Inflation, disinfaltion or deflation?

Discussion in 'Economy' started by Sail Away, Jan 14, 2011.

  1. Sail Away
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    Sail Away Member

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    OK, it’s not that I don’t believe government statistics but they have been known to tweek criteria. Most notably the durability/reliability multipliers in the CPI and PCE. Objectionable economists (even those within the CBO) believe that the durability/reliability multipliers understates inflation. I really find it hard to believe that we are experiencing 1% to 1.5% inflation when equities are up, soft commodities are way, way up and oil is approaching $100/barrel. The 1970s (oil) supply shocks, alone, were enough to spurn double digit inflation. I understand the concept that deleveraging and lower (retail) prices are supposed to negate the affects of increased money supply (which should generate inflation). I just don’t believe that it is happening that way. I really believe that we are experiencing some substantial inflation and being lied to. Has anyone read anything about this?
     
  2. LordBrownTrout
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    LordBrownTrout Gold Member

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    Good luck on trying to decipher the deflation, inflation, bubbles. There is no way that oil should be at 100 dollars a barrel.
     
  3. Sail Away
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    Sail Away Member

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    I hate to answer my own post but... Whenever I'm lied to, I ask myself; what motive would there be to justify the lie? Hence, what motive would the government/FED have to lie about low/no inflation? Well, if there is substantial inflation, what are the proven hedges? Answer; futures, gold and real estate. Considering the sub-prime bubble has all but destroyed real estate and there are few novice players in commodities markets, the most relevant choice would be gold. Now ask yourself, what is an ailing economy's worst enemy? Answer: not spending and taking dollars out of the economy. That answer basically defines the concept of using physical gold as a hedge. This "gold = economic enemy" logic could justify a motive for a low/no inflation lie formulated by government/FED.

    Am I nuts here?
     
  4. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    The motive is twofold:

    - Inflationary concerns increase interest rates. Considering the enormous level of federal debt, an increase in rates would spike the interest burden, and worsen the federal deficit.

    - To justify no increases in SS benefits. Another budgetary gimmick. The elderly who live on SS are likely very much affected by higher food and energy costs. So, the Feds conveniently exclude both from the inflation rate in order to claim that there is no or low inflation. (SS increases have historically been tied to wage inflation, but most recipients don't care about that - they care about their cost of living).
     
  5. Sail Away
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    Sail Away Member

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    So do you believe the Fed's story that inflation is 1 to 1.5 percent?
     
  6. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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  7. Sail Away
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    Sail Away Member

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    So if this chart is accurate, we are experiencing around 10% inflation by 1980 CPI standards. This 10% has huge potential to escalate considering oil and soft commodity prices rising. Is the the government's way of curing potential stagflation? If they "massage" data enough, there will never be substantially high inflation again. Hence, there can never be stagflation. This is right-in-line the government's allegiance to Keynesian principals as JMK never visualized stagflation. Now stagflation cannot exist, so JMK was right again.
     
  8. william the wie
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    william the wie Gold Member

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    While it is a bit more complicated with hot money, deleveraging and worldwide food shortages complicating the issue that's about it.
     
  9. Neubarth
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    Neubarth At the Ballpark July 30th

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    I think you might be wrong on this boedicca. CPI-W as best I remember includes food and energy in the index.
     
  10. Norman
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    Norman Gold Member

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    HYPER, inflation :eusa_drool:

    Seriously: according to bernanke inflation is not high enough and he has good enough control of inflation...

    So... I would say higher than average inflation and if things turn bad very, very high inflation.
     
    Last edited: Jan 15, 2011

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