Inflation-Consider yourselves warned

[Toddsterpatriot]

2% inflation is considered a retardant for growing a vibrant economy.

As long as the fed continues to buy 85b monthly of toxic mortgage securities bundles, we are safe.

Guaranteed MBS, the opposite of toxic.

Nope. The bundlers should have all gone to jail for life.

As long as the government buys up the toxic crap, inflation cannot take off.

The bundlers should have all gone to jail for life.

Sounds good, but Barney Frank, Bernie Sanders and Chris Dodd never would have let that happen to their friends at Fannie and Freddie.

As long as the government buys up the toxic crap

Where are they doing that? The Fed buys the good stuff, who's buying up the toxic crap?

 

[percysunshine]

Ok, so I was not the only one who noticed this. Where as I am wondering if this is a hint that inflation is about to really heat up, Williamson at NRO just thinks the NYT are a bunch of idiots;

"Item 1: “Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”

...The unspoken corollary here is that those higher prices charged to consumers are not matched or exceeded by higher prices paid to suppliers. Walmart has a great deal of market power, and it can very often force its suppliers, mostly smaller firms, to swallow some very bitter medicine. Also, Walmart and similar companies can, as the Times notes, raise prices while not raising wages, especially in the current weak employment market.

So, inflation adds to Walmart’s profits by lowering the real income of Walmart’s suppliers and by lowering the real wages of Walmart’s employees. It is amusing to contemplate the possibility of Janet Yellen’s calling a press conference to announce: “Our plan for improving the economy is to use monetary policy to help Walmart screw over its vendors and employees in order to increase its own bottom line.”

Inflation Fixes Nothing | National Review Online

 

[expat_panama]

"Item 1: “Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”

...The unspoken corollary here is that those higher prices charged to consumers are not matched or exceeded by higher prices paid to suppliers.

--and the reason that 'corollary' was unspoken is because it's stupid.

The idea is that inflation is prices increasing over time. On one day suppliers and workers are paid. The next day when prices are higher the goods are sold. Same with borrowing, on one day money is borrowed to buy materials and pay workers to make goods. The next day the goods are sold at higher prices and the loan is paid off with the extra money.

Deflation does all this in the opposite direction and that's why deflation is economic death.

 

[william the wie]

"Item 1: “Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”

...The unspoken corollary here is that those higher prices charged to consumers are not matched or exceeded by higher prices paid to suppliers.

--and the reason that 'corollary' was unspoken is because it's stupid.

The idea is that inflation is prices increasing over time. On one day suppliers and workers are paid. The next day when prices are higher the goods are sold. Same with borrowing, on one day money is borrowed to buy materials and pay workers to make goods. The next day the goods are sold at higher prices and the loan is paid off with the extra money.

Deflation does all this in the opposite direction and that's why deflation is economic death.

Ex-pat the reason this theory doesn't work is increasing returns industries look even better with inflation than without and destroy more employment, quicker. Any company that can generate 41% internal rate of return on critical components like GE has for the past century and more in regards to electric/electronic controls will outbid all other users of capital. That repeats with capital equipment only more hyperbolic.

And more increasing returns industries come online faster with easy money as happened in the 1920s and 1990s. The other shoe has yet to drop on the 1990s in as much as the shrinking labor force has not yet gone critical.

 

[SteadyMercury]

Let's get clear: high inflation is bad, slight inflation is the standard goal, deflation is economic death.

Exactly. Some inflation is part of a healthy economy, it encourages investment.

all you have to do is go to the grocery store on a regular basis and know that the 2% number is a complete farce.

The average American family only spends about 7% of their income on food for eating at home, so no strolling thru a grocery store isn't a very good barometer to judge the accuracy of a measure as wide and varied as inflation.

 

[pinqy]

We already have high inflation...but the government understates it by manipulating the market basket of goods so that they can keep interest rates and increases in SS low.

Ok, how exactly (meaning I want you to state the detailed specific process) are you claiming this is done? By Census in the Consumer Expenditure Survey or the Telephone Point of Purchase Survey? Or by BLS in processing or collection of prices? Or some combination?

 

[Rshermr]

We already have high inflation...but the government understates it by manipulating the market basket of goods so that they can keep interest rates and increases in SS low.

Ok, how exactly (meaning I want you to state the detailed specific process) are you claiming this is done? By Census in the Consumer Expenditure Survey or the Telephone Point of Purchase Survey? Or by BLS in processing or collection of prices? Or some combination?

Well, actually boedicca uses a couple of much more complex methods. One, she gets if from bat shit crazy con web sites with absolutely zero proof of the data, or Two, she simply pulls it from her ass.

 

[expat_panama]

...the government understates it by manipulating the market basket of goods...

Right. They monetize and sell debt...

--using black helicopters with secret mind rays to make people think they're buying debt to prevent deflation.

 

[pinqy]

We already have high inflation...but the government understates it by manipulating the market basket of goods so that they can keep interest rates and increases in SS low.

Ok, how exactly (meaning I want you to state the detailed specific process) are you claiming this is done? By Census in the Consumer Expenditure Survey or the Telephone Point of Purchase Survey? Or by BLS in processing or collection of prices? Or some combination?

Well, actually boedicca uses a couple of much more complex methods. One, she gets if from bat shit crazy con web sites with absolutely zero proof of the data, or Two, she simply pulls it from her ass.

Well, yeah... I was expecting a cut-and-paste from shadowstats. Which is why I asked for details. Maybe she'll look for the details and realize they're not there.

 

[Toro]

There is no inflation.

There may be in the future, but there isn't now.

 

[william the wie]

There is no inflation.

There may be in the future, but there isn't now.

But the rate of deflation in increasing marginal returns industries even without getting into the hedonics fight is almost totally unmeasured. How do you value a phone with 64 processors on one chip since until the launch there were no comparables?

Toro, Santa Claus in the form of the historical St. Nicholas has much better verification than the general equilibrium your inflation/deflation argument is based on.

 

[TakeAStepBack]

There is no inflation.

There may be in the future, but there isn't now.

Ridiculous.

 

[Toro]

There is no inflation.

There may be in the future, but there isn't now.

Ridiculous.

Where is it?

 

[pinqy]

There is no inflation.

There may be in the future, but there isn't now.

But the rate of deflation in increasing marginal returns industries even without getting into the hedonics fight is almost totally unmeasured. How do you value a phone with 64 processors on one chip since until the launch there were no comparables?

Toro, Santa Claus in the form of the historical St. Nicholas has much better verification than the general equilibrium your inflation/deflation argument is based on.

By the time that phone is entered into the indexes, it's been out for a few years and there's been time to get data. Its weight will be proportional to sales of other phones, and the first month of collected prices won't be used, it'll be entered into the second month. Same way as any new item.

Oh, and hedonics aren't used for phones.

 

[william the wie]

There is no inflation.

There may be in the future, but there isn't now.

But the rate of deflation in increasing marginal returns industries even without getting into the hedonics fight is almost totally unmeasured. How do you value a phone with 64 processors on one chip since until the launch there were no comparables?

Toro, Santa Claus in the form of the historical St. Nicholas has much better verification than the general equilibrium your inflation/deflation argument is based on.

By the time that phone is entered into the indexes, it's been out for a few years and there's been time to get data. Its weight will be proportional to sales of other phones, and the first month of collected prices won't be used, it'll be entered into the second month. Same way as any new item.

Oh, and hedonics aren't used for phones.

That's better than I expected from NBER explanations. However @ 60% annual price declines in optronics, nano-tech and apparently in cost of pound to orbit still makes me wonder if implicit or even explicit deflation can be adequately quantified? Like many others I agree with the Schumpeter school on the shake outs in autos, electrical/electronic industries and minor industries such as film outrunning the consumer market with prices dropping at close to exponential rates being the cause of realized deflation 1929-33.

 

[eagle1462010]

NY Fed to raise rate in its test of U.S. repo facility | Reuters

Nov 1 (Reuters) - The Federal Reserve Bank of New York said on Friday it would raise to 0.03 percent from 0.02 percent the fixed rate offered in its "operational exercise" for a proposed facility to better control short-term borrowing costs.

The branch of the U.S. central bank started testing the proposed tool - called an overnight, fixed-rate full-allotment, reverse repurchase agreement facility - in September. Fed policymakers are considering giving it the go-ahead as a new tool that could help them smooth market rates when the time comes to tighten monetary policy.

The New York Fed has been conducting "readiness" operations, it said on Friday. On Monday, it will raise the rate by 1 basis point; no other changes will be made.

 

[JimmieD]

Maybe they are telling us that quantitative easing is inflationary, and that it is finally working its way through the system to end retail pricing and wages. Sort of pre-excusifying what is unavoidable.

QE isn't inflationary, and may even be slightly deflationary at the margin. QE only changes the composition of the private sector's balance sheet. It exchanges one financial asset (a bond, bill, or mortgage, for example) for another (bank reserves). And where those bonds, bills and mortgages the Fed purchases could have been used as collateralized assets, the bank reserves the Fed supplies cannot and will never leave the Fed's balance sheet. So, each new purchase of bonds actually removes assets that could have functioned as a source of funding.

The assets the Fed buys, for all intents and purposes, serve the same function as money. The bank reserves it supplies are more constrained.

An easy to read article from Standard and Poor's on the subject: http://www.standardandpoors.com/spf/upload/Ratings_US/Repeat_After_Me_8_14_13.pdf

 

[william the wie]

I agree, like Japan in the 90s the country is experiencing deflation due to QE.

 

[percysunshine]

Maybe they are telling us that quantitative easing is inflationary, and that it is finally working its way through the system to end retail pricing and wages. Sort of pre-excusifying what is unavoidable.

QE isn't inflationary, and may even be slightly deflationary at the margin. QE only changes the composition of the private sector's balance sheet. It exchanges one financial asset (a bond, bill, or mortgage, for example) for another (bank reserves). And where those bonds, bills and mortgages the Fed purchases could have been used as collateralized assets, the bank reserves the Fed supplies cannot and will never leave the Fed's balance sheet. So, each new purchase of bonds actually removes assets that could have functioned as a source of funding.

The assets the Fed buys, for all intents and purposes, serve the same function as money. The bank reserves it supplies are more constrained.

An easy to read article from Standard and Poor's on the subject: http://www.standardandpoors.com/spf/upload/Ratings_US/Repeat_After_Me_8_14_13.pdf

Where is the money coming from that the Fed uses?

There has to be a bank deposit to balance the purchase.

(hmmm where are the GDs)

 

[Trajan]

Guaranteed MBS, the opposite of toxic.

Nope. The bundlers should have all gone to jail for life.

As long as the government buys up the toxic crap, inflation cannot take off.

The bundlers should have all gone to jail for life.

Sounds good, but Barney Frank, Bernie Sanders and Chris Dodd never would have let that happen to their friends at Fannie and Freddie.

As long as the government buys up the toxic crap

Where are they doing that? The Fed buys the good stuff, who's buying up the toxic crap?

who is; Franklin Raines?