and mentors, Ej and Fred. The pursuit of honesty is cherished in a world full of duplicity. As for timing, anybody ever been around for a child's delivery and known the variables and experiences at play in that event? Labor, natural, induced or impeded, is unpredictable bout minutes, seconds, and/or hours til delivery but the kid is gonna be born. So it be with inflation from thus messy process underway and the following one 'incoming'.

I'm so grateful for the insight and education offered by the legitimacy of the 'tug of war' at this site. Unfortunately, I have no pony in this race as the inflexibility of my investment 'guessing' was determined before I found this site. My only regret about this place is that time has ripened the blooming of this evening tulip a bit and the expertise of experience caught a different ship of knowledge that limits a thoughtful and reasoned contribution to the remarkable collection of itulipers that play in this sandbox of gold. So...playmates...and expecially Ej and Fred...thank you. van

jk
07-17-10, 09:44 AM
This is why we're getting Austerity in Europe.
just want to amend that statement to "this is why we're getting Austerity TALK in Europe." it remains to be seen what will be done, especially if there is another leg down in the global economy.

the austerity talk in europe may be no more meaningful than the fed's occasional announcements that it is discussing its "exit strategy" from easing.

Chris Coles
07-18-10, 03:49 AM
just want to amend that statement to "this is why we're getting Austerity TALK in Europe." it remains to be seen what will be done, especially if there is another leg down in the global economy.

the austerity talk in europe may be no more meaningful than the fed's occasional announcements that it is discussing its "exit strategy" from easing.

Any small business owner will tell you of the day they had to stop spending and self impose austerity. You do not have time to talk about it, nor think about it, austerity is imposed and you find that, immediately, it is there. My impression of what is being done within executive government here in the UK and Europe, is that everyone is trying to impose austerity upon someone else; to deflect it rather than face the facts of it. The politicals do not show the courage to cut the ranks of the layer upon layer of uselessness and the perpetrators remain aloof to their responsibilities. So as such, I too doubt we will see much to give us hope the message has yet to sink in.

raja
07-19-10, 09:07 AM
Excellent article . . . .

I would add that even the "independent analyst working for paid subscribers" still has his "book" . . . both financially and personally . . . and this may affect the quality of his or her advice.

The financial factor is the desire to maintain the loyalty of existing subscribers and gain new ones, which paradoxically may result in actions that do not benefit subscribers. On the personal, psychological level, the natural human desire to maintain a positive self-image and boost one's ego can also lead to behaviors by the analyst that can negatively impact the subscribers' bottom lines.

Here are some examples of the independent analyst working his "book":

1. Glossing over, "forgetting", or rationalizing past mistakes, resulting in a published track record that looks better than it is.

2. Failure to quickly address errors out of fear of tarnishing the pristine track record, causing those subscribers who took advice to lose more money than if errors were quickly rectified.

3. Devoting attention and effort to other activities that results in subscribers' interests being neglected.

No matter what the source of financial guidance, the investor would be wise to remain always vigilant.

rdrees
07-19-10, 01:25 PM
Personally, I think the failure of iTulip to predict deflation is, in a way, an example of them being right but not realizing how right they were. As this site has pointed out before, their dire predictions were often not dire enough. I think that the breadth and depth of this "Great Recession" have been so extensive as to counteract all the efforts of the Fed to reflate in a way even the Fed seems to find suprising. What kind of massive problem economy can stomach nearly two years of 0% fed funds rate and STILL see falling prices? I don't think anyone predicted that.

So my criticism is not even really with iTulip's general thesis that were were in a "pretend" economy for ten years or so. But I really wish iTulip would start grappling with the implications of this economy rather than try to make it seem like they were 100% accuract all the time with no failings.

And I think you are helping rewrite history when you say disinflation is a kind of deflation. It's not. Disinflation is a slowing in the rate of inflation. Assume that "regular" inflation is your $2.00 hamburger today costing $2.10 tomorrow. Disinflation is your $2.00 hamburger costing $2.05 tomorrow. Deflation is your $2.00 hamburger costing $1.95 tomorrow. Very different concepts that EJ made particular note of in his posting entitled, "No Deflation! Disinflation then lots of inflation." But deflation--not disinflation--is what we're seeing now for the past three months. Not major deflation, granted, but deflation nonetheless.

And really, why hasn't this site grappled with this? I find it astonishing that we've had three straight months of price declines for the second time this recession in both CPI and PPI. I recall a post a little while back by EJ going through a whole bunch of anecdotal evidence about how we're seeing inflation accompanied by photographs of his local Target store. Why is EJ wasting time with something like that? One of this site's biggest strengths is its reliance on cold hard data. During the housing boom, I think EJ would have ruthlessly mocked a website taking pictures of local real estate "sold" signs to "prove" that house prices could only go up. Rather, he looked at the data, saw major imbalances, and trusted the numbers rather than the anecdotes. And now he's relying on anecdotes to "prove" he was right about inflation? iTulip is better than that.

I urge iTulip to take a cold hard look at these numbers and provide their trademark analysis to help us understand the market forces at work. Why we're seeing deflation at this point in the recession; whether Japan is indeed a better model for us than previously believed; or why things might change in the imminent future.

Because frankly, a prediction that says ka ka ka....wait for it to eventually be poom is not much of a prediction at all. Surely we will see inflation again SOME day. But let's talk about today and tomorrow and next year, not someday. I mean, surely home prices will start to consitently rise again someday. How credible will Jim Cramer sound if, on that day, he says, "I told you so. I told you house prices would rise again." We need a better model than that, and iTulip is capable of delivering, in my opinion, if only it would turn its attention to it.

ThePythonicCow
07-19-10, 04:19 PM
Assume that "regular" inflation is your $2.00 hamburger today costing $2.10 tomorrow. Disinflation is your $2.00 hamburger costing $2.05 tomorrow. Deflation is your $2.00 hamburger costing $1.95 tomorrow. Prices going up or down is a variable and complex matter. I saw the prices of compute cycles and memory bits fall like a rock for the several decades I was in the business.

A useful discussion of inflation and deflation requires a clear understanding of what we choose to mean by those words. Milton Friedman's understanding of these words (if I understand Friedman correctly) as meaning the increase and decrease of the money supply is a more useful meaning in my view. All else being equal, an increase in the money supply will tend to cause prices to rise, but for any given price quote, things are rarely if ever equal. By useful I mean that the broad increase or decrease in the money supply is a systemic property, rather than particular nominal price quotes, which can be all over the lot (like the Target prices EJ reported or the computer prices I mentioned.)

In a debt-based monetary system, money comes into existence as the balancing bookkeeping entry of a debt. After a sufficiently large debt mega-bubble (the largest in human history in the present case) collapses, then debt collapses. The Fed is not printing money as they do in Zimbabwe; the Fed (and its partners in extend and pretend) are creating more bookkeeping entry pairs of money and debt. Even the Fed has a limit to how much new debt it can manufacture; hence it has a limit to how much money it can create.

The Fed cannot monetize all debt as fast it would otherwise collapse. It is not sufficiently powerful or pervasive to accomplish that (thank goodness.)

Prices will encounter severe turbulence; fasten your seatbelt. However on net, both money and new debt are harder to come by than they were in recent boom times. Local conditions vary of course. Goldman Sachs vice presidents are having an easier time of it than Las Vegas real estate investors. Peak Oil will over time force some serious changes in prices, the economy and much else. However price realignments are not what I would call inflation or deflation. Rather they are but possible symptoms thereof.

The overall decline in the supply of money and of debt, hand-in-hand, is real, is massive and is what Friedman would, I believe, call deflation.

rdrees
07-19-10, 04:43 PM
I'm not sure if you were taking issue with the quoted portion of my post or just clarifying it, but I agree with your conclusion: no matter how you slice it, the past two years of the Great Recession have exhibited deflation. Or at the very least, we have not seen anything one would reasonably call "significant inflation" which was this website's call. That particular call was wrong, though many more have been right.

No problem, people make mistakes. I'm just hoping iTulip will confront this mistake, adapt to it, and integrate it into their otherwise fantastic analyses.

For what it's worth, this crash always seemed (to my surface analysis, at least) the most similar to Japan's "lost decade" after their massive real estate bubble burst. Two years in, and I can't think of a more comparable historic example. I know EJ has always pooh-poohed that comparison because they were a creditor nation while we're a debtor nation. But I'm not sure if it's been explained why that would make such a world of difference. If anything, the fact that we have to make debt payments on top of our other obligations would seem to me to put even more pressure on the money supply and be a deflationary factor. I hope iTulip will at least revisit the similarities and differences between 1990s Japan and us now with a closer analysis why we may turn out differently, if that's still the call.

jk
07-19-10, 05:47 PM
For what it's worth, this crash always seemed (to my surface analysis, at least) the most similar to Japan's "lost decade" after their massive real estate bubble burst. Two years in, and I can't think of a more comparable historic example. I know EJ has always pooh-poohed that comparison because they were a creditor nation while we're a debtor nation. But I'm not sure if it's been explained why that would make such a world of difference. If anything, the fact that we have to make debt payments on top of our other obligations would seem to me to put even more pressure on the money supply and be a deflationary factor. I hope iTulip will at least revisit the similarities and differences between 1990s Japan and us now with a closer analysis why we may turn out differently, if that's still the call.

the difference being a debtor makes is that we couldn't take even the mild deflation the japanese have had off and on for 20 years. it would be much more devastating here, and so it won't be allowed to happen. it's time to go back and re-read bernanke's 2002 speech, which laid out the whole playbook: http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

ThePythonicCow
07-19-10, 05:48 PM
I'm not sure if you were taking issue with the quoted portion of my post or just clarifying it, Sorry, guess I wasn't clear. I was taking issue with part of what you said. Guess I'll have to be more disagreeable next time I disagree <grin>.

You were giving hamburger prices to demonstrate inflation, deflation and disinflation.

I was saying it is best not to use prices, not at Target, not for computers, not for oil, not for hamburgers, to define inflation and deflation. Rather I prefer the definitions for inflation and deflation that depend on the increase or decrease of the money supply (and hence also of the debt supply, in a debt-based monetary system such as ours.)

I also had a second message: we need to specify clearly which definition we're using, whether that be money supply, prices, or something else. I sometimes perceive a lack of sufficient discipline in this matter, which frustrates me.

ThePythonicCow
07-19-10, 06:08 PM
the difference being a debtor makes is that we couldn't take even the mild deflation the japanese have had off and on for 20 years. it would be much more devastating here, and so it won't be allowed to happen. it's time to go back and re-read bernanke's 2002 speech, which laid out the whole playbook: http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm
You're saying, as have many, a high debt burden with an increasingly strong currency (deflation) is intolerable when you don't have a large base of savers (such as the Japanese did) to borrow from.

I find Charles Hugh Smith's view more persuasive here. Yes, a high debt burden in a strengthening currency, once you've run out of willing lenders, is a serious pain in the backside (the wallet.) However, it's a pain felt by the debtor, not the lender. If you're the lender, you want to be repaid in ever stronger currency.

Who's steering this ship, the debtors or the lenders?

Over a century ago, William Jennings Bryan spoke of the burden of a Cross of Gold. We now endure the burden of a Cross of Debt. Unless we throw off this burden, we Americans (and quite a few countries we've dragged into this mess with us) will suffer under a crushing program of austerity, with <s>a high</s> an even higher percentage of our cash flows and resources going toward debt service.
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store. (http://www.cowboylyrics.com/lyrics/classic-country/sixteen-tons---tennessee-ernie-ford-14930.html)

jk
07-19-10, 07:21 PM
You're saying, as have many, a high debt burden with an increasingly strong currency (deflation) is intolerable when you don't have a large base of savers (such as the Japanese did) to borrow from.

I find Charles Hugh Smith's view more persuasive here. Yes, a high debt burden in a strengthening currency, once you've run out of willing lenders, is a serious pain in the backside (the wallet.) However, it's a pain felt by the debtor, not the lender. If you're the lender, you want to be repaid in ever stronger currency.

Who's steering this ship, the debtors or the lenders?

Over a century ago, William Jennings Bryan spoke of the burden of a Cross of Gold. We now endure the burden of a Cross of Debt. Unless we throw off this burden, we Americans (and quite a few countries we've dragged into this mess with us) will suffer under a crushing program of austerity, with <s>a high</s> an even higher percentage of our cash flows and resources going toward debt service.
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store. (http://www.cowboylyrics.com/lyrics/classic-country/sixteen-tons---tennessee-ernie-ford-14930.html)

i don't find smith's scenario persuasive. marc faber, some time ago, proposed that the wealthy would move their assets off-shore and into tangibles, blow up the currency via inflation, and then repatriate their wealth at much higher prices/rates of exchange to buy domestic assets. sounds more likely to me. who do you think owns all the gold? j6p?

ThePythonicCow
07-19-10, 11:38 PM
who do you think owns all the gold? j6p?jtabeb? <grin>

If you're one of the couple dozen wealthiest, most powerful families in the world, why let the rest of the world default on the debt they owe you by printing up a lot of paper dollars for them to pay off the debt easily?

As Charles Hugh Smith suggests, it is better to collect long term, high interest rates on the highest quality long term paper out there -- 20 and 30 year U.S. Treasury Bonds.


First you pile as much of the world's debt as you can onto the U.S. Fed's, Treasury's, and Agency's (Fannie, Freddie, FHA, FDIC, ...) balance sheets, while you accumulate short term T-Bills and what additional gold you can get cheap. The lower you keep the interest rates on T-Bills, the more debt you can pile on Uncle Sam's shoulders, as stupid Americans will be looking more at the "monthly payment" (or annual Federal budget in this case) than at the debt load.
Then you jack up the long bond rates for a little while (so they're cheap to buy) and buy a few trillion of them (trading in your T-Bills and the trading portion of your gold).
Then you collect 15% or 20% per annum "rent" from the U.S. taxpayer for the next 30 years while the long bond's slowly grow in value as well (their rates gradually decline, just as they have the last 30 years.)

Nice job if you can get it.

I'm not saying the same top wealthy won't continue to accumulate real property as always; I'm saying they like to collect rent checks (clip U.S. Treasury Bond coupons) in addition.

I suspect Faber and many of the other goldbugs I enjoy reading are talking their book, and that The Powers That Be are content to let the goldbugs do that, as the fear of inflation can help keep the economic engine from stalling out through these sharp curves. The wealthy and the prescient who got in on gold at low prices don't mind either. But gold is a side show to the current game; its market is way too small.

"Gold is Our Friend" Faber and "Gold is the Enemy" Volcker are playing for opposing teams in a side show that's useful in distracting and controlling the crowds, and on which some nice pocket change can be earned in side bets if you know the major turning points.

I don't hold gold as insurance against global economic collapse. I hold rice, beans and a Berkey Water Filter (http://www.berkeyfilters.com/) for that insurance. I hold gold because it's a horse I've placed winning bets on before at the race track, and I'm hoping to win a little more this time around.

ThePythonicCow
07-19-10, 11:49 PM
and then repatriate their wealth at much higher prices/rates of exchange to buy domestic assets.The super wealthy won't have to buy distressed U.S. property at fire sales; they will get plenty of such property, including major infrastructure from failing local and state governments, as collateral on failed debt.

the wealthy would move their assets off-shore and into tangibles, blow up the currency via inflation, and then repatriate their wealthThe world's major currencies and economies are too entwined for this to work. They cannot create a sufficiently large imbalance between the Dollar and Other currencies to make this their major move. Sure, the high speed traders such as Goldman and Morgan may slam the Euro this quarter and the Dollar next quarter, to pay for their next Lamborghini Reventon (http://www.thesupercars.org/lamborghini-super-cars/lamborghini-reventon/), but that's a game for the second level power players.

MarkL
07-19-10, 11:53 PM
RdRees, As you've done in other situations, you're carefully selecting time frames to make your arguments. Technically you may be correct that deflation occurred for a short time frame. But if you look at the bigger picture, say 6 months or a year or so (and you don't oh so carefully select them!), disinflation, not deflation occurred on average over time.

Take the time frame that you selected and using your figures sum the inflation and deflation from the numbers you presented here. Summed results over this time frame (which happens to include BOTH periods of the dreaded "deflation") still results in 1.2% CPI increase and 2.7% PPI Increase.

3482

I think waving around these short period of time you're referring to and yelling "Eric was wrong iTulip needs to face this!!!" is missing what's important and expecting things of economic forecasting that are unrealistic. Personally I think calendar years are good time frames to use as a reference points for these things and so far we have only seen disinflation, not deflation over these more reasonable time frames.

Stick to accusing iTulip of calling for inflation to happen prematurely... and maybe ask him to revise his timing estimates based on current facts.

But overall, over the time period you tendered, over calendar years, and over many other time frames Eric was spot on in sticking his neck out and stating "DISINFLATION, NOT DEFLATION." Just cause a car hits a pothole doesn't mean it's going downhill.

ThePythonicCow
07-20-10, 12:58 AM
then repatriate their wealth at much higher prices/rates of exchange to buy domestic assetsOne more point -- assets that lie fallow are just potential income.

What matters more are assets that are being hard worked by serfs, slaves or renters to pay their dues, rents, taxes, mortgages or other such regular income streams.

Spending one's assets for living expenses only seems attractive to us short term thinking proletarians, who were born broke and expect to die broke. Long running families avoid this as India farmers avoid eating their seed. Long running locks on reliable income streams are the source of spendable income and the fuel for further wealth and power accumulation.

ThePythonicCow
07-20-10, 01:00 AM
Attachment 3482 (http://www.itulip.com/attachment.php?attachmentid=3482)
MarkL - your attachment is not visible. Apparently it did not upload successfully or some such.

EJ
07-20-10, 01:03 AM
RdRees, As you've done in other situations, you're carefully selecting time frames to make your arguments. Technically you may be correct that deflation occurred for a short time frame. But if you look at the bigger picture, say 6 months or a year or so (and you don't oh so carefully select them!), disinflation, not deflation occurred on average over time.

Take the time frame that you selected and using your figures sum the inflation and deflation from the numbers you presented here. Summed results over this time frame (which happens to include BOTH periods of the dreaded "deflation") still results in 1.2% CPI increase and 2.7% PPI Increase.

3482

I think waving around these short period of time you're referring to and yelling "Eric was wrong iTulip needs to face this!!!" is missing what's important and expecting things of economic forecasting that are unrealistic. Personally I think calendar years are good time frames to use as a reference points for these things and so far we have only seen disinflation, not deflation over these more reasonable time frames.

Stick to accusing iTulip of calling for inflation to happen prematurely... and maybe ask him to revise his timing estimates based on current facts.

But overall, over the time period you tendered, over calendar years, and over many other time frames Eric was spot on in sticking his neck out and stating "DISINFLATION, NOT DEFLATION." Just cause a car hits a pothole doesn't mean it's going downhill.

Thank you for the comment. As you point out, there is a real difference between deflation and disinflation. This is the reason I dislike the term “deflation scare.” A thunderstorm and a hurricane are both stormy weather but are two utterly different weather events. You wouldn’t call a thunderstorm a “hurricane scare” would you? One is quick and not broadly damaging while the other is long and broadly damaging. Same with deflation versus disinflation.
Britannica Concise Encyclopedia:
deflation
Contraction in the volume of available money or credit that results in a persistent general decline in prices. A less extreme condition is known as disinflation. Attempts are sometimes made to bring on deflation (through raising interest rates and tightening the money supply) in order to combat inflation and slow the economy. Deflation is characteristic of depressions and recessions.
Several members have asked if I plan to debate deflationists again. I'm not sure it's a good use of time. I've proved them wrong repeatedly for the reasons I’ve explained for 12 years. What can we learn from analysis that's been proved wrong twice in a decade?

I have my own mistakes to work on, such as missing the end of the First Bounce of the Debt Deflation Bear Market by four months, due to a misreading of the political economy. Dwelling on the mistakes of others is a waste of time. Instead, I'm putting my energy into working out The Trade of the Century. It's the culmination of decades of work.

ThePythonicCow
07-20-10, 02:18 AM
As Charles Hugh Smith suggests, it is better to collect long term, high interest rates on the highest quality long term paper out there -- 20 and 30 year U.S. Treasury Bonds.Perhaps EJ and Smith are really saying much the same thing, just coming at it from different angles and with different timing expectations (exact timing is always tough.)

Perhaps both of them are consistent with the following three phases:


A Ka-phase, or disinflation, during which debt collapse drives people to Treasuries and Dollars.
A POOM phase of multi-year significant inflation, during which the U.S. Treasury long bond price falls (imputed yields rise to over 20%.)
A multi-decade follow on phase, during which the U.S. Treasury long bond price rises slowly (as it did after Volcker's medicine in the early 1980's.)

The Ka-phase may come in two steps, rather than one. I don't imagine EJ will be too surprised if he got the long term trend right, but underestimated the strength of a move. That is, perhaps we are now entering the second Ka of a Ka-Ka-POOM sequence, focusing this time on the weaker sovereign nations.

The POOM phase would likely be accompanied by a Dollar crisis, in which the U.S. Dollar loses its dominance as the world's sole reserve currency. Perhaps (though I'm not betting big bucks on this) the SDR or Wocu sort of concoction I've been anticipating will become the next equivalent to a world reserve currency. In any event, a substantial portion of the world's huge debt overhang will be resolved during this difficult phase, whether by inflation, default or restructuring.

The multi-decade follow on period, once we've gotten through the "exciting" times of the POOM phase, could be an excellent time to invest in productive businesses and energy solutions.

The long term strengths and inherent advantages of the United States are still rather awesome, in its geography, resources, culture and (if we can clean up some fraud) governance.

I am not betting against it long term, and consider it a no-brainer (given in part my complete ignorance of anywhere else) to stay right here. I'd avoid living in Detroit, the Las Vegas suburbs or the Louisiana Bayou country, however.

a warren
07-20-10, 04:49 AM
I have finally worked out The Trade of the Century. It's taken my lifetime. I've hidden it in plain sight but only one in a million will see it.

Can you please expand on this point? I understand you are forecasting Poom (high inflation) and think the bond market has long bonds priced with ridiculously low interest rates. But you can't time Poom. So whats the trade?

Chris Coles
07-20-10, 06:25 AM
One more point -- assets that lie fallow are just potential income.

What matters more are assets that are being hard worked by serfs, slaves or renters to pay their dues, rents, taxes, mortgages or other such regular income streams.

Spending one's assets for living expenses only seems attractive to us short term thinking proletarians, who were born broke and expect to die broke. Long running families avoid this as India farmers avoid eating their seed. Long running locks on reliable income streams are the source of spendable income and the fuel for further wealth and power accumulation.

Perhaps it will help if I give you a "live" example of this form of choice. A couple of years ago, I was placed under pressure, particularly on the basis of it being better to get something now, rather than wait..., to sell my patent portfolio. The idea being promoted by various attorneys, (one of which presented me with the most angry man conversation I have ever witnessed; red faced and spitting mad at my refusal is an understatement), as well as by an auction house at auction, for a predicted by the auctioneers value of perhaps slightly more than $1 million. Instead, I decided that I was happy, given present circumstances, to stay poor, almost debt free and wait. Instead turning the period into useful thinking time allowing me to add to my thinking and writing about the subject of gravity and of course, The Capital Spillway Trust which latter thinking has all now been presented to the UK government. (No I am not holding my breath, but they have to add it to their thinking).

There is good reason to believe that at some point in the future, I may be able to realise a much better value for for the patents, particularly due to being able to follow through with a claim against the European patent Office that abandoned me when I could not pay their fees in 1992; which my UK patent attorney still to this day believes might work out with a grant of the full European patents. Add that prospect to my ongoing firm belief that, for example, my suggestion that the FCC may owe me a royalty on their multi-billion 3G and 4G sales of spectrum and a number of other strategies in mind, the long term might bring in a much better result.

Yes, I might reach the grim reaper before then, but the value then gets passed on to whomever they are left to. So in which case I can smile from my grave. But the general result is always the same, It is a clear choice between selling for a pittance now or waiting for an indeterminate result. But one thing is very clear indeed. If you take the pittance, there is no possibility of any better tomorrow. If anyone can afford to wait it out, the potential never decreases; the value embedded always remains.

Chris Coles
07-20-10, 06:36 AM
I have finally worked out The Trade of the Century. It's taken my lifetime. I've hidden it in plain sight but only one in a million will see it.

For what it is worth, in my opinion, the best way forward is to exchange the currency for work done by the long term entrepreneur. Think; what changes a desert into productive soil? Answer is water. Question; what is the economic equivalent? Answer is Free Enterprise equity capital. The Trade of the Century will be timing the exchange between a concentration upon money value to an investment strategy centred upon entrepreneurial value. Precisely why I am happy to sit this phase of the economic cycle out; I absolutely intend to be an entrepreneurial part of the next wave.... when, .... when.... it comes to fruition.

MarkL
07-20-10, 06:51 AM
Entropy is one of the more immutable laws of the universe. I'm sure the forward march of technology has erased the embedded value of many vacuum tube patents. In addition, in the USA, patents only have a certain legal lifespan, after which their value disappears. Sometimes a bird in the hand is worth MORE than two in the bush and waiting is NOT the best move.

Chris Coles
07-20-10, 09:33 AM
You misunderstand. It is true the use potential disappears; but the embedded value by others infringement during their issue period does not.

Chomsky
07-20-10, 09:47 AM
I have finally worked out The Trade of the Century. It's taken my lifetime. I've hidden it in plain sight but only one in a million will see it.


Well, there's your provocative statement of the week, er, of the century. I assume this trade will be the core of the investment vehicle you are working so hard on.

EJ
07-20-10, 11:04 AM
Can you please expand on this point? I understand you are forecasting Poom (high inflation) and think the bond market has long bonds priced with ridiculously low interest rates. But you can't time Poom. So whats the trade?

I went public in March 2000 with my decision and my reasoning for getting out of NASDAQ and into Treasury bonds, with my decision to get into gold in 2001 and my reasons for doing so. My forecast for a 40% decline in the broad stock market in Dec. 2007 was based on my view that the first year of a debt deflation bear market was to start in 2008 but I noted it less publically at the time, only to subscribers.

Now I believe that I have worked out the next big trade. This is separate from thepostcatastropheeconomy portfolio that I've alluded to that we plan to launch before the end of August and the hard assets play to diversify out of Treasury bonds that we will also cover as soon as we're ready. This is a speculative bet like shorting tech stocks in March 2000 or the S&P500 in Dec. 2007 or going long gold in 2001 but much, much bigger. However, unlike before I'm not going public with it. In fact, only a handful of specialists under NDA will even understand what the positions are about that constitute the trade until the trade plays out a number of years from now. I'll update the community when we're farther along with it. I can tell you this: looks at least as crazy as buying gold did in 2001.

Chomsky
07-20-10, 11:14 AM
I went public in March 2000 with my decision and my reasoning for getting out of NASDAQ and into Treasury bonds, with my decision to get into gold in 2001 and my reasons for doing so. My forecast for a 40% decline in the broad stock market in Dec. 2007 was based on my view that the first year of a debt deflation bear market was to start in 2008 but I noted it less publically at the time, only to subscribers.

Now I believe that I have worked out the next big trade. This is separate from thepostcatastropheeconomy portfolio that I've alluded to that we plan to launch before the end of August and the hard assets play to diversify out of Treasury bonds that we will also cover as soon as we're ready. This is a speculative bet like shorting tech stocks in March 2000 or the S&P500 in Dec. 2007 or going long gold in 2001 but much, much bigger. However, unlike before I'm not going public with it. In fact, only a handful of specialists under NDA will even understand what the positions are about that constitute the trade until the trade plays out a number of years from now. I'll update the community when we're farther along with it. I can tell you this: looks at least as crazy as buying gold did in 2001.

Thanks for the elaboration. Good luck with the trade! Let the Kremlinology of your cryptic statements begin! I'm sure the iTulip community will be buzzing about this for some time, carefully parsing your words.

jpatter666
07-20-10, 11:52 AM
Thanks for the elaboration. Good luck with the trade! Let the Kremlinology of your cryptic statements begin! I'm sure the iTulip community will be buzzing about this for some time, carefully parsing your words.

I'm actually fairly pleased to hear this. Might fit in well with our decision to pay everything off including the house. Not having to worry too much about shelter (yeah, I know, property taxes) or anything else, we'll be in position to put some madness money down depending on what we hear.

After all, to win big, you have to be prepared to risk big. If you aren't prepared to risk big, you don't belong in the game.

Sounds like we'll be preparing for some exciting iTulip times ahead!

Chomsky
07-20-10, 01:05 PM
I'm actually fairly pleased to hear this. Might fit in well with our decision to pay everything off including the house. Not having to worry too much about shelter (yeah, I know, property taxes) or anything else, we'll be in position to put some madness money down depending on what we hear.

After all, to win big, you have to be prepared to risk big. If you aren't prepared to risk big, you don't belong in the game.

Sounds like we'll be preparing for some exciting iTulip times ahead!


I'm guessing the move is NOT to sell gold and buy cocoa, because if it is, EJ is too late:

http://www.dailyfinance.com/story/investing/hedge-fund-armajaro-huge-cocoa-buy/19560642/

c1ue
07-20-10, 01:09 PM
For what it is worth, in my opinion, the best way forward is to exchange the currency for work done by the long term entrepreneur. Think; what changes a desert into productive soil? Answer is water. Question; what is the economic equivalent? Answer is Free Enterprise equity capital. The Trade of the Century will be timing the exchange between a concentration upon money value to an investment strategy centred upon entrepreneurial value. Precisely why I am happy to sit this phase of the economic cycle out; I absolutely intend to be an entrepreneurial part of the next wave.... when, .... when.... it comes to fruition.

Mr. Coles,

Again, I admire the thrust of your work.

But again, I will note that the mere presence of free market capital will not resolve the hangover from the past decades of FIRE economy.

An increase of free market capital is an increase in the numerator of the economic equation (capital), but the problem right now is a denominator issue.

Even ignoring the massive debt service burden faced individually and collectively in the US, the cost of labor due to housing, taxation, health care, etc is so high that it is simply not possible for American workers collectively to be competitive.

And it is clearly possible for a 1st world nation to be competitive: Germany has shown that you can have a high standard of living AND be a net exporter. The German economic model which has netted out a competitive economy despite (or because of) national health care, no mortgage interest subsidies, 'socialist' taxes, etc etc is a clear disconnect from the 'red in tooth and claw' of neoliberal free market economics.

The path - for there is no solution - towards a better future will involve the myriad painful adjustments to back out the FIRE economy's domination of the US economy.

The longer this takes, the more painful.

Not to mention the greater likelihood of a demagogue or warlord in the model of Chiang Kai Shek or Julius Caesar.

jk
07-20-10, 01:15 PM
i'll just note that niether buying gold, nor buying treasuries, nor shorting the equities market required consultations with specialists bound by non-disclosure agreements. i do not assume this trade will be accessible to many or most or any reader here.

p.s i'll bite. something in the energy sector?

jpatter666
07-20-10, 01:38 PM
i'll just note that niether buying gold, nor buying treasuries, nor shorting the equities market required consultations with specialists bound by non-disclosure agreements. i do not assume this trade will be accessible to many or most or any reader here.

p.s i'll bite. something in the energy sector?

Dunno, but I doubt it unless it is something truly wild there. After all, EJ said it was going to look as loony as buying gold in 2001. Thus, I would think a peak cheap oil play (which doesn't look loony at all to me) is *not* what he has in mind.

I have some thoughts as to where he is going based on some hints EJ has dropped here and there, I'll be interested in seeing if I'm on target.

rdrees
07-20-10, 01:41 PM
MarkL, I think that's a bit of the pot calling the kettle black. You've carefully picked your time frame to show disinflation (one year), while my carefully picked time frame shows deflation (one quarter). We're either both wrong or both right; either way it doesn't move the argument along. But for what it's worth, it was EJ in this very post who called what we're seeing "brief deflation," not "disinflation" as he had previously called.

And in any event, that's not really my main point. As I said earlier, I'm not a "deflationista" and doubt very much that we'll have any kind of sustained, major drop in prices. What I do see, however, is two straight years of essentially flat/falling prices pretty much no matter how you slice the data. That's not significant inflation. And I don't see anything in the numbers that suggest that there's any kind of major change toward significant inflation on the horizon--indeed, the most recent numbers are trending down.

My main point is that among the very many excellent predictions made by EJ, the imminent significant inflation one was wrong, and I would sure love to see him address that. What was the flaw in his model? Did he underestimate the Fed's political ability/will to keep the printing presses jacked? Or did he underestimate the nastiness of this "Great Recession" and the immense deflationary pressures it puts on the economy? And once the model is corrected, what does he think is on the horizon? I would genuinely love to hear his thoughts on this one issue that he missed because I so value his perspective.

And just so we don't devolve into an inflationista/deflationista name calling debate, remember that there's a middle ground. It seems both sides can have a bit of the chicken little problem, with deflationistas screaming that prices will collapse while inflationistas shout that prices will skyrocket. But maybe the deflationary pressures of the sorry economy compared to the inflationary pressures of 0% interest rates effectively balance out such that we'll end up treading water for quite some time, with bits of deflation and bits of disinflation for several more quarters to come. It's not always sexy to predict the status quo or the middle ground, but sometimes that's what actually happens. For what it's worth, that's my non-professional opinion of what we're likely to see for a while, but I'd love to see some professional analysis on the subject.

Chomsky
07-20-10, 01:54 PM
i'll just note that niether buying gold, nor buying treasuries, nor shorting the equities market required consultations with specialists bound by non-disclosure agreements. i do not assume this trade will be accessible to many or most or any reader here.

p.s i'll bite. something in the energy sector?


How about something in the subprime CDO sector?

EJ
07-20-10, 01:59 PM
i'll just note that niether buying gold, nor buying treasuries, nor shorting the equities market required consultations with specialists bound by non-disclosure agreements. i do not assume this trade will be accessible to many or most or any reader here.

p.s i'll bite. something in the energy sector?

The beauty of the gold and Treasury bond portfolio through the asset boom/bust cycle of bubble economy was the simplicity and accessibility of it. It did require that one understand the dynamics of the process no later than the summer of 2000:

Asset Boom
Step 1: Asset price inflation groundwork – Deregulation and government subsidy
Step 2: Asset price inflation - Credit plus hype
Step 3: Crash trigger – Weakness in the real economy, revelation of fraud, etc.
Asset Bust
Step 4: Asset price deflation - Panic, asset sales, private credit contraction
Step 5: Spillover – Asset price deflation spills over in the P/C Economy through the banking system and credit markets
Reflation
Step 6: Reflation - Dollar depreciation, public debt expansion (liquidity), and movement of private debt to public account (solvency)

Why Treasury bonds and gold throughout? Treasury bonds rise in asset busts due to demand and also due to liquidity during reflation, while gold rises net the disinflation/reflation asset boom/bust cycle because the dollar ends the cycle weaker than when it started and total government debt levels end higher than before; as debt ratchets up, national solvency and the dollar ratchets down. Real equity prices fall because demand declines relative to claims on cash flows from taxes to pay government debt and payments of principle and interest on private debt.

Today one needs to understand an entirely different process to take positions that will hold up for the next ten years as well as gold and Treasury bonds did for the past ten years. Now we have to forget about the asset bubble cycle. That was then; this is now. This is why readers are not seeing more frequent posting from me. More time for analysis and thinking and running ideas past experts like Paul Volcker and Tom Ferguson means less time for commentary on the news and posting of intermediate results.

The Trade is not related to energy directly.

MarkL
07-20-10, 02:17 PM
Actually I picked several time frames... 2 different years, the specific time frame you originally tendered, and almost all 6 month periods. And I can pick many more time frames. More importantly I can pick MOST time frames. You MUST orient all of your argument around a very short, and very selective time frame.

So let's play your game and use the quarter as our time frame. How many quarters did you conveniently overlook over the last 2-3 years? Seven? Ten? During all of these OTHER quarters which your "quarter" selection conveniently ignored we've had inflation. And that's the majority sample. That's the trend. Especially when you sum the results.

Again, focusing on the speed bump doesn't give you a feeling for whether the car is going up or downhill. You have to look at more reasonable, longer time frames. Imagine how silly this argument would be if you were pointing to a week of deflation. Why does an occasional quarter or two of slight deflation over 2-3 years (8-12 quarters) mean we've had a "persistent drop in prices" to use Eric's dictionary deflation definition? Even over ONE year it doesn't mean that. Look at the general trend... please!

And in what 2 year time frame do you see "essentially flat/falling prices pretty much no matter how you slice the data?" I looked at multiple two year periods and the lowest I could get was 1.6%... and of course that was by being highly selective. Most are in 2%-3.8% range. No flat there... unless you call 1.6%-3% flat. I don't. I call it low inflation. But certainly not prices that are "flat/falling."

You're working hard to select the time frames, facts and definitions that fit your "deflation" argument. Let's stop the argument based on 1 or 2 quarters out of 8-12 and ask, to our own and the forum's benefit, what has the general economic trend that Eric was predicting REALLY been? Over 2007, 2008, 2009 or any two years combined, or any 3 years combined, OR an average of all of these types. Or averaging MULTIPLE quarters together. But for objectivity's sake, quit picking out the occasional one!

Economic forecasting on a quarterly basis is unrealistic and not what Eric intended.

Pick any of those multiple more reasonable economic time frames and I can't see any word for it but... Disinflation.

bill
07-20-10, 02:45 PM
The Trade is not related to energy directly.

But indirectly change energy use and source.

vinoveri
07-20-10, 02:53 PM
The Trade is not related to energy directly.

I guess that means shorting oil is out ... and shorting UST bonds and the $ is out b/c it's so obvious.

Is the trade based more on a macro-economic inevitabilities (e.g., peak oil, regional growth.. or not) or on likely political events, for example currency adjustments international debt restructurings, climate change? Or are these criteria too interdependent?

It occurs to me with all this unpayable debt, talk of a new global currency regime, if one could forecast (or an insider become privy to) how such debts will be written down and how a global currency(ies) is/are to be formulated and on what they will be based over the coming years, one could leverage that in some way in positioning themselves.

ASH
07-20-10, 04:51 PM
p.s i'll bite. something in the energy sector?

Apparently, the strategy is being surreptitiously crowd-sourced. :)

ThePythonicCow
07-20-10, 05:20 PM
The beauty of the gold and Treasury bond portfolio through the asset boom/bust cycle of bubble economy was the simplicity and accessibility of it.I take it that the flip side of this statement applies as well -- what you have in mind now is not so simple or accessible.

Hence, even if you told us more details (if you even could legally) it would not do us small-time part-time investors much good. It's not like gold where almost anyone with a few hundred dollars and a few hours of research time could have had some success buying and holding gold for the last decade.

I am imagining it's more like venture capital investing in the 1990's, where those with substantial contacts and substantial resources, able to invest serious money, could work (even create) opportunities that were not accessible to others.

Good luck with it.

dummass
07-20-10, 06:18 PM
Perhaps something in line with Buffett's purchase of Burlington Northern.

A shift due to the lack of energy.

ThePythonicCow
07-20-10, 06:50 PM
Perhaps something in line with Buffett's purchase of Burlington Northern.

A shift due to the lack of energy.
That's what I'm thinking too, along with a reversal of the suburban real estate and global trading trends of the last half century. This suggests going long rail, mass transit, municipal bonds and local or regional producers of food and basics. At the same time anything that can transit "for free", namely information, continues its global integration.

I worry however about the bezel, the infestation of fraud, corruption and tyranny at the highest centers of power. I think that bezel is a tad thicker and more sinister than EJ admits. Shrinking that bezel is going to be a bitch.

World Traveler
07-20-10, 07:01 PM
Railroads take a while to retrofit and upgrade - and U.S. rail system is in bad shape.

In the 1990's, I spent some time in several Latin American countries (Ecuador, Peru, Guatemala, Mexico), and I was very impressed by the bus systems, both within major cities like Quito and between cities. Most Latin Americans can't afford cars, but nonetheless get around quite well, due to the extensive bus systems.

As Peak Cheap Oil and the Dollar Downfall hit the U.S., a growing bus sysem is the logical alternative for a suddenly poorer population. We've already got excellent roads and highways. Buses are also the cheapest, fastest alternative to ramp up.

Will bus companies be a good future investment? Could be...

rdrees
07-20-10, 07:01 PM
I was never able to access your attachment, MarkL, so I don't actually know what data you were looking at. But you challenged me with underlines to pick any time period, and I'll pick the one I have been talking about the whole time: the past two years. Here's the raw data for PPI (which EJ has said is a preferred metric since it is less of a political football) for finished goods for the past two years:

July 08: 1.3
Aug 08: -.5
Sept 08: -.1
Oct 08: -2.6
Nov 08: -2.7
Dec 08: -1.8
Jan 09: 1.1
Feb 09: -.2
Mar 09: -.8
Apr 09: .6
May 09: 0
Jun 09: 1.8
Jul 09: -1.2
Aug 09: 1.5
Sept 09: -.5
Oct 09: .2
Nov 09: 1.5
Dec 09: .5
Jan 10: 1.3
Feb 10: -.5
Mar 10: .8
Apr 10: -.1
May 10: -.3
Jun 10: -.5

In sum, that's 13 of 24 months with falling prices, 10 with rising prices, and 1 with no change. 13 out of 24 months with falling prices is not me picking apart the data the way it pleases me; I think quite the opposite is true. You say you want to talk majority? You're talking deflation.

And I don't think it's unfair at all for me to characterize these past two years of having exhibited flat/falling prices. In fact, I believe it's what most people would call accurate: I'm not much at math, but I figure all the increases over that time frame total 10.6%. The decreases, on the other hand, total 11.8%, which means a net FALL in price over the last two years of 1.2%. Not disinflation; deflation.

I'm reminded of a recent study that found that when human beings believe something, they simply cannot accept plain facts that contradict their viewpoint. I wonder if there's some of this going on here. http://www.boston.com/bostonglobe/ideas/articles/2010/07/11/how_facts_backfire/?page=full

Now, I still stand by what I said: we're either both right or both wrong from a statistical standpoint. I have no doubt you can find statistics that bolster your argument. But you cannot deny that the reasonable, objective statistics I've referenced here bolster mine, so you're no "more right" than me.

But this is distraction, really. Let's get down to it: EJ was wrong when he said we'd have significant inflation by now. Using whatever statistics you want, I don't think even you, MarkL, would characterize what we're seeing now as significant inflation. No matter how right EJ's been no matter how many times (which I acknowledge), the man is a human being and on this particular call he was wrong. Let's confront that and integrate it into the analysis instead of pretending it never happened.

dummass
07-20-10, 07:13 PM
We've already got excellent roads and highways. Buses are also the cheapest, fastest alternative to ramp up.

The problem could be the maintenance of all those roads. Expensive oil = Expensive roads

metalman
07-20-10, 07:18 PM
I was never able to access your attachment, MarkL, so I don't actually know what data you were looking at. But you challenged me with underlines to pick any time period, and I'll pick the one I have been talking about the whole time: the past two years. Here's the raw data for PPI (which EJ has said is a preferred metric since it is less of a political football) for finished goods for the past two years:

July 08: 1.3
Aug 08: -.5
Sept 08: -.1
Oct 08: -2.6
Nov 08: -2.7
Dec 08: -1.8
Jan 09: 1.1
Feb 09: -.2
Mar 09: -.8
Apr 09: .6
May 09: 0
Jun 09: 1.8
Jul 09: -1.2
Aug 09: 1.5
Sept 09: -.5
Oct 09: .2
Nov 09: 1.5
Dec 09: .5
Jan 10: 1.3
Feb 10: -.5
Mar 10: .8
Apr 10: -.1
May 10: -.3
Jun 10: -.5

In sum, that's 13 of 24 months with falling prices, 10 with rising prices, and 1 with no change. 13 out of 24 months with falling prices is not me picking apart the data the way it pleases me; I think quite the opposite is true. You say you want to talk majority? You're talking deflation.

And I don't think it's unfair at all for me to characterize these past two years of having exhibited flat/falling prices. In fact, I believe it's what most people would call accurate: I'm not much at math, but I figure all the increases over that time frame total 10.6%. The decreases, on the other hand, total 11.8%, which means a net FALL in price over the last two years of 1.2%. Not disinflation; deflation.

I'm reminded of a recent study that found that when human beings believe something, they simply cannot accept plain facts that contradict their viewpoint. I wonder if there's some of this going on here. http://www.boston.com/bostonglobe/ideas/articles/2010/07/11/how_facts_backfire/?page=full

Now, I still stand by what I said: we're either both right or both wrong from a statistical standpoint. I have no doubt you can find statistics that bolster your argument. But you cannot deny that the reasonable, objective statistics I've referenced here bolster mine, so you're no "more right" than me.

But this is distraction, really. Let's get down to it: EJ was wrong when he said we'd have significant inflation by now. Using whatever statistics you want, I don't think even you, MarkL, would characterize what we're seeing now as significant inflation. No matter how right EJ's been no matter how many times (which I acknowledge), the man is a human being and on this particular call he was wrong. Let's confront that and integrate it into the analysis instead of pretending it never happened.

read ej again. in all articles since 2008 he predicts a fall purchasing power of income and savings... reflected in the declining quantity & quality of goods and services not nominal prices rising... higher commodity prices & weak demand keep producers from passing higher 'input costs' (ppi) to consumers. c1ue has a thread around here that tracks shrinking packages & less 'stuff' in the box. yo... when you get dog food instead of meatloaf is that 'deflation'? quality/quantity deflation = inflation.

where'd you get your ppi numbers?

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=0&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=PPIFGS&transformation=lin&scale=Left&range=Custom&cosd=2006-04-01&coed=2010-06-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-07-20&revision_date=2010-07-20&mma=0&nd=&ost=&oet=&fml=a

'persistent price decline' = deflation? where? nah. disinflation.

rdrees
07-20-10, 07:31 PM
This is certainly very interesting stuff.

I wonder if it's perhaps agricultural based. One of the areas where the US continues its world-class status is in agricultural production. But there are three countries that produce even more agricultural products than us: China, Brazil, and India. Three countries that many think are on the vanguard of prosperity with relatively much healtier balance sheets. So investing in agriculture may be, to a certain extent, an investment in those economies, plus a healthy part of ours

Plus, if Peak Cheap Oil is on the way, the value of food should tend to rise relative to all other goods since it is, in part, massive inputs of petroleum products that make farming so cheap these days--in other words, we may have a reduction in supply problem. And with a rising global population, demand should sure be there.

The details are probably complicated, since there are so many aspects to world agricultural output. The play could be in simple agricultural commodities, like cocoa as a previous poster pointed out. Or perhaps it's more toward equipment, or fertilizer producers, or agrarian real estate, or god knows what else.

Whatever it is, it sure is intriguing.

dummass
07-20-10, 07:41 PM
A few years back, I met a family living on an 80' cargo sailer; they built the ship themselves. At the time they were loaded with coffee from Costa Rica, on their way to Seatle. In their nitch market, they were already competitive with modern shipping companies. That's BPCO, before peak cheap oil.

rdrees
07-20-10, 07:43 PM
Actually, I agree with EJ that we are likely to see a decline in standards of living as a result of this "Great Recession," if that's what you mean by a fall in purchasing power of income and savings. If you lose your job, you're income has fallen precipitously, as has your purchasing power.

I have seen the thread about shrinking packages. I have no quibble with someone taking that into account, but I personally do not generally consider anecdotal evidence. I want the hard numbers. I recognize that there's room for intentional manipulation in raw numbers, but I think there's just enough room for intentional manipulation in anecdotal evidence and way more room for unintentional manipulation. Just a personal preference.

Call it deflation, call it disinflation. "Flat/falling prices" seems the most accurate to me, but I don't really care all that much about the terminology. What is abundantly clear to me, and what I do think is important, is that the numbers do not support significant inflation over this time period.

Oh, and the PPI numbers I posted I got straight from the Bureau of Labor Statistics PPI Press Release Archive. http://www.bls.gov/schedule/archives/ppi_nr.htm

ThePythonicCow
07-20-10, 08:07 PM
Railroads take a while to retrofit and upgrade - and U.S. rail system is in bad shape.

In the 1990's, I spent some time in several Latin American countries (Ecuador, Peru, Guatemala, Mexico), and I was very impressed by the bus systems, Ah - I was figuring rail for long haul shipping (when it doesn't have to get there for a few days) and bus for local (and even regional) human transportation. Smaller countries wouldn't need so much long haul shipping rail, but we're pretty big land with major cities spread all over.

metalman
07-20-10, 08:47 PM
Actually, I agree with EJ that we are likely to see a decline in standards of living as a result of this "Great Recession," if that's what you mean by a fall in purchasing power of income and savings. If you lose your job, you're income has fallen precipitously, as has your purchasing power.

I have seen the thread about shrinking packages. I have no quibble with someone taking that into account, but I personally do not generally consider anecdotal evidence. I want the hard numbers. I recognize that there's room for intentional manipulation in raw numbers, but I think there's just enough room for intentional manipulation in anecdotal evidence and way more room for unintentional manipulation. Just a personal preference.

Call it deflation, call it disinflation. "Flat/falling prices" seems the most accurate to me, but I don't really care all that much about the terminology. What is abundantly clear to me, and what I do think is important, is that the numbers do not support significant inflation over this time period.

Oh, and the PPI numbers I posted I got straight from the Bureau of Labor Statistics PPI Press Release Archive. http://www.bls.gov/schedule/archives/ppi_nr.htm

chart i posted is ppi finished goods from the bls. where's the controversy? no deflation.

read the mason gaffney interview...


MG: I’m not sure I have a short answer for that one. One thing is that inflation has advanced much faster than the official numbers. And so to some extent in order to maintain your standard of living you had to borrow but that is not an adequate statement by itself. At the same time you had people borrowing on equity. We all did it. I did it. You probably did it. So there, without producing anything, you had purchasing power. You didn’t have to lift a finger to have your house rise in value. Then you borrowed against it. I’m not talking about you…

EJ: I didn’t. I don’t have a mortgage. But I agree there was a period when you could do cash-out refinancing against inflated home prices. You could turn an illiquid asset into a liquid asset. It was a miracle.

MG: It pushed up prices of lots of things deceptively. It pushed up prices without encouraging production of supplies to meet the demand so we started importing them from overseas and borrowing from overseas and so we have a balance of payments deficit on top of the public deficits, enlarging the money supply without a corresponding increase of output. Now we’re waiting for the other shoe to drop. There’s a great inflation around the corner.

EJ: Interesting you should say that. We’ve been so convinced of inflation as the ultimate outcome of asset bubbles and reflation that we bought gold in 2001 when the US was supposedly entering a period of deflation. We seen the ration of new public and private sector debt growth to GDP growth go from 1 to one to nearly 5:1 in 2009. Is there some threshold where neither the private nor public sector cannot increase debt levels.

MG: Well there’s a steep decline in collateral values and I think we’ve reached that. That’s happening. Now as far as public debt is concerned that is a somewhat different story. That can go on quite a bit longer than private debt.

EJ: The Japanese have demonstrated that.

MG: Yes. My big worry is we’re seeing the limit of that, at which point the system is going to start doing some pretty strange things. But maybe inflation is the word for it.

EJ: The forecast I made not long after I first started iTulip in 1998, I didn’t see how the global contest of debt-financed economic growth could end any other way than through a competitive devaluation of currencies that would ultimately be inflationary. It’s looking to me like we’ve reached the phase in the latest series of bailouts that we’re substituting public credit for private credit to maintain the money supply but eventually we’ll run out of credit. Does that theory sound reasonable and what do you think would happen if we do run out of credit?

MG: Interest rates escalate. The bond market collapses. And all hell breaks loose.

EJ: On iTulip we call that a “Poom” derived from Ka-Poom Theory. It follows from the observation that sovereign debt and currency crises have this peculiar tendency to begin as a deflationary process and then suddenly become a high inflation process as bonds sold off and currencies, too. That was the pattern in Russia in the early 1990s, Argentina in the early 1990s and again in 2001, among many instances.

MG: It looks to me like we’re very close to there.

EJ: Where do you see inflation starting up first? Where do you think we’ll see evidence of that?

MG: My crystal ball is a little murky on that point. If you want to know when, I would say though that it is starting right now as evidenced by the rise of interest rates in the bond market.

EJ: The theory I proposed here the end of 2008 is that we’d start to see inflation no later than this quarter, the second quarter of 2010, that the government spending financed recovery was going to focus demand into a much more narrow supply chain. We’d have supply constraint colliding with a money supply expanded by public borrowing. All the manufacturers, wholesalers, and retailers that survived the consolidations and bankruptcies of 2008 and 2009 would see their pricing power quickly rapidly return and we’d start to experience consumer price inflation as in the 1970s but mostly in the form of reduced quality and quantity of goods per dollar, rather than higher nominal prices. Recent reports from our readers seem to confirm this, that manufacturers are not able to pass higher input costs, particularly energy costs—such as oil at $80 per barrel—on to the consumers. What they’re doing instead is that old trick you might remember from the 1970s. We’re seeing smaller packages sold at the same price, the substitution of lower cost ingredients for higher cost ingredients, package contents are shrinking but the prices of goods are staying the same. Also the cost-of-goods (COG) of manufactured products like automobiles is being reduced. The cars are “cheaper” in a quality sense, but the prices are the same or even higher.

MG: There’s definitely a lot of that. And that has been concealed and even turned backwards by economists who’ve been monkeying with the costs of the consumer price index. They bought the line that quality of goods is rising and they can cherry pick a few examples such as computers and leave out all the counter examples. For example, you go into a gasoline station forty years ago and you got three or four attendants swarming all over your car, cleaning the glass, checking the air-pressure, the oil and water. They had a rest room that was usually clean. They’d give you free maps. You could go on and on with all the free services that went with gasoline then. Now, I don’t need to tell you it’s a very different story.

http://www.itulip.com/forums/showthread.php/15277-Eric-Janszen-Interviews-Professor-Mason-Gaffney

jpatter666
07-20-10, 09:22 PM
Metalman,
What about the claim that there should have been significant inflation in early 2010. I kind of remember that post as well....you usually track down such stuff quickly.
I'm willing to cut EJ more time on that one -- if we've seen one thing it is that EJ sometimes underestimates the severity or the timeline of events. The events *do* happen, but they are (IMO) skewed by political/Fed maneuvering -- and no one can call that with any accuracy.

ThePythonicCow
07-20-10, 09:26 PM
Metalman,
What about the claim that there should have been significant inflation in early 2010. I kind of remember that post as well....you usually track down such stuff quickly.
Dang, that Metalman is some kinda' quick. He posted the answer to your question a half hour before you posted the question See the post just before yours, with the line:

EJ: The theory I proposed here the end of 2008 is that we’d start to see inflation no later than this quarter, the second quarter of 2010,

LargoWinch
07-20-10, 09:38 PM
Metalman,
What about the claim that there should have been significant inflation in early 2010. I kind of remember that post as well....you usually track down such stuff quickly.
I'm willing to cut EJ more time on that one -- if we've seen one thing it is that EJ sometimes underestimates the severity or the timeline of events. The events *do* happen, but they are (IMO) skewed by political/Fed maneuvering -- and no one can call that with any accuracy.

From my point of view jpatter666, you believe in Ka-Poom or you don't.

Does it really matter if EJ is off by even a few years? [and I am not suggesting he is here]


You have to realize that a whole lot of people still believe in deflation while loading up on long-dated and/or zero-coupon bonds thinking they will come out of this just fine. What I am trying to say is that even if these people get the "timing" right, they are still doomed and that figuring out the right outcome/thesis is so much more important than timing.

jpatter666
07-20-10, 09:50 PM
From my point of view jpatter666, you believe in Ka-Poom or you don't.

Does it really matter if EJ is off by even a few years? [and I am not suggesting he is here]


You have to realize that a whole lot of people still believe in deflation while loading up on long-dated and/or zero-coupon bonds thinking they will come out of this just fine. What I am trying to say is that even if these people get the "timing" right, they are still doomed and that figuring out the right outcome/thesis is so much more important than timing.

@Cow -- gahhhh....that's what I get for not refreshing the responses before posting.
@LW -- I believe! I believe! :-) I was just stating that I've learned (ok, going a little ridiculous here....) that EJ is *not* a prophet and pronouncements are not engraved on stone tablets. I think he does have the general trends correct, I'm just stating that given the governmental/Fed added chaos, while the long-term trend remains intact, short to medium term we could see damn well *anything*.

And given that statement, I think while I give it low-probability (look at Hungary for recent example) I think it is *possible* we could enter a short deflationary period (even by Metal's definition) especially after the 2010 elections.

Never underestimate the political powers-that-be's ability to make a bad situation far, far worse.....

metalman
07-20-10, 10:08 PM
@Cow -- gahhhh....that's what I get for not refreshing the responses before posting.
@LW -- I believe! I believe! :-) I was just stating that I've learned (ok, going a little ridiculous here....) that EJ is *not* a prophet and pronouncements are not engraved on stone tablets. I think he does have the general trends correct, I'm just stating that given the governmental/Fed added chaos, while the long-term trend remains intact, short to medium term we could see damn well *anything*.

And given that statement, I think while I give it low-probability (look at Hungary for recent example) I think it is *possible* we could enter a short deflationary period (even by Metal's definition) especially after the 2010 elections.

Never underestimate the political powers-that-be's ability to make a bad situation far, far worse.....

ah, yep... let's go back on the gold standard & get a deflation spiral going!

sweden & all other countries in the 1930s went off the gold standard & didn't do a deflation spiral...

http://www.itulip.com/images2/FisherPriceIndexSwedishvsUSA1931-1934.gif

why didn't the usa go off the gold standard & reflate? don't understand why the usa made that choice. :o

MarkL
07-21-10, 12:50 AM
That graph really says it all Metalman. The trend over time is quite clear.

Yes, RDRees, if you pick July of 2008 riggghttt at the tippy top of that big peak... and draw a line on Metalman's PPI graph, you get your slight decrease. Yup. You're right. You win.

I can do the same thing with the inflation adjusted peak of gold back in the 80's and show gold has decreased over the last few decades. It's equally meaningless as attempting to indicate or prove an economic trend.

Ask yourself RDRees, is "persistent price decreases" really the trend this graph really shows?
If you honestly drew a line on this graph, what angle would it have?

Throw in the towel on this one and go back to beating Eric up on Premature ejanszinflation.
(please don't boot me for that one!) :-]

ASH
07-21-10, 01:33 AM
A few years back, I met a family living on an 80' cargo sailer; they built the ship themselves. At the time they were loaded with coffee from Costa Rica, on their way to Seatle. In their nitch market, they were already competitive with modern shipping companies. That's BPCO, before peak cheap oil.

That is about the most fascinating thing I've read in the last several months.

MarkL
07-21-10, 01:34 AM
Great news for you RDRees! The price of oil and gas is dropping!

All you have to do to see this is start your analysis when Oil peaked at $142 a barrel on the not-so-coincidental date of July 08... the same date you gave me to start your deflation calculation, and the same date it was artificially pushing up the prices of everything in the economy, and you can see that we have a HUGE drop in oil prices! Isn't it great that all those forecasters that predicted that the general trend in oil prices would be upward were wrong?

Now...what's wrong with my credit card...?

Chris Coles
07-21-10, 04:55 AM
Mr. Coles,

Again, I admire the thrust of your work.

But again, I will note that the mere presence of free market capital will not resolve the hangover from the past decades of FIRE economy.

An increase of free market capital is an increase in the numerator of the economic equation (capital), but the problem right now is a denominator issue.

Even ignoring the massive debt service burden faced individually and collectively in the US, the cost of labor due to housing, taxation, health care, etc is so high that it is simply not possible for American workers collectively to be competitive.

And it is clearly possible for a 1st world nation to be competitive: Germany has shown that you can have a high standard of living AND be a net exporter. The German economic model which has netted out a competitive economy despite (or because of) national health care, no mortgage interest subsidies, 'socialist' taxes, etc etc is a clear disconnect from the 'red in tooth and claw' of neoliberal free market economics.

The path - for there is no solution - towards a better future will involve the myriad painful adjustments to back out the FIRE economy's domination of the US economy.

The longer this takes, the more painful.

Not to mention the greater likelihood of a demagogue or warlord in the model of Chiang Kai Shek or Julius Caesar.

C1ue,

You have missed the point, but at least one other has not and I will start by pointing everyone to a recent New York Times Op-Ed from Thomas Friedman:

A Gift for Grads: Start-Ups By THOMAS L. FRIEDMAN (http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/thomaslfriedman/index.html?inline=nyt-per) Published: June 8, 2010

<NYT_TEXT><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>"If you have a son or daughter graduating from college this year, you’ve probably gotten the word. When meeting this year’s college grads it’s best not to ask: “Hey, what are you doing next year?” Too many recent graduates don’t have an answer. They can’t find jobs even remotely related to their fields. This year’s graduation theme is: “Don’t ask. Can’t say.”

We owe our young people something better — and the solution is not that complicated, although it is amazing how little it is discussed in the Washington policy debates. We need three things: start-ups, start-ups and more start-ups. ........."

http://www.nytimes.com/2010/06/09/opinion/09friedman.html?_r=1&ref=thomaslfriedman

And I found that from researching a response to my US Mentor, Professor Donald L. Birx's request for my opinion on this:

The Innovation Delusion
By Ralph Gomory

"In the United States, innovation has become almost synonymous with economic competitiveness. Even more remarkable it is argued that the country's economic salvation can only be through innovation. We hear that because of low Asian wages the United States must innovate because it can't really compete in anything else. Inventive Americans will do the R&D and let the rest of the world, usually China, do the dull work of actually making things. Or Americans will do programming design but let the rest of the world, usually India, do low-level programming. This is a totally mistaken belief and one that, if accepted, will consign this nation to second- or third-class status.

The latest offender to advance this line of thought is Thomas Friedman, who has prominently displayed this familiar and entirely incorrect line of thought in The New York Times. Unfortunately, this idea is one that is widely accepted without careful thought about either its truthfulness or its consequences. ............"

http://www.todaysengineer.org/2010/Jul/innovation-delusion.asp

My own view is that almost everyone has forgotten that everything we use is, generation by generation, replaced new. EVERYTHING.

What Germany and Japan has done is to stick to designing and manufacturing for themselves first. And not rubbish bought from Walmart made in China, but very high level products made in Germany or Japan. Ceramics is a very good example. Their Sunday lunch is not eaten off of cheap ceramics from another nation, they eat off of wonderful designs of German ceramics that would grace the tables of an Emperor. Pass that thought right across the spectrum of products and act upon the very simple idea that all you need to do is forget the troubles of the FIRE economy and redress the lack of your own high quality products, from local, community based employment and thus local community investment.

You can sit in your derelict economy, constantly recounting why it is in such a dreadful state of dereliction and why nothing you can do will change the situation, or;

You can get up off your butt and think your way out of the FIRE slum into a new economic model that will completely bypass the existing fiasco. - The choice is yours. I choose to get up and do something different. If everyone did the same, the FIRE economy and all its problems would soon disappear into bankruptcy, never to return. Simply believing you cannot will keep you stuck in a rut for the rest of your life. As a once great American leader once said: "The only thing we have to fear is fear itself."

Personally, I chose to try, rather than to argue why not. If I fail, it is at the least with honour.


"It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat."


Franklin D. Roosevelt "Citizenship in a Republic,"
Speech at the Sorbonne, Paris, April 23, 1910
http://www.theodoreroosevelt.org/life/quotes.htm

WDCRob
07-21-10, 07:14 AM
That is about the most fascinating thing I've read in the last several months.

Had the same reaction. What a great idea if you like the lifestyle anyway.

metalman
07-21-10, 10:11 AM
Throw in the towel on this one and go back to beating Eric up on Premature ejanszinflation.
(please don't boot me for that one!) :-]

ejanszinflation ))O

seriously... name for deflation in quality/quantity of goods from a decline in purchasing power of income & savings w/o a nominal increase in finished goods prices?


SMALLER PACKAGING FOR SAME PRICE

Posted Thu by DEBORAH B. (http://www.planetfeedback.com/index.php?level2=account_public&user_id=672016) written to Kellogg Company

----- Original Message -----
From: Deborah
To: kellogg@casupport.com
Cc: Clark
Sent: Thursday, September 25, 2008 7:29 AM
Subject: Fw: Consumer Affairs 013649751A

Consumer Affairs Department

Per your email below: As you know, recent economic pressures have affected all of us as we see higher prices on goods and services we purchase for our families and homes. As a company, we also face significantly higher prices for ingredients, energy, packaging materials, labor, equipment, freight and warehousing.

It is interesting that the response by Kellogg to the economic situation is to reduce
package size, while maintaining cost. As a family, we also face the same higher prices - and paying the higher cost of gas to commute to work and school is significant. Our response is somewhat different however. Since it is not possible for us to reduce the hours that we work and still get paid the same amount of money (which would allow us time to go out and get a second job - wow - I wonder if my boss would go for that), we are forced to reduce our spending. That means finding the best deals we can on all goods that we buy, and purchasing smaller quantities for the same price we paid for larger packages is NOT an option. I will look for product that is on sale, less expensive, and not repackaged in smaller quantities just so that YOU can continue making the same amount of money, paying C Level staff ridiculous amounts for their salary and annual bonuses.

Shame on Kellogg.
Deborah

----- Original Message -----
From: Clark To: kellogg@casupport.com
Sent:Tuesday, September 23, 2008 9:20 PM
Subject: Re: Consumer Affairs 013649751

Mr. G.
I understand that we are in hard times but we are all used to having to pay a little more at the pump, at the grocery store, restaurants, etc. What we as consumers DON"T want to see is getting less product for price as the previous size larger package that contained more product and that is what you are doing by cutting down the size of your packaging. As a result, you can not count on me as a continued customer any longer. Doesn't get it for me or anybody I know for that matter.
May want to rethink this. I am going to CC my large family on this so you may get further comments on cutting down the size of your Famous Amos cookies and other Kellogg products but NOT the prices.
Lastly, why in the world would you think that reducing the size of your package and giving less pr
oduct is beneficial to the consumer? Consumers are much smarter than that and I am amazed that you obviously do not know that.

Wow!
Sincerely yours,
A Former Customer of many years.


---- Original Message ----
From: "kellogg@casupport.com"

Sent: Tuesday, September 23, 2008 7:30:58 PM
Subject: Re: Consumer Affairs 013649751A

Mr.
Thank you for contacting us regarding our recent reduction of our carton sizes on select Kellogg's cereal. We appreciate the opportunity to respond. The Kellogg Company remains committed to providing consumers with healthy and nutritious foods at a fair price. As you know, recent economic pressures have affected all of us as we see higher prices on goods and services we purchase for our families and homes. As a company, we also face significantly higher prices for ingredients, energy, packaging materials, labor, equipment, freight and warehousing. To help offset those increased costs, Kellogg is reducing the size of some of our products to help consumers. We hope we may count you among our valued family of consumers in the years ahead as we continue to offer you delicious and nutritious products at an affordable price.
Sincerely,
Consumer Affairs Department
013649751A
Kellogg NorthAmerica
PO Box CAMB
Battle Creek, MI 49016-1986

the forecast was correct... but what to call it? ej is the only analyst to forecast it correctly... er, why not call it janszinflation ;_TU

Chris Coles
07-21-10, 10:22 AM
Had the same reaction. What a great idea if you like the lifestyle anyway.

A great friend, just over a year ago, set off for deepest Africa having been challenged to create a simple but effective transport infrastructure to bring out a once war torn region's Cocoa crop. He whizzed past a week ago in his shiny new Jag grinning broadly. I am also reminded of a photograph I once saw in a book about square rigger ships of trade showing a group of shipwrights building a large wooden ship on a beach in the South of England. No infrastructure, just wood and hard work. All anyone with the gumption to needs - is the opportunity, usually provided by someone investing in their potential.

MTH
07-21-10, 10:22 AM
The independent economics analyst offends everyone by failing either to align with the dominant ideology, such as the neo-Keynesian religion that Athreya’s employer follows, or mine a thick vein of anger and disillusionment that runs through an intellectually appealing but impossibly flawed counter-ideologies such as Austrian economics.


Could you elaborate on your assessment of Austrian economics?

My views of Austrian economics center around two ideas: 1) Ludwig Von Mises correctly explained why socialism was doomed to failure because of the lack of free market prices, and 2) the Austrian business cycle theory which explains how when interest rates are held below their free market rates, it causes a shift of capital into longer term projects which are doomed to failure because the savings does not exist to allow their completion.

Both of these Austrian concepts are not only intellectually appealing but also in my view correct. What aspects od Austrian economics are you referring to that are impossibly flawed?

vinoveri
07-21-10, 10:46 AM
All anyone with the gumption to needs - is the opportunity, usually provided by someone investing in their potential.

Ah, well there's the rub isn't it, the perceived need for someone else to "invest in their potential "

Certainly their are counter-examples, e.g., Chris Columbus needed a benefactor to discover the new world, but I would suggest that the vast majority of humanity has always been pulling itself up by its bootstraps. A well defined goal coupled with gumption, moxie, perseverence will likely result in some form of success. Governments enable this when they allow unfettered, the seemingly semi-chaotic activities of individual, and insuring individual rights are not infringed by it or fellow citizens.

We live in a culture that teaches people that they need to do well in school, so they can get a good job, and climb the corporate ladder. When the goal of the vast majority becomes get a good job ... versus find a way to contribute/produce value for others.... not that these are always exclusive, but the attitude sure is different, we have surely lost our way as "economic innovators".

Chris Coles
07-21-10, 11:34 AM
Ah, well there's the rub isn't it, the perceived need for someone else to "invest in their potential "

Certainly their are counter-examples, e.g., Chris Columbus needed a benefactor to discover the new world, but I would suggest that the vast majority of humanity has always been pulling itself up by its bootstraps. A well defined goal coupled with gumption, moxie, perseverence will likely result in some form of success. Governments enable this when they allow unfettered, the seeminly semi-chaotic activities of individual, and insuring individual rights are not infringed by it or fellow citizens.

We live in a culture that teaches people that they need to do well in school, so they can get a good job, and climb the corporate ladder. When the goals of the vast majority become get a good job ... versus find a way to contribute/produce value for others.... not that these are always exclusive, but the attitude sure is different, we have surely lost our way as "economic innovators".

It is not the economic innovators that have lost their way, it is simply a lack of access to the investment. In which case it is the idea of a recognised responsibility, to invest in such economic innovators, by today's holders of the nation's savings that have lost their way. What I am saying is everyone is concentrating upon the wrong end of the stick; the problem is the attitude of the institutions, not the innovators.

bart
07-21-10, 03:09 PM
Actually, I agree with EJ that we are likely to see a decline in standards of living as a result of this "Great Recession," if that's what you mean by a fall in purchasing power of income and savings. If you lose your job, you're income has fallen precipitously, as has your purchasing power.

The decline in the standard of living been going on for many many years, when CPI-U ("inflation") is correctly accounted for per an apples to apples comparison with how it used to be calculated.

I noted John Williams ( shadowstats.com ) fine & accurate work to you almost a year ago and not only don't recall you ever looking at it or acknowledging it, but also suspect that you still haven't looked at his voluminous and fact based research on how the CPI-U has been seriously fiddled since 1980. It includes "special" items like OER, the Boskin Commission, geometric weighting, bad general weighting (health/medical is a *much* higher proportion of GDP than it is in CPI), hedonic adjustments, etc. and ad nauseum.


Here's just one example:

http://www.nowandfutures.com/images/pers_inc-expend_cpi_lies1963on.png





Call it deflation, call it disinflation. "Flat/falling prices" seems the most accurate to me, but I don't really care all that much about the terminology. What is abundantly clear to me, and what I do think is important, is that the numbers do not support significant inflation over this time period.


As far as PPI, PPI finished good trails PPI commodities. The red line below is PPI finished goods and both the short and long term trends are unmistakable.

http://www.nowandfutures.com/images/ppi_vs_ppi_commodities.png







PPI also strongly tends to lead CPI:

http://www.nowandfutures.com/images/cpi_vs_ppi_short_term.png


http://www.nowandfutures.com/images/cpi_vs_ppi.png




As far as inflation not being apparent to you in early 2010 as EJ and others predicted, I draw your attention to the bold portion below which shows real inflation in the 9-10% area since late 2009.


<table x:str="" style="border-collapse: collapse; width: 240pt;" border="0" cellpadding="0" cellspacing="0" width="320"><col style="width: 48pt;" span="5" width="64"> <tbody><tr style="height: 39.6pt;" height="53"> <td style="height: 39.6pt; width: 48pt;" height="53" width="64">
</td> <td class="xl24" style="width: 48pt;" width="64">CPI-U</td> <td class="xl24" style="width: 48pt;" width="64">Annual change rate</td> <td class="xl24" style="width: 48pt;" width="64">CPI without lies</td> <td class="xl24" style="width: 48pt;" width="64">Annual change rate</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38718" height="18">1/1/2006</td> <td class="xl26" x:num="" align="right">198.30</td> <td class="xl25" x:num="3.9853172522286373E-2" align="right">4.0%</td> <td class="xl26" x:num="307.0574837619161" align="right">307.06</td> <td class="xl27" x:num="8.0563324084119259E-2" align="right">8.06%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38749" height="18">2/1/2006</td> <td class="xl26" x:num="" align="right">198.70</td> <td class="xl25" x:num="3.59749739311781E-2" align="right">3.6%</td> <td class="xl26" x:num="310.55804726223141" align="right">310.56</td> <td class="xl27" x:num="8.6913451417972132E-2" align="right">8.69%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38777" height="18">3/1/2006</td> <td class="xl26" x:num="" align="right">199.80</td> <td class="xl25" x:num="3.3626487325400856E-2" align="right">3.4%</td> <td class="xl26" x:num="312.35137397202743" align="right">312.35</td> <td class="xl27" x:num="8.325632114903736E-2" align="right">8.33%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38808" height="18">4/1/2006</td> <td class="xl26" x:num="" align="right">201.50</td> <td class="xl25" x:num="3.5457348406988665E-2" align="right">3.5%</td> <td class="xl26" x:num="315.69719659276808" align="right">315.70</td> <td class="xl27" x:num="7.4561396687886194E-2" align="right">7.46%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38838" height="18">5/1/2006</td> <td class="xl26" x:num="" align="right">202.50</td> <td class="xl25" x:num="4.1666666666666741E-2" align="right">4.2%</td> <td class="xl26" x:num="319.69367370274034" align="right">319.69</td> <td class="xl27" x:num="8.4496354198891233E-2" align="right">8.45%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38869" height="18">6/1/2006</td> <td class="xl26" x:num="" align="right">202.90</td> <td class="xl25" x:num="4.3187660668380534E-2" align="right">4.3%</td> <td class="xl26" x:num="322.60253049186639" align="right">322.60</td> <td class="xl27" x:num="9.1797118955555979E-2" align="right">9.18%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38899" height="18">7/1/2006</td> <td class="xl26" x:num="" align="right">203.50</td> <td class="xl25" x:num="4.1453428863869046E-2" align="right">4.1%</td> <td class="xl26" x:num="325.05090458138199" align="right">325.05</td> <td class="xl27" x:num="8.9843618385104351E-2" align="right">8.98%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl23" style="height: 13.2pt;" x:num="38930" height="18">8/1/2006</td> <td class="xl26" x:num="" align="right">203.90</td> <td class="xl25" x:num="3.8187372708757605E-2" align="right">3.8%</td> <td class="xl26" x:num="327.56131244609281" align="right">327.56</td> <td class="xl27" x:num="9.4558439535100014E-2" align="right">9.46%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38961" height="18">9/1/2006</td> <td class="xl26" x:num="" align="right">202.90</td> <td class="xl25" x:num="2.0623742454728422E-2" align="right">2.1%</td> <td class="xl26" x:num="328.60321835490669" align="right">328.60</td> <td class="xl27" x:num="8.8766587952016085E-2" align="right">8.88%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="38991" height="18">10/1/2006</td> <td class="xl26" x:num="" align="right">201.80</td> <td class="xl25" x:num="1.3052208835341528E-2" align="right">1.3%</td> <td class="xl26" x:num="330.31318576838623" align="right">330.31</td> <td class="xl27" x:num="7.6665798045391753E-2" align="right">7.67%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39022" height="18">11/1/2006</td> <td class="xl26" x:num="" align="right">201.50</td> <td class="xl25" x:num="1.9736842105263275E-2" align="right">2.0%</td> <td class="xl26" x:num="330.23197622405092" align="right">330.23</td> <td class="xl27" x:num="7.0618444113061729E-2" align="right">7.06%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39052" height="18">12/1/2006</td> <td class="xl26" x:num="" align="right">201.80</td> <td class="xl25" x:num="2.5406504065040636E-2" align="right">2.5%</td> <td class="xl26" x:num="332.38142546903106" align="right">332.38</td> <td class="xl27" x:num="8.2650503314763979E-2" align="right">8.27%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39083" height="18">1/1/2007</td> <td class="xl26" x:num="202.416" align="right">202.42</td> <td class="xl25" x:num="2.0756429652042385E-2" align="right">2.1%</td> <td class="xl26" x:num="334.17087341322315" align="right">334.17</td> <td class="xl27" x:num="8.8300696400970935E-2" align="right">8.83%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39114" height="18">2/1/2007</td> <td class="xl26" x:num="203.499" align="right">203.50</td> <td class="xl25" x:num="2.4151987921489759E-2" align="right">2.4%</td> <td class="xl26" x:num="336.99551268609463" align="right">337.00</td> <td class="xl27" x:num="8.5128901527190992E-2" align="right">8.51%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39142" height="18">3/1/2007</td> <td class="xl26" x:num="205.352" align="right">205.35</td> <td class="xl25" x:num="2.7787787787787677E-2" align="right">2.8%</td> <td class="xl26" x:num="340.6834020748575" align="right">340.68</td> <td class="xl27" x:num="9.0705629824978207E-2" align="right">9.07%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39173" height="18">4/1/2007</td> <td class="xl26" x:num="206.68600000000001" align="right">206.69</td> <td class="xl25" x:num="2.5736972704714756E-2" align="right">2.6%</td> <td class="xl26" x:num="346.17795140746506" align="right">346.18</td> <td class="xl27" x:num="9.6550603374585764E-2" align="right">9.66%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39203" height="18">5/1/2007</td> <td class="xl26" x:num="207.94900000000001" align="right">207.95</td> <td class="xl25" x:num="2.6908641975308623E-2" align="right">2.7%</td> <td class="xl26" x:num="350.38079249067869" align="right">350.38</td> <td class="xl27" x:num="9.5989133699505347E-2" align="right">9.60%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39234" height="18">6/1/2007</td> <td class="xl26" x:num="208.352" align="right">208.35</td> <td class="xl25" x:num="2.6870379497289321E-2" align="right">2.7%</td> <td class="xl26" x:num="355.74221923619734" align="right">355.74</td> <td class="xl27" x:num="0.10272606570631493" align="right">10.27%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39264" height="18">7/1/2007</td> <td class="xl26" x:num="208.29900000000001" align="right">208.30</td> <td class="xl25" x:num="2.3582309582309557E-2" align="right">2.4%</td> <td class="xl26" x:num="357.78507083079757" align="right">357.79</td> <td class="xl27" x:num="0.1007047382057662" align="right">10.07%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39295" height="18">8/1/2007</td> <td class="xl26" x:num="207.917" align="right">207.92</td> <td class="xl25" x:num="1.9700833742030355E-2" align="right">2.0%</td> <td class="xl26" x:num="359.74811850527743" align="right">359.75</td> <td class="xl27" x:num="9.8261927877949962E-2" align="right">9.83%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39326" height="18">9/1/2007</td> <td class="xl26" x:num="" align="right">208.49</td> <td class="xl25" x:num="2.755051749630355E-2" align="right">2.8%</td> <td class="xl26" x:num="361.66780684792263" align="right">361.67</td> <td class="xl27" x:num="0.10062162098882621" align="right">10.06%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39356" height="18">10/1/2007</td> <td class="xl26" x:num="208.93600000000001" align="right">208.94</td> <td class="xl25" x:num="3.5361744301288356E-2" align="right">3.5%</td> <td class="xl26" x:num="364.68214300552154" align="right">364.68</td> <td class="xl27" x:num="0.10404960721499812" align="right">10.40%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39387" height="18">11/1/2007</td> <td class="xl26" x:num="210.17699999999999" align="right">210.18</td> <td class="xl25" x:num="4.3062034739454136E-2" align="right">4.3%</td> <td class="xl26" x:num="367.49544572214847" align="right">367.50</td> <td class="xl27" x:num="0.11284028253162126" align="right">11.28%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39417" height="18">12/1/2007</td> <td class="xl26" x:num="210.036" align="right">210.04</td> <td class="xl25" x:num="4.0812685827551931E-2" align="right">4.1%</td> <td class="xl26" x:num="372.2508041578098" align="right">372.25</td> <td class="xl27" x:num="0.11995068205907766" align="right">12.00%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39448" height="18">1/1/2008</td> <td class="xl26" x:num="" align="right">211.08</td> <td class="xl25" x:num="4.2802940479013563E-2" align="right">4.3%</td> <td class="xl26" x:num="374.07063003042498" align="right">374.07</td> <td class="xl27" x:num="0.11939926484216135" align="right">11.94%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39479" height="18">2/1/2008</td> <td class="xl26" x:num="211.69300000000001" align="right">211.69</td> <td class="xl25" x:num="4.0265554130487269E-2" align="right">4.0%</td> <td class="xl26" x:num="379.64539850747747" align="right">379.65</td> <td class="xl27" x:num="0.12655920988808678" align="right">12.66%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39508" height="18">3/1/2008</td> <td class="xl26" x:num="213.52799999999999" align="right">213.53</td> <td class="xl25" x:num="3.981456231251701E-2" align="right">4.0%</td> <td class="xl26" x:num="381.7574814191118" align="right">381.76</td> <td class="xl27" x:num="0.12056378178127147" align="right">12.06%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39539" height="18">4/1/2008</td> <td class="xl26" x:num="214.82300000000001" align="right">214.82</td> <td class="xl25" x:num="3.9368897748275122E-2" align="right">3.9%</td> <td class="xl26" x:num="387.2088794651126" align="right">387.21</td> <td class="xl27" x:num="0.11852553835629043" align="right">11.85%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39569" height="18">5/1/2008</td> <td class="xl26" x:num="216.63200000000001" align="right">216.63</td> <td class="xl25" x:num="4.17554304180352E-2" align="right">4.2%</td> <td class="xl26" x:num="391.7244408762615" align="right">391.72</td> <td class="xl27" x:num="0.11799633219530059" align="right">11.80%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39600" height="18">6/1/2008</td> <td class="xl26" x:num="218.815" align="right">218.82</td> <td class="xl25" x:num="5.0217900476117405E-2" align="right">5.0%</td> <td class="xl26" x:num="397.77205766344048" align="right">397.77</td> <td class="xl27" x:num="0.11814689444925608" align="right">11.81%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39630" height="18">7/1/2008</td> <td class="xl26" x:num="219.964" align="right">219.96</td> <td class="xl25" x:num="5.6001229002539565E-2" align="right">5.6%</td> <td class="xl26" x:num="404.01563216230869" align="right">404.02</td> <td class="xl27" x:num="0.12921322073098551" align="right">12.92%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39661" height="18">8/1/2008</td> <td class="xl26" x:num="219.08600000000001" align="right">219.09</td> <td class="xl25" x:num="5.3718551152623473E-2" align="right">5.4%</td> <td class="xl26" x:num="407.40360197503918" align="right">407.40</td> <td class="xl27" x:num="0.13246902768460944" align="right">13.25%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39692" height="18">9/1/2008</td> <td class="xl26" x:num="218.78299999999999" align="right">218.78</td> <td class="xl25" x:num="4.9369274305721911E-2" align="right">4.9%</td> <td class="xl26" x:num="409.7431193360303" align="right">409.74</td> <td class="xl27" x:num="0.13292671224210673" align="right">13.29%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39722" height="18">10/1/2008</td> <td class="xl26" x:num="216.57300000000001" align="right">216.57</td> <td class="xl25" x:num="3.655186277137501E-2" align="right">3.7%</td> <td class="xl26" x:num="411.52613488070176" align="right">411.53</td> <td class="xl27" x:num="0.12845156466701746" align="right">12.85%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39753" height="18">11/1/2008</td> <td class="xl26" x:num="212.42500000000001" align="right">212.43</td> <td class="xl25" x:num="1.0695746918073956E-2" align="right">1.1%</td> <td class="xl26" x:num="410.29541778423862" align="right">410.30</td> <td class="xl27" x:num="0.11646395230282613" align="right">11.65%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39783" height="18">12/1/2008</td> <td class="xl26" x:num="210.22800000000001" align="right">210.23</td> <td class="xl25" x:num="9.1412900645604367E-4" align="right">0.1%</td> <td class="xl26" x:num="404.74806963309805" align="right">404.75</td> <td class="xl27" x:num="8.7299382868523123E-2" align="right">8.73%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39814" height="18">1/1/2009</td> <td class="xl26" x:num="211.143" align="right">211.14</td> <td class="xl25" x:num="2.984650369528552E-4" align="right">0.0%</td> <td class="xl26" x:num="405.14113354716943" align="right">405.14</td> <td class="xl27" x:num="8.3060526602201756E-2" align="right">8.31%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39845" height="18">2/1/2009</td> <td class="xl26" x:num="212.19300000000001" align="right">212.19</td> <td class="xl25" x:num="2.361910880378737E-3" align="right">0.2%</td> <td class="xl26" x:num="407.42411635224545" align="right">407.42</td> <td class="xl27" x:num="7.3170168673125202E-2" align="right">7.32%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39873" height="18">3/1/2009</td> <td class="xl26" x:num="212.709" align="right">212.71</td> <td class="xl25" x:num="-3.8355625491738321E-3" align="right">-0.4%</td> <td class="xl26" x:num="411.69871167751296" align="right">411.70</td> <td class="xl27" x:num="7.8429976400463008E-2" align="right">7.84%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39904" height="18">4/1/2009</td> <td class="xl26" x:num="" align="right">213.24</td> <td class="xl25" x:num="-7.3688571521671742E-3" align="right">-0.7%</td> <td class="xl26" x:num="414.96620736795717" align="right">414.97</td> <td class="xl27" x:num="7.1685669866838664E-2" align="right">7.17%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39934" height="18">5/1/2009</td> <td class="xl26" x:num="213.85599999999999" align="right">213.86</td> <td class="xl25" x:num="-1.2814357989586078E-2" align="right">-1.3%</td> <td class="xl26" x:num="420.06966301711839" align="right">420.07</td> <td class="xl27" x:num="7.2360106194677254E-2" align="right">7.24%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39965" height="18">6/1/2009</td> <td class="xl26" x:num="215.69300000000001" align="right">215.69</td> <td class="xl25" x:num="-1.4267760436898702E-2" align="right">-1.4%</td> <td class="xl26" x:num="422.37648239775723" align="right">422.38</td> <td class="xl27" x:num="6.1855588546983364E-2" align="right">6.19%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="39995" height="18">7/1/2009</td> <td class="xl26" x:num="215.351" align="right">215.35</td> <td class="xl25" x:num="-2.097161353676058E-2" align="right">-2.1%</td> <td class="xl26" x:num="428.34406233929383" align="right">428.34</td> <td class="xl27" x:num="6.0216556589106185E-2" align="right">6.02%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40026" height="18">8/1/2009</td> <td class="xl26" x:num="215.834" align="right">215.83</td> <td class="xl25" x:num="-1.4843486119606064E-2" align="right">-1.5%</td> <td class="xl26" x:num="430.60255882564593" align="right">430.60</td> <td class="xl27" x:num="5.6943425974000261E-2" align="right">5.69%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40057" height="18">9/1/2009</td> <td class="xl26" x:num="215.96899999999999" align="right">215.97</td> <td class="xl25" x:num="-1.2862059666427395E-2" align="right">-1.3%</td> <td class="xl26" x:num="433.93830032305146" align="right">433.94</td> <td class="xl27" x:num="5.904963340501812E-2" align="right">5.90%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40087" height="18">10/1/2009</td> <td class="xl26" x:num="216.17699999999999" align="right">216.18</td> <td class="xl25" x:num="-1.8284827748612509E-3" align="right">-0.2%</td> <td class="xl26" x:num="436.59419008734312" align="right">436.59</td> <td class="xl27" x:num="6.0914855903157594E-2" align="right">6.09%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40118" height="18">11/1/2009</td> <td class="xl26" x:num="" align="right">216.33</td> <td class="xl25" x:num="1.8382958691302909E-2" align="right">1.8%</td> <td class="xl26" x:num="440.01657234202986" align="right">440.02</td> <td class="xl27" x:num="7.2438426727496674E-2" align="right">7.24%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40148" height="18">12/1/2009</td> <td class="xl26" x:num="215.94900000000001" align="right">215.95</td> <td class="xl25" x:num="2.7213311262058282E-2" align="right">2.7%</td> <td class="xl26" x:num="442.74606389638052" align="right">442.75</td> <td class="xl28" x:num="9.3880606515869047E-2" align="right">9.39%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40179" height="18">1/1/2010</td> <td class="xl26" x:num="216.68700000000001" align="right">216.69</td> <td class="xl25" x:num="2.6257086429576137E-2" align="right">2.6%</td> <td class="xl26" x:num="446.44319330935258" align="right">446.44</td> <td class="xl28" x:num="0.10194486894126853" align="right">10.19%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40210" height="18">2/1/2010</td> <td class="xl26" x:num="216.74100000000001" align="right">216.74</td> <td class="xl25" x:num="2.1433317781453631E-2" align="right">2.1%</td> <td class="xl26" x:num="448.83066196787291" align="right">448.83</td> <td class="xl28" x:num="0.10163008018854902" align="right">10.16%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40238" height="18">3/1/2010</td> <td class="xl26" x:num="217.631" align="right">217.63</td> <td class="xl25" x:num="2.3139594469439473E-2" align="right">2.3%</td> <td class="xl26" x:num="451.34334829384801" align="right">451.34</td> <td class="xl28" x:num="9.6295265182634315E-2" align="right">9.63%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40269" height="18">4/1/2010</td> <td class="xl26" x:num="218.00899999999999" align="right">218.01</td> <td class="xl25" x:num="2.2364471956480836E-2" align="right">2.2%</td> <td class="xl26" x:num="455.62027676705793" align="right">455.62</td> <td class="xl28" x:num="9.7969590480537994E-2" align="right">9.80%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40299" height="18">5/1/2010</td> <td class="xl26" x:num="218.178" align="right">218.18</td> <td class="xl25" x:num="2.0209860840939786E-2" align="right">2.0%</td> <td class="xl26" x:num="459.4646453217988" align="right">459.46</td> <td class="xl28" x:num="9.3782021824020623E-2" align="right">9.38%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl22" style="height: 13.2pt;" x:num="40330" height="18">6/1/2010</td> <td class="xl26" x:num="217.965" align="right">217.97</td> <td class="xl25" x:num="1.053348972845658E-2" align="right">1.1%</td> <td class="xl26" x:num="462.27983002882399" align="right">462.28</td> <td class="xl28" x:num="9.4473412450765348E-2" align="right">9.45%</td> </tr> </tbody></table>









Lastly as far as economics being hard - that's true, if and only if one believes the stats coming out of most governments or vested interest enabled businesses like multi-national banks. Its also hard if one doesn't put in at least as much time in real and honest study/research - as any other job/career in which one is a significant success.




















edit/add - just to make a point about both PPI and other "special" moments, the PPI commodity index does not track the CRB/CCI commodity index terribly well (it understates, much like the CPI-U) and was also changed in 2005 after GS changed its GSCI. General commodity prices are significantly higher than what it appears from the current CRB index.

http://www.nowandfutures.com/images/cci_crb_ratio.png

rdrees
07-21-10, 03:11 PM
Honestly, I think it's astonishing, MarkL, that you reference a graph that shows prices lower than they were two years ago and lower than they were three months ago and call me a fool for calling it deflation.

Take a look at Metalman's second graph, the one from the depression. I look at that and see deflation. You, apparently, would look at that and say that because U.S. Wholesale prices trended higher from the beginning of the graph to the end--that the line goes up across the whole graph for U.S. Wholesale prices--it's just disinflation. Ohhhh kayyy.

And let me repeat--it was EJ HIMSELF who called it "brief deflation" in THIS VERY ARTICLE. MarkL, you're so evangelical about defending the man that you're actually arguing that he was wrong in this very post!

But as I said before, one thing you can't dispute is the data, and WHO CARES what you call it. It's obviously not "significant inflation." That's the point because that was the call. I'm not necessarily saying that I don't think Ka-Poom is an accurate model. Maybe it is. But I sure think it needs some tweaking given the past two years of data. We can't deny that Poom isn't here yet. But we can ask ourselves why, we can question the theory, and hopefully we can improve it.

And I hate to repeat myself, but I just don't find interviews and anecdotal evidence at all convincing. I've got a ton of anecdotal evidence of deflation, to be honest. I like to play video games and there are so many deals on them these days I pay significantly less for them than I did two years ago. I've been shopping at the same grocery store for two years. Produce is cheaper now than it was two years ago. Blah blah blah you don't care because you'll have your own anecdotal evidence and we'll never ever convince each other of anything telling stories. Only the data is something we can agree on, even if we can't even agree on how we want to label the data.

Anyway, call me a heretic, but this data makes me question Ka-Poom. Makes me seriously wonder whether Japan in the 90s isn't the better analogue after all.

Let me offer one more heresy. There's one aspect of EJ's model that I just have never found convincing. In the posted interview, he talks about "All the manufacturers, wholesalers, and retailers that survived the consolidations and bankruptcies of 2008 and 2009 would see their pricing power quickly rapidly return and we’d start to experience consumer price inflation as in the 1970s but mostly in the form of reduced quality and quantity of goods per dollar, rather than higher nominal prices." This is a strange statement because it flies in the face of basic economic theory as I understand it, which says that when demand falls, so do prices. Remember the old supply and demand curves? I don't think economic theory says that less competition equals pricing power. To my recollection, pricing power can only be wielded by monopolies under traditional economics. When demand falls, so do prices, no matter how many suppliers there are, unless there's only a single supplier who doesn't have to compete anymore. The suppliers who went out of business were the ones that couldn't make the new, lower prices. I'm not evangelical for economics, but I thought that was pretty basic stuff that I learned in college that's not generally in question. Does EJ mean to challenge the basic supply and demand curves we learned, or am I misremembering them?

Anyway, I continue to hope that we can acknowledge that there are at least some tough questions we should ask of Ka-Poom even if we're committed to it as a general model.

MarkL
07-21-10, 06:09 PM
Honestly, I think it's astonishing, MarkL, that you reference a graph that shows prices lower than they were two years ago and lower than they were three months ago and call me a fool for calling it deflation.

Take a look at Metalman's second graph, the one from the depression. I look at that and see deflation. You, apparently, would look at that and say that because U.S. Wholesale prices trended higher from the beginning of the graph to the end--that the line goes up across the whole graph for U.S. Wholesale prices--it's just disinflation. Ohhhh kayyy.

And let me repeat--it was EJ HIMSELF who called it "brief deflation" in THIS VERY ARTICLE. MarkL, you're so evangelical about defending the man that you're actually arguing that he was wrong in this very post!

I'm getting tired of making the same points. Move your timeline back a quarter or forward a quarter and because you move off of the summer oil spike of 08 your argument vanishes. YES over the exact period you show deflation occurred. I have agreed with that literal statement twice now. However, during most other periods deflation did not occur as the graph clearly shows. There hasn't been an overall deflationary trend.


And let me repeat--it was EJ HIMSELF who called it "brief deflation" in THIS VERY ARTICLE. MarkL, you're so evangelical about defending the man that you're actually arguing that he was wrong in this very post!

I believe EJ has already made the point that brief deflation IS disinflation. Deflation when it does not result in a "persistent general decline in prices" is Disinflation. I am also, am not arguing against "brief deflation." It happened for a month. I happened for 3 months. It happened if you pick the spike over ONE single longer period. For NUMEROUS other quarters it did not. For MANY other 2 year start and end periods it did not. Overall, Disinflation.


But as I said before, one thing you can't dispute is the data, and WHO CARES what you call it. It's obviously not "significant inflation." That's the point because that was the call. I'm not necessarily saying that I don't think Ka-Poom is an accurate model. Maybe it is. But I sure think it needs some tweaking given the past two years of data. We can't deny that Poom isn't here yet. But we can ask ourselves why, we can question the theory, and hopefully we can improve it.

You're attempting to change the subject here to one I've agreed with repeatedly. I still agree with this paragraph! Need me to say it back to you? "It's not significant inflation." But it's not an overall deflationary trend either. It's disinflation. Give me more quarters of deflation than inflation, or sum the quarters up over a fair variety of time periods and average 'em... and THEN you can show me a trend if and when it occurs. It might happen! A year from now you could be right! But you're certainly not now.


Let me offer one more heresy. There's one aspect of EJ's model that I just have never found convincing. In the posted interview, he talks about "All the manufacturers, wholesalers, and retailers that survived the consolidations and bankruptcies of 2008 and 2009 would see their pricing power quickly rapidly return and we’d start to experience consumer price inflation as in the 1970s but mostly in the form of reduced quality and quantity of goods per dollar, rather than higher nominal prices." This is a strange statement because it flies in the face of basic economic theory as I understand it, which says that when demand falls, so do prices. Remember the old supply and demand curves?

I think he's saying that with the "bankruptcies of 2008 and 2009", supply would have fallen as well, maybe even more. It's not called "The Demand Curve." It's called "The Supply and Demand Curve."


I don't think economic theory says that less competition equals pricing power. To my recollection, pricing power can only be wielded by monopolies under traditional economics. When demand falls, so do prices, no matter how many suppliers there are...

I'm not sure I can quote "economic theory" or even that there is a single such thing. However, I do know from my personal experience that in my industry more suppliers means more pricing pressure. Fewer suppliers means less pricing pressure. Back when there were 30-40 players in the CRM software space, pricing was MUCH more aggressive than when the market coalesced down to 5 or so. In the Marketing Automation software market today there are about 5-8 players, but very little pricing pressure because most consumers don't bumble across most of the players. As more and more players are entering this space over the last year, pricing pressure is gradually increasing.

Of course this varies greatly across industries. But usually as more suppliers enter a market, each finds unique niches and ways to differentiate themselves. Some through geography, others through service, some through selection, and eventually some through shaving the margins razor thin and cutting both service and selection (think Costco vs Safeway).

Thus... a reduction in suppliers increases the power of the remaining ones to raise prices... or otherwise improve the value relationship to increase their profits. I do believe the internet reduces this effect on items that are not geographically dependent. But even on the internet the relationship exists. Amazon could certainly raise prices if a couple of it's main competitors went out of business... without requiring that ALL of them go under. And even Ebay, which one could argue is almost a monopoly has had to keep it's prices reasonably low because of the threat of smaller companies. With that said...they certainly have MORE pricing power because they are closer to a monopoly.

Bottom line, it's not shelf where only a monopoly can increase prices. It's a gradient scale, albeit certainly not a linear one.

Brooks Gracie
07-21-10, 06:35 PM
SOMEONE HELP ME WITH SOME DATA:

Slightly off topic, but I cannot get answers anywhere else, so I am appealing to fellow itulip members for some data:

Here is my semi-simple question: Much of the Great Depression (the first one, not this one), was blamed on a trade war generated by Smoot-Hawley tarriffs. But we were a net creditor then, from both a treasury/fiscal and trade surplus perspective. Is there any data on the effects of the First Great Depression for a treasury/fiscal and trade deficit country? Did they suffer? Did they just get by? Did they profit afterward? I don't know why I cannot find this, despite numerous google searches. Has any economist written a dissertation on this?

My thinking is that we should withhold payroll taxes on outsourced labor (we do it to our own people), and invoke a surcharge on offshore investment. China does this by regulating capital flows and making their currency non-convertible. I think having the dollar as the de facto reserve currency has hurt American workers, while benefitting the FIRE economy.

I am getting to the point where I WANT a trade war. I don't see the downside--we basically export food, which everyone needs, or technology/entertainment which everyone wants or needs. We don't export kid's toys or other discretionary items. Bring on the tarriffs, we can only win from that deal.

Can someone give me evidence otherwise?

MarkL
07-21-10, 07:43 PM
Go to this page and run the chart. You can get a broader view of exports by industry. Ag is number 5 on the USA export list. Entertainment is quite a ways down.
http://tse.export.gov/TSE/TSEOptions.aspx?ReportID=2&Referrer=TSEReports.aspx&DataSource=NTD

Your implication that they need us more than we need them may be true, nevertheless the economies of all countries involved in a trade war typically suffer during the event. Tariffs are effectively taxes. And taxes in whatever form they take on, diminish commerce.

It's kind of like a real war. We might be able to win a real war. But this doesn't mean that "bring it on" is the best thing to do. At the end a war a country usually has terrific economic costs, regardless of final victory... not to mention human costs.

In addition, the fact that the USA imports more than it exports is an argument for the USA being hurt more by a trade war than an opponent. But win or lose... it's best to keep war as a last resort.

While some of our trading partners take advantage of us through currency manipulation, on the whole having the dollar as the world currency has given the USA the ability to run up ridiculous debts and this ability to generate capital has given us a huge advantage in the global markets. The time is coming to pay the piper. But as far as fair trade goes... we've gotten and are still getting the best end of the deal. Most of the world's currency manipulations have a trivial impact on us compared to what we do on a global scale.

As one small example, who do you think owns the debt that Greece, Portugal, Italy and Spain are having so much trouble with? The answer is lots of folks of course... but Goldman Sachs and other US companies and individuals have more than many.

rdrees
07-21-10, 07:53 PM
Yes, I recall you pointing out Shadowstats to me last year. I'm more than happy to explain to you why I reject those numbers.

First, as a personal background matter, I'm not much of a conspiracy theorist. I'm much more into Occam's razor and the belief that most people are too lazy/busy to come up with master plans, implement them, and successfully deceive the public about it. Maybe I'm naive, but that's me. I checked the BLS retort to many of the charges against the CPI I've seen here (http://www.bls.gov/cpi/cpiqa.htm) and frankly, these explanations seem reasonable to me.

Second, I've always thought it was way ironic that EJ and everyone else on this site has no trouble relying on all kinds of government produced data about the economy to make predictions, explain points, rebut contrarian posters such as myself, etc. etc. etc. I can't think of a webite with more graphs and Fed data and all kinds of government statistics. But no one complains that those are doctored. Just the inflation stats. Which seems kind of convenient if they don't support the generally high on inflation views of this website. I'm confortable using all the government stats to analyze these issues, not just all-the-government-stats-but-the-inflation-ones. Are there likely to be some intentional "massaging" of various numbers? It wouldn't surprise me. But it's probably systemic in my view, and hey--it's what we've got straight from the source. As much as the shadowstat man may know and have studied, he's one step removed from the source of the data since he doesn't work for the government, and thus in my opinion that's a signficant handicap right there. Plus, if the government has an agenda, surely shadowstats does, too. Everyone has an agenda, all data is subject to abuse and massage. Me? I'm sticking with the official numbers because they're widely used, they're readily accessible, and hey--they're official. I do recognize that CPI is much more widely used in economic things that matter, like wage increases etc., and thus more likely to be used for political purposes as EJ has pointed out in the past. Respecting those concerns, I've generally been looking at PPI.

Third, those shadowstat numbers just do not comport with my personal experience at all. 10% inflation this year? That's surely significant inflation. The kind you would see all around you in major and obvious ways. But I just haven't see anything even close to that in my daily life--those numbers fail the gut check test pretty badly. I know I've railed against using anecdotal evidence as an argument, but if I'm going to ignore official statistics in favor of some other person's "shadow" method of caluclation, the numbers have to at least have some consistency with the world I see around me. And these just don't. I go to Costco every couple weeks and buy pretty much the same kind of stuff. Been doing it for years. And I haven't seen anything even approaching 10% across the board price increases this year. Not even close. And if I understand those numbers correctly, they're telling us that we had somewhere north of a 10% increase in prices in 2008, another 5% plus in 2009, and now another 10% increase this year? These shadowstats are telling us that we've experienced more than 25% increase in prices between 2007 and now? All in the midst of this Great Recession? I'm sorry, but I call BS on that. Maybe the BLS numbers underestimate inflation, but my personal experience tells me these shadowstats strongly overstate inflation.

Now I will admit that my personal experience is not consistent with meaningful price declines accross the board either. I've seen some price declines. I've seen a lot of constant prices. And I've seen some prices raised. But these personal experiences are generally more consistent for me with the government numbers than with the shadowstat ones. Maybe your personal experience differs.

Anyway, there is my response to your figures. If you do believe that we're already in the midst of "POOM" and that we're experiencing significant inflation now and have been for the past couple years, I guess we'll have to agree to disagree. But I didn't want you to think that I was ignoring you or not taking seriously your offer for me to consider the shadowstats.

jk
07-21-10, 08:01 PM
i suggest you first establish that you are familiar with various specific elements of the modern cpi calculation- incLuding oer, geometric averaging, hedonic adjustments, and substitution - and THEN tell us why you prefer to include these elements in your own thinking about inflation.

and i, at least, and MANY others here have observed that real gdp numbers reflect the deflator calculations made by the gov't and therefore may require further adjustment. further, you may have come across the real dow chart on occasion, and discussions of the validity of various adjustments made to calculate it, perhaps the most interesting being that if you deflate the dow by shadowstats' numbers instead of the bls', the dow is currently undervalued by that chart's methodology. there's a paradox for those of who don't like the bls calculation, but don't like equities either.

LargoWinch
07-21-10, 10:22 PM
What aspects od Austrian economics are you referring to that are impossibly flawed?

MTH, I for myself is very attracted to Austrian economics. So simple. So elegant. So right.

...but, I would say that this year's biggest revelation for me, was the comments by EJ pointing out to the Austrian E. flaws of "gold standard / Austerity on gov't" at this precise moment of the cycle.

More precisely, EJ - I think - argues that austerity imposed by Austrian E. in 2010 does not take into account the current mess we are in. Austerity and small gov't is good, but you see the patient is dying.

So, if we impose "austerity" there is a very high risk of economic contraction leading to an inability to service the massive gov't debt; that is bad. This leads to ruin.

...

The collapse and previous mistakes are unfortunate, but must be acknowledged and managed accordingly is what I believe EJ is saying.

bart
07-21-10, 10:32 PM
Yes, I recall you pointing out Shadowstats to me last year. I'm more than happy to explain to you why I reject those numbers.

First, as a personal background matter, I'm not much of a conspiracy theorist. I'm much more into Occam's razor and the belief that most people are too lazy/busy to come up with master plans, implement them, and successfully deceive the public about it. Maybe I'm naive, but that's me. I checked the BLS retort to many of the charges against the CPI I've seen here (http://www.bls.gov/cpi/cpiqa.htm) and frankly, these explanations seem reasonable to me.



You are of course welcome to use or not use anything you like, but to characterize John Williams work as "conspiracy" when his CPI-U work is completely fact based is, to say the least, a bit odd. Even bringing up the emotionally laden area of conspiracy when Williams work is 100% fact based with links, etc. is disturbing since it moves away from raw facts which you purport to be pursuing.

I also urge you to review this:
A very good short essay on "Unconscious Conspiracies". (http://viridia.org/2007/08/16/unconscious-conspiracies/)
"Conspiracies" frequently have nothing to do with tinfoil hats or smoke filled rooms.

Your experiences with various costs and prices are also almost exactly opposite to mine. Good or top quality food, medical, health insurance, auto insurance etc. are all up very substantially over last year for the exact same items (not "buy pretty much the same kind of stuff" per your statement).
A bit tongue in cheek perhaps, but factually even the U.S. Big Mac has gone up substantially in the last few years - last year it was up too.


Additionally, given the plethora of lies and mis-statements etc. by our and other governments over the decades (like the Pueblo incident or the bogus differences between CPI and the GDP deflator, and many others examples I could cite), I'm disappointed to see that you'd prefer to believe the BLS, in spite of all the contrary facts in Williams and others various articles and studies.

The BLS retort doesn't even cover the gigantic difference between the health/medical portion of CPI (about 6%) and the GDP portion (16-18%), plus their attempted reconstruction of CPI on an attempted apples to apples basis showed that inflation in 1980 peaked at 10%. I was there and that number is just plain outrageously wrong.
In my view, the BLS simply glossed over most of the real facts and issues and blew smoke.

Additionally, you imply by your partial agreement with the BLS that things like the OER (severely understates or overstates housing costs, depending on economic conditions), Boskin adjustments to help "save" on Social Security payments, geometrical weighting prices (if beef prices go up and chicken doesn't, they bias the result strongly towards chicken), hedonics, etc. etc. are at least somewhat correct and moral and ethical. I don't, and in no uncertain terms.

I won't quibble on shadowstats numbers either - the recent average 9% numbers could be 6% or 7% and it wouldn't change the basic point.



Second, I've always thought it was way ironic that EJ and everyone else on this site has no trouble relying on all kinds of government produced data about the economy to make predictions, explain points, rebut contrarian posters such as myself, etc. etc. etc. I can't think of a webite with more graphs and Fed data and all kinds of government statistics. But no one complains that those are doctored. Just the inflation stats. Which seems kind of convenient if they don't support the generally high on inflation views of this website. I'm confortable using all the government stats to analyze these issues, not just all-the-government-stats-but-the-inflation-ones. Are there likely to be some intentional "massaging" of various numbers? It wouldn't surprise me. But it's probably systemic in my view, and hey--it's what we've got straight from the source. As much as the shadowstat man may know and have studied, he's one step removed from the source of the data since he doesn't work for the government, and thus in my opinion that's a signficant handicap right there. Plus, if the government has an agenda, surely shadowstats does, too. Everyone has an agenda, all data is subject to abuse and massage. Me? I'm sticking with the official numbers because they're widely used, they're readily accessible, and hey--they're official. I do recognize that CPI is much more widely used in economic things that matter, like wage increases etc., and thus more likely to be used for political purposes as EJ has pointed out in the past. Respecting those concerns, I've generally been looking at PPI.



All I can say is that I believe that you haven't read a lot of posts here. The subject of inaccurate government etc. stats has been covered quite frequently - both by EJ on "Personal Income" stats and by many others... including myself on my own site.

You are also the one that alleges problems with deflation vs. inflation here on iTulip, and I find it odd that you reject much of the primary and factual evidence that inflation is indeed much higher than many/most think, especially those are part of (for lack of a better word/concept) the "ruling class".

You also criticize Williams in very broad terms and allege that he has no access to the raw data, most of which is right there on the BLS and other sites, while citing no actual facts of your own other than the BLS retort and don't even mention Williams' rejoinder.

As far as PPI and its accuracy, I addressed many of the raw facts and even added in some comments about the CRB & CCI, but I find no substantive response to it/them.





Third, those shadowstat numbers just do not comport with my personal experience at all. 10% inflation this year? That's surely significant inflation. The kind you would see all around you in major and obvious ways. But I just haven't see anything even close to that in my daily life--those numbers fail the gut check test pretty badly. I know I've railed against using anecdotal evidence as an argument, but if I'm going to ignore official statistics in favor of some other person's "shadow" method of caluclation, the numbers have to at least have some consistency with the world I see around me. And these just don't. I go to Costco every couple weeks and buy pretty much the same kind of stuff. Been doing it for years. And I haven't seen anything even approaching 10% across the board price increases this year. Not even close. And if I understand those numbers correctly, they're telling us that we had somewhere north of a 10% increase in prices in 2008, another 5% plus in 2009, and now another 10% increase this year? These shadowstats are telling us that we've experienced more than 25% increase in prices between 2007 and now? All in the midst of this Great Recession? I'm sorry, but I call BS on that. Maybe the BLS numbers underestimate inflation, but my personal experience tells me these shadowstats strongly overstate inflation.

Now I will admit that my personal experience is not consistent with meaningful price declines accross the board either. I've seen some price declines. I've seen a lot of constant prices. And I've seen some prices raised. But these personal experiences are generally more consistent for me with the government numbers than with the shadowstat ones. Maybe your personal experience differs.




Covered above




Anyway, there is my response to your figures. If you do believe that we're already in the midst of "POOM" and that we're experiencing significant inflation now and have been for the past couple years, I guess we'll have to agree to disagree. But I didn't want you to think that I was ignoring you or not taking seriously your offer for me to consider the shadowstats.





Overall in the POOM area, I was only addressing your comment above EJ's forecast for inflation in early 2010, and inflation rates as represented by the BLS BS in CPI-U being grossly low.
And yes, I suspect that we will have to agree to disagree on that and other things, much as others are disagreeing with you here - and did a year ago too.

You may wish to observe the CPI w/o lies trend the first 6 months of 2010 - it's down. You may also wish to look at my M3 post a few weeks ago ( M3 shrinking and recessions/depressions (http://www.itulip.com/forums/showthread.php/15843-M3-shrinking-and-recessions-depressions?daysprune=60) ), and also note that there's a possibility that it has bottomed. And then there's velocity which has almost certainly bottomed... and on top of that we have normal lags between money flows changing and it being reflected in inflation/disinflation/deflation. Continuing, there's also a far from non-zero probability of QE2.


In other words and hopefully more clearly, disinflation and stagflation in the near and intermediate term - yes.
True deflation where total money supply drops faster than GDP type measures (deflation being defined as per the dictionary as "less money than goods") and real CPI-U stays below zero for over a quarter in the near and intermediate term - I seriously doubt it.

Expressed in another way and excluding black swans like defaults or China selling huge quantities of Treasuries or similar, I agree with EJ (and vice versa <wink> :wink: )
</wink>

...

BuckarooBanzai
07-21-10, 10:37 PM
Largo, the patient isn't dying, it's dead. Or more precisely, Undead. EJ worries that Austrian Economics will kill the patient; but that's what you do to zombies. You kill them.

LargoWinch
07-21-10, 10:43 PM
Largo, the patient isn't dying, it's dead. Or more precisely, Undead. EJ worries that Austrian Economics will kill the patient; but that's what you do to zombies. You kill them.

BuckarooBanzai, what if we are all ridding on the zombie's back? ;_UN

dummass
07-21-10, 11:00 PM
(deflation being defined as per the dictionary as "less money than goods"

Less money then goods was the last depression, when the US was running a surplus.

This time we are getting less money and less goods. Perhaps, that is why goods are not getting cheaper. Even if they cost the same, they feel more expensive in terms of our purchasing power.

bart
07-21-10, 11:07 PM
Less money then goods was the last depression, when the US was running a surplus.

This time we are getting less money and less goods. Perhaps, that is why goods are not getting cheaper. Even if they cost the same, they feel more expensive in terms of our purchasing power.

The definition is still 100% valid.

Less goods - yes.
Lots less money like the 1930s - the data I use doesn't show it. See The Great Depression tight parallels... busted (v 2.0) (http://www.itulip.com/10575-The-Great-Depression-tight-parallels...-busted-%28v-2.0%29?daysprune=-1)

cjppjc
07-21-10, 11:36 PM
Thanks Bart again for all your great charts.
I too feel the deflation sirens song. It just doesn't feel like inflation. Of course if the media changed the tone of their conversation.
It is a fasinating debate for sure.

dummass
07-21-10, 11:40 PM
Lots less money like the 1930s - the data I use doesn't show it. See The Great Depression tight parallels... busted (v 2.0) (http://www.itulip.com/10575-The-Great-Depression-tight-parallels...-busted-%28v-2.0%29?daysprune=-1)

Oooh...Live charts... I never thought to go back.

bart
07-21-10, 11:50 PM
Thanks Bart again for all your great charts.
I too feel the deflation sirens song. It just doesn't feel like inflation. Of course if the media changed the tone of their conversation.
It is a fascinating debate for sure.

My pleasure on the charts.

I know exactly what you mean about what it feels like, it gets to me too sometimes and I question if I'm really tracking correctly, or even if there's some hidden errors or logic faults in my various spreadsheets from hell.

But all I can do is call it like I see it, keep collecting data & facts, and try to stay on top of the various behind the scenes stuff as best I can - especially confidence issues (or should I say CONfidence? :().

Time will tell...

bart
07-21-10, 11:53 PM
Oooh...Live charts... I never thought to go back.

The text sure is out of date, but its also handy as a comparison to where we are now vs. mid 2009.

c1ue
07-22-10, 12:26 AM
C1ue,

You have missed the point, but at least one other has not and I will start by pointing everyone to a recent New York Times Op-Ed from Thomas Friedman:

A Gift for Grads: Start-Ups By THOMAS L. FRIEDMAN (http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/thomaslfriedman/index.html?inline=nyt-per) Published: June 8, 2010

<NYT_TEXT><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>"If you have a son or daughter graduating from college this year, you’ve probably gotten the word. When meeting this year’s college grads it’s best not to ask: “Hey, what are you doing next year?” Too many recent graduates don’t have an answer. They can’t find jobs even remotely related to their fields. This year’s graduation theme is: “Don’t ask. Can’t say.”

We owe our young people something better — and the solution is not that complicated, although it is amazing how little it is discussed in the Washington policy debates. We need three things: start-ups, start-ups and more start-ups. ........."

http://www.nytimes.com/2010/06/09/op...homaslfriedman (http://www.nytimes.com/2010/06/09/opinion/09friedman.html?_r=1&ref=thomaslfriedman)

Mr. Coles,

I submit that anytime you source Thomas Friedman as a counterpoint, that you tread where angels fear to.

The startup crap Mr. Friedman espouses is standard neoliberal propaganda which others including Mr. Andy Grove of Intel have resoundingly disproven.

Again, it is not that I feel your drive to free up capital from the bankster's grasp is misguided - it is that the fundamental problem isn't the allocation of capital as much as it is the misallocation of debt. And FIRE.

rdrees
07-22-10, 01:52 PM
It is clear that you have done a lot of thinking and research into this; most certainly more than me. I didn't mean to suggest that I had any more knowledge or training on the subject. My three reasons are mostly based on personality and gut.

On the conspiracy theory thing, I wasn't really referring to tinfoil hats either. What I meant was that I have trouble believing that the government has entered into an orchestrated campaign to massively lie to us about inflation. Do they massage and tweak on the margins? As I said, that wouldn't surprise me. But if the shadowstat numbers are to be believed, then the government numbers are indeed massive lies. Call me naive, but I don't buy that.

You talk about the health/medical stuff. Why would the increase in the GDP be reflected in a one-one ratio with inflation? I don't see why it would. If people are consuming more medical services that would bump up GDP more than price, it would seem to me. So I'm not sure if I believe that disconnect is evidence of massive tampering.

Let me propose a disconnect with the shadowstats. I think we would both agree that housing prices, at least, have massively deflated since 2007--the national Case Shiller index is down nearly 30% since Q1 2007. And I think we would both agree that housing is the biggest proportion of a person's cost of living. And finally, I think we would both agree that housing is a major component of the CPI. But shadowstats says we have had 25% inflation over that same period? That the cost of everything else has so far outstripped the massive fall in housing costs? That's a major disconnect for me and another reason I just can't accept those numbers.

Now, I will reiterate that I don't necessarily believe that CPI and PPI are "perfect" or 100% accurate. I acknowledged that there are reasons to massage those numbers and I wouldn't be surprised if they were. So choosing to rely on those figures does not mean that I accept them as gospel. But I think they're more useful than the shadowstat numbers for the reasons I stated, including ease of access and the ability to talk to people in a language they understand (most normal folks probably haven't ever heard of shadowstats, but most have heard of CPI).

And I don't know where you live, but it surprises me that anyone has seen 25% inflation since 2007. I know this is a useless endeavor as an argument, but I can convey some facts of my experience: My housing costs are less since 2007 because I refinanced to a lower rate. My health insurance company withdrew from the market so I had to get a new one this year. The new premium was slightly less than the old one. I pay a lot less for gas now than in 2008 at least (can't remember 2007). I buy a soda most days from a local market and the price has barely changed over that time period (it went up about 10 cents in mid 2008, then back down 8 cents last year where it has stayed). They did raise the price at my kid's school for this coming year by 3% over last year, but I'm actually paying less this year because they introduced a plan where you get one free month if you pay the whole year in advance. My car insurance and home insurance have been the exact same for years. My cable bill is less than it was in 2007 because I cancelled for a while and got a great deal when I re-upped. My electricity bill is way down because I bought cheap CFLs at Costco and installed them.

I'm telling you these things not because I think you'll be convinced by it (as I've said before, I don't think anyone is ever convinced to a contrary view by anecdotal evidence), but because I want to give you some perspective as to why I have to call BS on those shadowstat numbers based on my personal experience. I don't know yours and won't question it. But here's some idea of mine, and if you'll assume I'm telling you the truth (which I am), I think you'd have to agree that there's no POOM in my world, or at the very least, the shadowstat numbers are totally inconsistent with it.

And finally, I actually agree with EJ on most things, too. I just have a hard time swallowing the "significant inflation by Q2 2010" prediction, which I don't think was accurate, and the idea that "significant inflation" of the kind seen in the shadowstats is imminent. But I think we agree on more than you think, Bart, because I don't think we'll see major deflation either (in other words, a sustained a major drop in prices). The environment just looks a lot more to me like "more of the same" flat/little bit of inflation for a while.

rdrees
07-22-10, 02:52 PM
Well, I don't really think this deflation/disinflation debate is going anywhere further than you say tomato, I say potato. I don't think anyone can deny that what has happened since 2007 is a major price event, whatever you want to call it, and pretty distinctly unlike any other price decline event since WWII, but if you want to equate it to other "disinflations" you're welcome to do so. To me, that's a bit like a person remarking after half their house burned down that it was "basically just a fireplace fire" because the entire house didn't go up in smoke.

Now on the economic theory thing, you're ignoring one part of the equation and conflating two distinct issues in the other.

First, you're mistakenly equating the supply of a good with the number of suppliers. If you work in software, I can understand why you might be confused on that point because software is a bit like a service in that the supply of software and the number of suppliers can roughly correlate. If five software engineers get laid off and one gets hired, that's an 80% decline in the number of software suppliers and you're likely to get something like an 80% decline in software production as well.

But that's not the case at all for most goods. If Wal-Mart opens a store and five mom and pops go out of business, there's an 80% reduction in the number of suppliers, but a 0% reduction in supply because Wal-Mart's physical plant is plenty big enough to hold all the goods from all five of the little mom and pop stores.

This confusion is messing up your analysis because it's the supply and demand curve, not the suppliers and demand curve. Reducing the number of suppliers does not reduce demand in any way. And here we come to the part you ignored: the demand curve. If demand is steady, a fall in supply (not suppliers) leads to higher prices. But it goes the other way, too. Assuming steady supply, when demand falls prices fall.

I think you'd have to agree with me that demand for many goods has fallen significantly during this Great Recession. Unemployment at close to 10% is a particularly brutal way to decrease demand, but it does the trick. All things being equal, that lowered demand equals lower prices under the supply demand graph.

So you counter by saying that the number of suppliers will go down in the bloody aftermath of the shrinkage of the market. But that's irrelevant to the supply demand curve. There's simply no reason to think that the remaining suppliers wouldn't want to provide as much supply as the new, lowered demand can stomach. In the wake of suppressed demand, the reamining suppliers shouldn't have any pricing power because if they try to inflate the price above the new, lower equilibrium price, their remaining competitors will undercut them or new players will enter the market and undercut them.

The only way that a supplier would have pricing power to raise prices above the new, lower equilibrium price would be if they were the only supplier and there were sufficient barriers to entry that would prevent another competitor coming along to undercut them at the appropriate price. In other words, a monopoly. The only other way would be for suppliers to collude to price fix, which is illegal and not what I think you our EJ are talking about.

Now, there is one sense in which remaining suppliers would have a little room to raise prices in the aftermath of demand destruction. In the cutthroat shakeout as demand collapses, some companies might end up undercutting the new, lower equilibrium price, either intentionally or unintentionally. When the dust settles, they may be able to get the prices a bit higher due to their overshoot. But this will still be a lower price than before the demand collapsed.

So under classical economic theory, Amazon cannot raise their prices if a couple competitors die out because new competitors will come back in.

Now you might shout, "wait a minute! Sometimes a supplier can't cut prices any further or they would go out of business." Except then you would be forgetting that when demand falls, the new, lower price point is at a lower supply point as well. In other words, the supplier doesn't have to produce as much as before to meet the new lowered demand, so they spend less. Not only do they need to purchase less raw material to make their good, but they can lay off people because they need fewer workers since they're making less of the product now. The employment part should sound awfully familiar to what we're seeing around us now.

Now, don't mistake me for a true believer in classical economics in the sense that I think these forces work perfectly every time. It's a human endeavor, after all, and demand can be sticky in some places, geographical and human factors come into play, etc. But the basic concept of "lower demand equals lower price" is pretty widely accepted, I think.

But EJ's statement is contrary to that. He says that even in the face of lower demand, suppliers will be able to RAISE prices. Is he confusing the number of suppliers with the supply of the good like you, MarkL? Or is he rejecting classical economics?

Another thing that confuses me about the statement is that it's somewhat contrary to another pretty widely-held view: that inflation is basically about money. I thought most people understood inflation to be about debauchment of the currency itself--the oversupply of dollars relative to demand that makes its price (value) fall. When the Fed prints too much money, all our dollars are worth less for all things. It seems unusual, then, for EJ to be talking about supply and demand for particular goods playing a part in his prediction for inflation, rather than the supply and demand of money itself.

I mean, I think of inflation as something that's completely across the board. Because the Fed over-printed, my dollar is worth less and can buy less of everything. But if some of the inflation EJ is predicting is because of supply/demand considerations for particular goods, then it won't be an across the board thing. Surely EJ would not suggest that all markets will be subject to upward pricing power by sellers: think housing or coffee shops, for example. Which means EJ's prediction for inflation (at least on this basis) is limited only to certain aspects of and markets within the CPI.

c1ue
07-22-10, 08:31 PM
If Wal-Mart opens a store and five mom and pops go out of business, there's an 80% reduction in the number of suppliers, but a 0% reduction in supply because Wal-Mart's physical plant is plenty big enough to hold all the goods from all five of the little mom and pop stores.

The problem with this simplistic explanation is that the 5 mom and pop stores almost certainly had a much larger number of different suppliers than Wal-Mart.

So while the number of cleansers or knick knacks available at Wal-Mart likely didn't change vs. the 5 mom and pops - if anything they increased since Wal-Mart has far more storage space - ultimately the variety has gone down considerably. Equally so the lack of variety then prejudices Wal-Mart against all but the largest suppliers.

Over time you wind up with a Soviet style economy.

bart
07-22-10, 10:31 PM
It is clear that you have done a lot of thinking and research into this; most certainly more than me. I didn't mean to suggest that I had any more knowledge or training on the subject. My three reasons are mostly based on personality and gut.



No worries, I was just adding other viewpoints and some facts.
Everybody has to make their own call.






On the conspiracy theory thing, I wasn't really referring to tinfoil hats either. What I meant was that I have trouble believing that the government has entered into an orchestrated campaign to massively lie to us about inflation. Do they massage and tweak on the margins? As I said, that wouldn't surprise me. But if the shadowstat numbers are to be believed, then the government numbers are indeed massive lies. Call me naive, but I don't buy that.



I'm not at all asking you to buy it - your description and view is very much *not* what I'm looking at. The CPI-U "lies" are not the result of eeeevil folk in a smoke filled room or similar.

The primary areas are both poor economics and understanding, and also the "natural" vested interests. For example, the government wants to and should control its expenses - like Social Security - so they set up the Boskin Commission in the mid '90s. The result was a set of changes in CPI to limit the yearly increases.

Another example - people change their eating habits and food choices when things get tight... so the BLS got into geometric weighting (the beef & chicken example for am earlier post) of food. But they ignored that one of the prime and original purposes of CPI was to track actual cost of living - that's at least quite stupid and short sighted in my opinion.
[/color]




You talk about the health/medical stuff. Why would the increase in the GDP be reflected in a one-one ratio with inflation? I don't see why it would. If people are consuming more medical services that would bump up GDP more than price, it would seem to me. So I'm not sure if I believe that disconnect is evidence of massive tampering.



I got lost here. My point about the differences in medical and CPI share of GDP is that, by severely under weighting medical in CPI it inevitably makes CPI lower than it should be.

Depending on whose data you use, medical costs have been going up between 7-14% per year - for many years. Roughly tripling the medical weight in CPI would increase CPI greatly.





Let me propose a disconnect with the shadowstats. I think we would both agree that housing prices, at least, have massively deflated since 2007--the national Case Shiller index is down nearly 30% since Q1 2007. And I think we would both agree that housing is the biggest proportion of a person's cost of living. And finally, I think we would both agree that housing is a major component of the CPI. But shadowstats says we have had 25% inflation over that same period? That the cost of everything else has so far outstripped the massive fall in housing costs? That's a major disconnect for me and another reason I just can't accept those numbers.



Yes - its about 25% and yes, housing is the biggest piece of CPI and houses are down about 25% since 2007 Q1 per CS.

What I believe you're missing and not seeing is that the actual out of pocket expenses for rent or a mortgage has not dropped much at all for the huge majority, and certainly not by 25%... and it is more than offset and then some just by the increasing costs of medical.



Now, I will reiterate that I don't necessarily believe that CPI and PPI are "perfect" or 100% accurate. I acknowledged that there are reasons to massage those numbers and I wouldn't be surprised if they were. So choosing to rely on those figures does not mean that I accept them as gospel. But I think they're more useful than the shadowstat numbers for the reasons I stated, including ease of access and the ability to talk to people in a language they understand (most normal folks probably haven't ever heard of shadowstats, but most have heard of CPI).



Fair enough - another area where agreeing to disagree applies



And I don't know where you live, but it surprises me that anyone has seen 25% inflation since 2007. I know this is a useless endeavor as an argument, but I can convey some facts of my experience: My housing costs are less since 2007 because I refinanced to a lower rate. My health insurance company withdrew from the market so I had to get a new one this year. The new premium was slightly less than the old one. I pay a lot less for gas now than in 2008 at least (can't remember 2007). I buy a soda most days from a local market and the price has barely changed over that time period (it went up about 10 cents in mid 2008, then back down 8 cents last year where it has stayed). They did raise the price at my kid's school for this coming year by 3% over last year, but I'm actually paying less this year because they introduced a plan where you get one free month if you pay the whole year in advance. My car insurance and home insurance have been the exact same for years. My cable bill is less than it was in 2007 because I cancelled for a while and got a great deal when I re-upped. My electricity bill is way down because I bought cheap CFLs at Costco and installed them.



It's dicey to deal with specifics, especially since you're talking about expenses rather than prices - and also not strictly dealing with apples to apples comparisons like (in theory) a Consumer Price Index should.

But... I imagine that your sewer, water and actual kwh electricity costs etc. are way up since 2007 - not usage, but actual raw prices.

I also can't comment on or judge your insurance costs but I suspect you're also not dealing with a strict apples to apples comparison in the policies or limits - and I also suspect that the service level is not as good (not unlike an earlier EJ example of bags of Fritos or whatever being the same price but smaller or using cheaper ingredients).

I could also post charts of food costs or the CRB/CCI and similar, but it'd be a bit like beating a dead horse.

You did take actions too like on your cable costs and a refi, so again - that's not apples to apples.

One additional point - taxes and fees and similar are not part of the CPI and never have been, which is a severe shortcoming of it... and they're certainly not down since 2007.




I'm telling you these things not because I think you'll be convinced by it (as I've said before, I don't think anyone is ever convinced to a contrary view by anecdotal evidence), but because I want to give you some perspective as to why I have to call BS on those shadowstat numbers based on my personal experience. I don't know yours and won't question it. But here's some idea of mine, and if you'll assume I'm telling you the truth (which I am), I think you'd have to agree that there's no POOM in my world, or at the very least, the shadowstat numbers are totally inconsistent with it.



No worries again - but I think you at least see what I'm talking about a bit better, whether my work or shadowstats work on CPI lies lines up with your experiences or not.

I do see that you don't have (or don't believe you have) significant POOM, but hopefully I've shown you at least a different view in the apples to apples area as well as OER, hedonics, Boskin, geometric weighting, etc. exposures and "BLS BS".


And finally, I actually agree with EJ on most things, too. I just have a hard time swallowing the "significant inflation by Q2 2010" prediction, which I don't think was accurate, and the idea that "significant inflation" of the kind seen in the shadowstats is imminent. But I think we agree on more than you think, Bart, because I don't think we'll see major deflation either (in other words, a sustained a major drop in prices). The environment just looks a lot more to me like "more of the same" flat/little bit of inflation for a while.



Cool - glad to hear that we're closer than I thought, especially on deflation.

For what its worth, most of my work does indeed show disinflation occurring and dead ahead, but when we get QE2 (or something truly ugly likely more/bigger wars or major defaults) - "Katie bar the door".







But EJ's statement is contrary to that. He says that even in the face of lower demand, suppliers will be able to RAISE prices. Is he confusing the number of suppliers with the supply of the good like you, MarkL? Or is he rejecting classical economics?

This is from another of your responses but I thought I'd add my $.02.

I can't comment on whether its classical economics or speak for EJ, but the simple answer is that its stagflation.

aaron
07-23-10, 12:15 AM
Americans love their credit, including American businesses. More businesses died this time around than in normal recessions (because of the excessive leverage and need for credit). Demand for business products and services did not go down as much. The process should continue.

Fewer competitors DOES equal higher prices. You think Ford would be charging the same amount if GM and Chrysler went out of business?

EJ's KAPOOM theory, at least in the near term, relies on Uncle Ben Bernanke's ability and desire to bring about inflation. We should take him at his word ... deflation will not be allowed to happen here. In fact, he has already said the economy is "unusually uncertain" --> That is Fed Speak for WE ARE GOING TO PRINT BABY!

Jay
07-23-10, 03:19 AM
the difference being a debtor makes is that we couldn't take even the mild deflation the japanese have had off and on for 20 years. it would be much more devastating here, and so it won't be allowed to happen. it's time to go back and re-read bernanke's 2002 speech, which laid out the whole playbook: http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

Thanks, that was a nice refresher. He has stayed true to the script. He's also a fairly lucid guy.

I found this part interesting:


Moreover, since the United States is a large, relatively closed economy, manipulating the exchange value of the dollar would not be a particularly desirable way to fight domestic deflation, particularly given the range of other options available.

I never considered the US a relatively closed economy. It also is worth noting when thinking of potential currency plays.

Chris Coles
07-23-10, 04:22 AM
Mr. Coles,

I submit that anytime you source Thomas Friedman as a counterpoint, that you tread where angels fear to.

The startup crap Mr. Friedman espouses is standard neoliberal propaganda which others including Mr. Andy Grove of Intel have resoundingly disproven.

Again, it is not that I feel your drive to free up capital from the bankster's grasp is misguided - it is that the fundamental problem isn't the allocation of capital as much as it is the misallocation of debt. And FIRE.

Apologies for the delay in reacting, (busy writing a paper on singularities), but can you please provide me with a reference to this statement. I will then be in a much better position to see if I can provide a repost to your assertions.

PS: Much prefer to being addressed as Chris. Mr Coles makes me feel old and gnarled, when instead, I like to feel like I am on my third wind on the long run into the uncertainty of a possible Century. :)

Chomsky
07-23-10, 07:49 AM
Apologies for the delay in reacting, (busy writing a paper on singularities), but can you please provide me with a reference to this statement. I will then be in a much better position to see if I can provide a repost to your assertions.

PS: Much prefer to being addressed as Chris. Mr Coles makes me feel old and gnarled, when instead, I like to feel like I am on my third wind on the long run into the uncertainty of a possible Century. :)


Chris,

This thread has the Andy Grove piece on startups.

http://www.itulip.com/forums/showthread.php/16121-Down-the-Start-Up-Staircase

Chris Coles
07-23-10, 11:20 AM
Chris,

This thread has the Andy Grove piece on startups.

http://www.itulip.com/forums/showthread.php/16121-Down-the-Start-Up-Staircase

Thanks Chomsky, will get back to you all next week.

goadam1
07-23-10, 05:07 PM
Do we get to know or not? I'm confused. It feels like the message here is gold is so 00's and maybe Grantham was right about blue chips in march 2009.

rdrees
07-23-10, 06:49 PM
Yes, the explanation is rather simplistic because it's just an application of the classic supply and demand curve stuff we probably learned about in High School. As I acknowledged, the real world is of course more compicated.

But the basic principle should remain the same. It's one thing to say that there is more nuance to the picture than the simple graph shows. I agree with that. It's another to say the graph is altogether wrong and that less demand will somehow equal HIGHER prices than lower prices. That's just flat contradictory to basic economics--which maybe is EJ's position, but that's pretty radical and I'd sure appreciate more of an explanation.

As for the variety going down, that doesn't match my experience at all. I actually live in a place where there are still a number of mom and pop businesses left. I've been to several mom and pop hardware stores in the area and believe me when I tell you their variety--even their collective variety--cannot hold a candle to the breadth and depth of selection at the Home Depot or the Lowes down the highway. Not even close.

And in any event, variety doesn't equal price, which was my main point. I mean, at a certain point a good is just a good. Does it hurt your standard of living if Home Depot has three brands of hammers, but not the brand of hammer you used to like at the mom and pop hardware store? To paraphrase Freud, sometimes a hammer is just a hammer.

I don't see where or how this leads to a Soviet style economy. If Wal Mart starts to raise prices beyond the equilibrium, people will shop at Target. If there really is some difference in that fourth brand of hammer that is sufficient to create a market for that brand, you can bet someone will start selling it.

rdrees
07-23-10, 07:06 PM
I don't think it's super helpful to just repeat your premise with capital letters, and I'm not sure if you intended to engage. But assuming you did, here goes my response.

If GM and Chrysler went out of business, I imagine Ford might attempt to charge more. And they might get away with it for a bit until someone bought GM or Chrysler's assets and competed again. Ford is not a monopoly, so there's no reason to think that competition would just disappear if two players left the market.

In any event, that doesn't take into account demand, which is what I'm talking about and what this Great Recession is causing to be suppressed. Let's say demand for cars plummetted 30% and that's why GM and Chrysler went out of business. That's the scenario I'm getting at: lower demand. Classical economics says lower demand equals lower price. If Ford survived this 30% demand collapse, perhaps they did it by overshooting the new equilibrium price a bit. When the dust settled, maybe they could then rise the price a bit. But I'm not aware of any economic theory that says the new price will be higher than the price all three could command back when millions more people wanted their cars.

To put some numbers on it, let's say all three sell their cars for about $30,000 before the demand collapse. Then Ford cuts prices more aggresively than GM and Chrysler to $15,000 and survives while they don't. Then they go up to $20,000 because it turns out that is the new equilibrium price. Yes, the final price was $5,000 higher than the lowest price you ever saw for the car, but it's $10,000 cheaper than you used to pay before demand collapsed! The net net is what classical economics predicts: lower demand equals lower price. But you seem to be saying no, somehow Ford could raise prices beyond the $30,000. How? If they try to go much higher than $20,000, a competitor will start selling cars for $20,000 and Ford would have to head back down to the equilibrium price. Competition!

You have a lot of faith in Bernake. But don't you think it's time to start questioning whether he has the ability to create significant inflation with the tools and political environment he has? I mean, it's been two whole years of 0% interest rates! That's the traditional way the Fed "prints money" in our economy. And still no significant inflation. On top of that, we had quantitative easing, too. And the three most recent months of PPI were all declines! Doesn't that raise some legitimate questions? And to reemphasize, I do not expect we'll see sustained, major price declines. But at the same time, I have no reason to suspect that we'll have sustained, major price increases either. The headwinds appear awfully strong against that.

rdrees
07-23-10, 07:44 PM
Bart, I appreciate the civility of this debate! And glad to hear we're on the same page at least on some things.

I will concede that my water bills have increased per gallon. They made a point to tell us about the increase, but also that it was directly related to a major capital spending campaign, with new dams and sewers, so it wasn't purely a cost-of-living thing.

I also agree that medical costs--in addition to higher education costs--are rising well above inflation. That concerns me no doubt. But just because medical and education costs are rising doesn't necessarily outweigh all the other aspects of CPI/PPI that have downward pressures in this Great Recession. I guess I just don't think that these two aspects of of the economy--one of which is essentially purely discretionary (higher education) and the other of which imposes the major portion of its costs in a semi-random way--can cause the kind of numbers shadowstats is showing. A person might go years without any reamajor illness and thus not really be subject to most of the major price increases in medicine. Sure, his insurance premium may go up, but I suspect for most people their health insurance premium is not a major slice of their overall living expenses. I just don't see how the price increases in these two fields could counteract all the other stuff, including the fall in housing costs, such that the whole basket ends up at 25% higher prices since 2007.

Anyway, on your last point about stagflation, I don't deny that stagflation can happen. But I do think it's a different mechanism that does not undermine classic economic theory. It's pretty widely agreed that stagflation has identifiable external causes. Energy costs are a big example. Obviously, higher energy costs are going to generally manifest themselves in higher prices. But this is consistent with classical economics since higher energy prices are basically a supply shock: suppliers can no longer supply the same amount of goods as they could before at that price. The supply curve moves leftward pushing prices up. The resulting unemployment suppresses demand pushing the demand curve leftward as well, which puts downward pressure on prices. There's nothing contrary to economic theory if the end result of these two movements is higher prices because the demand suppression was outweighed by the supply constraint. Might we see that with Peak Cheap Oil? Absolutely. But that's a different process--a supply shock--that is different than EJ's statement that firms can raise prices in the face of lower demand EVEN WITHOUT a supply shock to outstrip that process.

Other external causes of stagflation in the 70s included the wage and price controls we imposed which unnaturally messed with the market. You need demand to outstrip supply for prices to rise (putting aside monetary inflation for a moment, which is a different mechanism), and the wage and price controls acted as their own supply shock because suppliers would not supply enough of goods at unnaturally low prices. This excess demand pushed real prices up.

So I don't think stagflation answers the question. I believe EJ has said that Peak Cheap Oil is looming, but not that he was expecting it by Q2 10. But what he WAS expecting by Q2 10 was higher prices, in part because he said that suppliers could raise prices in the face of demand destruction. That still appears to me to be directly contrary to ye olde supply demand curve. Does he really mean that?

bart
07-23-10, 08:58 PM
Bart, I appreciate the civility of this debate! And glad to hear we're on the same page at least on some things.

I will concede that my water bills have increased per gallon. They made a point to tell us about the increase, but also that it was directly related to a major capital spending campaign, with new dams and sewers, so it wasn't purely a cost-of-living thing.




I think you'll find that if you delve deeper that water prices are way up since 2007 across the country, just like electricity is.



I also agree that medical costs--in addition to higher education costs--are rising well above inflation. That concerns me no doubt. But just because medical and education costs are rising doesn't necessarily outweigh all the other aspects of CPI/PPI that have downward pressures in this Great Recession. I guess I just don't think that these two aspects of of the economy--one of which is essentially purely discretionary (higher education) and the other of which imposes the major portion of its costs in a semi-random way--can cause the kind of numbers shadowstats is showing. A person might go years without any reamajor illness and thus not really be subject to most of the major price increases in medicine. Sure, his insurance premium may go up, but I suspect for most people their health insurance premium is not a major slice of their overall living expenses. I just don't see how the price increases in these two fields could counteract all the other stuff, including the fall in housing costs, such that the whole basket ends up at 25% higher prices since 2007.



I have little clue what you're driving at or what your purpose is.

I already addressed the housing area in depth, and you have apparently ignored everything I stated.

I thought we'd already agreed to disagree about shadowstats.com and my own similar work?


Anyway, on your last point about stagflation, I don't deny that stagflation can happen. But I do think it's a different mechanism that does not undermine classic economic theory. It's pretty widely agreed that stagflation has identifiable external causes. Energy costs are a big example. Obviously, higher energy costs are going to generally manifest themselves in higher prices. But this is consistent with classical economics since higher energy prices are basically a supply shock: suppliers can no longer supply the same amount of goods as they could before at that price. The supply curve moves leftward pushing prices up. The resulting unemployment suppresses demand pushing the demand curve leftward as well, which puts downward pressure on prices. There's nothing contrary to economic theory if the end result of these two movements is higher prices because the demand suppression was outweighed by the supply constraint. Might we see that with Peak Cheap Oil? Absolutely. But that's a different process--a supply shock--that is different than EJ's statement that firms can raise prices in the face of lower demand EVEN WITHOUT a supply shock to outstrip that process.

Other external causes of stagflation in the 70s included the wage and price controls we imposed which unnaturally messed with the market. You need demand to outstrip supply for prices to rise (putting aside monetary inflation for a moment, which is a different mechanism), and the wage and price controls acted as their own supply shock because suppliers would not supply enough of goods at unnaturally low prices. This excess demand pushed real prices up.

So I don't think stagflation answers the question. I believe EJ has said that Peak Cheap Oil is looming, but not that he was expecting it by Q2 10. But what he WAS expecting by Q2 10 was higher prices, in part because he said that suppliers could raise prices in the face of demand destruction. That still appears to me to be directly contrary to ye olde supply demand curve. Does he really mean that?



If you're going to reject all the evidence and facts I've stated about inflation and shadowstats, there's little I can add other than "money printing" always trumps supply & demand... and yes, that's not "classical economics" (it doesn't work well, as many have shown - like Friedman in the '70s).

The oil shock in the '70s had its echo a year or two ago, and a much larger and unrelated financial/credit/ethics set of issues occurred too - and both were preceded by massive money creation.

Lots of firms raised prices in the '70s during stagflation - literally by definition.





...

c1ue
07-24-10, 12:46 PM
I've been to several mom and pop hardware stores in the area and believe me when I tell you their variety--even their collective variety--cannot hold a candle to the breadth and depth of selection at the Home Depot or the Lowes down the highway.

Hardware - especially given that they're largely small machinery and steel dependent - is likely an extremely low variety field to begin with. Just how many hammer makers are there in the world anymore?

Consider instead the original example: Wal-Mart vs. regular grocery stores. Wal-Mart vs. Walgreens/CVS. Wal-Mart vs. an Indian culture grocery store. Wal-Mart vs. an organic grocery store.

As someone who's had first hand experience as an importer - the business practices of any chain in the US whether it is Trader Joe's or Wal-Mart had a crushing effect on any small supplier unless you are the lowest cost. Even then the terms are equally punishing.

But of course this speaks to variety, not cost. Given that Wal-Mart is primarily sourced from China (see old product map), the Chinese peg to the US dollar won't manifest as a price increase immediately. It will be lower quality goods or substitutes - until the suppliers get better pricing power via competitors failing.

3489

As for prices, I observe the opposite to what you see.

While the prices I pay aren't up dramatically - it is because I am an urban hunter gatherer of items on sale.

If I don't get a minimum of 40% off the total bill, I consider that trip unsuccessful.

However, looking back at 4 years of Safeway receipts, it is quite obvious that the non-sale prices are going up.

Diet Coke - my primary vice - was once $4.99 regular price for a 12-pack. It is now $5.99.

Here's the scan of 2 receipts: 1 from 2006, the other from 2010 documenting this.

3490

The price I personally paid in this case was actually lower in 2010, but the discount rate was higher. The CRV has also significantly increased.

The regular price in 2006 was $19.96 for 4-12 packs with $1.92 CRV. The price I paid was $11.00

The regular price in 2010 was $23.96 for 4-12 packs with $2.40 CRV. The price I paid was $9.56

So officially you could say there was deflation in the price I personally paid. But the prices have gone up significantly. And those who aren't willing to spend the 3 or 4 months between sales as I do, and stockpile when prices are optimum - they're paying much closer to the $5.99 than the $2.39 much as they were paying much closer to the $4.99 than the $2.75 in 2006.

flyer38
07-24-10, 06:27 PM
Now I believe that I have worked out the next big trade. This is separate from thepostcatastropheeconomy portfolio that I've alluded to that we plan to launch before the end of August and the hard assets play to diversify out of Treasury bonds that we will also cover as soon as we're ready. This is a speculative bet like shorting tech stocks in March 2000 or the S&P500 in Dec. 2007 or going long gold in 2001 but much, much bigger. However, unlike before I'm not going public with it. In fact, only a handful of specialists under NDA will even understand what the positions are about that constitute the trade until the trade plays out a number of years from now. I'll update the community when we're farther along with it. I can tell you this: looks at least as crazy as buying gold did in 2001.

I figured you out Janszen! Where's my free 1-year iTulip subscription for solving the puzzle?

The reason you won't disclose for a few years, like you did with the tech stocks & gold, is that your Trade of the Century is limited in supply. What's one of the few things limited in supply? Land!

Your new venture: Farmland (in Michigan), close to waterways & railways for cheap transportation costs, and accessible to sell your goods domestic & international markets. Waterways provide a low-cost means of transporting bulky goods over long distances.

It works under your Peak Cheap Oil thesis and your Poom thesis. High gas costs, mean high food costs. You'll have a competitive advantage if you have a farm near waterways and/or train stations.

Now I just got to figure out what you're planning on growing! Or maybe you'll just buy the land, and become a sharecropper. (you're not likely to get your hands dirty).

-Ed

Jay
07-24-10, 08:10 PM
But of course this speaks to variety, not cost. Given that Wal-Mart is primarily sourced from China (see old product map), the Chinese peg to the US dollar won't manifest as a price increase immediately. It will be lower quality goods or substitutes - until the suppliers get better pricing power via competitors failing.



My family just had a hard shell lobster dinner with my parents. Two of the new lobster shell crackers snapped; both made in China. No problem with the others which we have had in the family for twenty years.


While the prices I pay aren't up dramatically - it is because I am an urban hunter gatherer of items on sale.

If I don't get a minimum of 40% off the total bill, I consider that trip unsuccessful.


Can you hang out with my beautiful wife for a week?

Diarmuid
07-24-10, 08:22 PM
Can you hang out with my beautiful wife for a week?carefully what you wish for Jay ;-)

PS. hope you are keeping well :-)

dummass
07-24-10, 09:39 PM
Can you hang out with my beautiful wife for a week?

http://i190.photobucket.com/albums/z139/earlpendly/dirty-old-man2.jpg

aaron
07-24-10, 10:45 PM
--> I have less faith in Bernanke than EJ does, but still feel like he will prevent deflation. He was appointed so that it would not happen here (deflation). The bigger inflation comes when foreigners see that their dollars are not going to be be worth very much, so they start dumping them. Unless you have faith that the government and Fed are competent enough to get it "just right" and not screw up the dollar, then we should expect higher inflation.

In a normal business environment, you are probably right with your equilibrium explanation. However, when companies are so leveraged up and owe so much money, small declines in demand are enough to put them out of business. The remaining "competitors" are able to raise prices.
http://en.wikipedia.org/wiki/Oligopoly

I will believe deflation when I see it. Nothing I buy has gone down in price (just the "assets" I owned). Inflation has been a part of life for as long as I can remember. No country has experienced it since we went off the gold standard.

With that said, here is a reasonable argument against high inflation:
Why (Hyper) Inflation Is Not In the Cards (http://www.oftwominds.com/blogjuly10/deflation-hyperinflation-07-10.html)


http://charleshughsmith.blogspot.com/2010/07/why-hyper-inflation-is-not-in-cards.html


The policies of the Federal government are set to benefit those who hold the levers of power. Deflation benefits those who own the debt, inflation benefits the debtors. The Financial Power Elites are not the debtors--we are.

ThePythonicCow
07-24-10, 11:34 PM
Now I just got to figure out what you're planning on growing! Or maybe you'll just buy the land, and become a sharecropper. (you're not likely to get your hands dirty).Hasn't EJ been showing us pictures of plants around his home lately? Perhaps he does like getting his hands dirty growing things.

LargoWinch
07-24-10, 11:58 PM
What's one of the few things limited in supply? Land!


I am sorry flyer38, but you do sound like a Realtor peddling Olympic-Village-Vancouver condos... VancouverGoinUp (http://www.itulip.com/forums/member.php/3475-VancouverGoinUp)is that really you?

raja
07-25-10, 11:47 AM
The reason you won't disclose for a few years, like you did with the tech stocks & gold, is that your Trade of the Century is limited in supply. What's one of the few things limited in supply? Land!

Not land . . . .

Land is subject to inflation tax whenever you sell it. Your profits, which you are hoping will compensate for inflation, will be taxed by the gov't . . . so you'll still be a net loser.

Gold will be a losing investment for this reason . . . but in the future he who loses less will be the winner.
And gold has other merits that make it worthy of being part of one's portfolio.

The only non-losing inflation-hedge investments are income-producing ones that you never have to sell.
But even that's not a sure thing, for they, too, can be subject to gov't theft in ways not yet known . . . .

In short, big guys win, little guys loses. It's the way of the world. Very hard to beat the system.

raja
07-25-10, 11:56 AM
The banks own lots of mortgages, and I imagine that many of them are fixed rate.
If there is high inflation, it will kill the banks, because people will be paying their loans back pennies on the dollar.

If inflation/deflation is a political decision, why then would TPTB opt in favor of inflation?????

ThePythonicCow
07-25-10, 12:25 PM
If inflation/deflation is a political decision, why then would TPTB opt in favor of inflation?????Good question. I agree that it would seem that TPTB wouldn't want to hold such a losing asset. I suspect most mortgages were either held by Fannie, Freddie, and other GSE's, who were motivated by quite different goals than long term capital appreciation, or the mortgages were securitized and derived and sliced and diced, with their interest rate risk swapped with some other sucker. The winners collected the fees and the short term gains they could control; the losers paid the fees and got stuck with the long term loses they didn't even understand much less control.

P.S. -- However if I were a Power That Be, I would not want to hold large quantities of long U.S. Treasury bonds at present. I'd wait until that round of inflation EJ is forecasting has spiked long bond rates to something like 20% before buying them in large quantities.

ThePythonicCow
07-25-10, 12:26 PM
In short, big guys wins, little guys loses.So ... next we see EJ, will he be obese?

raja
07-25-10, 05:47 PM
Thanks for you answer, Bovinator. However, I did a quick google to see just how much the banks were invested in mortgages and found this:


The total stock of mortgages outstanding in the US is about $10 thousand billion . . . . Given that the overall stock of mortgages still outstanding on the balance sheets of commercial banks is around $3.6 thousand billion . . . . http://www.voxeu.org/index.php?q=node/1714
That's $3.6 trillion in mortgages owned by the banks. So, if there were a high inflation rate persisting over several years, as EJ predicts, that would not be beneficial to TPTB.

So, my original question stands: If inflation/deflation is a political decision, why then would TPTB opt in favor of inflation?????

EJ (or somebody) might want to answer this question to defend his Ka-Poom theory, otherwise I'm going to go over to the Dark Side (the deflationistas).

flyer38
07-25-10, 06:07 PM
I am sorry flyer38, but you do sound like a Realtor peddling Olympic-Village-Vancouver condos... VancouverGoinUp (http://www.itulip.com/forums/member.php/3475-VancouverGoinUp)is that really you?

Forget the last Olympics! Get in on the ground floor of the 2016 Olympics in Brazil, hurry before it's too late for this once in a lifetime opportunity! They also have a soccer world cup in 2014, so you'll double opportunities.

How would you like to spend the next few years making lists of things you're going to do with all the money you have.

Seriously though, why else would EJ say that he won't share his trade of the century, unless it has something to do with the availability of the investment?

Unless him and Fred are working on inventing some revolutionary energy breakthrough thingy, and dont' want anyone to front-run them at the Patent Office.
Any ideas?

flyer38
07-25-10, 06:09 PM
Not land . . . .

Land is subject to inflation tax whenever you sell it. Your profits, which you are hoping will compensate for inflation, will be taxed by the gov't . . . so you'll still be a net loser.

Gold will be a losing investment for this reason . . . but in the future he who loses less will be the winner.
And gold has other merits that make it worthy of being part of one's portfolio.

The only non-losing inflation-hedge investments are income-producing ones that you never have to sell.
But even that's not a sure thing, for they, too, can be subject to gov't theft in ways not yet known . . . .

In short, big guys win, little guys loses. It's the way of the world. Very hard to beat the system.

If the land itself produces income, then you don't need to sell it to post a profit. That's why I ventured a guess that it's farmland.

we_are_toast
07-25-10, 06:29 PM
Unless him and Fred are working on inventing some revolutionary energy breakthrough thingy, and dont' want anyone to front-run them at the Patent Office.
Any ideas?

A low Delta T sterling engine, low cost carbon nanotube battery, or a plateless battery where the charge is stored in the electrolyte.

raja
07-25-10, 07:37 PM
If the land itself produces income, then you don't need to sell it to post a profit. That's why I ventured a guess that it's farmland.
I don't have any experience in this area, just heresay from living in a farming area . . . but the impression I get is that renting farmland is not very profitable. Now farming, on the other hand, could be a different story . . . or not. I hear about farmers struggling a lot.

ThePythonicCow
07-25-10, 08:45 PM
I hear about farmers struggling a lot.Farming is rough these days (has been rough for much of the last century.) On the other hand, industrialized and subsidized agriculture is doing quite well, thank-you, and making a handsome profit producing all that <s>fine food</s> fake poisonous crud that fills our grocery stores and restaurants (fast food or sit down.)

jk
07-25-10, 08:48 PM
it's true, tptb and the elite who own all the bonds will never allow inflation. in fact, that's why there wasn't any inflation in the 1970's.

bart
07-25-10, 08:59 PM
Thanks for you answer, Bovinator. However, I did a quick google to see just how much the banks were invested in mortgages and found this:

http://www.voxeu.org/index.php?q=node/1714
That's $3.6 trillion in mortgages owned by the banks. So, if there were a high inflation rate persisting over several years, as EJ predicts, that would not be beneficial to TPTB.

So, my original question stands: If inflation/deflation is a political decision, why then would TPTB opt in favor of inflation?????

EJ (or somebody) might want to answer this question to defend his Ka-Poom theory, otherwise I'm going to go over to the Dark Side (the deflationistas).



Very simple answer - its a hedgeable risk and has been hedged.

The huge majority of the $600+ trillion of world derivatives are in the interest rate areas.

ThePythonicCow
07-25-10, 09:02 PM
Very simple answer - its a hedgeable risk and has been hedged. Yup. That's what I was trying to say with my phrase "with their interest rate risk swapped with some other sucker", but you said it much clearer. Thanks.

Jay
07-25-10, 09:10 PM
Very simple answer - its a hedgeable risk and has been hedged.

The huge majority of the $600+ trillion of world derivatives are in the interest rate areas.
Someone has to be on the other side of the trade. If TSHTF I think the whole derivatives game breaks down into chaos. Everything will be frozen.

bart
07-25-10, 09:46 PM
Someone has to be on the other side of the trade. If TSHTF I think the whole derivatives game breaks down into chaos. Everything will be frozen.


We live in (sometimes potentially way excessively) interesting times.


And do consider that there will be a huge amount of netting in that scenario - perhaps as high as 50%.

Jay
07-25-10, 09:58 PM
We live in (sometimes potentially way excessively) interesting times.


And do consider that there will be a huge amount of netting in that scenario - perhaps as high as 50%.
I would expect so, but who runs the clearinghouse? And I had assumed the netting percentage would be HIGHER! ;-00
And what is the total derivatives amount now, has it reached a quad? ;_CC

vinoveri
07-25-10, 10:05 PM
Someone has to be on the other side of the trade. If TSHTF I think the whole derivatives game breaks down into chaos. Everything will be frozen.

And that $15 Trillion in US retirement accounts will be, in the interest of national security, required to be invested significantly in US treasuries. After that, we can have our inflation :(, and the middle class can watch their pensions slowly (or not so slowly) confiscated.

bart
07-25-10, 10:36 PM
I would expect so, but who runs the clearinghouse? And I had assumed the netting percentage would be HIGHER! ;-00
And what is the total derivatives amount now, has it reached a quad? ;_CC


DTCC and other exchanges will clear. The "emergency" one will kick in too.

It could of course be higher than 50%, but if so, that's better.


Total derivatives, per the BIS is about $606 trillion - with "shadow banking", I've seen estimates approaching $2 quadrillion.

MarkL
07-26-10, 10:28 AM
And in any event, variety doesn't equal price, which was my main point. I mean, at a certain point a good is just a good. Does it hurt your standard of living if Home Depot has three brands of hammers, but not the brand of hammer you used to like at the mom and pop hardware store? To paraphrase Freud, sometimes a hammer is just a hammer.

I don't see where or how this leads to a Soviet style economy. If Wal Mart starts to raise prices beyond the equilibrium, people will shop at Target. If there really is some difference in that fourth brand of hammer that is sufficient to create a market for that brand, you can bet someone will start selling it.

Being a regular buyer of hammers (and yesterday a Rake) I can vouch for the fact that these things are not all made the same. Take a metal rake for example. Yesterday I made the choice to buy a rake with 16 tines and a Fiberglass handle instead of the "standard" of 14 tines and a metal handle. It cost me $22 instead of 14, but the quality for me was worth it. In speaking with the gardening department the dept manager mentioned they're not going to carry the rake I wanted anymore because the cost of it had gone up and people have recently switched more to the lower quality rakes.

Both consumer demand pressure for cheaper goods combined with mfgr raw material increase pressures (like metal!) are causing the market to send our products "downstream" in quality. Williams-Sonoma with the ridiculously high quality (and arguably over priced) gardening equipment... is out of business.

Thus, I do think there is something to the quality of goods going down, while prices stay similar effectively hiding *some* inflation. I can't reduce this issue to percentages, but even at the dollar store where I consistently pick up a few things I see 16oz marinated peppers now in 12oz bottles and other things all shrinking by an oz or two. And none of this touches the potential for "hidden" quality drops which can occur with ingredient changes and the laying off of health and testing personnel. I believe that if it's happening at the quantity level, it's certainly happen in places where it's easier to hide.

In addition, as my 24 tine fiberglass rake vanishes from the market, I DO believe it will be easier for Home Depot and it's supplier to raise the price of the 14 tine wood handled rake. There is certainly less competition at the upper end of the market and I'm sorry, I don't go to multiple stores to buy a rake. Lowe's may still carry the 24 tine rake, but I certainly can't and don't afford the time to go to multiple places to buy a rake and I didn't even know there was a 24 tine rank when I went in to make my choice.

And this even extends to "pure" commodities, albeit to a lesser degree. A commodity company that has excellent customer service... or better quality, or better delivery or better return policy, or even better sales can charge a higher price than one that doesn't. There are even whole books written on this subject that espouse how in today's world SERVICE matters MORE than the item in question! And selection is one of these services...

Conclusion RDRees, Choice and selection IS competition and competition DOES drive prices down. If GM had gone out of business Ford would have had more pricing power. They would have been the last American truck manufacturer and for many that's enough for them to make their truck choice, despite "furriner" competition. If Lowe's went out of business, Home Depot would have more pricing power and if the Dollar Store went out of business, Safeway would sell more marinated peppers. And when my 24tine rake is no longer sold, the 14 tine mfgr and Home Depot will have slightly more pricing power.

Competition is all about minor differences in quality/feature/choice and is an essential part of capitalism, competition, and pricing power.

ThePythonicCow
07-26-10, 11:45 AM
I don't go to multiple stores to buy a rakeI do most of my shopping online. If it is something that would cost more to ship than it's worth (like your rake), then once I learn what the range of choices are, I look to see via the websites what is in my local stores (Lowe's, Home Depot, etc) and then go buy the best I can get for my needs locally. Usually I have no hope of finding just what I want locally and am happy to spend the $5 to $10 to ship it.

The shipping cost is often less cost than local sales tax plus driving, and I get something I could not have gotten locally in any case. The local UPS driver knows right where I live. It takes him less time to drop off a package for me than it takes most clerks to ring up a sale, and it takes him less gas to add a stop at my place to his route that day than it takes me to drive to a store.

It's actually cheaper in real labor and energy to ship one item than to go to the store for it. Inventory on the other end is more efficient as well. One regional warehouse can run a broader inventory with tighter controls than a hundred retail stores. Some of the advantages that made Sears, Roebuck and Co successful selling various items to farmers a century ago still apply. Only now with the web, a thousand stores can run specialty businesses, many focusing considerable expertise on a narrow product line, all automatically handled in real-time 24 by 7 except for the picking and boxing.

raja
07-26-10, 06:34 PM
it's true, tptb and the elite who own all the bonds will never allow inflation. in fact, that's why there wasn't any inflation in the 1970's.
Was it because TPTB couldn't control inflation, and it ended up hurting them . . . or they did want inflation so made it happen (if so, how did inflation help them) . . . or they didn't care because inflation couldn't hurt them (if so, why were they immune?)

raja
07-26-10, 06:43 PM
Very simple answer - its a hedgeable risk and has been hedged.

The huge majority of the $600+ trillion of world derivatives are in the interest rate areas.
So . . . you are saying the banks are not afraid of inflation, so will let it happen . . . because they are protected by derivatives.

Do the banks have no fear of a derivative meltdown?
Do you think they honestly believe that they will be covered by the incestuous derivative edifice if high inflation destroys their mortgages?
Or is it that they believe they will be bailed out again by their buddies in government?

bart
07-26-10, 07:35 PM
So . . . you are saying the banks are not afraid of inflation, so will let it happen . . . because they are protected by derivatives.



Pretty much - yes.


Do the banks have no fear of a derivative meltdown?
It's a very small fear - they can be incredibly arrogant, and they think they can hedge any risk - or invent an instrument that will hedge a given risk or risks.

Do you think they honestly believe that they will be covered by the incestuous derivative edifice if high inflation destroys their mortgages?
Pretty much yes - just recall Blankfein's comment about doing the work of God.
Or is it that they believe they will be bailed out again by their buddies in government?
That too - they don't see any way they can lose (which of course is one of their Achilles heels)


This Keynes quote applies too.

"A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him."
-- John Maynard Keynes, "Consequences to the Banks of a Collapse in Money Values", 1931

LargoWinch
07-26-10, 07:36 PM
it's true, tptb and the elite who own all the bonds will never allow inflation. in fact, that's why there wasn't any inflation in the 1970's.

...and the elite owns no hard assets of course (Muskoka summer house, Hamptons real estate, fine art, rare spirits, jewellery etc.)

bart
07-26-10, 08:42 PM
<table x:str="" style="border-collapse: collapse; width: 569pt;" border="0" cellpadding="0" cellspacing="0" width="761"><col style="width: 179pt;" width="239"> <col style="width: 35pt;" span="6" width="47"> <col style="width: 90pt;" span="2" width="120"> <tbody><tr style="height: 15.6pt;" height="21"> <td class="xl24" colspan="3" style="height: 15.6pt; width: 249pt;" height="21" width="333">USDA Normalized Price Estimates, National Level<sup>1</sup></td> <td class="xl24" style="width: 35pt;" width="47">
</td> <td class="xl24" style="width: 35pt;" width="47">
</td> <td class="xl24" style="width: 35pt;" width="47">
</td> <td class="xl24" style="width: 35pt;" width="47">
</td> <td class="xl24" style="width: 90pt;" width="120">
</td> <td class="xl24" style="width: 90pt;" width="120">
</td> </tr> <tr style="height: 15.6pt;" height="21"> <td class="xl29" colspan="5" style="height: 15.6pt;" height="21">http://www.ers.usda.gov/Data/normalizedprices/natlprices.xlx</td> <td class="xl24">
</td> <td class="xl24">
</td> <td class="xl24">
</td> <td class="xl24">
</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl30" style="height: 13.2pt;" x:str="Commodity " height="18">Commodity </td> <td class="xl30" x:num="" align="right">2004</td> <td class="xl30" x:num="" align="right">2005</td> <td class="xl30" x:num="" align="right">2006</td> <td class="xl30" x:num="" align="right">2007</td> <td class="xl30" x:num="" align="right">2008</td> <td class="xl30" x:num="" align="right">2009</td> <td class="xl31">2006-2009 change</td> <td class="xl31">2007-2009 change</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Wheat, all types (bushels)</td> <td class="xl25" x:num="2.84" align="right">$2.84</td> <td class="xl25" x:num="2.99" align="right">$2.99</td> <td class="xl25" x:num="3.16" align="right">$3.16</td> <td class="xl25" x:num="3.31" align="right">$3.31</td> <td class="xl25" x:num="3.61" align="right">$3.61</td> <td class="xl25" x:num="4.19" align="right">$4.19</td> <td class="xl32" x:num="0.32594936708860756" x:fmla="=(G4/D4)-1" align="right">32.6%</td> <td class="xl32" x:num="0.26586102719033233" x:fmla="=(G4/E4)-1" align="right">26.6%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Rye (bushels)</td> <td class="xl26" x:num="" align="right">2.71</td> <td class="xl26" x:num="" align="right">2.80</td> <td class="xl26" x:num="" align="right">2.99</td> <td class="xl26" x:num="" align="right">3.13</td> <td class="xl26" x:num="" align="right">3.22</td> <td class="xl26" x:num="" align="right">3.56</td> <td class="xl32" x:num="0.1906354515050166" x:fmla="=(G5/D5)-1" align="right">19.1%</td> <td class="xl32" x:num="0.13738019169329085" x:fmla="=(G5/E5)-1" align="right">13.7%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Rice (cwt)</td> <td class="xl26" x:num="" align="right">5.88</td> <td class="xl26" x:num="" align="right">5.71</td> <td class="xl26" x:num="" align="right">5.98</td> <td class="xl26" x:num="" align="right">6.36</td> <td class="xl26" x:num="" align="right">7.50</td> <td class="xl26" x:num="" align="right">9.16</td> <td class="xl32" x:num="0.53177257525083599" x:fmla="=(G6/D6)-1" align="right">53.2%</td> <td class="xl32" x:num="0.44025157232704393" x:fmla="=(G6/E6)-1" align="right">44.0%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Corn for grain (bushels)</td> <td class="xl26" x:num="" align="right">2.00</td> <td class="xl26" x:num="" align="right">2.09</td> <td class="xl26" x:num="" align="right">2.12</td> <td class="xl26" x:num="" align="right">2.15</td> <td class="xl26" x:num="" align="right">2.37</td> <td class="xl26" x:num="" align="right">2.74</td> <td class="xl32" x:num="0.29245283018867929" x:fmla="=(G7/D7)-1" align="right">29.2%</td> <td class="xl32" x:num="0.27441860465116297" x:fmla="=(G7/E7)-1" align="right">27.4%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Oats (bushels)</td> <td class="xl26" x:num="" align="right">1.33</td> <td class="xl26" x:num="" align="right">1.41</td> <td class="xl26" x:num="" align="right">1.48</td> <td class="xl26" x:num="" align="right">1.60</td> <td class="xl26" x:num="" align="right">1.65</td> <td class="xl26" x:num="" align="right">1.82</td> <td class="xl32" x:num="0.22972972972972983" x:fmla="=(G8/D8)-1" align="right">23.0%</td> <td class="xl32" x:num="0.13750000000000001" x:fmla="=(G8/E8)-1" align="right">13.8%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Barley (bushels)</td> <td class="xl26" x:num="" align="right">2.22</td> <td class="xl26" x:num="" align="right">2.39</td> <td class="xl26" x:num="" align="right">2.48</td> <td class="xl26" x:num="" align="right">2.56</td> <td class="xl26" x:num="" align="right">2.68</td> <td class="xl26" x:num="" align="right">2.94</td> <td class="xl32" x:num="0.18548387096774199" x:fmla="=(G9/D9)-1" align="right">18.5%</td> <td class="xl32" x:num="0.1484375" x:fmla="=(G9/E9)-1" align="right">14.8%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Sorghum grain (cwt)</td> <td class="xl26" x:num="" align="right">3.34</td> <td class="xl26" x:num="" align="right">3.59</td> <td class="xl26" x:num="" align="right">3.64</td> <td class="xl26" x:num="" align="right">3.68</td> <td class="xl26" x:num="" align="right">4.16</td> <td class="xl26" x:num="" align="right">4.79</td> <td class="xl32" x:num="0.31593406593406592" x:fmla="=(G10/D10)-1" align="right">31.6%</td> <td class="xl32" x:num="0.30163043478260865" x:fmla="=(G10/E10)-1" align="right">30.2%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Hay, all types, baled (tons)</td> <td class="xl26" x:num="" align="right">86.70</td> <td class="xl26" x:num="" align="right">86.88</td> <td class="xl26" x:num="" align="right">90.20</td> <td class="xl26" x:num="" align="right">92.92</td> <td class="xl26" x:num="" align="right">95.62</td> <td class="xl26" x:num="" align="right">102.74</td> <td class="xl32" x:num="0.13902439024390234" x:fmla="=(G11/D11)-1" align="right">13.9%</td> <td class="xl32" x:num="0.10568230736117079" x:fmla="=(G11/E11)-1" align="right">10.6%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Dry beans (cwt)</td> <td class="xl26" x:num="" align="right">18.22</td> <td class="xl26" x:num="" align="right">18.10</td> <td class="xl26" x:num="" align="right">19.76</td> <td class="xl26" x:num="" align="right">20.36</td> <td class="xl26" x:num="" align="right">20.36</td> <td class="xl26" x:num="" align="right">22.70</td> <td class="xl32" x:num="0.1487854251012144" x:fmla="=(G12/D12)-1" align="right">14.9%</td> <td class="xl32" x:num="0.11493123772102165" x:fmla="=(G12/E12)-1" align="right">11.5%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Sugarbeets (tons)</td> <td class="xl26" x:num="" align="right">37.12</td> <td class="xl26" x:num="" align="right">38.12</td> <td class="xl26" x:num="" align="right">38.06</td> <td class="xl26" x:num="" align="right">40.24</td> <td class="xl26" x:num="" align="right">41.12</td> <td class="xl26" x:num="" align="right">41.58</td> <td class="xl32" x:num="9.2485549132947931E-2" x:fmla="=(G13/D13)-1" align="right">9.2%</td> <td class="xl32" x:num="3.3300198807157066E-2" x:fmla="=(G13/E13)-1" align="right">3.3%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Sugarcane for sugar (tons)</td> <td class="xl26" x:num="" align="right">27.32</td> <td class="xl26" x:num="" align="right">27.76</td> <td class="xl26" x:num="" align="right">28.30</td> <td class="xl26" x:num="" align="right">28.72</td> <td class="xl26" x:num="" align="right">29.00</td> <td class="xl26" x:num="" align="right">29.24</td> <td class="xl32" x:num="3.3215547703180137E-2" x:fmla="=(G14/D14)-1" align="right">3.3%</td> <td class="xl32" x:num="1.8105849582172651E-2" x:fmla="=(G14/E14)-1" align="right">1.8%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" x:str="Cotton, lint, upland (pounds) " height="18">Cotton, lint, upland (pounds) </td> <td class="xl26" x:num="" align="right">0.47</td> <td class="xl26" x:num="" align="right">0.47</td> <td class="xl26" x:num="" align="right">0.47</td> <td class="xl26" x:num="" align="right">0.45</td> <td class="xl26" x:num="" align="right">0.48</td> <td class="xl26" x:num="" align="right">0.51</td> <td class="xl32" x:num="8.5106382978723527E-2" x:fmla="=(G15/D15)-1" align="right">8.5%</td> <td class="xl32" x:num="0.1333333333333333" x:fmla="=(G15/E15)-1" align="right">13.3%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Tobacco (pounds)</td> <td class="xl26" x:num="" align="right">1.87</td> <td class="xl26" x:num="" align="right">1.90</td> <td class="xl26" x:num="" align="right">1.93</td> <td class="xl26" x:num="" align="right">1.90</td> <td class="xl26" x:num="" align="right">1.84</td> <td class="xl26" x:num="" align="right">1.79</td> <td class="xl32" x:num="-7.2538860103626868E-2" x:fmla="=(G16/D16)-1" align="right">-7.3%</td> <td class="xl32" x:num="-5.7894736842105221E-2" x:fmla="=(G16/E16)-1" align="right">-5.8%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Cottonseed (tons)</td> <td class="xl26" x:num="" align="right">103.00</td> <td class="xl26" x:num="" align="right">100.60</td> <td class="xl26" x:num="" align="right">104.30</td> <td class="xl26" x:num="" align="right">102.30</td> <td class="xl26" x:num="" align="right">106.20</td> <td class="xl26" x:num="" align="right">118.40</td> <td class="xl32" x:num="0.13518696069031644" x:fmla="=(G17/D17)-1" align="right">13.5%</td> <td class="xl32" x:num="0.15738025415444779" x:fmla="=(G17/E17)-1" align="right">15.7%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Soybeans for beans (bushels)</td> <td class="xl26" x:num="" align="right">4.87</td> <td class="xl26" x:num="" align="right">5.35</td> <td class="xl26" x:num="" align="right">5.55</td> <td class="xl26" x:num="" align="right">5.73</td> <td class="xl26" x:num="" align="right">6.14</td> <td class="xl26" x:num="" align="right">7.05</td> <td class="xl32" x:num="0.27027027027027017" x:fmla="=(G18/D18)-1" align="right">27.0%</td> <td class="xl32" x:num="0.23036649214659666" x:fmla="=(G18/E18)-1" align="right">23.0%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Peanuts, for nuts (pounds)</td> <td class="xl26" x:num="" align="right">0.24</td> <td class="xl26" x:num="" align="right">0.22</td> <td class="xl26" x:num="" align="right">0.21</td> <td class="xl26" x:num="" align="right">0.19</td> <td class="xl26" x:num="" align="right">0.18</td> <td class="xl26" x:num="" align="right">0.19</td> <td class="xl32" x:num="-9.5238095238095233E-2" x:fmla="=(G19/D19)-1" align="right">-9.5%</td> <td class="xl32" x:num="0" x:fmla="=(G19/E19)-1" align="right">0.0%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Flaxseed (bushels)</td> <td class="xl26" x:num="" align="right">4.46</td> <td class="xl26" x:num="" align="right">4.63</td> <td class="xl26" x:num="" align="right">5.46</td> <td class="xl26" x:num="" align="right">5.99</td> <td class="xl26" x:num="" align="right">6.29</td> <td class="xl26" x:num="" align="right">7.74</td> <td class="xl32" x:num="0.41758241758241765" x:fmla="=(G20/D20)-1" align="right">41.8%</td> <td class="xl32" x:num="0.29215358931552582" x:fmla="=(G20/E20)-1" align="right">29.2%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Apples, all commercial (pounds)</td> <td class="xl26" x:num="" align="right">0.18</td> <td class="xl26" x:num="" align="right">0.19</td> <td class="xl26" x:num="" align="right">0.18</td> <td class="xl26" x:num="" align="right">0.17</td> <td class="xl26" x:num="" align="right">0.18</td> <td class="xl26" x:num="" align="right">0.20</td> <td class="xl32" x:num="0.11111111111111116" x:fmla="=(G21/D21)-1" align="right">11.1%</td> <td class="xl32" x:num="0.17647058823529416" x:fmla="=(G21/E21)-1" align="right">17.6%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Oranges, all types (boxes)</td> <td class="xl26" x:num="" align="right">6.20</td> <td class="xl26" x:num="" align="right">5.79</td> <td class="xl26" x:num="" align="right">5.81</td> <td class="xl26" x:num="" align="right">6.12</td> <td class="xl26" x:num="" align="right">6.63</td> <td class="xl26" x:num="" align="right">7.79</td> <td class="xl32" x:num="0.34079173838209997" x:fmla="=(G22/D22)-1" align="right">34.1%</td> <td class="xl32" x:num="0.27287581699346397" x:fmla="=(G22/E22)-1" align="right">27.3%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" x:str="Grapefruit, all types (boxes) " height="18">Grapefruit, all types (boxes) </td> <td class="xl26" x:num="" align="right">5.19</td> <td class="xl26" x:num="" align="right">5.22</td> <td class="xl26" x:num="" align="right">5.14</td> <td class="xl26" x:num="" align="right">7.09</td> <td class="xl26" x:num="" align="right">8.54</td> <td class="xl26" x:num="" align="right">8.85</td> <td class="xl32" x:num="0.72178988326848259" x:fmla="=(G23/D23)-1" align="right">72.2%</td> <td class="xl32" x:num="0.24823695345557129" x:fmla="=(G23/E23)-1" align="right">24.8%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Potatoes (cwt)</td> <td class="xl26" x:num="" align="right">6.01</td> <td class="xl26" x:num="" align="right">6.07</td> <td class="xl26" x:num="" align="right">6.04</td> <td class="xl26" x:num="" align="right">6.45</td> <td class="xl26" x:num="" align="right">6.52</td> <td class="xl26" x:num="" align="right">6.69</td> <td class="xl32" x:num="0.10761589403973515" x:fmla="=(G24/D24)-1" align="right">10.8%</td> <td class="xl32" x:num="3.7209302325581506E-2" x:fmla="=(G24/E24)-1" align="right">3.7%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Sweet potatoes (cwt)</td> <td class="xl26" x:num="" align="right">16.06</td> <td class="xl26" x:num="" align="right">16.84</td> <td class="xl26" x:num="" align="right">16.82</td> <td class="xl26" x:num="" align="right">17.36</td> <td class="xl26" x:num="" align="right">17.94</td> <td class="xl26" x:num="" align="right">18.24</td> <td class="xl32" x:num="8.4423305588584796E-2" x:fmla="=(G25/D25)-1" align="right">8.4%</td> <td class="xl32" x:num="5.0691244239631228E-2" x:fmla="=(G25/E25)-1" align="right">5.1%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Steers and Heifers (cwt)</td> <td class="xl26" x:num="" align="right">69.44</td> <td class="xl26" x:num="" align="right">72.82</td> <td class="xl26" x:num="" align="right">76.60</td> <td class="xl26" x:num="" align="right">82.78</td> <td class="xl26" x:num="" align="right">86.22</td> <td class="xl26" x:num="" align="right">91.28</td> <td class="xl32" x:num="0.19164490861618799" x:fmla="=(G26/D26)-1" align="right">19.2%</td> <td class="xl32" x:num="0.1026818071998068" x:fmla="=(G26/E26)-1" align="right">10.3%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Cows for slaughter (cwt)</td> <td class="xl26" x:num="" align="right">59.90</td> <td class="xl26" x:num="" align="right">87.70</td> <td class="xl26" x:num="" align="right">67.20</td> <td class="xl26" x:num="" align="right">44.62</td> <td class="xl26" x:num="" align="right">45.76</td> <td class="xl26" x:num="" align="right">47.88</td> <td class="xl32" x:num="-0.28749999999999998" x:fmla="=(G27/D27)-1" align="right">-28.8%</td> <td class="xl32" x:num="7.3061407440609738E-2" x:fmla="=(G27/E27)-1" align="right">7.3%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Calves (cwt)</td> <td class="xl26" x:num="" align="right">94.58</td> <td class="xl26" x:num="" align="right">99.22</td> <td class="xl26" x:num="" align="right">105.50</td> <td class="xl26" x:num="" align="right">111.68</td> <td class="xl26" x:num="" align="right">117.08</td> <td class="xl26" x:num="" align="right">121.60</td> <td class="xl32" x:num="0.15260663507108996" x:fmla="=(G28/D28)-1" align="right">15.3%</td> <td class="xl32" x:num="8.882521489971329E-2" x:fmla="=(G28/E28)-1" align="right">8.9%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Sheep (cwt)</td> <td class="xl26" x:num="" align="right">31.74</td> <td class="xl26" x:num="" align="right">32.60</td> <td class="xl26" x:num="" align="right">34.10</td> <td class="xl26" x:num="" align="right">36.32</td> <td class="xl26" x:num="" align="right">36.44</td> <td class="xl26" x:num="" align="right">37.10</td> <td class="xl32" x:num="8.7976539589442737E-2" x:fmla="=(G29/D29)-1" align="right">8.8%</td> <td class="xl32" x:num="2.1475770925110105E-2" x:fmla="=(G29/E29)-1" align="right">2.1%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Lambs (cwt)</td> <td class="xl26" x:num="" align="right">73.44</td> <td class="xl26" x:num="" align="right">77.86</td> <td class="xl26" x:num="" align="right">83.16</td> <td class="xl26" x:num="" align="right">89.28</td> <td class="xl26" x:num="" align="right">95.00</td> <td class="xl26" x:num="" align="right">99.98</td> <td class="xl32" x:num="0.20226070226070236" x:fmla="=(G30/D30)-1" align="right">20.2%</td> <td class="xl32" x:num="0.11984767025089615" x:fmla="=(G30/E30)-1" align="right">12.0%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Hogs (cwt)</td> <td class="xl26" x:num="" align="right">36.94</td> <td class="xl26" x:num="" align="right">37.50</td> <td class="xl26" x:num="" align="right">41.30</td> <td class="xl26" x:num="" align="right">42.90</td> <td class="xl26" x:num="" align="right">43.20</td> <td class="xl26" x:num="" align="right">45.86</td> <td class="xl32" x:num="0.11041162227602919" x:fmla="=(G31/D31)-1" align="right">11.0%</td> <td class="xl32" x:num="6.8997668997669015E-2" x:fmla="=(G31/E31)-1" align="right">6.9%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Milk (cwt)</td> <td class="xl26" x:num="" align="right">13.90</td> <td class="xl26" x:num="" align="right">13.31</td> <td class="xl26" x:num="" align="right">13.66</td> <td class="xl26" x:num="" align="right">14.22</td> <td class="xl26" x:num="" align="right">13.80</td> <td class="xl26" x:num="" align="right">15.79</td> <td class="xl32" x:num="0.15592972181551978" x:fmla="=(G32/D32)-1" align="right">15.6%</td> <td class="xl32" x:num="0.11040787623066084" x:fmla="=(G32/E32)-1" align="right">11.0%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" x:str="Broilers, commercial (pounds) " height="18">Broilers, commercial (pounds) </td> <td class="xl26" x:num="" align="right">0.36</td> <td class="xl26" x:num="" align="right">0.35</td> <td class="xl26" x:num="" align="right">0.37</td> <td class="xl26" x:num="" align="right">0.39</td> <td class="xl26" x:num="" align="right">0.38</td> <td class="xl26" x:num="" align="right">0.41</td> <td class="xl32" x:num="0.10810810810810811" x:fmla="=(G33/D33)-1" align="right">10.8%</td> <td class="xl32" x:num="5.12820512820511E-2" x:fmla="=(G33/E33)-1" align="right">5.1%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Turkeys (pounds)</td> <td class="xl26" x:num="" align="right">0.39</td> <td class="xl26" x:num="" align="right">0.39</td> <td class="xl26" x:num="" align="right">0.39</td> <td class="xl26" x:num="" align="right">0.40</td> <td class="xl26" x:num="" align="right">0.40</td> <td class="xl26" x:num="" align="right">0.48</td> <td class="xl32" x:num="0.23076923076923062" x:fmla="=(G34/D34)-1" align="right">23.1%</td> <td class="xl32" x:num="0.2" x:fmla="=(G34/E34)-1" align="right">20.0%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" style="height: 13.2pt;" height="18">Eggs (dozens)</td> <td class="xl26" x:num="" align="right">0.63</td> <td class="xl26" x:num="" align="right">0.64</td> <td class="xl26" x:num="" align="right">0.66</td> <td class="xl26" x:num="" align="right">0.64</td> <td class="xl26" x:num="" align="right">0.63</td> <td class="xl26" x:num="" align="right">0.69</td> <td class="xl32" x:num="4.5454545454545414E-2" x:fmla="=(G35/D35)-1" align="right">4.5%</td> <td class="xl32" x:num="7.8125E-2" x:fmla="=(G35/E35)-1" align="right">7.8%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl27" style="height: 13.2pt;" height="18">Wool (pounds)</td> <td class="xl28" x:num="" align="right">0.44</td> <td class="xl28" x:num="" align="right">0.47</td> <td class="xl28" x:num="" align="right">0.55</td> <td class="xl28" x:num="" align="right">0.63</td> <td class="xl28" x:num="" align="right">0.69</td> <td class="xl28" x:num="" align="right">0.63</td> <td class="xl32" x:num="0.14545454545454528" x:fmla="=(G36/D36)-1" align="right">14.5%</td> <td class="xl32" x:num="0" x:fmla="=(G36/E36)-1" align="right">0.0%</td> </tr> <tr style="height: 13.2pt;" height="18"> <td class="xl24" colspan="8" style="height: 13.2pt;" x:str="1/ Prices for crops and milk are for marketing years; for livestock and wool, calendar years. " height="18">1/ Prices for crops and milk are for marketing years; for livestock and wool, calendar years. </td> <td class="xl32">
</td> </tr> </tbody></table>

LargoWinch
07-26-10, 09:24 PM
Wow. Think of the impact of the following, where rice is the main source of nutrients for a lot of humans:

Rice (cwt) 2007-2009: +44.0%

bart
07-26-10, 10:20 PM
Here's a more current picture, the correction to date has brought rice back to 2007 prices - and its still still up ~43% since 2005.



http://www.nowandfutures.com/d3/rice2005-2010.png

ThePythonicCow
07-26-10, 10:58 PM
Here's a more current picture, the correction to date has brought rice back to 2007 prices - and its still still up ~43% since 2005.iTulip's premier chart slut strikes again - thanks!

Does anyone here know why the price of rice spiked in early 2008?

MarkL
07-27-10, 03:09 AM
I buy things online too but more books and things I already know.

I agree with all of your efficiency and cost arguments.

But I like to touch stuff... especially tools. You can get a real feel for whether something is going to brake by twisting on it and checking the welds and plastic parts and such, especially with tools like drills and saws. The 24 tine rake head was also made of a much stronger thickness of metal than the cheaper rake... something that would've been hard to ferret out online.

More than once I've bought something online that had a great picture that.. disappointed upon arrival.

ThePythonicCow
07-27-10, 04:14 AM
But I like to touch stuff... especially tools.Good point.

Chomsky
07-27-10, 04:46 AM
iTulip's premier chart slut strikes again - thanks!

Does anyone here know why the price of rice spiked in early 2008?


Couldn't have had anything to do with OIL, could it?

3494
http://www.itulip.com/forums/images/misc/pencil.png

ThePythonicCow
07-27-10, 05:24 AM
Couldn't have had anything to do with OIL, could it?There are indeed certain similarities between those two curves.

Chris Coles
07-27-10, 05:27 AM
iTulip's premier chart slut strikes again - thanks!

Does anyone here know why the price of rice spiked in early 2008?

Surely the chart is a classic example of a market movement caused by speculators discovering somewhere previously undiscovered to place their bets, ride to top and put to the bottom?

Chomsky
07-27-10, 08:02 AM
There are indeed certain similarities between those two curves.


Food riots occurred around the world when oil spiked, because food prices were dragged upward along with the price of oil.

raja
07-27-10, 08:40 AM
raja: Do the banks have no fear of a derivative meltdown?
http://www.itulip.com/forums/images/misc/quote_icon.png Originally Posted by bart
It's a very small fear - they can be incredibly arrogant, and they think they can hedge any risk - or invent an instrument that will hedge a given risk or risks.Bart, thanks for your response . . . .

A follow-up question:

If high inflation starts to occur, and if the arrogant bankers' hedges against inflation begin to flail, will TPTB then be forced to halt inflation to save the banks? (we're assuming here EJ's contention that inflation/deflation is a political decision, so inflation can be reversed.)

This would kill inflation . . . POOM would be cut very short . . . and Deflation would commence in a big way.

It the gov't tried to bail out the banks in response to a massive derivatives collapse, wouldn't that quickly lead to HYPERINFLATION, since the sums of money needed would be in the trillions?

If either of the above scenarios were to play out, we would have to amend EJ's theory to Ka Ka POOM Ka Ka Ka Ka . . . . or . . . HYPERinflation.

bart
07-27-10, 04:09 PM
iTulip's premier chart slut strikes again - thanks!

Does anyone here know why the price of rice spiked in early 2008?

Check this:
http://en.wikipedia.org/wiki/Rice_shortage

My opinion - a combination of weather, inflation, fear and speculation.


Here's a pretty decent look at the entire area:
http://en.wikipedia.org/wiki/2007%E2%80%932008_world_food_price_crisis

ThePythonicCow
07-27-10, 04:18 PM
Check this:Thanks, bart.

bart
07-27-10, 04:35 PM
Bart, thanks for your response . . . .

A follow-up question:

If high inflation starts to occur, and if the arrogant bankers' hedges against inflation begin to flail, will TPTB then be forced to halt inflation to save the banks? (we're assuming here EJ's contention that inflation/deflation is a political decision, so inflation can be reversed.)

This would kill inflation . . . POOM would be cut very short . . . and Deflation would commence in a big way.

It the gov't tried to bail out the banks in response to a massive derivatives collapse, wouldn't that quickly lead to HYPERINFLATION, since the sums of money needed would be in the trillions?

If either of the above scenarios were to play out, we would have to amend EJ's theory to Ka Ka POOM Ka Ka Ka Ka . . . . or . . . HYPERinflation.



Very rough set of questions, since it depends so much on those things called human politicians that tend to blow with the wind - especially when we have a President who talks a good game but comes up short in the area of effective & sane actions.

Volcker was backed by both Carter and Reagan (a historical demonstration of how inflation and its control are mostly a political decision). In other words, eventually yes - the PTBs & elites will be forced to bring inflation under better control... much like they'll be forced to bring "deflation" under control too.
Don't forget that current inflation as measured by CPI without lies is running at least 5-6% currently, on a trailing basis.

Timing is of course the main issue, and who knows at this point - way too many variables. Do also consider that if there is a "derivatives collapse", the rest of the world will have basically the same problems. US non shadow derivatives are "only" about 1/3 of the world total - per the OCC and BIS.

Like EJ, I don't believe that we'll truly have hyperinflation - but I won't totally exclude it either. I can foresee a year with 25-40%+ inflation though, primarily due to international dollar value loss.

Amen on the KaKa... :( ... and more seriously, there's more than a small possibility in my opinion that volatility & uncertainty & political games will cause a period of KaPoomKaPoomKaPoom. We've sort of been going through one in the last few months.

chr5648
07-27-10, 06:28 PM
http://imgur.com/Us54W.png

Green is fed funds rate, orange is rough rice. Right when the fed funds rate was dropped, price for rough rice skyrocketed. Replace rough rice with any commodity and you get the same result. Oil included too. This is more government interference and manipulation in the markets, their interventions in the fed funds created a tax for consumers in food commodities and oil.

You guys are amateurs. :D

ThePythonicCow
07-27-10, 09:49 PM
Right when the fed funds rate was dropped, price for rough rice skyrocketed. ... This is more government interference and manipulation in the markets
Are you speaking tongue in cheek?

If you're speaking seriously, then may I suggest you not confuse correlation with causation. There were likely other events that caused both these changes.

Note also near the end of 2009, when the fed funds rate fell again. This time rice fell as well.

dummass
07-27-10, 10:08 PM
There were likely other events that caused both these changes.


My wife and I have a farm in an area where rice is grown. If I recall, the price of fertilizer was very high at the time. They don't grow rice in our area without fertilizer. Since few had the resources to plant that year, there were shortages.

chr5648
07-27-10, 10:43 PM
Are you speaking tongue in cheek?

If you're speaking seriously, then may I suggest you not confuse correlation with causation. There were likely other events that caused both these changes.

Note also near the end of 2009, when the fed funds rate fell again. This time rice fell as well.

Market structure changes with endogenous and exogenous variables. Carry trade, participants, sentiment, volume, etc.

If you also remember at the time the beginning of the 4th quarter tarp and a whole bunch of bailouts occurred. Most importantly confidence and credibility was lost among almost all market participants. Deleveraging and fear was the name of the game. If you notice there was that huge spike of the fed funds rate that one day and then the further collapse of markets.

The market structure now is completely different than it was 6 months ago, a year ago, and even 2 years ago.

raja
07-27-10, 11:15 PM
there's more than a small possibility in my opinion that volatility & uncertainty & political games will cause a period of KaPoomKaPoomKaPoom. We've sort of been going through one in the last few months.
I think that there are limits to the power of TPTB: political, e.g. French Revolution; financial, e.g. a derivatives implosion; mathematical, e.g., the Ponzi scheme that is our out-of-control debt games; peak oil; etc. When EJ predicts that TPTB will print money and cause an inflationary POOM, that is only one possible scenario among many, in part due to the fact that TPTB may lose control . . . or they may simply create deflation because they think that better serves their self interest . . . or as Bart suggested, we may get KaPoomKaPoomKaPoom.

When I read the different predictions out there from educated, intelligent people, which run the gamit from minor recession to deflationary depression to hyperinflation to major societal collapse, that tells me that there are too many variables for anyone to have any real certainty of what the future holds. (Even if an analyst has a stellar performance record, as we all know, past performance doesn't guarantee future results.) Yet, we know the future is coming, and the investment decisions we make now will determine our fate. Personally, I'd love to know whether we're going to have inflation or deflation or both, but I don't think it's possible to know, so I'm diversified to cover every scenario (that is survivable and does not require fleeing to another country).

In addition to my daily readings of iTulip, Denninger, Krugman, ZH, the MSM, and others, what I'd like to find is a discussion forum that is agnostic on the future, where all possible scenarios are examined in a systematic, critical and energetic way. ZH is the closest to that, but the info there is chaotic and fragmented. (By the way, I get a lot out of their post comments, but there are so many I rarely get through them all.)

rdrees
07-29-10, 07:55 PM
Wow, I have never had the experience of someone citing figures supporting my argument while they are attempting to contradict my argument. You paid less in 2010 than you did in 2006 and you say that "proves" that prices have significantly risen? Astounding!

Why do you assume that an arbitrary number that Safeway says a hypothetical person would pay is the "price?" You didn't pay that price! Safeway didn't require you to pay that price! How can you say that's the price?

Sure, some suckers probably don't sign up for that free Safeway Club card and pay through the nose, but that has got to be a small minority of customers. But let's assume 25% of consumers are crazy enough not to take advantage of lower prices that Safeway is visibly offering for a nominal one-time investment of 5 minutes of your time. I couldn't find any figures online, but I would assume that a 25% sucker rate is being very generous. That means the actual average price Safeway gets per unit is basically flat. At a 25%/75% split, average price in 2006 would be $13.72 while today would be $13.76

Even if it's a 50/50 split of suckers to normal people who would generally prefer to pay less, which I cannot imagine being the case, the average price in 2006 would be $16.44 while today would be $17.96, a four year price increase of a little over 9%, which averages out to barely over a 2% yearly inflation rate.

Remember, my point is not that we will see deflation of any major kind (though I do think we've seen some of what I would call deflation). My point is that EJ was wrong when he said we'd see significant inflation by now. Basically flat prices for four years is NOT significant inflation. And I think it's a major stretch to call 2% yearly inflation "significant" inflation of the kind that you would want to specifically structure your investments around. 2% yearly inflation is basically the kind of background steady inflation that has been the hallmark of healthy, growing, modern economies. And really, even if that 50/50 split were correct, does a 4 year inflation rate of a little over 9% really matter than much when the increase in personal income was over 10.5% during that same time period? http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=58&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Qtr&FirstYear=2006&LastYear=2010&3Place=N&Update=Update&JavaBox=no

So I appreciate very much your Safeway comparison receipts, as I think it pretty clearly demonstrates that EJ was wrong on this particular call, as much as he may be right about other things.

c1ue
07-29-10, 09:37 PM
Wow, I have never had the experience of someone citing figures supporting my argument while they are attempting to contradict my argument. You paid less in 2010 than you did in 2006 and you say that "proves" that prices have significantly risen? Astounding!

Wow, clearly you didn't read the entire post, nor comprehend what was actually written.

An anecdotal sale - which happens once every 3 months or so - is hardly deflation.

Were I to dig more carefully, I guarantee I can find a lower price in the 2006-2010 period.

The list prices are up and the average price paid is almost certainly up.

Bart's data also is quite consistent with what I see - while you CAN find some things cheaper due to clearance or whatever, it is quite clear from the dollar totals that prices have gone up.

So if you want to believe EJ is wrong, so be it.

From what I can see, you want to see deflation and so you do.

MarkL
07-29-10, 09:52 PM
Wow, clearly you didn't read the entire post, nor comprehend what was actually written.

Respectfully, this is a frequent phrase of yours C1ue.

I've quickly counted 21 posts of yours (and stopped counting) where a good variety of readers of yours didn't "comprehend what was actually written", myself being one of those readers. In truth, what's happening here is people disagreeing, not "not comprehending what was written." Your repeated use of this and similar phrases is a demeaning technique that doesn't add value to the conversation.

By the way, I'm not implying that you are the only one that does this, nor that I'm not guilty of similar techniques myself!

And as a second BTW, in this post I agree with you and not RDRees on the overall subject of him wanting to see deflation and doing so by picking the peak to start his analysis.

bart
07-29-10, 10:27 PM
...

Bart's data also is quite consistent with what I see - while you CAN find some things cheaper due to clearance or whatever, it is quite clear from the dollar totals that prices have gone up.

So if you want to believe EJ is wrong, so be it.

From what I can see, you want to see deflation and so you do.


Indeed - I posted at least a half dozen charts that clearly show substantial inflation - and even provided examples in his very own expenses.




And then we have this, which really has my hackles up - if this was an unmoderated board, he's be a little speck of carbon due to having been flamed by me - with afterburners on max.



...
My point is that EJ was wrong when he said we'd see significant inflation by now. Basically flat prices for four years is NOT significant inflation.
...



This is the second time he's been here, both times beating the deflation drum hard and saying that EJ was wrong.

There's a difference between debate/discussion and pounding the same ideas in post after post. And the horse puckey about flat prices for the last four years is just plain ridiculous.


In my opinion and at best, that's quite tacky.... and at worst he's an astroturfer or similar.

MarkL
07-30-10, 12:33 AM
With that said, here is a reasonable argument against high inflation:
Why (Hyper) Inflation Is Not In the Cards (http://www.oftwominds.com/blogjuly10/deflation-hyperinflation-07-10.html)

THIS is an excellent article. It is the ONLY solid argument against Poom that I've read. (Sorry RDRees!)

EJ, You've argued that the government will act in it's own best interests and deflate away our debt by printing money madly. What do you think of this counterpoint from Aaron's article?

So if high inflation is bad for the Power Elites who own 75% of the productive assets of the nation, and this same Power Elite wields unassailable influence over the processes of governance (Congress, the Fed, the Treasury, etc.), then why would they allow the Fed and the Treasury to inflate away their wealth?

(Someone should make this a thread of it's own!!)

EJ? Fred?

MarkL
07-30-10, 12:42 AM
Indeed - I posted at least a half dozen charts that clearly show substantial inflation - and even provided examples in his very own expenses.

Yea, and RDRees showed the PPI and CPI from the BLS that backed up his position and showed multiple other expense examples.


And then we have this, which really has my hackles up - if this was an unmoderated board, he's be a little speck of carbon due to having been flamed by me - with afterburners on max. This is the second time he's been here, both times beating the deflation drum hard and saying that EJ was wrong.

He's not beating the deflation drum hard, he's accusing EJ of prematurely predicting inflation. READ his posts.
"my point is not that we will see deflation of any major kind..."


There's a difference between debate/discussion and pounding the same ideas in post after post. And the horse puckey about flat prices for the last four years is just plain ridiculous. In my opinion and at best, that's quite tacky.... and at worst he's an astroturfer or similar.

There's also a difference between debate/discussion and just flaming your opponents like this post does.

I don't agree with RDRees's opinion. But he's supported his arguments with strong factual backup (much of which I've written opposition to, but I still respect) and we need more people on this board of an opposing opinion. LOTS of people on this site pound the same idea out over and over (and over and over)... and they are accepted because they are in line with the general opinion.

RDRees, you and I have had some intense disagreements even in this same thread, but I for one APPRECIATE your contribution and opinions here and respect someone who brings intellectual honesty to an opposing opinion. We need MORE of that here and less "flaming with afterburners on max" just because we don't agree with someone.

LargoWinch
07-30-10, 04:35 AM
I think I saw the word "tequila" on c1ue receipt!

So Diet Coke and Tequila, that makes what? Tar Bals! (2-for-1 in FL as I understand...)

LargoWinch
07-30-10, 04:46 AM
THIS is an excellent article. It is the ONLY solid argument against Poom that I've read. (Sorry RDRees!)

EJ, You've argued that the government will act in it's own best interests and deflate away our debt by printing money madly. What do you think of this counterpoint from Aaron's article?

So if high inflation is bad for the Power Elites who own 75% of the productive assets of the nation, and this same Power Elite wields unassailable influence over the processes of governance (Congress, the Fed, the Treasury, etc.), then why would they allow the Fed and the Treasury to inflate away their wealth?

(Someone should make this a thread of it's own!!)

EJ? Fred?


MarkL, I do not believe the quoted article by CHS provides a "solid" argument against inflation, for the following reasons:

a) The top 1% assets are not mainly cash, far from it. They own assets. Think: RE, art, boats, wine, collectible, stocks, businesses etc. etc.

b) The top 1% benefits from inflation as the largesses from the government flows into their industry first: think military contractors

c) The top 1% benefit/own/control the banking system which of course makes a killing during times of negative interest rates, which is unrelated to inflation (borrow at 10% lend at 15% - or borrow at 0% lend at 5%)


Also, ask yourself why over the last decade, did the gap between rich and poor grew? The rich did not get "less rich", they got insanely richer despite substantial inflation.

Inflation is a tax from the government in favor of the rich and well connected. Period. This process will continue and accelarate.

As such, the article by CHS is misguided.

bart
07-30-10, 06:44 AM
Yea, and RDRees showed the PPI and CPI from the BLS that backed up his position and showed multiple other expense examples.



I submit, as others have, that the period he used was basically cherry picked. He also blew off and never responded to my points about his various expenses.



He's not beating the deflation drum hard, he's accusing EJ of prematurely predicting inflation. READ his posts.
"my point is not that we will see deflation of any major kind..."



Perhaps you should more carefully read those posts of his, but probably the simplest answer is for us to agree to disagree.



There's also a difference between debate/discussion and just flaming your opponents like this post does.



If you believe that my post was a flame and that there are no such things as astroturfing and similar, there's little else I can say.

My take is that there's something else going on with his comments and views that is undisclosed, per my decade plus of experience on forums with areas like cognitive dissonance and logical fallacies - and again, you're free to disagree.
Could I be wrong - sure - but it happens very infrequently.


I don't agree with RDRees's opinion. But he's supported his arguments with strong factual backup (much of which I've written opposition to, but I still respect) and we need more people on this board of an opposing opinion. LOTS of people on this site pound the same idea out over and over (and over and over)... and they are accepted because they are in line with the general opinion.



"General opinion" is what any forum is composed of, but for example and in my opinion when someone writes a long post about something as minor as Safeway discount cards to try and prove that we haven't had much inflation, I call foul and poor analysis - and do not respect it.

Opposing opinion to the general opinion is fine and I seldom post about them on any forum, but when I believe that cherry picking and similar tools are used (intentionally or not) or that someone's data or conclusions are truly bogus, I speak up.

The main comment to which I strongly objected was "Basically flat prices for four years". I have real problems with "conclusions" like that, mostly for their strongly misleading nature.


RDRees, you and I have had some intense disagreements even in this same thread, but I for one APPRECIATE your contribution and opinions here and respect someone who brings intellectual honesty to an opposing opinion. We need MORE of that here and less "flaming with afterburners on max" just because we don't agree with someone.



You're of course welcome to take my comment about afterburners out of context and spin it, but his clear and in context and bogus statements like "basically flat prices for four years" remain.



..

MarkL
07-30-10, 10:56 AM
c) The top 1% benefit/own/control the banking system which of course makes a killing during times of negative interest rates, which is unrelated to inflation (borrow at 10% lend at 15% - or borrow at 0% lend at 5%)

You've shifted the conversation from the article's focus on "The Banksters" influence in Washington to "The Rich." It's an interesting distinction and I'm not sure who has more influence... and to what degree there is a difference between the two. However, I think understanding the answer the question might help resolve the question.

a and b are valid points, although I think minor in comparison to c and points related to c. IF the rich own the banks and during an inflationary period the debt on the banks balance sheets will take a terrific beating, then the rich will take a hit. Even if you disagree that the rich own the banks, the point in the article is that the Banksters have substantial influence in Washington (hard to deny!!!) and their motivations will remain to not have their debt inflated away. It's a decent argument to me... at the least against the specific motivations that EJ has tendered for WHY our government will cause it.


Also, ask yourself why over the last decade, did the gap between rich and poor grew? The rich did not get "less rich", they got insanely richer despite substantial inflation.

I'm not sure I would characterize the 2%-4% inflation we've seen over the last decade as "substantial" (Defined as prices based on CPI/PPI not money flows). I don't think it is "substantial" if you compare to say, the last 50 or 100 years. But that's probably an unimportant point. I know of a number of reasons why the rich got richer, but did moderate inflation promote that wealth transfer or retard it? I'm not sure I know the answer to that specific or can jump to that as a proof point.

Good thoughts.

MarkL
07-30-10, 11:40 AM
I have no problem with you "calling foul and poor analysis." I've done that several times with RDRees.

I see zero indication of astro-turfing... none of it looks like boilerplate to me. But we can certainly disagree here and I really don't have a problem with you claiming Astro-turfing where you see it.

I am however, very frustrated by the way many people here don't tolerate opposing opinions and flame with few facts opposing opinions. I've been with iTulip for awhile and it's gone from (IMHO) a reasonably objective discourse covering both sides of these issues (in the forums) to a bunch of philosophically incestuous folks back-patting each other on how smart they are that doesn't do justice to intelligent discourse. I've (until the last 3 days) spent MUCH less time here because of it and found other places where ALL perspectives are debated heartily and with tolerance. I mostly only come here now to read Eric's brilliant articles... but I don't really look for intelligent counterpoint because flamers have pushed them away.

Posts calling "foul" and why are good. Posts that flame are bad and push intelligent discourse away.

His arguments for "basically flat prices for four years" have some decent BLS numbers behind them. I heartily disagree with them and have presented extensive counterpoint and was one of the first that made the "cherry picking time frame" argument. But he provides intelligent discourse here and doesn't deserve to be "a little speck of carbon due to having been flamed by me - with afterburners on max."

bart
07-30-10, 12:52 PM
I have no problem with you "calling foul and poor analysis." I've done that several times with RDRees.

I see zero indication of astro-turfing... none of it looks like boilerplate to me. But we can certainly disagree here and I really don't have a problem with you claiming Astro-turfing where you see it.



I don't *know* that its astroturfing or similar, but his patterns and views and *always* attacking EJ in his very first post do more than concern me.


I am however, very frustrated by the way many people here don't tolerate opposing opinions and flame with few facts opposing opinions. I've been with iTulip for awhile and it's gone from (IMHO) a reasonably objective discourse covering both sides of these issues (in the forums) to a bunch of philosophically incestuous folks back-patting each other on how smart they are that doesn't do justice to intelligent discourse. I've (until the last 3 days) spent MUCH less time here because of it and found other places where ALL perspectives are debated heartily and with tolerance. I mostly only come here now to read Eric's brilliant articles... but I don't really look for intelligent counterpoint because flamers have pushed them away.



Given your strong feelings about large quantities of flamers and back-patters supposedly being here, I completely fail to understand why you even posted initially.

I've been here since virtually day one of the restart of iTulip and see little substantial evidence of flaming or back-patting (with the possible exception of a very few of metalman's posts), but more than a little random carping criticism from those who aren't fully aware of all of what EJ has written - and especially including his multiple admissions of having blown it now & then, just like virtually everyone else - including myself... and his documented record of being correct is up there with the best in my opinion.


Posts calling "foul" and why are good. Posts that flame are bad and push intelligent discourse away.

His arguments for "basically flat prices for four years" have some decent BLS numbers behind them. I heartily disagree with them and have presented extensive counterpoint and was one of the first that made the "cherry picking time frame" argument. But he provides intelligent discourse here and doesn't deserve to be "a little speck of carbon due to having been flamed by me - with afterburners on max."




I'm aware that you were one of the ones who got after him for cherry picking, but didn't note it in order to avoid being accused of pandering or whatever.

If you & he choose to believe the BS coming out of the BLS in spite of the weight of cited evidence to the contrary, and ignore or denigrate large quantities of specific facts & evidence from elsewhere (like the CRB/CCI vs. PPI etc., shadowstats work including BS like OER, geometric weighting, hedonics, horrific & bogus weighting of medical, etc. - all of which is easily provable -- or even various charts I've posted like electric rates which have gone up about 8% per year since 2007 and about 5% per year since 2006 - any many more examples like oil which is up about 6%+ per year since 2006), then again and at the very least we must agree to disagree.

The raw facts just plain show that "basically flat prices for four years" is ~99% bogus and worse.

Additionally, I did not flame (either with or without afterburners) rdrees as you yet again try and pose or spin and accuse me of - and after having made a big deal out of iTulip posters being flamers or back patters etc.

The full quote was (referring to the basically no inflation comment) "And then we have this, which really has my hackles up - if this was an unmoderated board, he's be a little speck of carbon due to having been flamed by me - with afterburners on max.". (emphasis mine)

"Interesting" how you failed to include the entire quote yet again for proper and full perspective.





The basic point remains - even the lying CPI (and rdress admitted that its low) shows that, even splitting the difference between CPI and shadowstats numbers, "inflation" ran at about 6% per year for the last 4 years.

That's not even vaguely close to "basically flat prices for four years", and I still maintain that his comment was ridiculous.

MarkL
07-30-10, 04:13 PM
I respect your difference of opinion with RDRees on the value of the CPI and PPI BLS figures. However, please note that others here including EJ use those figures ALL THE TIME and I don't see you criticizing EJ when he uses them. Can't you show respect for the opinions of others through intelligent discourse, regardless of whether you think their facts or their conclusions are bogus?


if this was an unmoderated board, he's be a little speck of carbon due to having been flamed by me - with afterburners on max.". "Interesting" how you failed to include the entire quote yet again for proper and full perspective.

Come on bart... don't pretend those 6 words magically erase what you said! I've read your posts and KNOW you're an intelligent guy.. you know that saying you'd say those words somewhere else, is virtually the same as saying them!

People who pretend not to say something when they've typed it right there in black and white... THAT is what should get your hackles up!

If I was somewhere else I'd say that George Bush was a lousy President. Oh! Whoops! Heehee. I said it anyway didn't I??

bart
07-30-10, 05:04 PM
I respect your difference of opinion with RDRees on the value of the CPI and PPI BLS figures. However, please note that others here including EJ use those figures ALL THE TIME and I don't see you criticizing EJ when he uses them. Can't you show respect for the opinions of others through intelligent discourse, regardless of whether you think their facts or their conclusions are bogus?



I don't believe that you intended to, but you just made one of my points for me. EJ very much does believe and has stated numerous times that CPI is significantly understated at best. The last I recall, he believed that shadowstats numbers were 2-3% high - and as I stated above in one of my responses to rdrees, I'm not adamant about using exact numbers from either shadowstats or from my own CPI w/o lies reconstruction.

You should take your own advice and read some more - no wonder you have a low opinion of this forum.

There are many regular posters here with whom I disagree but none of them always start a series of posts criticizing EJ, and you will also find that I do post in others threads many times when either I notice a factual error or think I can add something substantive - and without hammering anyone. You can even find multiple posts where Finster & I have disagreed, and then worked it out - and its the same with EJ, although we don't disagree often.

Additionally, if you're suggesting that I respect people whose opinions and facts I believe to be more than a little wrong (and most especially when they're as forcefully or continually stated as rdrees has, and in the context of trying to prove EJ wrong), then yet again there's little I can say.




Come on bart... don't pretend those 6 words magically erase what you said! I've read your posts and KNOW you're an intelligent guy.. you know that saying you'd say those words somewhere else, is virtually the same as saying them!



I suggest that you do indeed know how important those six words are, as witness you having failed to quote them precisely twice in a row.


People who pretend not to say something when they've typed it right there in black and white... THAT is what should get your hackles up!

If I was somewhere else I'd say that George Bush was a lousy President. Oh! Whoops! Heehee. I said it anyway didn't I??


And yet again, in my opinion you have failed to directly address the root issue (quoted below) noted at the bottom of my last post - but have rather chosen to ridicule or attempt to divert or whatever.

You of course may continue along those lines, but unless you or he brings up something substantive and factual (as well as at least taking a stab at all the open issues that I've brought up that remain unacknowledged or addressed - best I can tell), I'm done.




The basic point remains - even the lying CPI (and rdrees admitted that its low) shows that, even splitting the difference between CPI and shadowstats numbers, "inflation" ran at about 6% per year for the last 4 years.

That's not even vaguely close to "basically flat prices for four years", and I still maintain that his comment was ridiculous. ... and I stand by the rest of my words too.

Jay
07-30-10, 05:14 PM
http://i190.photobucket.com/albums/z139/earlpendly/dirty-old-man2.jpg

Awesome.

c1ue
07-30-10, 05:38 PM
In truth, what's happening here is people disagreeing, not "not comprehending what was written." Your repeated use of this and similar phrases is a demeaning technique that doesn't add value to the conversation.

You may note that in the original post with the Safeway Diet Coke data points, I wrote:


The price I personally paid in this case was actually lower in 2010, but the discount rate was higher. The CRV has also significantly increased.

The regular price in 2006 was $19.96 for 4-12 packs with $1.92 CRV. The price I paid was $11.00

The regular price in 2010 was $23.96 for 4-12 packs with $2.40 CRV. The price I paid was $9.56

So officially you could say there was deflation in the price I personally paid. But the prices have gone up significantly. And those who aren't willing to spend the 3 or 4 months between sales as I do, and stockpile when prices are optimum - they're paying much closer to the $5.99 than the $2.39 much as they were paying much closer to the $4.99 than the $2.75 in 2006.

What RDRees stated in his subsequent post:


Wow, I have never had the experience of someone citing figures supporting my argument while they are attempting to contradict my argument. You paid less in 2010 than you did in 2006 and you say that "proves" that prices have significantly risen? Astounding!

is a clear misinterpretation - deliberate or otherwise - in what I said.

RDRees chose to focus only on the price I paid, while ignoring BOTH the list price and the CRV paid as well as the statement I made at the end.

So while you may choose to view my post as a cognitive dissonance, for my part I do not agree. If anything, it is your attempting to continue a disagreement on another thread which is coloring your own actions.

For the record, while I believe EJ and iTulip have done seminal work - I personally believe hyperinflation in the 100%/1 year, 10%/1 month sense is very much a strong possibility because of the political power structure in the US as well as the ongoing economic trajectory.


There's also a difference between debate/discussion and just flaming your opponents like this post does.

As for your ongoing "discussion" with bart - it is quite rare that bart even bothers participating in such EJ is right/EJ is wrong discussions.

Also for the record: EJ has never said prices would not fall. EJ has never said that inflation was going to occur on x date at y rate. He cannot, nor can anyone, because the ultimate driving factors are political in nature: kicking the can down the road may make the problem worse but only if you're still in office.

The EJ/iTulip thesis has been quite clear. In those instances where EJ/iTulip have made a strong stand and been wrong, they have to their great credit openly acknowledged doing so - something which is almost never seen anywhere else.

Rdrees may disagree with EJ/iTulip, but to his detriment he has not done his homework.

EJ has many times clearly stated that deflation in the Great Depression sense is a self sustaining spiral - RDRees has not demonstrated anything more than a period of falling prices, even beyond the CPI-lies issue.

note to iTulip: part of the problem may be in the likely seldom used but still out-of-date iTulip Glossary.

Jay
07-30-10, 05:42 PM
In my mind, the large financial players can front run any inflationary or deflationary forces at this point as long as those forces don't risk the system. Goldman had a perfect first quarter, 63 days of making at least 25 million a day. They got this thing figgerd.

LargoWinch
07-30-10, 09:24 PM
You've shifted the conversation from the article's focus on "The Banksters" influence in Washington to "The Rich."

As stated previously, the rich own most of the assets, and thus benefit from inflation...

Perhaps my point "c" was confusing (Banksters), but what is your counter-argument for "a" and "b"?

MarkL
07-31-10, 02:10 AM
No. I said the rich own most of the assets, and thus benefit from inflation.
Perhaps my point "c" was confusing, but what is your counter-argument for "a" and "b"?

I agreed with point a&b!

The question I see the article and your response leading me to is, how does the power-influence game in Washington shake out in regards to monetary policy and whether the gov/fed steers us towards inflation/deflation.?

Influence #1: "The Gov" (EJ's argument). The government needs to deflate it's debt so therefore they will pull the trigger on inflation via money printing. There is no difference between the gov and the Fed in reality so the Fed will print money as governments have done numerous times to make their debt go away.

Influence #2: "The Banksters" (The Article's Argument) The Banksters have enough influence over the Pres and Congress to make them less concerned about the debt and more concerned about not deflating the Banksters debt (so the poli's will get their campaign finance). Inflation is bad for Bankers because their debt would whither in value and their influence over the Gov will win the day... no inflation.

Influence #3 "The Rich" (Largo's argument). The Rich own assets (not debt?) and so inflation benefits them. The rich have more influence over the government than the Banksters so the Rich and the Gov will pull together to pull the trigger on inflation.

The above choices simplifies reality of course. There is certainly cross-over between 2 & 3 (Rich Banksters that own both assets and debt). So to rephrase the question I stated above... if you add the Rich & the Banksters together, do they care more about inflating assets or not deflating their outstanding loans? Which do they have more of and what would the net impact of inflation be on them? Summed together which way would the rich and the Banksters end up influencing the government?

I see all your points Largo... and agree all are valid. The rich do have assets. They do benefit from gov largess, and they do own banks which do receive benefit during inflationary times. But I'm not sure to what degree these facts outweigh the fact that the Rich and the Banksters also have huge loans they've made to the world that they don't want inflated away.

I used to completely agree that EJ's gov-debt argument would unilaterally influence Washington to inflate away the debt.

I'm starting to think that both arguments have pull in Washington due to Bankster Lobbyists:
--No inflation! It will kill the economy & destroy the debt-assets of our banks pushing our banking system over the edge!!
--Inflate the Debt away! It's the only solution to the Trillion dollar deficit!!

MarkL
07-31-10, 02:24 AM
And yet again, in my opinion you have failed to directly address the root issue (quoted below) noted at the bottom of my last post - but have rather chosen to ridicule or attempt to divert or whatever.

You of course may continue along those lines, but unless you or he brings up something substantive and factual (as well as at least taking a stab at all the open issues that I've brought up that remain unacknowledged or addressed - best I can tell), I'm done.

... and I stand by the rest of my words too.

As you failed to address mine. I've read your words over several times... I have no clue what subtlety you're referring to and still must call it as I see it... you are flaming someone who was simply stating opposing opinion in those words instead of making a cogent argument.

You make lots of good arguments on here Bart. I'm just saying the flames (as I see them) are beneath you...and this forum.

MarkL
07-31-10, 02:28 AM
If you & he choose to believe the BS coming out of the BLS...

And please don't put words in my mouth. I didn't say I believed the BLS figures. I said they can be argued to be valid. Much like yours can argued to be valid and just like EJ can argue yours are 2%-3% too high.

To quote myself, "I don't agree with RDRees's opinion. But he's supported his arguments with strong factual backup (much of which I've written opposition to, but I still respect)..."

LargoWinch
07-31-10, 06:37 AM
I agreed with point a&b!

The question I see the article and your response leading me to is, how does the power-influence game in Washington shake out in regards to monetary policy and whether the gov/fed steers us towards inflation/deflation.?

Influence #1: "The Gov" (EJ's argument). The government needs to deflate it's debt so therefore they will pull the trigger on inflation via money printing. There is no difference between the gov and the Fed in reality so the Fed will print money as governments have done numerous times to make their debt go away.

Influence #2: "The Banksters" (The Article's Argument) The Banksters have enough influence over the Pres and Congress to make them less concerned about the debt and more concerned about not deflating the Banksters debt (so the poli's will get their campaign finance). Inflation is bad for Bankers because their debt would whither in value and their influence over the Gov will win the day... no inflation.

Influence #3 "The Rich" (Largo's argument). The Rich own assets (not debt?) and so inflation benefits them. The rich have more influence over the government than the Banksters so the Rich and the Gov will pull together to pull the trigger on inflation.

The above choices simplifies reality of course. There is certainly cross-over between 2 & 3 (Rich Banksters that own both assets and debt). So to rephrase the question I stated above... if you add the Rich & the Banksters together, do they care more about inflating assets or not deflating their outstanding loans? Which do they have more of and what would the net impact of inflation be on them? Summed together which way would the rich and the Banksters end up influencing the government?

I see all your points Largo... and agree all are valid. The rich do have assets. They do benefit from gov largess, and they do own banks which do receive benefit during inflationary times. But I'm not sure to what degree these facts outweigh the fact that the Rich and the Banksters also have huge loans they've made to the world that they don't want inflated away.

I used to completely agree that EJ's gov-debt argument would unilaterally influence Washington to inflate away the debt.

I'm starting to think that both arguments have pull in Washington due to Bankster Lobbyists:
--No inflation! It will kill the economy & destroy the debt-assets of our banks pushing our banking system over the edge!!
--Inflate the Debt away! It's the only solution to the Trillion dollar deficit!!

Thanks MarkL , that is a great synopsis of the discussion. "Food for thoughts" as they say!

Ben
07-31-10, 08:50 AM
Yes - and a moderate inflation is probably the easiest way to save the system, which is what the rich ultimately want

Jay
07-31-10, 08:57 AM
I'm starting to think that both arguments have pull in Washington due to Bankster Lobbyists:
--No inflation! It will kill the economy & destroy the debt-assets of our banks pushing our banking system over the edge!!
--Inflate the Debt away! It's the only solution to the Trillion dollar deficit!!
That's why the ultimate solution for those who make money and wield power is, "do whatever you must to preserve the system!" "We make tons of money either way!"

They will start to eat themselves eventually.

raja
07-31-10, 10:34 AM
Influence #1: "The Gov" (EJ's argument).
Influence #2: "The Banksters"
Influence #3 "The Rich" (Largo's argument).

MarkLm,

Let me suggest two other influences . . . .

Influence #4 -- The People
EJ's premise is that the government will keep the people happy by fulfilling its obligations through printing. But those obligations will be filled with inflated money, so the pensioners, people with savings, and those on the government teat will experience a severe reduction in their standard of living. It's already happening with reduced State services, retirement savings lost in the stock market, unfunded pensions. Soon, the true cause of the People's poverty will come out . . . that is, the wealth disparity in this country caused by the actions of the parasitical Financial Elite. Will The People rise up politically against the Financial Elite? If they do, and I think they will, it could very easily result in anti-inflationary policies that are inimical to the banks and the wealthy.

Influence #5 -- Our Lenders
If we inflate away the value of the dollar, will the oil-producers still sell us cheap oil? Will our trading partners still take our funny money in exchange for their labor and raw materials? If no, then world commerce -- and profits of TPTB -- will dry up.

Since inflation or deflation seems to be a choice, the question is, what do TPTB think will serve them best?

I'd really like to hear c1ue chime in on this one . . . .
And . . . it would be good to hear how EJ weighs these competing influences in his analysis. Maybe MetalMan can dig up something from the archives?

c1ue
07-31-10, 08:28 PM
Certainly in a simplistic sense, the banksters want the debt accumulation/FIRE game to continue forever.

However, just because they are selfish and amoral, doesn't make them stupid.

As Dr. Michael Hudson noted previously and which I referenced here: http://www.itulip.com/forums/showthread.php/11559-Talk-of-dollar-devaluation-getting-stronger-by-the-day.?p=119180#post119180

At some point the parasites realize the host can't support them anymore, and start devoting their efforts to reproduction and escape.

Thus this talk about banksters not wanting inflation/hyperinflation only makes sense if the banksters truly believe the existing system can continue - i.e. that their existing and ongoing debt is collectable.

I don't believe it is.

Jay
07-31-10, 09:38 PM
I don't believe it is.
The answer will be in the TIC data.

The debt is collectible, in tiny dollar bills.

raja
07-31-10, 11:05 PM
Certainly in a simplistic sense, the banksters want the debt accumulation/FIRE game to continue forever.

However, just because they are selfish and amoral, doesn't make them stupid.

As Dr. Michael Hudson noted previously and which I referenced here: http://www.itulip.com/forums/showthread.php/11559-Talk-of-dollar-devaluation-getting-stronger-by-the-day.?p=119180#post119180

At some point the parasites realize the host can't support them anymore, and start devoting their efforts to reproduction and escape.

Thus this talk about banksters not wanting inflation/hyperinflation only makes sense if the banksters truly believe the existing system can continue - i.e. that their existing and ongoing debt is collectable.

I don't believe it is.
Thanks for your response . . . .

What about Hudson's prediction of the system continuing under Debt Servitude? Wouldn't the parasitical Financial Elite stick around for that?

Debt Servitude wouldn't work if all the debts were inflated away . . . so it seems like deflation would be most beneficial to TPTB.

Or maybe you see a different future. What would that look like?

By the way, I think the Financial Elite are too selfish to reproduce . . . if they did they'd have to share the pie.

c1ue
08-01-10, 01:29 PM
What about Hudson's prediction of the system continuing under Debt Servitude? Wouldn't the parasitical Financial Elite stick around for that?

Debt Servitude wouldn't work if all the debts were inflated away . . . so it seems like deflation would be most beneficial to TPTB.

Or maybe you see a different future. What would that look like?

Again, it depends on your point of view. I would argue we're already in the condition of debt servitude: between the mortgage (and its Fed/bankster/No Bank Left Behind-TARP), the health care (Obamacare/No Health Insurance Company left behind), the jobs (no multinational left behind), and the foreign entanglements (No Defense Company left behind), I think that the US is already thoroughly in the debt servitude condition as a nation.

What is going on now is that the public is now discovering there is no pea under any of the walnut shells. FIRE dominance is a 'soft' one where the dominance works only if the subject doesn't know any better.

The stage we are in is one where such dominance must either transfer into a physical one or else be consumed in a populist rage.

But this transformation is a very risky one.

For every two dozen tin-pot dictators, you get a French Revolution or an outbreak of Communism.


By the way, I think the Financial Elite are too selfish to reproduce . . . if they did they'd have to share the pie.

I think if you look at the stats, the rentiers have far more children on average than the middle class.

The actual farm laborers have lots of kids, but these are already severely disadvantaged economically.

But actually I wasn't referring to physical reproduction. Sacculina don't use money, they value expansion of their genome.

Banksters reproduce by calving off chunks of rentier-dom to other nations.

Ben
08-02-10, 08:36 PM
MarkL, like I say, I'm not sure about this. The banksters know that they depend on bailouts, stimulus and QE to not go bust.

They know some of the debt is junk, and that more of it would default in deflation and/or if the economy were allowed to weaken. They also know deflation would crush the economy.

So a moderate inflation is quite acceptable.

MarkL
08-03-10, 12:39 AM
MarkL, like I say, I'm not sure about this. The banksters know that they depend on bailouts, stimulus and QE to not go bust.

They know some of the debt is junk, and that more of it would default in deflation and/or if the economy were allowed to weaken. They also know deflation would crush the economy.

So a moderate inflation is quite acceptable.

They didn't depend on these things prior to 3 years ago, and with the political winds blowing in the country may not be able to depend on them in the future. Even moderate inflation can cut the value of a debt in half over 10 years... quite a huge bite for the Banksters.

rdrees
08-04-10, 02:55 PM
I had moved on to the next article and hadn't seen how this had devolved. Thanks, MarkL for at least defending the concept of me being skeptical about one aspect of EJ's thesis.

If you can't take an honest, skeptical look at your beliefs you've lost the ability to be intellectual about them. They become a religion of sorts that cannot be questioned, critiqued, or even examined more than superficially.

The facts are that both PPI and CPI are lower now than they were two years ago. Dismissing the data, shooting the messenger, pretending you're misunderstood...that doesn't really get you anywhere, now does it? My only interest is in acknowledging that fact and trying to deal with it in an intellectually honest way. Does it mean we're in a deflation spiral on the order of the 1930s? I have repeatedly said that it does not, in my opinion. Does it cause me to question whether the deflationary pressures are strong enough to keep significant inflation at bay in the short to medium term? You better believe it!

c1ue, I guarantee that you can find a lower price for some things and a higher price for other things. Our economy is so damn complex that it eludes pretty much all of us. That's why I basically reject anecdotal data. You can find a higher price or a lower price or an anecdotal data point to support pretty much anything. But the aggregate numbers--PPI and CPI--say that prices are lower now than two years ago. Just like you paid less for Diet Coke this year than two years ago. I don't want to see deflation. I want to take an honest look at the numbers and that's what they say (call it disinflation, deflation, mis-inflation, or whatever you want; that's just semantics).

bart, you say you've posted a whole bunch of things that clearly show inflation. Of some things. Even in my own expenses, which I was happy to admit. But in terms of the aggregate, you've got the shadowstats, and we just have to agree to disagree on that. I use CPI and PPI, like EJ does in his posts; you use shadowstats. We're not going to change our minds on that issue so we may as well call a truce on the issue and quit the name calling.

Because I'm not here banging any deflation drum. I'll say it yet again: I don't think we'll have 1930s style deflation! I've also said repeatedly that I'm not on any mission to discredit EJ. I think he deserves a lot of credit. But we're all human beings. He made a call about the numbers that didn't quite work out. Live with it! It clearly upsets and angers you when I say we've had basically flat prices for the last several years, but I'm not pulling that out of my arse. I'm just repeating what CPI and PPI say. You can choose to disregard those numbers, but I hope you can back off from making ad hominem attacks about me being a liar or some such when that's not the case at all. You don't believe in the numbers, fine, but they do exist.

FRED
08-04-10, 04:11 PM
I had moved on to the next article and hadn't seen how this had devolved. Thanks, MarkL for at least defending the concept of me being skeptical about one aspect of EJ's thesis.

If you can't take an honest, skeptical look at your beliefs you've lost the ability to be intellectual about them. They become a religion of sorts that cannot be questioned, critiqued, or even examined more than superficially.

We attribute our success at 12 years of forecasting to our willingness to learn from our mistakes. We welcome vigorous debate of the theories we put forward. We only ask that when a point is debated and closed that it remain closed so that we don't waste time re-hashing facts that were previously established. Back-tracking prevents forward movement.


The facts are that both PPI and CPI are lower now than they were two years ago. This assertion is simply false, wrong, incorrect, and not true. We will post, again, a chart that prove this, again, so that we can move on.


http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=27016&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%23F1F5E9&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=10&preserve_ratio=false&fo=ve&id=PPIITM,PPIFCG,CPIAUCNS&transformation=lin,lin,lin&scale=Left,Left,Left&range=Custom,Custom,Custom&cosd=2006-04-01,2006-04-01,2006-04-01&coed=2010-06-01,2010-06-01,2010-06-01&line_color=%23FF0000,%230000FF,%23006600&link_values=,,&mark_type=NONE,NONE,NONE&mw=4,4,4&line_style=Solid,Solid,Solid&lw=2,2,2&vintage_date=2010-08-04,2010-08-04,2010-08-04&revision_date=2010-08-04,2010-08-04,2010-08-04&mma=0,0,0&nd=,,&ost=,,&oet=,,&fml=a,a,a
The facts are that both PPI and CPI are higher now than they were two years ago.


A persistent unwillingness by new guests to accept easily observable facts and argue endlessly with members is called "trolling" and we do not tolerate it.

vinoveri
08-04-10, 04:45 PM
We attribute our success at 12 years of forecasting to our willingness to learn from our mistakes. We welcome vigorous debate of the theories we put forward. We only ask that when a point is debated and closed that it remain closed so that we don't waste time re-hashing facts that were previously established. Back-tracking prevents forward movement.

This assertion is simply false, wrong, incorrect, and not true. We will post, again, a chart that prove this, again, so that we can move on.


http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=27016&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%23F1F5E9&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=10&preserve_ratio=false&fo=ve&id=PPIITM,PPIFCG,CPIAUCNS&transformation=lin,lin,lin&scale=Left,Left,Left&range=Custom,Custom,Custom&cosd=2006-04-01,2006-04-01,2006-04-01&coed=2010-06-01,2010-06-01,2010-06-01&line_color=%23FF0000,%230000FF,%23006600&link_values=,,&mark_type=NONE,NONE,NONE&mw=4,4,4&line_style=Solid,Solid,Solid&lw=2,2,2&vintage_date=2010-08-04,2010-08-04,2010-08-04&revision_date=2010-08-04,2010-08-04,2010-08-04&mma=0,0,0&nd=,,&ost=,,&oet=,,&fml=a,a,a
The facts are that both PPI and CPI are higher now than they were two years ago.


A persistent unwillingness by new guests to accept easily observable facts and argue endlessly with members is called "trolling" and we do not tolerate it.

FRED, it looks like the PPI and CPI are just a tad lower than they were 2 years ago, which was just before the financial crisis and when the bottom was falling out of the dollar and oil had hit $147/barrel, or am I misreading the graph? Perhaps a comparison to 1 year ago or 3 years ago would serve to illustrate the FACT of rising prices.

FRED
08-04-10, 05:05 PM
FRED, it looks like the PPI and CPI are just a tad lower than they were 2 years ago, which was just before the financial crisis and when the bottom was falling out of the dollar and oil had hit $147/barrel, or am I misreading the graph? Perhaps a comparison to 1 year ago or 3 years ago would serve to illustrate the FACT of rising prices.

We've been over this. Final word. If you start from the point of the highest surge of inflation in 30 years that peaked in June 2008, then of course inflation is lower today. But we never said inflation was going to be as high after the recession as it was at the first Peak Cheap Oil surge that ended in 2008 and helped precipitate the credit crisis. We did say that inflation would stop falling and rise even before the recession ended and that it is now higher than it was before the recession started.


http://www.itulip.com/images2/ppicpirecession.gif

Today inflation is rising steadily, and surging with respect to imports.


http://www.itulip.com/images2/importspriceinflation.gif

To deny it is to deny obvious facts. What is the motivation for denying obvious facts?

We've seen this movie over and over here. Trolls take advantage of the good nature and patience of our members who are too polite to tell them to get lost. My job is to prevent trolls from exploiting them. I'm expected to ban trolls without ceremony for this reason, and do.

ThePythonicCow
08-04-10, 05:08 PM
FRED, it looks like the PPI and CPI are just a tad lower than they were 2 years ago That's my read too. But I think we're getting distracted by small stuff.

Perhaps rdrees and FRED could both agree that PPI and CPI both declined from mid 2008 to early 2009, and have since rose to about back where they were before, give or take.

If someone's thesis or antithesis depends on whether PPI or CPI is just above, or just below, where it was two years ago, that's a rather delicate thesis.

If someone's thesis is consistent with PPI or CPI going down for a little while, than resuming their climb, then I would think they are in good shape, given the evidence.

rdrees
08-04-10, 05:27 PM
Nevermind this post...there were a couple responses already posted, so I moved it up to that part of the discussion.

rdrees
08-04-10, 05:43 PM
It seems that it's all a matter of how you look at the data, and it's not as simple as a "fact." Are prices higher than the beginning of 2008? Yes. Are they lower than mid-2008? Yes. I agree 100% on that.

EJ's made a ton of great calls. But the call for significant inflation seems wrong to me based on my reading of the data, and while there are a lot of ways to read data, I don't think mine is an objectively unreasonable one. It certainly doesn't seem like a trolling sort of viewpoint to me. Some posters have jumped all over me for being a deflationista or just spouting random poop to get a reaction, but I don't think that's a fair read of my comments at all.

I have repeatedly said that I do not think we will have a large drop in prices. The evidence and my gut tells me we're starting to look a lot like Japan in the '90s--PPI and CPI going down and up but hovering on average in the 0-2% range. Maybe not a whole decade's worth of such minor ups and downs, but for a while at least. If I differ from EJ and the majority of the people on this board on that score, is that really a bannable offense? If I think EJ was right in predicting this crisis (which hardly anyone else was), but wrong in anticipating the sheer depth of it (which pretty much everyone else was, myself included), does that make me unwelcome to participate in this discussion?

My thesis or antithesis as stated above isn't based at all on whether PPI or CPI is just below where it was two years ago. But I would certainly hope that when I make a factual statement that it was below, and it in fact was below, that I am not taken to the woodshed for it.

tastymannatees
08-04-10, 05:57 PM
MarkLm,

Let me suggest two other influences . . . .

Influence #4 -- The People
EJ's premise is that the government will keep the people happy by fulfilling its obligations through printing. But those obligations will be filled with inflated money, so the pensioners, people with savings, and those on the government teat will experience a severe reduction in their standard of living. It's already happening with reduced State services, retirement savings lost in the stock market, unfunded pensions. Soon, the true cause of the People's poverty will come out . . . that is, the wealth disparity in this country caused by the actions of the parasitical Financial Elite. Will The People rise up politically against the Financial Elite? If they do, and I think they will, it could very easily result in anti-inflationary policies that are inimical to the banks and the wealthy.

Influence #5 -- Our Lenders
If we inflate away the value of the dollar, will the oil-producers still sell us cheap oil? Will our trading partners still take our funny money in exchange for their labor and raw materials? If no, then world commerce -- and profits of TPTB -- will dry up.

Since inflation or deflation seems to be a choice, the question is, what do TPTB think will serve them best?

I'd really like to hear c1ue chime in on this one . . . .
And . . . it would be good to hear how EJ weighs these competing influences in his analysis. Maybe MetalMan can dig up something from the archives?

Influence #6 heard this the other day - "Of course the government will do anything to avoid deflation, They can tax inflation easy but they have not figured out how to tax deflation....."

fountainhead
08-04-10, 06:08 PM
I really wish iTulip would start grappling with the implications of this economy rather than try to make it seem like they were 100% accuract all the time with no failings.
WHO are you rdrees? iTulip never claims they were 100% "accuract" all the time with no failings. Show us your own analysis and records instead of trolling!

ThePythonicCow
08-05-10, 12:29 AM
It certainly doesn't seem like a trolling sort of viewpoint to me.I suspect that it's not the viewpoint that is "a trolling sort", rdrees. Rather I suspect that it is the posters behavior, focusing on a call that they find wrong.


If I differ from EJ and the majority of the people on this board on that score, is that really a bannable offense?Differing is not an offense (I hope -- for I'm sure I could find some differences myself if I looked.) It's the not letting the point rest.

It's OK now and then to raise a point of disagreement. But do so a bit gently, and let it rest if apparently the point is not going to be resolved. Notice above how vinoveri (http://www.itulip.com/member.php/1010-vinoveri) handled it above. He saw a point on which he disagreed with FRED, and gently asked if the data showed something else. FRED made it quite clear that this was not a point on which he was going to come to a meeting of minds with vinoveri at the present. I'll wager a pretty penny (copper, not gold) that vinoveri will not continue to harp on this matter.

When someone else is not going to come to agreement with your position, you ultimately don't know and can't know why. Your mind (as does my mind) tells you they're wrong, you're right. But just as often the truth lies closer to the other persons position, or even some where far afield from both of you. A gentle modesty for the limits of ones own mind recommends that you retire to a position of relative silence, or at least to a position that happily allows the other person to pretty much ignore you or to write you off as eccentric.

Good natured people will often attempt to resolve matters that appear to be causing the other party distress. It's being a pain in the butt to leverage that tendency to keep bringing them back to a point on which, for whatever reason, agreement is unlikely to be reached at present.

dummass
08-05-10, 07:12 AM
Hey Cow, have you ever considered a career in marriage counseling?

ThePythonicCow
08-05-10, 07:35 AM
Hey Cow, have you ever considered a career in marriage counseling?no - :)

jk
08-05-10, 11:51 AM
you always have the option of skipping posts that are repetitive and don't further the discussion. i started exercising this option some time before fred's reproof.

metalman
08-05-10, 04:28 PM
I suspect that it's not the viewpoint that is "a trolling sort", rdrees. Rather I suspect that it is the posters behavior, focusing on a call that they find wrong.

Differing is not an offense (I hope -- for I'm sure I could find some differences myself if I looked.) It's the not letting the point rest.

It's OK now and then to raise a point of disagreement. But do so a bit gently, and let it rest if apparently the point is not going to be resolved. Notice above how vinoveri (http://www.itulip.com/member.php/1010-vinoveri) handled it above. He saw a point on which he disagreed with FRED, and gently asked if the data showed something else. FRED made it quite clear that this was not a point on which he was going to come to a meeting of minds with vinoveri at the present. I'll wager a pretty penny (copper, not gold) that vinoveri will not continue to harp on this matter.

When someone else is not going to come to agreement with your position, you ultimately don't know and can't know why. Your mind (as does my mind) tells you they're wrong, you're right. But just as often the truth lies closer to the other persons position, or even some where far afield from both of you. A gentle modesty for the limits of ones own mind recommends that you retire to a position of relative silence, or at least to a position that happily allows the other person to pretty much ignore you or to write you off as eccentric.

Good natured people will often attempt to resolve matters that appear to be causing the other party distress. It's being a pain in the butt to leverage that tendency to keep bringing them back to a point on which, for whatever reason, agreement is unlikely to be reached at present.

you nailed it, cow. i've seen this here before.

say the itulip forum is a restaurant vs a forum. the forum sells forecasts that patrons consume vs plates of food. most of the food is great, but once in a while a dish kinda sucks.

if a patron pulls the manager aside & says, 'hey, the food's good here but i gotta tell ya this dish is awful' the manager will appreciate it.

if the customer announces loudly, 'hey, this dish sucks' the other patrons will look around in embarrassment & the manager will ignore him.

but if the customer stands on a chair yells...

'hey, this dish sucks!'

'doesn't this dish suck?'

'it really sucks, no?''

'don't get me wrong... the food is good here... except for this dish. it sucks'.

'don't you all agree it sucks?'

& then starts walking table to table...

'doesn't this dish suck?'

'it really sucks, no?''

'don't you all agree it sucks?'

management gets the idea that the patron either works for a competitor & is trying to disrupt the joint or doesn't know how to behave... offers a refund & shows him the door.

my sense of our man or woman is a lawyer... the point of lawyering isn't to get to a conclusion but to create doubt. create doubt & you win. so if you want him to give up just tell him he's introduced enough doubt to make his/her case plausibl that ej was wrong about inflation. there's no inflation. purchasing power is higher now than before the recession. hey, if you want to believe that... why not?

MarkL
08-06-10, 01:27 AM
Well, Fred, no offense, but your shaded areas go back to 2.75 years ago. RDRees is accurate if you stick to "2 years."

Broaden the question to the 1.5 or 2.75 years and you're absolutely correct. A minor period of deflation, as compared to 2 years ago and the peak has occurred. RDRees is right on that fact.

Has deflation in general occurred and was EJ wrong? No.. but you don't pick ONLY 2 years to make that determination.

rdrees
08-06-10, 01:33 PM
Alright, point taken. I had thought this forum was more like a traditional Roman forum where people wanted and encouraged discussion to test, refine, and challenge their views. But if this forum is more akin to a restaurant where people just want to enjoy a good meal in polite company, I can respect that. Here I thought I was being thought provoking, and it sounds like I was just coming off as the annoying kid who won't shut up.

On the subject of doubt, my personal opinion is that doubt and conclusions are not mutually exclusive. I try to cast doubt on my assumptions to test them so that I can come to a robust conclusion, and even then try to question (doubt) those conclusions every now and again so they don't get stale. I posted recently that I just read "The Black Swan" by Nicholas Nasim Taleb. He has a similar viewpoint and I agreed with his message, but he sure comes across as an arrogant SOB. Maybe skepticism is a socially awkward state of mind.

Anyway, on to shutting up.

MarkL
08-06-10, 03:42 PM
It's OK now and then to raise a point of disagreement. But do so a bit gently, and let it rest if apparently the point is not going to be resolved.

Oh, sure glad that "now and then" I can disagree. Not so sure I'm good at doing so "gently" although I agree I should do so without being unusually insulting or derogatory.

I'm pretty sure these "inflation/deflation issues" are never going to be resolved as time perpetually marches on and people will always disagree. In addition this is one of the defining questions of this entire website... even EJ continually (for years now) has been discussing and refining this point. To ask me or anyone to set the issue aside, is to ask us to set the site aside!

It seems to me the whole point of this website is to have these back and forth discussions. I hope the point of the site is not to just have a love-fest for EJ and Ka-Poom without serious conflicting vigorous discourse.

jk
08-06-10, 05:03 PM
I hope the point of the site is not to just have a love-fest for EJ and Ka-Poom without serious conflicting vigorous discourse.
i hope the point of the site is to develop new insights into the economy and financial system as they unfold and not to endlessly recapitulate old discussions.

fred, i think this ONCE AGAIN speaks to the need for a FAQ's page, with - at a minimum- pointers to the relevant articles from the past. then, when a newcomer raises the same old question for the umpteenth time, you can just say, "see faq #13" and the rest of us can move on.

metalman
08-06-10, 09:51 PM
Alright, point taken. I had thought this forum was more like a traditional Roman forum where people wanted and encouraged discussion to test, refine, and challenge their views. But if this forum is more akin to a restaurant where people just want to enjoy a good meal in polite company, I can respect that. Here I thought I was being thought provoking, and it sounds like I was just coming off as the annoying kid who won't shut up.

On the subject of doubt, my personal opinion is that doubt and conclusions are not mutually exclusive. I try to cast doubt on my assumptions to test them so that I can come to a robust conclusion, and even then try to question (doubt) those conclusions every now and again so they don't get stale. I posted recently that I just read "The Black Swan" by Nicholas Nasim Taleb. He has a similar viewpoint and I agreed with his message, but he sure comes across as an arrogant SOB. Maybe skepticism is a socially awkward state of mind.

Anyway, on to shutting up.

if you're looking for a roman forum where people want & are encouraged to discuss, test, refine, and challenge their views... you came to the right place. shit, there's a whole thread on deflation here (http://www.itulip.com/forums/showthread.php/5038-4-3-2-1-...-Deflation%21) that oppose ej's view & it's damn popular...

Replies: 1,063
Views: 33,160

dissent is encouraged. but rehashing established fact over & over is not.

if you want to make the point that annual % cpi is lower now than before the recession, you need a chart like this...

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=CPIAUCNS&transformation=pc1&scale=Left&range=Custom&cosd=2007-01-01&coed=2010-06-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-08-06&revision_date=2010-08-06&mma=0&nd=&ost=&oet=&fml=a

ej's recent short term disinflation forecast jives... the fed's bitching about deflation & has the charts & graphs to 'prove' it! we all need to prepare for the next trick in the bag o tricks the fed has to stop it.

reflation... buy on rumor, sell on fact.

fed deflation talk = impending reflation = rise in gold

MarkL
08-07-10, 03:19 PM
Boy Fred, you're sure disappointing me here. You're normally spot on in my experience.

RDRees said "The facts are that both PPI and CPI are lower now than they were two years ago."
You said "This assertion is simply false, wrong, incorrect, and not true..."
You called out this exact quote and made this exact response despite the fact that your own charts supported RDRees's answer.

You then went on to say his unwillingness to accept "facts" was trolling and said "we do not tolerate it" effectively threatening to use moderator power.

In your second post you acknowledged RDRees was right on this specific point, but then instead of going to the root of the discrepancy, time frame, you instead went on to state that:
"Today inflation is rising steadily... ...To deny it is to deny obvious facts."
"...I'm expected to ban trolls without ceremony for this reason, and do."

Fred!! Where is your normal dispassionate analysis?! It can certainly be argued depending on time frame selected that EITHER inflation has occured, deflation has occurred, and that prices have been flat over the last 1-3 years! You can make that GRAY area on your chart other sizes and have a descending line or a flat line. LOOK AT IT! I personally think your conclusion is the right one when considering the big picture and agree that RDRees is looking at timeframes that are too short. But I can acknowledge the ability to draw different conclusions and draw different angled lines based on time frames!

I have no problems with the second discourse... or you making that first error. But effectively threatening to ban somebody twice, first accusing them of being wrong when they weren't, and second simply because they interpret facts differently, is in my opinion, a misuse of moderator power.

MarkL
08-07-10, 03:22 PM
Great post Metalman. Thanks for supporting what is for me, the second most valuable contribution of iTulip. Intelligent back and forth! EJ's posts, are of course, the first!

cindykimlisa
08-09-10, 09:14 AM
A little help with the inflation - deflation issue: timing and discounts is important.

I buy lots of clothes from JC Penny and Macy's

5 years ago J C Penny used to have realistic prices for shirts and sometimes had a real sale. If you shop at Macy's this analysis also applies to them.

Today a shirt that is worth say $25 for example is priced on the table at $50.00 or way over priced from what it should be. A few years ago that same shirt might have been $35 so it looks like by the price we have seen some real inflation there, but in reality that is not true. Because if you look at the paper every Sunday you see Pennys has a 20% sale every week and a bonus coupon. And when that sale is not ongoing they have a buy one get one at 50% off sale in the store. So you really end up most days paying about the same as you did for a shirt a few years ago or $35.

However, there is much more to the Game. If you buy the shirt at the beginning of the season then you might pay the highly inflated price and on a very bad day you might miss all the sales and pay retail of $50 -- very inflated. In the middle of the season you are going to get %25 or more off retail on most days - Maybe inflation or disinflation. Towards the end of the season you can get as much as %80 off retail - perhaps some might say deflation. I make the majority of my purchases at 80% off.

In this example the person who pays retail or list in slammed by Hyper inflation. The person who gets it on sale pays something like disinflation and with a coupon gets deflation. And the person who waits til the end of the season pays Hyper deflation -- off of the previous and current years hyperinflated retail prices.

So there will be no misunderstandings there are some quality issues here: some of the clothes are less in quality but some are of fine quality. I just bought a pinstripe $400 American Eagle suit of excellent quality at %75 off Hyper inflated retail.
I got a nice $300 suit priced at retail of $400 for about $100. Last year at the same time I might have gotten a similar suit for about $90 at 75% off. Is that Inflation, Deflation, Disinflation. I think I know but I am not going too argue about it til the cows come home.

On another note 10 years ago my spouse did all the grocery shopping at my house and now I do it all. My spouse spent $ 500 a month and ten years later I spend about $350 for about the same type food purchases. Is that inflation, deflation, disinflation, stagflation or something else. Answer: Some of all of the above on a microeconomic theory basis: this is combined with prudence and good shopping habits along with timing of purchases.


Cindy

we_are_toast
08-09-10, 10:18 AM
A little help with the inflation - deflation issue: timing and discounts is important.

I buy lots of clothes from JC Penny and Macy's

5 years ago J C Penny used to have realistic prices for shirts and sometimes had a real sale. If you shop at Macy's this analysis also applies to them.

Today a shirt that is worth say $25 for example is priced on the table at $50.00 or way over priced from what it should be. A few years ago that same shirt might have been $35 so it looks like by the price we have seen some real inflation there, but in reality that is not true. Because if you look at the paper every Sunday you see Pennys has a 20% sale every week and a bonus coupon. And when that sale is not ongoing they have a buy one get one at 50% off sale in the store. So you really end up most days paying about the same as you did for a shirt a few years ago or $35.

However, there is much more to the Game. If you buy the shirt at the beginning of the season then you might pay the highly inflated price and on a very bad day you might miss all the sales and pay retail of $50 -- very inflated. In the middle of the season you are going to get %25 or more off retail on most days - Maybe inflation or disinflation. Towards the end of the season you can get as much as %80 off retail - perhaps some might say deflation. I make the majority of my purchases at 80% off.

In this example the person who pays retail or list in slammed by Hyper inflation. The person who gets it on sale pays something like disinflation and with a coupon gets deflation. And the person who waits til the end of the season pays Hyper deflation -- off of the previous and current years hyperinflated retail prices.

So there will be no misunderstandings there are some quality issues here: some of the clothes are less in quality but some are of fine quality. I just bought a pinstripe $400 American Eagle suit of excellent quality at %75 off Hyper inflated retail.
I got a nice $300 suit priced at retail of $400 for about $100. Last year at the same time I might have gotten a similar suit for about $90 at 75% off. Is that Inflation, Deflation, Disinflation. I think I know but I am not going too argue about it til the cows come home.

On another note 10 years ago my spouse did all the grocery shopping at my house and now I do it all. My spouse spent $ 500 a month and ten years later I spend about $350 for about the same type food purchases. Is that inflation, deflation, disinflation, stagflation or something else. Answer: Some of all of the above on a microeconomic theory basis: this is combined with prudence and good shopping habits along with timing of purchases.


Cindy

I think you've introduced some pretty interesting concepts here, the most interesting being the impact of gender on inflation and disinflation.

I assure you, for a male going into Penny's or Macey's, the top priority will be to get out as quickly as possible so you can go to a sporting event or watch a sporting event on TV. For a female, the act of shopping is in itself one of the most competitive sporting events one could conceive of.

So having males do the shopping could very well lead to an inflationary environment as they probably will pay the higher price just so they can get out. Having females do the shopping could lead to a deflationary environment as they shop for the best bargains.

If we are slipping into disinflation, maybe the FOMC will release a statement requesting congress to pass legislation requiring males to do the shopping. The opposite if we see inflation on the horizon.

OTOH: Of course many males would say to themselves, why do I need a $400 suit when these blue jeans and this T-shirt fit me just fine?! The heck with the suit, I'm going fishing instead. This could very well lead to a deflation spiral if the fishing is going very well. If the stores start putting everything on sale, and the females do all the shopping, it might not lead to inflation, but it probably would lead to another credit bubble as credit cards get maxed out, and too much fishing and not enough working would eventually lead to another debt crises.

This certainly adds to the complexity of the inflation/deflation debate.

dummass
08-09-10, 11:56 AM
too much fishing and not enough working would eventually lead to another debt crises.

I share your concerns toast. This is some of the most disturbing economic analysis I have read in some time. If you don't mind me finishing your thoughts, how much worse will the economy get when these guys (fishermen) realize that can eat the fish? What if they stop buying food? We are on dangerous ground here, toast.

Brooks Gracie
08-14-10, 09:13 PM
Eric, I have known you for a long time, and spoken with you about economic issues while at Osborn Capital at least once a week. But I still cannot see the inflation coming--entirely based on political issues. The members of the Fed are elected by regional banks--who love deflation; they get paid back in more valuable dollars. Congress is owned by multi-nationals who outsource jobs and leave American "service workers" or unemployed to fend for themselves, offshoring labor. This cannot change without a revolution, and Americans are too uneducated, divided and deluded by MSM to initiate a change.

Protectionist legislation is not even on the table--though it is the only way to increase America's competitiveness--multinationals control Congress. Congress cannot even get a decent stimulus plan to spur demand. With ZIRP, the Fed is helpless anyway. Tax cuts for the wealthy merely moves money from one speculator to another, or otherwise overseas. When was the last time you saw a super-wealthy create a start-up?

Education debt is a ticking time-bomb, with graduates having no hope whatsoever of getting a job that can repay their borrowings--and it is non-dischargeable, following one to his grave. I think that if a real revolution is going to arise, it will be initiated by the young who are having their Burger King wages garnished by Sally Mae. All for having the ambition and dream to finish college.

I have no hope whatsoever until we return to Depression era tent cities outside of Congress and the White House overflowing with rowdy crowds.

LargoWinch
08-14-10, 09:59 PM
Eric, I have known you for a long time, and spoken with you about economic issues while at Osborn Capital at least once a week. But I still cannot see the inflation coming--entirely based on political issues. The members of the Fed are elected by regional banks--who love deflation; they get paid back in more valuable dollars. Congress is owned by multi-nationals who outsource jobs and leave American "service workers" or unemployed to fend for themselves, offshoring labor. This cannot change without a revolution, and Americans are too uneducated, divided and deluded by MSM to initiate a change.

Protectionist legislation is not even on the table--though it is the only way to increase America's competitiveness--multinationals control Congress. Congress cannot even get a decent stimulus plan to spur demand. With ZIRP, the Fed is helpless anyway. Tax cuts for the wealthy merely moves money from one speculator to another, or otherwise overseas. When was the last time you saw a super-wealthy create a start-up?

Education debt is a ticking time-bomb, with graduates having no hope whatsoever of getting a job that can repay their borrowings--and it is non-dischargeable, following one to his grave. I think that if a real revolution is going to arise, it will be initiated by the young who are having their Burger King wages garnished by Sally Mae. All for having the ambition and dream to finish college.

I have no hope whatsoever until we return to Depression era tent cities outside of Congress and the White House overflowing with rowdy crowds.

That is quite a profound statement Brooks Gracie.

However - and sadly- since inflation hurt the poor in a disproportionate fashion, I believe that is what awaits.

jk
08-14-10, 10:27 PM
in 1981 long rates were over 15% because no one believed in the fed's determination and ability to kill inflation.
in 2010 long rates are below 4% because no believes in the fed's determination and ability to kill deflation.

Jim Nickerson
08-14-10, 11:03 PM
in 1981 long rates were over 15% because no one believed in the fed's determination and ability to kill inflation.
in 2010 long rates are below 4% because no believes in the fed's determination and ability to kill deflation.

Now, jk, don't you truly, and I mean sincerely, know and believe that Bernanke knows how not to allow deflation to occur here. What I read about him and his knowledge leads me to believe it (deflation) CANNOT occur here if one believes the spiel. My personal feeling, from a point of no serious knowledge about any of this stuff, is that the problems with the unwinding of the massive debts is bigger than Bernanke and bigger than the Fed. I just hope I live long enough to develop some real sense of how this ultimately resolves.

About your comment, Bernanke may be "determined" and I suppose might actually have the "ability" to produce inflation, but it supposedly may be political concerns, forces, influence that keep him from doing his "magic."

EJ
08-14-10, 11:30 PM
Eric, I have known you for a long time, and spoken with you about economic issues while at Osborn Capital at least once a week. But I still cannot see the inflation coming--entirely based on political issues. The members of the Fed are elected by regional banks--who love deflation; they get paid back in more valuable dollars. Congress is owned by multi-nationals who outsource jobs and leave American "service workers" or unemployed to fend for themselves, offshoring labor. This cannot change without a revolution, and Americans are too uneducated, divided and deluded by MSM to initiate a change.

Protectionist legislation is not even on the table--though it is the only way to increase America's competitiveness--multinationals control Congress. Congress cannot even get a decent stimulus plan to spur demand. With ZIRP, the Fed is helpless anyway. Tax cuts for the wealthy merely moves money from one speculator to another, or otherwise overseas. When was the last time you saw a super-wealthy create a start-up?

Education debt is a ticking time-bomb, with graduates having no hope whatsoever of getting a job that can repay their borrowings--and it is non-dischargeable, following one to his grave. I think that if a real revolution is going to arise, it will be initiated by the young who are having their Burger King wages garnished by Sally Mae. All for having the ambition and dream to finish college.

I have no hope whatsoever until we return to Depression era tent cities outside of Congress and the White House overflowing with rowdy crowds.

I have argued with the deflationists over the years that government can prevent deflation spirals with reflation based on currency depreciation and extreme double entry bookkeeping, which forecasts have proved accurate, but have never asserted that governments can ably negotiate the ugly terrain between asset price deflation and commodity and wage price inflation that results from said reflation.


http://www.itulip.com/images2/unempvscpicompared1.gif

http://www.itulip.com/images2/unempvscpicompared2.gif

http://www.itulip.com/images2/unempvscpicompared3.gif

http://www.itulip.com/images2/unempvscpicompared4.gif

Should the Fed raise rates now? Of course. Can the Fed raise rates? No.


http://www.itulip.com/images2/ABS2001-July2010.gif
Credit bubble fuel level: Near Empty

http://www.itulip.com/images2/consumercredit1968-July2010.gif
Credit demand? Still falling.

So how can the Fed prevent commodity and wage price inflation in the Productive Economy without crashing the FIRE Economy? It can't.

LargoWinch
08-14-10, 11:32 PM
in 1981 long rates were over 15% because no one believed in the fed's determination and ability to kill inflation.
in 2010 long rates are below 4% because no believes in the fed's determination and ability to kill deflation.

Yes, and the market is wrong. (http://www.itulip.com/forums/showthread.php/9707-Everyone-is-wrong-again-%C2%96-1981-in-Reverse-Part-I-The-Great-Divide-%C2%96-Eric-Janszen?p=95409)

The deflationists view is that credit contraction leads to deflation. That is pure nonsense as credit is not money (Jesse's calls it "vapor" (http://jessescrossroadscafe.blogspot.com/2010/08/zerohedge-richard-russell-slams-robert.html)). Once the CBs are done with their "we-prevent-asset-deflation-at-all-cost" experiment, a zero (or two, or three...) will need to be added to virtually all paper bills around the world.

ThePythonicCow
08-15-10, 12:22 AM
The deflationists view is that credit contraction leads to deflation. That is pure nonsense as credit is not money True, credit is not money. But in a debt-based monetary system, lending is how we create money. We're lending less, and <a href="http://www.shadowstats.com/alternate_data/money-supply-charts">shadowstats.com M3</a> is down.

Chris Coles
08-15-10, 04:44 AM
Eric, I have known you for a long time, and spoken with you about economic issues while at Osborn Capital at least once a week. But I still cannot see the inflation coming--entirely based on political issues. The members of the Fed are elected by regional banks--who love deflation; they get paid back in more valuable dollars. Congress is owned by multi-nationals who outsource jobs and leave American "service workers" or unemployed to fend for themselves, offshoring labor. This cannot change without a revolution, and Americans are too uneducated, divided and deluded by MSM to initiate a change.

Protectionist legislation is not even on the table--though it is the only way to increase America's competitiveness--multinationals control Congress. Congress cannot even get a decent stimulus plan to spur demand. With ZIRP, the Fed is helpless anyway. Tax cuts for the wealthy merely moves money from one speculator to another, or otherwise overseas. When was the last time you saw a super-wealthy create a start-up?

Education debt is a ticking time-bomb, with graduates having no hope whatsoever of getting a job that can repay their borrowings--and it is non-dischargeable, following one to his grave. I think that if a real revolution is going to arise, it will be initiated by the young who are having their Burger King wages garnished by Sally Mae. All for having the ambition and dream to finish college.

I have no hope whatsoever until we return to Depression era tent cities outside of Congress and the White House overflowing with rowdy crowds.

You forget the one mechanism that has driven the economies of the planet since the beginning of time.... Competition. But this time, not multi-national based competition, but nation based competition. You are about to be humbled by a silly little nation from which many of your forebears originated. The United Kingdom.

Watch this space.

Chris Coles
08-15-10, 05:00 AM
And then, by pure chance, this has turned up on Slashdot.


Simply put, if we are serious about lifting the economy out of its rut, we need to focus all of our energy on helping entrepreneurs. Provide them with the incentives (tax breaks and seed financing); education; and infrastructure. And gear public policy—like patent-protection laws—toward the startups. Let’s not bet on the companies that are too big to fail or too clumsy to innovate.

http://techcrunch.com/2010/08/14/startups-or-behemoths-which-are-we-going-to-bet-on/

Slimprofits
09-26-10, 11:14 AM
Is this the Bernanke response?

Chairman Ben S. Bernanke
At the Conference Co-sponsored by the Center for Economic Policy Studies and the Bendheim Center for Finance, Princeton University, Princeton, New Jersey
September 24, 2010
Implications of the Financial Crisis for Economics

http://www.federalreserve.gov/newsevents/speech/bernanke20100924a.htm

With that taxonomy in hand, I would argue that the recent financial crisis was more a failure of economic engineering and economic management than of what I have called economic science. The economic engineering problems were reflected in a number of structural weaknesses in our financial system. In the private sector, these weaknesses included inadequate risk-measurement and risk-management systems at many financial firms as well as shortcomings in some firms' business models, such as overreliance on unstable short-term funding and excessive leverage. In the public sector, gaps and blind spots in the financial regulatory structures of the United States and most other countries proved particularly damaging. These regulatory structures were designed for earlier eras and did not adequately adapt to rapid change and innovation in the financial sector, such as the increasing financial intermediation taking place outside of regulated depository institutions through the so-called shadow banking system. In the realm of economic management, the leaders of financial firms, market participants, and government policymakers either did not recognize important structural problems and emerging risks or, when they identified them, did not respond sufficiently quickly or forcefully to address them. Shortcomings of what I have called economic science, in contrast, were for the most part less central to the crisis; indeed, although the great majority of economists did not foresee the near-collapse of the financial system, economic analysis has proven and will continue to prove critical in understanding the crisis, in developing policies to contain it, and in designing longer-term solutions to prevent its recurrence.

Chris Coles
09-26-10, 11:44 AM
Reads to me like the junky with a trembling hand telling the pusher that he has everything under control and that a small adjustment to the dose will solve all his problems....

Someone needs to place a copy of The PostCatastrophe Economy into his hands and tell him to read page 17, paragraph 2:


"Much as the great inflation crisis of the late 1970's gave the U.S. leadership the political will to make painful adjustments to economic and monetary policy, a grinding deterioration in living standards will drive American policy makers to return to the core values that made the country vital: an unparalleled capacity for innovation, a spirit of fair competition, a strong work ethic, a willingness to take risks, a tolerance for failure, a culture of self reliance, a willingness to forgo immediate gratification by saving for the future, a desire to pull one's own weight, and the respect for the rights of others".