cpi shows inflation over 9% using 1980 methodology

CPI is for the "typical household." Some postulate that the wealthy have a different basket than the poor, true. However, with goods, the goods the poor use actually have a different trajectory than those the wealthy use. Walmart goods are NOT going up, while TIffany's and BMW prices are, per recent WSJ and NYT stories. Housing prices are going down still for many Americans (and that is 30% of CPI.) So its a mixed bag to use this sort of argument.

My point is that MIT does claim BP = inflation. I posted a WSJ story that went service by service and showed that inflation was clearly muted or even negative for everything from restaurant meals to haircuts to online music rentals. (You buy = good. you rent = service.)

Lecker: BPP also covers only online retailers. And it is in 70 countries, not just the US.

In an interview with CNBC, Charles Evans of the Chicago Fed said that he would “favour more accommodation” and became the first policymaker on the rate-setting Federal Open Market Committee to explicitly countenance letting inflation rise above the Fed’s target of 2 per cent in the short-term.

“If 1 per cent was not a catastrophe, 3 per cent is not a catastrophe,” said Mr Evans.

---------------
No wonder Gold is going up....

We had over three percent inflation (on average) for most of the 8 years under Bush. We had it for ALL of the time under Reagan. Its blatently partisan to complain about a blip up to that level now. For three years you and your ilk have warning us that inflation was just about to be as bad as it was under Reagan and Bush 2. At which time there were no complaints. Nor are there retroactive complaints about runaway inflation under Reagan or Bush 2.

You want me to complain about inflation during the 1980's too. Perhaps I should complain about the jobless during the depression? Very wacked response..

Thanks for these responses. Jason, I largely agree with your assessment that we are experiencing huge deflationary forces exepcially in regards labor. I left RE out of my description partly for the reasons you describe.

That being said, to ignore the rising prices we are seeing in goods and necessities glosses over huge problem for the majority of americans

Something I ran across recently was this little tidbit: http://www.guardian.co.uk/environment/damian-carrington-blog/2011/aug/25/food-price-arab-middle-east-protests?utm_source=twitterfeed&utm_medium=twitter

It plots out spikes in foot prices with civil unrest. I can only imagine the day in this country when tea party obstructionists vow to block any extension of food stamps after a period where Bennie B wantonly erodes purchasing power for 65% of americans whose basket of goods is predominantly weighted by goods and not services....

doh - "It plots out spikes in FOOD prices..."

This is something to follow CPI less housing(42% of the index)
* * * *
http://pragcap.com/weak-housing-conceals-higher-inflation

Most people have heard about the CPI variant that excludes food and energy. But not many people outside the economics community know that the Bureau of Labor Statistics also publishes a long list of alternate permutations of CPI calculations, including or excluding various components. This week’s chart shows a comparison of the CPI-Housing growth rate versus “all items less shelter”, which is that other 58% of the CPI calculation I mentioned above. When we exclude the contribution of the housing price data, we can see that the inflation rate for everything else is already up to 4.68%

Forget stocks, TIPs, Gold, Timber, hedge with medallions

.

Each cab requires a medallion, and the supply has been so strictly controlled that, as the city population and economy grew over the last three decades, the current price has bloomed from about $140,000 in 1980 to $678,000 today.

http://www.theatlantic.com/business/archive/2011/09/better-than-stocks-better-than-gold-the-taxi-medallion-as-inflation-hedge/245602/

A new study by the Kaiser Family Foundation, a nonprofit research group that tracks employer-sponsored health insurance on a yearly basis, shows that the average annual premium for family coverage through an employer reached $15,073 in 2011, an increase of 9 percent over the previous year.

The unexpected increase in premiums raises questions about whether health care costs are, in fact, stabilizing at all, as people have postponed going to the doctor or dentist and have put off expensive procedures. “No one quite knows,” said Mr. Altman.

http://www.nytimes.com/2011/09/28/business/health-insurance-costs-rise-sharply-this-year-study-shows.html?_r=1&hp

Its bad. I don't think Obamacare will make much of a dent in the price rises, and I know the GOP has proposed nothing (since Bob Dole) that will mitigate such either.

The short-term trend -- a three-month annualized increase of 4.8 percent for the CPI and 2.1 percent for the core index -- is worse than the long-term trend. Rapidly growing emerging markets, such as China and India, are combating rising inflation. So are some slow-growing developed countries, such as the U.K., which reported a 5.2 percent year-over-year inflation rate for September.

In the U.S., the Fed keeps telling us inflation is moderating. So far there's no sign of it in the numbers. Saying it over and over won't make it so.

http://www.bloomberg.com/news/2011-10-24/inflation-is-moderating-except-in-the-data-the-ticker.html

The folks at the USDA released their projections for 2011/2012-food price inflation. The bad news is that feeding ourselves will cost ~4% more in 2011. The good news is that USDA thinks prices will rise only ~2.5% next year.
I shop (I hate it). My food inflation is closer to 10%. It depends on what you eat. For example, from the report:

Meats, poultry and fish +6%
Seafood +6.5%
Beef +9%
Fresh vegetables +5%
Cooking oils +7.5%

These items are all well above the average set by the USDA. The following kept the index low:

Processed vegetables +1.5%
Beverages +2%

http://brucekrasting.blogspot.com/2011/10/food-for-thought.html

WSJ says (and has stats to prove) Bernake is one of the best Fed presdidents when it comes to inflation. INCLUDING food and energy.

http://blogs.wsj.com/economics/2011/11/04/bernankes-inflation-record-not-nearly-as-bad-as-critics-contend/

Former Reagan and Bush adviser says Riversider is wrong.

http://economix.blogs.nytimes.com/2011/11/08/can-the-fed-stimulate-growth-or-only-inflation/?scp=2&sq=economix&st=cse

Bartlett is wrong. Dropping rates to near zero has not produced any results. Einstein defined insanity as repeating an action and expecting a different result. Clearly ZIRP is a failure.

You did not actually read the whole article, did you? This is NOT at all what he recommends or spoke about.

See also "The Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is 1.40 percent. In other words, the public currently expects the inflation rate to be less than 2 percent on average over the next decade..."

http://www.clevelandfed.org/research/data/inflation_expectations/index.cfm

Didn't the Fed also predict sub-prime contained?

http://www.youtube.com/watch?v=TGDKbw8o0uo

Seems the Federal Reserve doesn't eat turkey..

---
WASHINGTON, D.C., November 10, 2011 – The retail cost of menu items for a classic Thanksgiving dinner including turkey, stuffing, cranberries, pumpkin pie and all the basic trimmings increased about 13 percent this year, according to the American Farm Bureau Federation.

http://www.fb.org/index.php?action=newsroom.news&year=2011&file=nr1110.html

"Didn't the Fed also predict sub-prime contained?"

No, you idiot, this is the bond market's estimate, merely reported by the Fed.

"Seems the Federal Reserve doesn't eat turkey.."

Because holiday food is the only measure of inflation anyone should ever use. Ever.

The Fed likes inflation today - a true Monetarist's view of how to expand the economy.

Ask Milton Friedman.

No, Bernanke reported that subprime was contained to the U.S. Congress. Seems the all powerful Oz is not all knowing.

Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that growing troubles in the market for risky mortgages thus far doesn't appear to be spreading to the overall economy but the situation bears close watching.

"At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," Bernanke said in prepared testimony to Congress' Joint Economic Committee.

http://archive.newsmax.com/archives/ic/2007/3/28/110709.shtml

What did you expect him to say? That a tsunami was coming?

RS, in case I was not clear this: "No, you idiot, this is the bond market's estimate, merely reported by the Fed." refers to the INFLATION expectations. You cannot conflate what the entire bond market thinks with what Bernake said.

" December 12, 2011, 10:51 AM ET

Treasurys[SIC]: Yields Could Break Through 1940s Record Lows..."

http://blogs.wsj.com/marketbeat/2011/12/12/treasurys-yields-could-break-through-1940s-record-lows/?mod=yahoo_hs

The same WSJ whose editorial board has spent the past three years warning us about invisible bond vigilantes who will drive up US interest rates. The bond market seems to not expect hyperinflation.

"Hmm. I was looking at the Thomson Reuters/Jefferies commodity price index, which has been trending down since the spring:

And I found myself thinking about the hearing last February in which Paul Ryan accused Ben Bernanke of debasing the currency, using rising commodity prices to argue that dangerous inflation lurked just around the corner.

So, will Ryan demand more expansionary policies from the Fed given the sharp fall in commodity prices this year?

Truly, it is amazing how our political landscape continues to be dominated by people who have been wrong about everything for years."

See

http://www.bloomberg.com/apps/quote?ticker=CRY:IND

and

http://krugman.blogs.nytimes.com/2011/12/12/debasing-the-dollar-not/

Bernanke ID DEBASING THE CURRENCY. Fed policy is creating downward pressure on dollar. Unfortunately Paul Ryan didn't predict Europe blowing itself up, which is creating a countervailing force supporting the dollar.

How could he have not predicted Europe when the PIIGS crises started a year before he uttered those words?

Funny how the USD index is above not only where it was when Ryan said that, but essentially Bush's entire last year in office.

http://www.bloomberg.com/apps/quote?ticker=DXY:IND

"As China Goes, So Go Commodities

The outlook for global prices depends heavily on whether the country maintains its voracious appetite for oil, copper and other products."

What!?!?!?!?! SUPPLY AND DEMAND!??!?! No!! NO!!! Its debasement of the dollar by the Fed!!!! I KNOW IT IS!!!! Because people on this thread on on Fox and talk radio told me so!!!!!!!!!

http://online.wsj.com/article/SB10001424052970204012004577073971768290922.html?grcc=dcd4949fbda945c3efebfc09a9f837afZ3&mod=WSJ_hps_sections_markets

Well , that's a good reason why people go with gold and not copper or oil.

And yet, you can buy more Gold, Euros, Swiss Francs, Copper, oil, wheat, corn, and a whole host of other things now than you could three months ago with dollars. Despite all this debasement and phantom inflation.

Krugman conveniently destroys everything RS says in one post today.

http://krugman.blogs.nytimes.com/2011/12/14/interest-rates-inflation-and-the-way-the-world-works-slightly-wonkish/#more-27351

Awkward...

http://bpp.mit.edu/usa/

Krugman conveniently destroys everything RS says in one post today.
--
of course, you're quoting an economist who i dont' agree with, quote from the economists that represent different schools of thought, instead of krugman, who is off his rocker.

"of course, you're quoting an economist who i dont' agree with, quote from the economists that represent different schools of thought, instead of krugman, who is off his rocker."

Not one thing the Austrians or Ron Paul etc has come true, and everything he says would happen happened, as he illustrates with actual, you know, facts, in his post.

No surprise jason doesn't like Austrian people.

Here is inflation, averaged over the previous 3 and four years, from 1980 to now, using CPI. INCLUDING food and energy. Where is this hyperinflation?

http://graphics8.nytimes.com/images/2011/12/14/opinion/121411krugman4/121411krugman4-blog480.jpg

You're conflating the argument
1) Food basket of CPI is not representative of what a healthy person eats. Lots of processed foods and vegetables. If one were to rebalance using fresh fruits, vegetables, fish the increase is much higher
2) The CPI understates inflation.
3) Inflation may be understated but we don't have hyperinflation at the moment
4) Bernanke got a gift on the inflation front in the form of Europe blowing up
5) Money supply has increased and many believe the risk of sharply rising prices exists in the middle of the decade.

6) you are a congenital liar

What is inflation like in Columbiacounty¿ How much is a bail of hay¿

"You're conflating the argument"

No, you are. I am presenting the actual data.

"Food basket of CPI is not representative of what a healthy person eats. Lots of processed foods and vegetables."

Weak. Cherry picking. Lots of people buy more electronics and use a lot more cable and internet than the average person. Those prices per units have been declining YOY every year for decades.

"The CPI understates inflation."

So you have been arguing for 500+ posts. Most economists disagree.

"Bernanke got a gift on the inflation front in the form of Europe blowing up "

Inflation was LOWER in 2009-early 2010 than it is now. Greece blew up in May 2010.

"Money supply has increased and many believe the risk of sharply rising prices exists in the middle of the decade." Oh you mean like Ron Paul and Peter Schiff, who said they by NOW, we ALREADY would have been in like the second year of massive inflation?

No, dummy, Japan has had over a decade of giant money supply growth with no inflation or even deflation.

If you one can't make his/her arguments without words like "dummy" & "idiot" perhaps , then perhaps the argument is weak
----------------------
Fact is the the CPI is at an all time high, I understand the Fed and it's economists call that price stability but it isn't. The folks at the USDA recently issued their projections for 2011-2012 food prices(Meats, poultry and fish)+6% , Seafood +6.5% ,Beef +9%, Fresh vegetables +5% & Cooking oils +7.5%, but their over-all estimate was lower. Why? Americans eat processed foods!

Fact is real people don't switch from Beef to Spam every time Beef goes up. And we don't apply geometric measures to weigh down sudden increases in the price of lettuce.

And maybe half your budget goes to Kindles , IPADs and Tv's but for most people electronics is not that big an item. Electronics is not a core item, food is.

The reality is the cost of food keeps going up, our taxes keep going up, education keeps going up, a college education keeps going up

The cost of the goods and services we buy keep going up, but incomes are not matching the increases. This is a real problem.

Krugman argues that the inflation argument is wrong now and wrong ever because he wants stimulus(spending). The problem is that massive deficits are prime cause on the Euro crisis, and now that everything's blowing up, austerity is too late. We need to bring spending down before it's a focus of the market. The currency depreciation/inflation concern is something Krugman needs to belittle so that he can have his ineffective social programs. Of course he'd just say we need to tax more, which doesn't explain how countries/municipalities with a huge tax source are floundering(Italy & Nassau County NY)

"Forty months into the project, the BPP shows a price rise about a third of a percentage point higher than the CPI. That’s around 0.1 percent higher inflation on an annual basis — i.e., essentially nothing.

Sorry, folks, but there’s no grand conspiracy to hide inflation."

http://krugman.blogs.nytimes.com/2011/12/18/inflation-conspiracy-theories/

Give up already.

In addition to the US, Japan,and UK - Denmark, Sweden, and other EU nations OUTSIDE the Eurozone are NOT seeing interest rates rise - they also have ultra- low rates. The one common denominator, regardless of how high or low governemt spending or debt is they have their own currency.

The world treats the Euro like the D-mark, btw.

And Germany, Sweden, and Denmark have the highest level of government spending by far of any rich nations, yet have ultra-low interest rates. Clearly then government spending is NOT at all what bond markets are worried about.

, folks, but there’s no grand conspiracy to hide inflation........

I think there is

Conspiracy is not the word I would have used. But a mutual interest in the under-reporting of. YES

Krugman argues that the "inflation argument" is wrong because (1) the statistics don't show any inflation and (2) standard theory doesn't predict current policies are inflationary and (3) the alternative theories that do predict inflation are both internally incoherent and not predictive of reality.

Like everyone who pays attention to the math, he expects the US dollar to depreciate eventually, since at current values we import far more than we export. That's not a policy recommendation. It's a recognition of the implications of standard economic theory. Eventually, foreigners will decide that they want something other than dollar bills in return for giving us their stuff; at that point, there will be a surplus of dollars abroad and their price will drop.

Although Krugman doesn't say this, dollar depreciation would also be a very good thing: if the dollar dropped, the primary effect would be to make manufacturing in the US profitable again, which would be an enormous benefit to ordinary Americans. As a side benefit, it'd reverse some of the upward redistribution of the last several decades: with more jobs, working people would be able to bargain for higher wages, while the upper crust would see profits drop just as they'd have to pay more for manufactured stuff and trips abroad.

In the short run, however, foreigners -- and Americans -- are quite happy to hold dollars since the alternatives are all too scary, so the US can continue to import more than in exports, and the US government could, if it so wished, rebuild the country and put people back to work at no cost.

Krugman has also repeatedly pointed out that the European crisis obviously has little to do with "massive deficits" since most of the crisis countries were running primary surpluses prior to the crisis: the crisis caused the deficits, not the other way around. Their crisis, like ours, was caused by a massive housing bubble and the PRIVATE borrowing it encouraged, combined with trade imbalances due to an inflexible currency system and compounded by policymakers who've decided to sacrifice jobs in order to protect incompetent creditors from the consequences of their irresponsibility.

Finance Guy,
agree...as Bill Gross coined it. The United States is the least dirt shirt in the hamper.

>while the upper crust would see profits drop just as they'd have to pay more for manufactured stuff and trips abroad.

Seriously, trips to Paris and Rio become more expensive, so that's a step on the way to solving problems that we may have?

>In the short run, however, foreigners -- and Americans -- are quite happy to hold dollars since the alternatives are all too scary

Short run? If the alternatives are truly "scary", then it isn't short-term.

"Conspiracy is not the word I would have used. But a mutual interest in the under-reporting of. YES"

You yourself have used the the billion price index as proof of YOUR POV. And yet 40 months in, it shows inflation virtually identical to overall CPI, and actual a bit LOWER than goods-only CPI. You fail epicly.

"“It is the ability to print one’s own currency to pay government bond investors back under any circumstances that makes a government bond a government bond, i.e. a (credit) risk- free asset for hold-to-maturity investors,” Elga Bartsch, the chief European economist at Morgan Stanley in London, said in a report this month to clients." - http://www.bloomberg.com/news/2011-12-18/s-p-downgrade-proves-absurd-as-global-investors-make-u-s-assets-preferred.html

"...Take Germany. They have a pretty big welfare state: pensions, health care, paid vacations, unemployment benefits equal to two-thirds of one’s income. Indeed, the Organization for Economic Cooperation and Development keeps track of social spending — unemployment, old-age pensions, health care, etc — as a percentage of GDP. In 2007, Germany spent 25.2 percent of their GDP on such things. Greece spent 21.3 percent on social policies. Yet Greece is in crisis, and Germany is fine..."

http://www.washingtonpost.com/blogs/ezra-klein/post/a-larger-welfare-state-can-mean-a-lower-deficit/2011/08/25/gIQAkL9ufO_blog.html?wprss=ezra-klein

"....It's tempting to view the European debt crisis as a simple morality tale. Hard-working, fiscally responsible northern Europeans such as the Germans and the Dutch are being forced to pick up the tab for their profligate southern neighbors—the Greeks, the Italians and the Spanish....Unfortunately, that attractively simple story doesn't always stack up—most notably in the case of Spain...

...In 2007, before the crisis struck, Spain had a modest debt load representing just 36% of its economy, according to European Union figures. And those responsible Germans? They had 65%. ...

...Last year, Spain's public debt load represented 61% of its economy. Germany's rose to 83%. In fact, Spain's debt burden last year remained below that of the Netherlands (63%), France (83%) and, for comparison, the U.S. (93%)...."

http://online.wsj.com/article/SB10001424052970203501304577088221198128632.html

From the NYT on same topic: "“The relationship between 3 percent [deficits] and fiscal vulnerability is a weak one,” said Jean Pisani-Ferry, director of Bruegel, an economic research institution in Brussels. Both Spain and Ireland have run balanced budgets, or even budget surpluses, in recent years, and both were well within the Maastricht criteria, but became speculative targets in the credit crisis anyway; Italy has one of the lowest budget deficits in the euro zone, and runs a primary surplus, meaning that its budget is in the black when debt service is discounted. "

Krugman just wants to depreciate the dollar. He says so all the time, but frankly every country wants a lower currency, Switzerland, Japan, Greece, so we know where that leads us to(currency wars).. and as far as the U.S. is concerned inflation and depreciating currencies go hand in hand.
------------------------------------------------------------------------------------------------------------

So, the bottom line: to narrow international imbalances, we need a lower relative price of US output. Because prices are sticky, by far the easiest way to get there is dollar depreciation.
http://krugman.blogs.nytimes.com/2009/10/24/adjustment-and-the-dollar/

First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed.

http://www.nytimes.com/2011/05/20/opinion/20krugman.html

Its not so much that Krugman "wants" it. Its simple economics. You cannot run huge trade deficits for years AND budget deficits and NOT have your currency depreciate. Its mathematically impossible.

When properly accounted, global inflation is already substantially higher than common pricei baskets indicate, meaning real interest rates are even more negative than the CPI currently suggests¹

¹It is not necessarily true that price indexes like the Consumer Price Index accurately capture the loss of purchasing power, commonly referred to as inflation. The CPI calculates the price changes of components within a basket of goods and services. The components of the basket are subjectively weighted and periodically substituted, and are further subjected to hedonic adjustments (which seek to account for quality changes such as rising computing power). While the US CPI may accurately capture the loss of purchasing power for American wage earners living paycheck to paycheck, it does not capture the loss of purchasing power for savers or investors seeking to buy homes, travel abroad or send their children to college, nor for businesses seeking to delay capital spending, pay future wages or exchange goods or services for foreign currencies, nor for institutional investors managing employee retirement funds. The US CPI seeks to narrowly capture US dollar denominated price adjustments of basic goods and services for US dollar denominated wage earners spending their US dollars in the US, period.

Meanwhile, the United States imports the majority of the goods that American consumers buy with US dollars. This implies that the loss of purchasing power of dollar-denominated wage earners, savers and investors is largely determined by the exchange value of US dollars against other currencies. Exchange values fluctuate because producers and manufacturers demand constant value for their goods and services regardless of the nominal prices of their output. For example, if crude oil producers in the Middle East or toy manufacturers in Asia believe US dollars will hold more future purchasing power than Euros, then they would rather exchange their goods for US dollars. Another major shortcoming of “inflation indexes” like the CPI is that they do not capture the impact of necessary future money printing needed to service and pay down already existing debt. Such future money printing necessarily diminishes the purchasing power of savers and investors directly because it forces providers of goods, services, assets and labor to demand more currency in exchange (i.e. higher prices). The wider the gap separating the supply of existing debt from the supply of existing base money, the more future inflation (money creation) there must be. So, price baskets are simply very narrow measures of contemporaneous price changes. Finally, ShadowStats.com calculates its SGS-alternate 1990 based US CPI-U data series to be over 11% presently.

http://www.ritholtz.com/blog/2011/12/gold-in-perspective/

Which Krugman you quoting from Jason?
----------------------------------------------------
http://www.nytimes.com/2003/10/14/opinion/don-t-look-down.html

During the 1990's I spent much of my time focusing on economic crises around the world -- in particular, on currency crises like those that struck Southeast Asia in 1997 and Argentina in 2001. The timing of such crises is hard to predict. But there are warning signs, like big trade and budget deficits and rising debt burdens.

And there's one thing I can't help noticing: a third world country with America's recent numbers -- its huge budget and trade deficits, its growing reliance on short-term borrowing from the rest of the world -- would definitely be on the watch list.

The crisis won't come immediately. For a few years, America will still be able to borrow freely, simply because lenders assume that things will somehow work out.

But at a certain point we'll have a Wile E. Coyote moment. For those not familiar with the Road Runner cartoons, Mr. Coyote had a habit of running off cliffs and taking several steps on thin air before noticing that there was nothing underneath his feet. Only then would he plunge.

What will that plunge look like? It will certainly involve a sharp fall in the dollar and a sharp rise in interest rates. In the worst-case scenario, the government's access to borrowing will be cut off, creating a cash crisis that throws the nation into chaos.

I know: it all sounds unbelievable. But would you have believed, three years ago, that the U.S. budget would plunge so quickly from a record surplus to a record deficit? And would you have believed that, confronted with that plunge, our leaders would offer excuses rather than solutions?

I am not sure what your point is RS. Krugman has said from 1999 (about Japan) to today that when the economy is in a slump and itnerest rates at the zero bound (like japan then and the US and Europe now) deficits and expansionary monetary policy are needed because REAL interest rates are below zero.

Meanwhile, look at non-existent inflation, per the Dallas fed:

http://dallasfed.org/data/pce/index.html

Here's the point. Many of these economists(krugman specifically for this discussion are political)
-----------------------------------------------------

If you ever wondered whether most economics is poisoned by political biases then look no further than this excellent story by Joe Weisenthal. Joe cites the environment in the early 2000′s when the political tables were flip flopped. The Republicans were in charge and budget deficits were booming. But the stunning thing in Joe’s sleuthing is that the economists were playing the exact opposite roles they are playing today. Instead of liberal economists arguing in favor of high budgets and the lack of fiscal crisis, many of them were arguing that the US economy was threatened by fiscal crisis as a result of the policies of George Bush (see Paul Krugman’s piece here). Many conservatives, on the other hand, were arguing the opposite position as Republican mouthpiece Don Luskin did back in 2004 (see here).

http://pragcap.com/the-disgusting-politics-of-economics

You fucking moron, RS, I already explained that - as has Krugman MANY times in MANY columns. Deficits are bad when you are NOT in a recession and interest rates are higher than they are now. SO too is accomadating monetary policy. He said this in 1999, well before Bush was President, and he has said it many times since, SPECIFICALLY in response to absolutely retarded post like what you said above.

IF we were at 5% unemployment and 10-year UST interest rates were 9% and inflation 5%, yes, then he would be all about cutting the deficit, you moron.

Jason is a retard, and racist.

He said Harlem was safer because it was more diverse (i.e. lower percentage of black people) than in the past and he called Herman Cain "toast" when he'd never call a white candidate "toast" which is a hardly-clever but still rather clear code word.

Interest rates are low for countries that borrow in their own currencies. There is nothing special about the US in this regard:

http://graphics8.nytimes.com/images/2011/12/27/opinion/122711krugman2/122711krugman2-blog480.jpg

Deficits are bad when you are NOT in a recession --- didn't Keynes ay that

What he’s missing is that none of these nations “borrow” their currency (he cites Japan, the USA, UK and Sweden). Why in the world would you “borrow” a currency you have monopoly supply of and an endless ability to create? You wouldn’t. Dr. Krugman is SO close to closing he loop on all of this, but he’s working from the totally defunct convertible currency paradigm. As sovereign currency issuers these countries are not dependent on bond markets to acquire money for “funding” purposes. When these nations want to spend they simply reach into their bottomless pit of money and credit bank accounts. Like a scorekeeper at a football game, these nations don’t have piles of “points” (or money) sitting around waiting to be spent. They don’t acquire points from the teams playing the game. And these four countries, just like the scorekeeper, don’t acquire money for spending purposes when they want to. They simply credits bank accounts. The scorekeeper wouldn’t “borrow” the points he has monopoly supply of would he? Absolutely not. The key is that the sovereignty eliminates the bond vigilante myth so that bond markets serve as a tool for the central bank to target interest rates as opposed to being a “funding” source as we see in non-sovereign nations such as Europe’s nations. See here if you’re at all confused on this subject.

http://pragcap.com/dear-dr-krugman-its-about-sovereignty-not-the-liquidity-trap

I guess Ben was wrong on both..
________________________________
In his first meeting as Fed chairman, Ben S. Bernanke noted that the housing market was causing some uncertainty, but that he “was reassured to hear that most participants think that a decline in housing will be cushioned by strong fundamentals in terms of income, jobs, and continuing low interest rates.”

He agreed with that view, saying “strong fundamentals support a relatively soft landing in housing.” He pointed out that residential investment represents just 6 percent of the economy. “I think it would take a very strong decline in the housing market to substantially derail the strong momentum for growth that we are currently seeing in the economy.”

Bernanke made light of the questions surrounding Iceland, which was causing some early waves in financial markets after borrowing heavily.

After a Fed economist gave a presentation that noted those trembles, Bernanke said, “We’d like a full report on the Icelandic,” before he was interrupted by laughter.

Later, the explosion of Iceland’s financial markets led to that country’s banks defaulting on their debts, feeding the financial crisis.

http://www.washingtonpost.com/business/economy/greenspan-image-tarnished-by-newly-released-documents/2012/01/12/gIQAvh0mtP_story.html

and Al.

No riversider, you make shit up. We KNOW from published treasury and central bank reports how much bond issuance is bought by the central banks and how much by market participants, and actually even more granularity the TYPE and location of participant. And the vast majority of Canadian, Swedish or Danish (or US) government bonds are NOT bought by the central banks.

Such massive hyperinflation. Not.

http://www.nytimes.com/2012/01/20/business/economy/jobless-claims-fall-sharply.html?_r=2&ref=business

The Treasury sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Federal Reserve will be successful in sparking inflation.

“It signals people’s expectation of the Fed being able to create some inflation with the QE program,” said Alex Li, an interest-rate strategist in New York at Deutsche Bank AG, which as a primary dealer is required to bid at Treasury auctions. “With nominal rates so low, in order have high TIPS breakevens you’ve got to have negative real yields on the five-year.”

http://www.bloomberg.com/news/2010-10-25/treasury-draws-negative-yield-for-first-time-during-10-billion-tips-sale.html

It also means the deficit is no big deal versus jobs. If somone said I could borrow at negative rates I would borrow as much as I can - I mean me, personally, $100,000,000.00, and invest it in ANYTHING with a positive return. Its free money.

The US Society of Civil Engineers says the country needs to spend $2.2 TRILLION just to make our EXISTING infrastructure back to a "B" grade out of A-F. As in its a C- now.

I say the bond market says inflation fears are overblown, RS poo-poos the bond market. The market says what RS wants to say, and suddenly the bond market knows best.

I say that ACTUAL inflation should not worry people because EXPECTED inflation is low, RS says BS, irs actual inflation that should matter. Now that actual inflation is low, its EXPECTED that should matter, per RS.

Based on today's logic, the bond market (10-year normal - TIPS) says 10 year inflation expectations are a walloping 2.5%. Versus the average of over 3% for the past 90 years, and well over 3% during all of the Reagan and Bush 2 years.

Meanwhile, see this handy chart showing deflation across many products, including some food and most commodities. Despite what RS predicted a few weeks ago in posts above.

http://si.wsj.net/public/resources/images/NA-BP041_Econom_G_20120119183312.jpg

Hmmm, I overstated it. I just types it up on Bloomberg - [function ILBE] - the 30 year breakeven is 2.26%, and the 10 year is 2.23%, and the 5 year 1.7%. That is, the bond market is saying inflation will be only 1.7% over the next five years.

So the next post will be RS backtracking from his earlier post, and saying the bond market does not matter.

Interesting... The Fed states it has a goal of increasing the inflation rate, and you believe we will continue to have low inflation, so the only logical conclusion is that you believe the Fed will fail in its growth objective

It's not me, it's the bond market. Which you yourself used as evidence not four posts up.

" Fed data indicate U.S. deflation risk
The U.S. economy faces a risk of deflation, not inflation, according to a Federal Reserve survey of credit conditions. Banks relaxed lending standards seven quarters in a row for large and midsize companies beginning in 2009, but they reversed course and started tightening them in the fourth quarter, the survey found. The Wall Street Journal (1/30), Reuters (1/27), The Globe and Mail (Toronto) (1/29)"

http://online.wsj.com/article/SB10001424052970203363504577187363550301118.html?mod=dist_smartbrief

http://www.reuters.com/article/2012/01/27/us-usa-fed-inflation-idUSTRE80Q28J20120127

http://www.theglobeandmail.com/globe-investor/investment-ideas/features/taking-stock/bernankes-siren-song-for-us-treasury-bonds/article2318955/

http://www.merlehazard.com/Merle_Hazard/FINANCIALLY_SUSPCIOUS_MINDS.html

Saving is harder when you don't earn interest. Proabbly the reason why spending stalled.
-----------------------
Consumer spending stalled in December as Americans took advantage of a jump in incomes to restore depleted savings, indicating households remain focused on repairing finances.

http://www.bloomberg.com/news/2012-01-30/consumer-spending-in-u-s-stalled-in-december-as-americans-boosted-savings.html

Changing the topic. Inflation remains low. THe outlook is for inflation to remain low. After nearly 600 posts.

But the moment inflation ticks up...he called it

Oh, and Haley's comet is coming...any day now

Ron Paul has been saying we will very soon have massive hyper-inflation since about 1982. Peter Schiff since about 1999. Someday they may be right.

I predict right now that there will be a female President.

Clearly inflation, however it is defined, is not at hyper-inflation levels, but I guess the best way to dismiss an argument is via straw man and hyperbole. The Fed is worried about asset prices and has a policy to prop them up and then discusses a misplaced fear about negative CPI as justification and then attempts to assuage fears saying the guy making barely minimum wages can maneuver the financial markets to break even. Bottom line is the Fed has a policy of destroying purchasing power at a rate of around 2% per annum using CPI measures and in reality more than that, and to the guy who barely makes a living or is living on fixed income who can't negotiate his income that's a tax.

Inflation ran what per year under the gold standard?

Riversider

Your constant mantra has been that inflation is a serious present concern that is likely to get even worse in the near future. You have been wrong. Enough said.

"Growing Number of Americans Can’t Cover Basic Expenses if Job Loss or Other Emergency Strikes"

"In the United States, 27 percent of all households are “asset poor,” meaning they lack the savings or other assets to cover basic expenses for just three months if a layoff or other emergency leads to loss of income, according to the 2012 Assets & Opportunity Scorecard, released today by the Corporation for Enterprise Development (CFED). Since the release of the 2009-2010 Assets & Opportunity Scorecard, the number of asset poor families has increased by 21 percent from one in five families to one in four families. The asset poverty rate is now nearly twice as high as the Census Bureau’s official income poverty rate of 15.1 percent.

For the first time the Assets & Opportunity Scorecard also includes a measure for “liquid asset poverty,” which excludes assets such as a home, business or car that can’t easily be converted to cash, and consequently provides a more realistic picture of the resources families have to meet emergency needs. According to that measure, 43 percent of households nationwide are “liquid asset poor” with little or no savings to fall back on if emergency strikes. "

"* One in five jobs is low-wage and nearly half of employers do not offer health insurance. In addition, 55 percent of workers do not have or participate in retirement plans.

* While the number of people getting four year college degrees is up slightly, the average debt for graduating college seniors has risen 19 percent since 2007 to $25,250. "

http://assetsandopportunity.org/scorecard/assets/National_Press_Release_Final.pdf

pulaski, things are bad for more than not. The rich poor divide is bad. I get it. Does not mean we have had Peter Schick/Ron Paul/Riversider runaway inflation. It just means there are a lot of poor and near poor people.

The important thing to note, is that most central banks use inflation as a tool, a tax to transfer wealth from one group to another, that government has an interest in under-reporting numbers, and that inflation hurts the lower income strata more than the upper who have more tools at their disposal to cope. It's also true that once the genie is out of the bottle it's not so easy to put back as Paul Volcker learned. And lastly it's wise to not trust the Fed 100% as they are not omnipotent, as evidenced by their failure to both anticipate and recognize the current credit bubble.

"Growing Number of Americans Can’t Cover Basic Expenses if Job Loss or Other Emergency Strikes"

How surprising! With discretionary income from wages falling to a third of what it was 30 years ago and savings rates being negative during part of last decade... Who could have seen this coming?

In our household though, inflation this year is super mild. We don't notice it in "shelter costs" much, as our rent went up 3% or less, food costs don't seem higher, and health care premiums actually went down a ton for us, more than 60% thanks to being healthy and being able to use a HSA for the first time (wonder why employers didn't make them available earlier!!!). Also we bought a tons of technology that cost us much less than what similar items used to cost 2 or 3 years ago. I LOVE LOVE LOVE deflation! A pitty that we only see it in technology items and now, in health care premiums.

Tech is really a small percentage of a typical budget during the course of the year. It pales in comparison to Food, Energy, Shelter, Health...

> It pales in comparison to Food, Energy, Shelter, Health...

Sure! that's my point. It'd be AWESOME to have deflation across the board, not only in tech and health care (our 2011/2 experience so far), but also in Shelter... With home prices declining still, hopefully we will profit from that type of deflation going forward :-)

Energy was super mild this year, also deflationary imho thanks to super low natural gas. Being in NYC we spend almost nothing in transportation though. Not a bad thing :-) Food inflation, which almost everybody claims is rampant, didn't reach us somehow.

Deflation means our dollars go further, in effect a higher standard of living, it's not a bad thing. In the early part of the last century.. technology, the assembly line, and the industrial revolution meant more of us could afford a car or purchase an air conditioner. The deflation talk is double speak, the Fed speaks of targeting CPI, but in reality is worried about asset prices.

exactly right. the FED just cares of asset prices going up. if printing is needed for that, they are most willing as long was they succeed reducing real wages, so that inflation doesn't go out of hand. so wage earners are sacrificed to the benefit of asset holders, the top 10% at best.

the only issue is that under a democratic system in which the lion share of voters are wage-slaves, not asset-owners... how can the FED get away with this. will people wake up?

"In the early part of the last century.. technology, the assembly line, and the industrial revolution meant more of us could afford a car or purchase an air conditioner. "

You are mixing up time frames. The great deflation occurred from roughly 1870-1890, and made farmers furious (and caused the whole "cross of silver" speech railing against the gold standard, etc.) It was hardly painless to about half the population. Yes it was largely productivity-driven, but demand driven deflation is essentially ALWAYS bad. Always.

> deflation is essentially ALWAYS bad. Always.

To those in debt, maybe. For the rest, it's a great thing.