Has America entered into a dreaded stagflation?

[pinqy]

Which is all horeshit.
The government grossly underestimates the cost of living. As the article states, if you remove the biases inflation is near 7%.
The method in which the government measures prices is flawed to say the least. If you are smart enough to be aware of economic conditions - you are also smart enough to know what I am saying here is true.
So why are you repeating a flawed figure?

The Obama apologists will give him cover when ever they can.

Apparently. That or he blindly believes government reports.
An example of how the government measures prices:

Average cost of a 6 pack of beer in one year is $5.00
One year later the average price is $5.75....a 15% price increase.
But everyone is switching to cheaper brands where the average price is $5.10....the government counts this as only a 2% inflationary rate because they measure not the price of items, but just the items people are buying.
A very, very flawed method that gives favorable reporting.

Wait, you're seriously saying that for cost of living prices that people aren't paying and aren't part of their cost of living should be included???

And it works both ways, if people start drinking good beer for an average of $7, that would be used in the index too.

 

[iamwhatiseem]

The Obama apologists will give him cover when ever they can.

Apparently. That or he blindly believes government reports.
An example of how the government measures prices:

Average cost of a 6 pack of beer in one year is $5.00
One year later the average price is $5.75....a 15% price increase.
But everyone is switching to cheaper brands where the average price is $5.10....the government counts this as only a 2% inflationary rate because they measure not the price of items, but just the items people are buying.
A very, very flawed method that gives favorable reporting.

I don't see how anyone can blame Obama for that... it's not like the previous administration was any better.

It would be helpful if Americans could put the party crap aside and focus on how we fix it rather than ranting about what the other side did. That might be fun, but it doesn't solve the problem.

We're going down the wrong road here...Obama doesn't have anything to do with this thread. My questions is...do people believe we are entering into a stagflationary period. This is critical. If we are, and the government glosses over the data and media economist don't talk about it, this could be damning.

 

[slackjawed]

Which is all horeshit.
The government grossly underestimates the cost of living. As the article states, if you remove the biases inflation is near 7%.
The method in which the government measures prices is flawed to say the least.

So, I know a good deal about price indexes, please explain what you think
the flaws and biases are and what you would consider the correct methodology.

This old cowboy does not have a good understanding of how the government calculates the consumer price index or the inflation rate. I have always been told that the method they use reduces social security payments. I only know that that I have almost twice as many horses now as I did 5 years ago, but they are worth less per horse. My cattle on the other hand are worth more, but I have fewer than I did 5 years ago.

I would be interested in what you have to say if you know about these things.

 

[iamwhatiseem]

The Obama apologists will give him cover when ever they can.

Apparently. That or he blindly believes government reports.
An example of how the government measures prices:

Average cost of a 6 pack of beer in one year is $5.00
One year later the average price is $5.75....a 15% price increase.
But everyone is switching to cheaper brands where the average price is $5.10....the government counts this as only a 2% inflationary rate because they measure not the price of items, but just the items people are buying.
A very, very flawed method that gives favorable reporting.

Wait, you're seriously saying that for cost of living prices that people aren't paying and aren't part of their cost of living should be included???

And it works both ways, if people start drinking good beer for an average of $7, that would be used in the index too.

Correct.
The government doesn't measure the cost as is, but rather measures the costs of what people are buying on average. This is of course flawed.
If laptops (all brands) rise 8% over one year....but people are shying away from costly brands and are buying cheaper laptops - the government will report that the price of laptops has gone down.

 

[bobgnote]

PRACTICAL PROBLEMS:

1. VALUE is gone, with the wind, since assholes have all managed to cop shit-subsidies or jobs, doing whatever assholes do;
2. Real estate inflated, after years of wars on drugs and everything in all directions, during poor enforcement of border security. Now that the FBI and CIA wouldn't share intel about the known 9/11 perps, we have a DHS. Border Patrol and ICE are actually performing, with some efficiency;
3. CO2 is at 400 ppm. What usually happens is it tops out at 280 ppm, and a cooling cycle takes us slowly, over 80-110K years, into a glacial maximum, until CO2 hits 180 ppm, and then the warming rocket back up, in only a few thousand years. But humans since the 18th Century pushed the planet to 300 ppm by the start of the 20th Century, to 400 ppm, today, with severe NO2 and CH4 (methane) expected to push temperatures way up there, while water acidifies, and the ocean food chain is collapsing, already;
4. Politicians have CRS, HUB (head up butt), DKS (don't know shit), or they are faking, so they can continue their circle-jerk, for profiteering, with their 1% PAC-men and women, all pretending their fart-around has value.

But there is no value. All gone!

The runaway global warming will accelerate, to likely force seismic and volcanic events. Can we eat shit and die? YESSSS! Screw around, at your peril.

 

[California Girl]

Apparently. That or he blindly believes government reports.
An example of how the government measures prices:

Average cost of a 6 pack of beer in one year is $5.00
One year later the average price is $5.75....a 15% price increase.
But everyone is switching to cheaper brands where the average price is $5.10....the government counts this as only a 2% inflationary rate because they measure not the price of items, but just the items people are buying.
A very, very flawed method that gives favorable reporting.

I don't see how anyone can blame Obama for that... it's not like the previous administration was any better.

It would be helpful if Americans could put the party crap aside and focus on how we fix it rather than ranting about what the other side did. That might be fun, but it doesn't solve the problem.

We're going down the wrong road here...Obama doesn't have anything to do with this thread. My questions is...do people believe we are entering into a stagflationary period. This is critical. If we are, and the government glosses over the data and media economist don't talk about it, this could be damning.

Are we entering a stagflationary period? Oh, hell, yea. I don't really think anyone (with a decent understanding of economics) would disagree.... of course, those who think they know more than they actually do know about economics might argue the toss about it. But, those people would be wrong.

Many of the economists I work with are voicing a lot of concern about it - and it's not just the US... I think most EU countries are joining us as we merrily tumble into the abyss. On the bright side, at least we'll have company when we hit the bottom and wander aimlessly in the dark.

 

[iamwhatiseem]

I don't see how anyone can blame Obama for that... it's not like the previous administration was any better.

It would be helpful if Americans could put the party crap aside and focus on how we fix it rather than ranting about what the other side did. That might be fun, but it doesn't solve the problem.

We're going down the wrong road here...Obama doesn't have anything to do with this thread. My questions is...do people believe we are entering into a stagflationary period. This is critical. If we are, and the government glosses over the data and media economist don't talk about it, this could be damning.

Are we entering a stagflationary period? Oh, hell, yea. I don't really think anyone (with a decent understanding of economics) would disagree.... of course, those who think they know more than they actually do know about economics might argue the toss about it. But, those people would be wrong.

Many of the economists I work with are voicing a lot of concern about it - and it's not just the US... I think most EU countries are joining us as we merrily tumble into the abyss. On the bright side, at least we'll have company when we hit the bottom and wander aimlessly in the dark.

That is my worry.
I run a business, it isn't a small business either.
I just received the trial balance from our controller last night.
We are on track to crush last years results. Is this because we have grown our business? Are we making more money because we are beating competitors? No.
Like many businesses our revenue did stop falling by 2010...but it has been flat ever since. Our gross revenue is only up 2.8% over last year...but the bottom line is up 18%. So what gives? We lowered our costs. We have less people, we aren't buying anything that we don't have to have. We are repairing rather than replacing. Businesses all over the country are doing this exact same thing. And for the overall economy - this SUCKS.
Thus slow growth and a nagging unemployment level that is going nowhere.
I cannot and will not spend the companies money when I have absolutely no idea what is down the road. I don't trust the fake numbers that we are getting, I can see with my own eyes they are way off. The industry is stagnant to say the least and I am building the war chest for an upcoming storm. And again - I am far from alone. We have no confidence.

 

[pinqy]

Apparently. That or he blindly believes government reports.
An example of how the government measures prices:

Average cost of a 6 pack of beer in one year is $5.00
One year later the average price is $5.75....a 15% price increase.
But everyone is switching to cheaper brands where the average price is $5.10....the government counts this as only a 2% inflationary rate because they measure not the price of items, but just the items people are buying.
A very, very flawed method that gives favorable reporting.

Wait, you're seriously saying that for cost of living prices that people aren't paying and aren't part of their cost of living should be included???

And it works both ways, if people start drinking good beer for an average of $7, that would be used in the index too.

Correct.
The government doesn't measure the cost as is, but rather measures the costs of what people are buying on average. This is of course flawed.

why on earth do you think that's flawed? The whole point is to measure the average change in cost of what people are buying in order to measure how much more expensive it is to maintain a constant standard of living.

If laptops (all brands) rise 8% over one year....but people are shying away from costly brands and are buying cheaper laptops - the government will report that the price of laptops has gone down.

actually, no. If all laptops are rising 8%, then the cheaper laptops are included in that "all," and it would show as an 8% increase.

I don't think you understand the details, and I sure as hell don't understand how you think things should be . How would yo measure things a nd aggregate them? I'm especially interested in how you would weight and average.

 

[iamwhatiseem]

Wait, you're seriously saying that for cost of living prices that people aren't paying and aren't part of their cost of living should be included???

And it works both ways, if people start drinking good beer for an average of $7, that would be used in the index too.

Correct.
The government doesn't measure the cost as is, but rather measures the costs of what people are buying on average. This is of course flawed.

why on earth do you think that's flawed? The whole point is to measure the average change in cost of what people are buying in order to measure how much more expensive it is to maintain a constant standard of living.

If laptops (all brands) rise 8% over one year....but people are shying away from costly brands and are buying cheaper laptops - the government will report that the price of laptops has gone down.

actually, no. If all laptops are rising 8%, then the cheaper laptops are included in that "all," and it would show as an 8% increase.

I don't think you understand the details, and I sure as hell don't understand how you think things should be . How would yo measure things a nd aggregate them?

It is a valuable figure (the current way CPI measures inflation) but it is not accurate in measuring prices, and is also not altogether useful to measure an economy.
Why?
Easy.
If you have 1000 people. In year one, the average grocery bill was 15% of their household income.
Year two. For various reasons the 1000 people as a whole have less money. Item per item comparison with no regard for what is selling...pure item for item let's say the average total grocery costs is 6% higher than year one. However, in year two the 1000 people are buying less of everything. They are buying cheaper items, they stopped splurging...so the average grocery bill for year two is 13% of their income because they need the money for other expenses.
You tell me - what with the CPI show?

 

[Douger]

By it's definition I would say yes. I think a lot of folks agree.

You use the word America very loosely.
Do you refer to murka or the real world in this hemisphere ?

 

[iamwhatiseem]

Example 2
Applewood bacon and standard platter bacon.

Year one
Aplwd Bacon - $3 per lb.
Platter - $2.20 per lb.
Americans spent $1 million for bacon.
Of that 40% was Aplwd or 133,333 lbs. ($399,999)
60% was platter or 272,727 lbs. ($599,999)
406,060 lbs for $1 million spent.
CPI measurment = $2.46 per lb. This is the "consumer experience".

Year two...
Aplwd Bacon increased 4% - now $3.12 lb.
Platter bacon increased 5% - now $2.31 lb.
Because of the increase and higher unemployment etc. people buy more of the Platter bacon.
Year two
Aplwd - 30% of the market
Platter - 70% of the market
Americans still spent $1 million on bacon.
Aplwd = 96,154 lbs ($300,000)
Platter = 303,030 lbs ($700,000)
399,184 lbs sold for $1 million spent.
CPI measurement = $2.50 per lb.
Inflation rate = 1%

True price increase average = 4.5%
CPI - 1%

Government tells people bacon prices have barely rose...basically steady.

 

[iamwhatiseem]

News Headlines

RealClearMarkets - The US Is Headed For Stagflation

Stagflation with a twist - Forbes

 

[Flopper]

By it's definition I would say yes. I think a lot of folks agree.

The inflation rate currently stands at 2.3%, lowest point this year and the average for the last 10 years is 2.6%. The highest rate was in 2008 at 3.85% and the lowest in 2009 was -.34% Please explain why you think we are entering a period of stagflation with inflation rates so low and the rates trending downward. The last stagflation in the US was in 1980 with inflation reaching 13.58% and unemployment at 7.5%.

http://inflationdata.com/inflation/inflation_rate/historicalinflation.aspx

Which is all horeshit.
The government grossly underestimates the cost of living. As the article states, if you remove the biases inflation is near 7%.
The method in which the government measures prices is flawed to say the least. If you are smart enough to be aware of economic conditions - you are also smart enough to know what I am saying here is true.
So why are you repeating a flawed figure?

We use the cost living index to measure inflation. Whether the index is a good measure of your cost of living depends on what you buy. It's not the absolute value of the index that is important but rather the value relative to other time periods or geographical locations. The last major change in the index was in the early 1980's so the inflation rates we see today are comparable to the past figures.

As the BLS points out, "CPI is not a gauge of current living costs; what is it? It is a measure of the prices of a "market basket" of goods and services purchased at some point in time by a typical urban worker's family relative to the prices of that same "market basket" at some other point in time."

The CPI as any measure of inflation is of course flawed. We use it because it is the only reliable index that covers all major urban areas and spans a time period of over 90 years.

 

[iamwhatiseem]

The inflation rate currently stands at 2.3%, lowest point this year and the average for the last 10 years is 2.6%. The highest rate was in 2008 at 3.85% and the lowest in 2009 was -.34% Please explain why you think we are entering a period of stagflation with inflation rates so low and the rates trending downward. The last stagflation in the US was in 1980 with inflation reaching 13.58% and unemployment at 7.5%.

http://inflationdata.com/inflation/inflation_rate/historicalinflation.aspx

Which is all horeshit.
The government grossly underestimates the cost of living. As the article states, if you remove the biases inflation is near 7%.
The method in which the government measures prices is flawed to say the least. If you are smart enough to be aware of economic conditions - you are also smart enough to know what I am saying here is true.
So why are you repeating a flawed figure?

We use the cost living index to measure inflation. Whether the index is a good measure of your cost of living depends on what you buy. It's not the absolute value of the index that is important but rather the value relative to other time periods or geographical locations. The last major change in the index was in the early 1980's so the inflation rates we see today are comparable to the past figures.

As the BLS points out, "CPI is not a gauge of current living costs; what is it? It is a measure of the prices of a "market basket" of goods and services purchased at some point in time by a typical urban worker's family relative to the prices of that same "market basket" at some other point in time."

The CPI as any measure of inflation is of course flawed. We use it because it is the only reliable index that covers all major urban areas and spans a time period of over 90 years.

Blah Blah Blah Blah
I gave concrete examples showing how the CPI is a useless fictitious number generated to make something look better than it is in bad times.
It is inarguable that the index will show a lower inflationary number when spending contracts and/or people become more frugal in their purchasing...obvious. Not even you would argue with that.
The problem is when people use this fictional number to make decisions - they are therefore making decisions based upon bad data.
A ridiculous 2.3% for 2012 is absurd. It doesn't pass the smell test for anyone who is a consumer. You can't tell a mother with 3 children that prices are about the same when she is the one that goes to the store every week.
It is a bad number that misuses consumer data.

Having said that....are we or are we not in a stagflation...and if we are...a stimulus as an example, would be the worst thing to do as it would further devalue currency...further increase INFLATION that is more like 7%.

 

[pinqy]

If you have 1000 people. In year one, the average grocery bill was 15% of their household income.

Which is not useful information. % of consumption spending, is , % of income is not.

Year two. For various reasons the 1000 people as a whole have less money.

which will be reflected in 2 years when the weights are re-done.

Item per item comparison with no regard for what is selling...pure item for item let's say the average total grocery costs is 6% higher than year one.

how are you measuring that? How are you weighting items and how are you averageing them?
[/quote]However, in year two the 1000 people are buying less of everything. They are buying cheaper items, they stopped splurging...so the average grocery bill for year two is 13% of their income because they need the money for other expenses.
You tell me - what with the CPI show?[/QUOTE]Don't know. CPI measures the price on shelves. The basket is updated every 2 years and the relative importance of items is updated every December.
Rember, the CPI measures changes based on a costa t standard of living. So reduced income won't affect the index.

Ok try again so I can tell what you do and don't understand:
Explain in your own words how the CPI is calculated. As much steal as possible.
And then say how you would do it. And I mean details: I don't want any "they take the average" crap. Weighted or unweighted, which average? Formulas would be nice.

 

[iamwhatiseem]

Blah blah

Are we in a stagflation or not?
Tell me why you believe so.

 

[BakshisMouse]

By it's definition I would say yes. I think a lot of folks agree.

Stagflation is one of the worst economic conditions a country can be in, and the United States just entered it.

It has actually been responsible for revolutions and uprisings in developed countries around the world. Most recently Greece, Spain and Portugal are experiencing severe doses of this dreaded economic condition. It is extraordinarily difficult to work through and often destroys wealth for generations.

Stagflation is simply defined by high unemployment, slow economic growth and high inflation. It makes inflationary and deflationary periods look like a walk in the park. Stagflation usually results in very long, severe recessions.

Read more: Ready or Not, Stagflation is Here | Fox Business

By that definition, the USA is not in stagflation. The inflation rate is just not that high.

Massachusetts Institute of Technology Inflation Project

 

[BakshisMouse]

No inflation? The money supply has increased over 9 trillion dollars in 11 years. Name a time in our history that matches up.

If you're talking about the relationship of money supply to price level, have a look at this:

What makes you think our situation is not comparable?

 

[BakshisMouse]

The prices of food and fuel are volatile. If we just look at them, the inflation rate is probably higher than headline inflation. However, because of the volatility, they can easily deflate. They are not a useful indicator of underlying inflation.

Headline inflation is often based on "sticky" price inflation.

Some prices in the economy fluctuate all the time in the face of supply and demand; food and fuel are the obvious examples. Many prices, however, don’t fluctuate this way — they’re set by oligopolistic firms, or negotiated in long-term contracts, so they’re only revised at intervals ranging from months to years. Many wages are set the same way.

The key thing about these less flexible prices — the insight that got Ned Phelps his Nobel — is that because they aren’t revised very often, they’re set with future inflation in mind.

Source

These "sticky" prices are not accelerating in value. That should mean something to anyone who cares to read.

 

[Annie]

By it's definition I would say yes. I think a lot of folks agree.

Stagflation is one of the worst economic conditions a country can be in, and the United States just entered it.

It has actually been responsible for revolutions and uprisings in developed countries around the world. Most recently Greece, Spain and Portugal are experiencing severe doses of this dreaded economic condition. It is extraordinarily difficult to work through and often destroys wealth for generations.

Stagflation is simply defined by high unemployment, slow economic growth and high inflation. It makes inflationary and deflationary periods look like a walk in the park. Stagflation usually results in very long, severe recessions.

Read more: Ready or Not, Stagflation is Here | Fox Business

The inflation rate currently stands at 2.3%, lowest point this year and the average for the last 10 years is 2.6%. The highest rate was in 2008 at 3.85% and the lowest in 2009 was -.34% Please explain why you think we are entering a period of stagflation with inflation rates so low and the rates trending downward. The last stagflation in the US was in 1980 with inflation reaching 13.58% and unemployment at 7.5%.

http://inflationdata.com/inflation/inflation_rate/historicalinflation.aspx

Take out housing deflation, count energy and food, that would be inflation. The wrong items are included and missing from the index.