Has America entered into a dreaded stagflation?

[BakshisMouse]

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

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

I request that you respond to the post just above of yours. (#39)

 

[iamwhatiseem]

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

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

Thank you - I was beginning to think only hard headed 1st year economics juniors were posting today. Jesus.
I ask about stagflation and they give me the CPI index and say no.
God...articles by some of the best and most prominent sources (some of which I included here) all circle around a real inflation rate of about 7% when you remove the biases and skewed factors.
7% is high. And that is a number that I believe any average consumer can agree with. 2.3% is a joke.
I am not alone in thinking that a stagflation condition is a real possibility, and I am joined by greater economic minds than anyone here including me by far of course.
If we are entering into a stagflation - this could be a very bad thing. The best weapon to fight it is to:
1) Lower interest rates (oops - can't do that)
2) Lower business taxes (not happening now, and if Obama wins - he wants to raise it)
3) DO NOT print money. (oops...too late for that, and the casino Gods in the market are crying for more)

Point is - our corrupt government could really and truly create an abyss if the right things aren't done.

 

[BakshisMouse]

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.

Thank you - I was beginning to think only hard headed 1st year economics juniors were posting today. Jesus.
I ask about stagflation and they give me the CPI index and say no.
God...articles by some of the best and most prominent sources (some of which I included here) all circle around a real inflation rate of about 7% when you remove the biases and skewed factors.
7% is high. And that is a number that I believe any average consumer can agree with. 2.3% is a joke.
I am not alone in thinking that a stagflation condition is a real possibility, and I am joined by greater economic minds than anyone here including me by far of course.
If we are entering into a stagflation - this could be a very bad thing. The best weapon to fight it is to:
1) Lower interest rates (oops - can't do that)
2) Lower business taxes (not happening now, and if Obama wins - he wants to raise it)
3) DO NOT print money. (oops...too late for that, and the casino Gods in the market are crying for more)

Point is - our corrupt government could really and truly create an abyss if the right things aren't done.

What the fuck? Lowering interest rates usually causes more inflation. Paul Volcker got rid of the stagflation of the late 1970s-1980s by using the Federal Reserve to create a deep recession with high unemployment by raising interest rates. Once inflation was down, the economy grew healthily.

The way the Federal Reserve influences the interest rate to go down is by bying US treasury bonds via open market operations. This raises the money supply. (aka: printing money)

Unexpected high inflation is a backdoor way to lower real interest rates, by the way.

 

[iamwhatiseem]

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

Thank you - I was beginning to think only hard headed 1st year economics juniors were posting today. Jesus.
I ask about stagflation and they give me the CPI index and say no.
God...articles by some of the best and most prominent sources (some of which I included here) all circle around a real inflation rate of about 7% when you remove the biases and skewed factors.
7% is high. And that is a number that I believe any average consumer can agree with. 2.3% is a joke.
I am not alone in thinking that a stagflation condition is a real possibility, and I am joined by greater economic minds than anyone here including me by far of course.
If we are entering into a stagflation - this could be a very bad thing. The best weapon to fight it is to:
1) Lower interest rates (oops - can't do that)
2) Lower business taxes (not happening now, and if Obama wins - he wants to raise it)
3) DO NOT print money. (oops...too late for that, and the casino Gods in the market are crying for more)

Point is - our corrupt government could really and truly create an abyss if the right things aren't done.

What the fuck? Lowering interest rates usually causes more inflation. Paul Volcker got rid of the stagflation of the late 1970s-1980s by using the Federal Reserve to create a deep recession with high unemployment by raising interest rates. Once inflation was down, the economy grew healthily.

The way the Federal Reserve influences the interest rate to go down is by bying US treasury bonds via open market operations. This raises the money supply. (aka: printing money)

Unexpected high inflation is a backdoor way to lower real interest rates, by the way.

Sorry...I meant to say raise interest rates...I believe I typed the same thing in a different thread today.
Bernanke cannot raise rates like in the 70's because that would make the government debt wholly unmanageable and most likely put a lot of high-debt/income businesses - out of business. The past 30 years our economy has been drunk on treating debt as income - therefore a huge percentage of the economy is based on debt and debt servicing (thanks to Greenspan) to raise the rates at any level worthwhile could cause catastrophe to the governments budget as well as Wall Street. It should have been done slowly over the past 20 years - but thanks to plutocratic policies - that didn't happen.

 

[Paulie]

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.

I think that more expensive products that are substituted for should be taken into consideration when the higher priced product was what the consumer would ultimately have bought had it not risen in price.

If I'm being priced out of a certain product I usually buy, I'm feeling that inflationary effect and it should be considered.

 

[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.

^^^^
I still think this is pertinent.

 

[Middleoftheroad]

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

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

Why on earth would you take out housing? Almost everyone I know spends 15-20% of their income on housing. It accounts for 14% of GDP. There is absolutely no reason whatsoever to take this out, unless you are trying to manipulate the numbers to show high inflation.

Everyone knows why energy isn't included, it is incredibly volatile. You want energy included? Then you must be prepared to admit for the last month we have been in a deflationary period as energy prices have been tumbling. Which is exactly the opposite of what you are trying to prove.

 

[EdwardBaiamonte]

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

the Fed balance sheet is up but velocity is down. This time may be different since economics is a new science and we have learned a little, perhaps, about macroeconomics. If you compare the Fed today with the Fed in 1929 you see a monster difference.

Or if you look at China you see 10% growth for 30 years straight along with massive government and massive central banking.

 

[EdwardBaiamonte]

Almost everyone I know spends 15-20% of their income on housing.

renters spend far more than that. Taking housing out allowed Greenspan to keep pumping up the bubble and say there was no inflation

Then you must be prepared to admit for the last month we have been in a deflationary period as energy prices have been tumbling.

deflation is a decline in the general price level not just the price of energy. In theory if you spend more on energy you spend less on other things driving their price down and keeping inflation at 0%. To have inflation you must have more money printed.

 

[Middleoftheroad]

Almost everyone I know spends 15-20% of their income on housing.

renters spend far more than that. Taking housing out allowed Greenspan to keep pumping up the bubble and say there was no inflation

Then you must be prepared to admit for the last month we have been in a deflationary period as energy prices have been tumbling.

deflation is a decline in the general price level not just the price of energy. In theory if you spend more on energy you spend less on other things driving their price down and keeping inflation at 0%. To have inflation you must have more money printed.

All physical goods are made and transported with use of energy. If the price of gas falls, transportation costs fall and goods become cheaper. Further if oil prices fall, many products are made with use of oil including rubber, plastic, fertilzer and pesticides. If you look at food, the price gets hit several times by oil in use of fertilizer, pesticides, transportation costs, and costs of running the farming equipment. Further if your food is wrapped in plastic, add a little bit more.

 

[EdwardBaiamonte]

Almost everyone I know spends 15-20% of their income on housing.

renters spend far more than that. Taking housing out allowed Greenspan to keep pumping up the bubble and say there was no inflation

Then you must be prepared to admit for the last month we have been in a deflationary period as energy prices have been tumbling.

deflation is a decline in the general price level not just the price of energy. In theory if you spend more on energy you spend less on other things driving their price down and keeping inflation at 0%. To have inflation you must have more money printed.

All physical goods are made and transported with use of energy. If the price of gas falls, transportation costs fall and goods become cheaper. Further if oil prices fall, many products are made with use of oil including rubber, plastic, fertilzer and pesticides. If you look at food, the price gets hit several times by oil in use of fertilizer, pesticides, transportation costs, and costs of running the farming equipment. Further if your food is wrapped in plastic, add a little bit more.

nevertheless the general price level cant rise until the liberals print more money.

If we only have 100 dollars we cant pay 105 dollars!!

 

[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

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

The wrong items? Consider how the BLS determines the weight of over 200 item categories that make up the index.

"The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought. For the current CPI, this information was collected from the Consumer Expenditure Surveys for 2007 and 2008. In each of those years, about 7,000 families from around the country provided information each quarter on their spending habits in the interview survey. To collect information on frequently purchased items, such as food and personal care products, another 7,000 families in each of these years kept diaries listing everything they bought during a 2-week period.

Over the 2 year period, then, expenditure information came from approximately 28,000 weekly diaries and 60,000 quarterly interviews used to determine the importance, or weight, of the more than 200 item categories in the CPI index structure."
Consumer Price Index Frequently Asked Questions

The point is that the BLS weights the item categories in the index based on how families actually spend their money. In 2011 groceries increased nearly 5% and gasoline prices and healthcare rose everywhere as did fuel oil. However property taxes, electricity, new home prices, and natural gas was down. How closely your cost of living matches the index depends on how closely your spending pattern matches the 7,000 families in the survey and where you live.

 

[Flopper]

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.

Why on earth would you take out housing? Almost everyone I know spends 15-20% of their income on housing. It accounts for 14% of GDP. There is absolutely no reason whatsoever to take this out, unless you are trying to manipulate the numbers to show high inflation.

Everyone knows why energy isn't included, it is incredibly volatile. You want energy included? Then you must be prepared to admit for the last month we have been in a deflationary period as energy prices have been tumbling. Which is exactly the opposite of what you are trying to prove.

CPI includes food and energy. Inflation rate comes from the CPI.
Core CPI is the same number but excludes food and energy due to volatility. The Federal Reserves uses Core CPI as a tool in determining monetary policy.

 

[pinqy]

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

Why on earth would you take out housing? Almost everyone I know spends 15-20% of their income on housing. It accounts for 14% of GDP. There is absolutely no reason whatsoever to take this out, unless you are trying to manipulate the numbers to show high inflation.

Everyone knows why energy isn't included, it is incredibly volatile. You want energy included? Then you must be prepared to admit for the last month we have been in a deflationary period as energy prices have been tumbling. Which is exactly the opposite of what you are trying to prove.

CPI includes food and energy. Inflation rate comes from the CPI.
Core CPI is the same number but excludes food and energy due to volatility. The Federal Reserves uses Core CPI as a tool in determining monetary policy.

Actually, the Fed stopped using the CPI about 10 years ago. They use the core PCE now.

 

[EdwardBaiamonte]

Why on earth would you take out housing? Almost everyone I know spends 15-20% of their income on housing. It accounts for 14% of GDP. There is absolutely no reason whatsoever to take this out, unless you are trying to manipulate the numbers to show high inflation.

Everyone knows why energy isn't included, it is incredibly volatile. You want energy included? Then you must be prepared to admit for the last month we have been in a deflationary period as energy prices have been tumbling. Which is exactly the opposite of what you are trying to prove.

CPI includes food and energy. Inflation rate comes from the CPI.
Core CPI is the same number but excludes food and energy due to volatility. The Federal Reserves uses Core CPI as a tool in determining monetary policy.

Actually, the Fed stopped using the CPI about 10 years ago. They use the core PCE now.

in any case deflation is more of a worry then inflation so op is silly

 

[iamwhatiseem]

CPI includes food and energy. Inflation rate comes from the CPI.
Core CPI is the same number but excludes food and energy due to volatility. The Federal Reserves uses Core CPI as a tool in determining monetary policy.

Actually, the Fed stopped using the CPI about 10 years ago. They use the core PCE now.

in any case deflation is more of a worry then inflation so op is silly

Your the silly one if you think I am comparing inflation with deflation.
Stagflation is nether...it is a combinational condition where there is slow growth over an extended period, high and persistent unemployment and then inflation to boot.
Stagflation makes deflation look like a great economy.

 

[EdwardBaiamonte]

Stagflation makes deflation look like a great economy.

deflation is the worst of all possible worlds since tomorrow everything will be cheaper; therefore there is no reason to buy anything at all today.

 

[iamwhatiseem]

Stagflation makes deflation look like a great economy.

deflation is the worst of all possible worlds since tomorrow everything will be cheaper; therefore there is no reason to buy anything at all today.

Ok...so you just showed your lack of knowledge about economic principles and conditions.
Good to know.
I suggest you read some more before you come back.

 

[saveliberty]

I suggested we had stagflation about two years ago. Obama's suggestion this is the new employment rate confirms it in my mind.

 

[iamwhatiseem]

I suggested we had stagflation about two years ago. Obama's suggestion this is the new employment rate confirms it in my mind.

When you consider 50% of the unemployed have been unemployed for over 2 years....that certainly fits the bill of sustained high unemployment.
We have 1.9% growth....can you say anaemic?
Inflation is truly around 7%...that meets all three requirements for stagflation.

Therefore a QE3 would inarguably cause more harm than good and prolong the recession. In a stagflation, it is paramount to not further dilute currency to increase the inflationary condition. In a stagflation, each facet has a direct reaction with the others....thus the great difficulty in dealing with it. Trying to help one facet only exacerbates the other two.
We DO NOT have the right people on power to deal with the problem effectively. And I am not sure it is possible to change that.