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NFT: Inflation

WideRight : 4/17/2015 10:46 am
Is its time coming? Is getting up to 2% actually desirable, or at least not likely to be associated with market consequences? And there's that timing problem. Is the Journal calling this correctly?
Inflation - ( New Window )
Ask  
BobOnLI : 4/17/2015 10:48 am : link
Bill Bellichek.
can't answer your questions  
giants#1 : 4/17/2015 10:49 am : link
but the market seems to think this means interest rates will be rising soon...
Fed target for inflation is 2%  
johnnyb : 4/17/2015 11:25 am : link
As labor markets tighten, upward pressure on wages will find their way to prices. I do not think the Fed will tighten in June but more inflation readings like today will force the Fed to act. I work for a private wealth management firm and it is our view that the Fed is falling behind the curve.
Do I need to wear  
Big Al : 4/17/2015 11:51 am : link
my Ford Whip Inflation Now (WIN) button?
RE: Fed target for inflation is 2%  
BeerFridge : 4/17/2015 12:20 pm : link
In comment 12237693 johnnyb said:
Quote:
As labor markets tighten, upward pressure on wages will find their way to prices. I do not think the Fed will tighten in June but more inflation readings like today will force the Fed to act. I work for a private wealth management firm and it is our view that the Fed is falling behind the curve.


This is the conflict of the Fed's dual mandate.
LOL...  
Tesla : 4/17/2015 12:23 pm : link
Right wing economists have been predicting a huge inflation increase for, what, at least 5 years now? Why would they have a shred of credibility left? This is based on political leanings, not economics.
True inflation is alive and kicking ....  
Beer Man : 4/17/2015 12:51 pm : link
and has been for the last few years. Just look at the items you buy every day. Size/volume are getting smaller (though packaging has remained the same to give the consumer the impression that they are receiving the same amount), and prices have been climbing. My grocery bills today are 50% to 60% higher than they were a few years ago. Don't need a watered down govenment number to tell me when the cost of everything I purchase is rising faster than my wages.
Isn't the inflation number right now bogus?  
mdc1 : 4/17/2015 12:56 pm : link
in that it is much worse due to the way the government calculates it by throwing away specific indices that mask the true number? Sort of like the bogus unemployment number, in which they don't count people that gave up and are part of half of americans that aren't working.

Can't remember which inflation indices, but was mentioned recently on something I was listening to.
food and fuel prices  
mdc1 : 4/17/2015 12:59 pm : link
I think.
RE: Isn't the inflation number right now bogus?  
BeerFridge : 4/17/2015 1:00 pm : link
In comment 12237902 mdc1 said:
Quote:
in that it is much worse due to the way the government calculates it by throwing away specific indices that mask the true number? Sort of like the bogus unemployment number, in which they don't count people that gave up and are part of half of americans that aren't working.

Can't remember which inflation indices, but was mentioned recently on something I was listening to.


Better head back to Fox News to be sure.
what does fox news  
mdc1 : 4/17/2015 1:30 pm : link
have to do with anything fool
RE: what does fox news  
BMac : 4/17/2015 1:35 pm : link
In comment 12237972 mdc1 said:
Quote:
have to do with anything fool


Yeah, you old fool!
RE: food and fuel prices  
WideRight : 4/17/2015 1:42 pm : link
In comment 12237910 mdc1 said:
Quote:
I think.


Core infaltion is CPI minus food & fuel...

Not sure if any one inflation metric matters more than others. Once the thought process is there and the money guys start to prepare for tightening it can become a self-fulfilling prophecy. Moving closer to target (further away from deflation) should be welcomed, IMO
RE: True inflation is alive and kicking ....  
Giants2012 : 4/17/2015 1:49 pm : link
In comment 12237890 Beer Man said:
Quote:
and has been for the last few years. Just look at the items you buy every day. Size/volume are getting smaller (though packaging has remained the same to give the consumer the impression that they are receiving the same amount), and prices have been climbing. My grocery bills today are 50% to 60% higher than they were a few years ago. Don't need a watered down govenment number to tell me when the cost of everything I purchase is rising faster than my wages.


+1

been rising for a few years now.
our means of measuring inflation vs. monetary policy  
hitdog42 : 4/17/2015 1:50 pm : link
is the biggest joke in the market.
if you only measure inflation by things that don't go up much.... you wont see inflation. check out the price of eggs, and other food. stuff that actually matters to people.... all up---- but no inflation....
RE: what does fox news  
BeerFridge : 4/17/2015 1:55 pm : link
In comment 12237972 mdc1 said:
Quote:
have to do with anything fool


That's probably where you heard that narrative
CPI - minus food and fuel - ( New Window )
RE: our means of measuring inflation vs. monetary policy  
BeerFridge : 4/17/2015 1:58 pm : link
In comment 12238006 hitdog42 said:
Quote:
is the biggest joke in the market.
if you only measure inflation by things that don't go up much.... you wont see inflation. check out the price of eggs, and other food. stuff that actually matters to people.... all up---- but no inflation....


Gas matters to people and is also way down. If you comb thru the numbers you can find the ones that match what your looking for. That's why folks aggregate them instead.
It all hits the pocketbook...  
WideRight : 4/17/2015 2:11 pm : link
Food and fuel you have some control over.

Recession because of monetary policy change in response to actual or perceived inflation hits you harder and is outside your control
RE: RE: True inflation is alive and kicking ....  
Deej : 4/17/2015 2:17 pm : link
In comment 12238004 Giants2012 said:
Quote:
In comment 12237890 Beer Man said:


Quote:


and has been for the last few years. Just look at the items you buy every day. Size/volume are getting smaller (though packaging has remained the same to give the consumer the impression that they are receiving the same amount), and prices have been climbing. My grocery bills today are 50% to 60% higher than they were a few years ago. Don't need a watered down govenment number to tell me when the cost of everything I purchase is rising faster than my wages.



+1

been rising for a few years now.

Why do you all assume that package-shrink is not accounted for in the inflation numbers. Do you think you're so much smarter than the people who do this for a living?

Inflation hits products differently. Prior to the last few months, staples like food, education, and housing have been going up in price, but that was being offsets by drops in prices for things like consumer electronics, appliances, and cloth (saw a chart about this last week). Remember the days when a desktop cost $2500? $1200? Long gone.
Larger electronic purchases are rarely done  
kicker : 4/17/2015 2:22 pm : link
on an annual basis, which is why they are given less weight.

And no, package shrink is rarely accounted for in annual (or quarterly or monthly) inflation numbers, as the basket isn't changed consistently. The current basket is from 2011 and 2012.

There are a variety of reasons why Fed hired economists are constantly researching new ways to measure inflation, and why there are currently several different series'. Most Fed economists believe that it's a sloppy measure that's more of a political tool than a policy one.

I don't put much stock in it, but all information has some value.
Really kicker?  
Deej : 4/17/2015 2:28 pm : link
Consumer Reports says that package shrink IS accounted for:

Quote:
Manufacturing chicanery can involve optical illusions that maintain the same visible outer dimensions of the package but rob from the unseen interior space by indenting the bottom of the package, for example.

The good news is that, as clever as packaging pickpockets are, they can’t fool the U.S. Bureau of Labor Statistics, which is the federal agency that calculates and keeps track of the Consumer Price Index and the CPI-W for wage earners and clerical workers (a subset index used for Social Security cost of living adjustments).

BLS pricing experts are aware of and adjust for shrinkage.

So yesterday’s 99-cent two-ounce candy bar that’s still 99 cents today but has been downsized to 1.8 ounces doesn’t get away with not having raised its price in the eyes of the Feds. Economists at the BLS count that as a 10 percent price increase....

It’s tough to get even subtle chiseling past BLS. When airlines started charging separately for baggage in recent years, the Bureau made an upward adjustment to account for the fact that airline ticket prices used to include transportation of at least a couple of pieces of checked luggage.

“We always try to capture what comes out of the consumer’s pocket,” Steve Reed, an economist in the Information Analysis Branch of the CPI Program, said.

Q&A: Is price inflation hiding behind shrinking packaging? Federal experts are aware of and adjust for shrinkage - ( New Window )
Deej  
kicker : 4/17/2015 2:41 pm : link
I didn't say it wasn't accounted for. I mentioned that the numbers are revised, often after the fact (last I heard, about 15 months afterwards), for the shrinking package size. Often because the statistical models are checked and re-checked, and require the current data.

I believe it's modeled under a "hedonic quality adjustment" (or similar to that).

Ah, I see where I was sloppy. I should have  
kicker : 4/17/2015 2:44 pm : link
said that the initial numbers rarely adjust for quality or package shrinkage, but that they are later revised for these.

It's good practice, too. Allows to see if the package shrinkage is more of a quality dimension than a "price" bump.
RE: True inflation is alive and kicking ....  
RappingFrog : 4/17/2015 4:04 pm : link
In comment 12237890 Beer Man said:
Quote:
and has been for the last few years. Just look at the items you buy every day. Size/volume are getting smaller (though packaging has remained the same to give the consumer the impression that they are receiving the same amount), and prices have been climbing. My grocery bills today are 50% to 60% higher than they were a few years ago. Don't need a watered down govenment number to tell me when the cost of everything I purchase is rising faster than my wages.


we have a winner
We do not have any significant inflation, as measured by the market.  
manh george : 4/17/2015 4:45 pm : link
Yes, the market measures a different basket than what individuals experience, but the market will follow what the market follows, and the Fed will respond to what the market follows. And the market as defined by Treasury yields, hasn't budged since the end of March, and has been at or higher than it is now for most of 2015, except for about 10 days at the end of January/beginning of February.

Also, the market isn't looking at inflation, it's looking at inflation expectations. The Cleveland Fed 10-years from today projection of inflation expectations sits right about where the 10-year Treasury is: 1.71%

As far as the real world, as opposed to what the market is discounting, the case for significantly higher inflation any time in the foreseeable future is extremely modest, imo. Four main factors:

1) Most of the world is seeing exceedingly soft growth, if any. Especially in mainland Europe, Southeast Asia and large parts of Latin America, with the biggest country there, Brazil in an economic mess.

2) This time around, that includes China too.

3) Commodity prices, including energy costs, are very soft, for a number of reasons, not the least of which is
the growing supply of recoverable carbon based energy.

4) Last but far from least is my favorite factor: accelerating technological change (ATC). It really is impossible, in my view, to look at economic patterns over the next 10 years and beyond and not account for several key parts of ATC. a) Inflation as the markets measure it is actually overstated, because productivity growth is understate during the transition to a digital world. b) Labor costs just aren;t growing, which will ultimately affect the demand side of supply/demand. d) ATC will ultimately also lead to sharper increases in the means of production than in demand. Excess capacity will grow for the foreseeable future as automated solutions get vastly broader and incredibly faster.

All of the best futurists I know of look at the long-term result in terms of "abundance": vast amounts of goods and services provided at a very low marginal cost through digital/automated solutions. That, if it occurs, means declining prices, even as the demand side is being hit by competition between labor and automated solutions.

So, NO, I don't think we will see a significant uptick in inflation any time soon.

Last two posts illustrate the dichotomy between the grocery store and  
WideRight : 4/17/2015 5:57 pm : link
the market. Markets don't seem to care whats going on in the grocery store, pun intended. ATC's are a hot topic and I find it fascinating that marginal costs of so many service sector/digital enterprises are going to zero. However thats just one segment and there will likely be unmet demand elsewhere (water? rare earth elements? (vital to ATC)). We are a product of our generation, and mine was the inflationary 70s. Hard to think it wont come back. But smart guys are buying are still buying billions T-bills @ 1% everyday...
RE: RE: RE: True inflation is alive and kicking ....  
Beer Man : 4/18/2015 8:14 am : link
In comment 12238045 Deej said:
Quote:
In comment 12238004 Giants2012 said:


Quote:


In comment 12237890 Beer Man said:


Quote:


and has been for the last few years. Just look at the items you buy every day. Size/volume are getting smaller (though packaging has remained the same to give the consumer the impression that they are receiving the same amount), and prices have been climbing. My grocery bills today are 50% to 60% higher than they were a few years ago. Don't need a watered down govenment number to tell me when the cost of everything I purchase is rising faster than my wages.



+1

been rising for a few years now.


Why do you all assume that package-shrink is not accounted for in the inflation numbers. Do you think you're so much smarter than the people who do this for a living?

Inflation hits products differently. Prior to the last few months, staples like food, education, and housing have been going up in price, but that was being offsets by drops in prices for things like consumer electronics, appliances, and cloth (saw a chart about this last week). Remember the days when a desktop cost $2500? $1200? Long gone.


Oh no, someone hiding behind their keyboard tried to insult me across the internet. Maybe you should go back and re-read my response, that way you won’t come across as an ass while trying to make yourself look so cunning. Nowhere did I imply that “package-shrink is not accounted for in the inflation numbers”. My point was that businesses are trying to hide the rising costs of their products by keeping packaging sizes consistent. For example, many brewers now give you 11 or 11.2 oz. in the same bottle they used to give you 12oz. I referred to the government’s inflation number as watered down because it excludes the items that we must buy as part of our existence (e.g., food and fuel). They do the same with the unemployment number. Buisness and government alike are trying to hide just how bad things are becoming.
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