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mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Sun Apr 25, 2010 8:20 am Post subject: Inflation arrives |
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U.S. Food Inflation Spiraling Out of Control
FORT LEE, N.J., April 22 /PRNewswire/ -- The National Inflation Association today issued the following food inflation alert to its http://inflation.us members:
The Bureau of Labor Statistics (BLS) today released their Producer Price Index (PPI) report for March 2010 and the latest numbers are shocking. Food prices for the month rose by 2.4%, its sixth consecutive monthly increase and the largest jump in over 26 years. NIA believes that a major breakout in food inflation could be imminent, similar to what is currently being experienced in India.
Some of the startling food price increases on a year-over-year basis include, fresh and dry vegetables up 56.1%, fresh fruits and melons up 28.8%, eggs for fresh use up 33.6%, pork up 19.1%, beef and veal up 10.7% and dairy products up 9.7%. On October 30th, 2009, NIA predicted that inflation would appear next in food and agriculture, but we never anticipated that it would spiral so far out of control this quickly.
The PPI foreshadows price increases that will later occur in the retail sector. With U-6 unemployment rising last month to 16.9%, many retailers are currently reluctant to pass along rising prices to consumers, but they will soon be forced to do so if they want to avoid reporting huge losses to shareholders.
Food stamp usage in the U.S. has now increased for 14 consecutive months. There are now 39.4 million Americans on food stamps, up 22.4% from one year ago. The U.S. government is now paying out more to Americans in benefits than it collects in taxes. As food inflation continues to surge, our country will soon have no choice but to cut back on food stamps and other entitlement programs.
Most financial experts in the mainstream media are proclaiming that the recession is over and inflation is not a problem in the U.S. Unfortunately, they fail to realize that rising food and gasoline prices accounted for 58% of February's year-over-year 3.85% rise in retail sales. NIA believes price inflation is beginning to accelerate in many areas of the economy besides food and energy, and all increases in U.S. retail sales this year will be entirely due to inflation.
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Bernanke creates hoards of new money to bail out the banks. Banks pay themselves higher bonuses and us non-banksters pay higher food costs.
http://www.usatoday.com/money/industries/banking/2010-04-21-tarp-banks_N.htm?loc=interstitialskip
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Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn't get aid, a USA TODAY/American University review found.
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� Lending fell. The amount of loans outstanding to businesses and individuals fell 9.1% for the 12 months ending Sept. 30, 2009, at banks that participated in TARP compared with a 6.2% drop at banks that didn't.
� Employee pay rose. Average pay at banks getting aid rose 9.4% in the program's first year. By contrast, non-TARP banks increased salaries 1.8%.
� Cost-cutting limited. Banks in TARP cut costs less than those outside the program. Government-aided banks increased branches by 2.7% while non-TARP banks cut branches by 1.2%.
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Fox
Joined: 04 Mar 2009
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| Posted: Sun Apr 25, 2010 4:53 pm Post subject: |
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| Most financial experts in the mainstream media are proclaiming that the recession is over and inflation is not a problem in the U.S. Unfortunately, they fail to realize that rising food and gasoline prices accounted for 58% of February's year-over-year 3.85% rise in retail sales. |
If they fail to realize something like that, is it really fair to call them financial experts? These guys seem like they are somewhere between professional liar and voodoo witch-doctor. |
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TheUrbanMyth
Joined: 28 Jan 2003
Location: Retired
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| Posted: Sun Apr 25, 2010 11:15 pm Post subject: |
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| Fox wrote: |
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| Most financial experts in the mainstream media are proclaiming that the recession is over and inflation is not a problem in the U.S. Unfortunately, they fail to realize that rising food and gasoline prices accounted for 58% of February's year-over-year 3.85% rise in retail sales. |
If they fail to realize something like that, is it really fair to call them financial experts? These guys seem like they are somewhere between professional liar and voodoo witch-doctor. |
Or perhaps they mean core inflation which doesn't count the food and energy sectors as they can be highly volatile? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Mon Apr 26, 2010 4:32 am Post subject: |
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| Inflation is only inflation when it is 1) counted and 2) not volatile? I think what you really mean is that they count what is useful when it is useful to get a number they want. Like pulling AIG/Citi off the DOW. If the metric shows failure, change the metric. |
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chellovek
Joined: 29 Feb 2008
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| Posted: Mon Apr 26, 2010 4:10 pm Post subject: |
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| About bloody time. Was thinking my debts would never be devalued. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Apr 29, 2010 5:54 am Post subject: |
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Hiding inflation
Scared that 9% inflation might return? It�s already here. The statisticians are just fiddling the numbers
The Bank of Canada declares on its website, �One indication of the success of Canada�s monetary policy is that inflation � the rate of change of consumer prices as reflected in the consumer price index (CPI) � is much less newsworthy today than it was during the 1970s, when it was often a headline issue.�
Indeed, since governor John Crow introduced inflation targeting in the late 1980s, the bank has been pretty good at keeping headline inflation low, according to the official inflation numbers. Inflation targeting in other advanced economies has produced similar outcomes since the nightmares of the 1970s and early1980s.
But was it just sound monetary policy that knocked it out of the news? Something else happened around the time that inflation targeting was introduced � and that was wholesale changes to the way government statistical agencies around the world measure inflation, led by the U.S. Bureau of Labor Statistics (BLS). When inflation is measured the old way, February inflation in the United States came in at an eye-popping 9.4%.
Inflation is not a concrete phenomenon and cannot be directly observed, so we talk of the consumer price index is if that was inflation. But the CPI is also the measurement instrument. It is thus the thing being measured, and the instrument to measure it, melded into one, then wrapped in technical language and arcane procedure.
Central to the struggle to measure inflation for more than 200 years has been the vexing issue of how to deal with changes in the composition, proportion, and quality of the goods in the basket that makes up the CPI.
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For the last 150 years, most of the changes in methods to measure inflation involved fine-tuning on the three themes of quality, proportion and composition. That changed on October 17 1973, with the OPEC oil embargo. The surge in the price of oil had a striking effect upon inflation in the industrial nations.
Arthur Burns, who was then the chairman of the US Federal Reserve, asked the Fed�s economists to strip out energy prices from the CPI so he could get a measure of the �underlying trend� in prices, unaffected by what was then believed to be a temporary price shock. When food prices then rose sharply, they stripped those out � followed by used cars, children�s toys, jewellery, housing and so on, until around half the CPI basket was excluded because it was supposedly �distorted� by exogenous forces. This led to the development of �core inflation,� which is the CPI less energy and food prices.
The BLS made further major changes in 1978, 1987, 1995 and 1998. Government statistical agencies around the world copied them. It�s not hard to see why.
The BLS introduced a technique known as �hedonic regression� to account for quality changes, as in the Greek word �hedon� for pleasure. The idea is to remove that part of an increase in price that results from an increase in quality (or pleasure) rather than inflation. When goods in the basket of goods become unavailable the Bureau tries to match them with similar goods, and then regresses out the difference.
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As hedonic regression has grown, so has the controversy about it. The bureau itself admits the technique relies on �strong assumptions.� It assumes that pleasure-giving characteristics are quantifiable and ignores the influence of demand and supply on these characteristics. Hedonic methods make subjective changes to the measuring instrument in response to changes in the thing that the instrument is measuring.
Now the goods in the basket are substituted to reflect consumer substitutions. This is turning the CPI into a cost of survival index, rather than a price index. If the price of steak goes up too much for me to afford it, inflation � my inflation, that is � does not follow. I need to eat, so I�ll substitute steak with chicken, or maybe tofu. My quality of life, however, goes down, and does not get hedonically regressed back up. Another change was to switch to geometric from arithmetic means in the calculation of average prices of goods in the basket. Surprise: Geometric means are less than arithmetic means.
Economist John Williams runs a website known as Shadow Government Statistics on which he publishes his �Alternate CPI� using the methodology the BLS was using in the early 1980s, before the gimmicks were introduced. The two inflation measures have slowly but steadily diverged � so much so that William�s measure has been running about 7% higher than the official CPI.
Williams does not measure an alternate CPI for Canada. But StatsCan, which measures inflation in Canada, is also using hedonic regression, geometric means and the other tricks. That�s one reason inflation is lower, and less newsworthy today, than it was during the 1970s.
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http://network.nationalpost.com/NP/blogs/fpcomment/archive/2010/04/28/hiding-inflation.aspx#ixzz0mVbrkDhw
The use and misuse of economic statistics is an extremely cynical way for states to manage their populations. Here's another example:
http://www.zerohedge.com/article/why-consumer-confidence-most-manipulated-economic-indicator |
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gakduki
Joined: 16 Jul 2009
Location: Passed out on line 2 going in circles
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| Posted: Thu Apr 29, 2010 9:21 am Post subject: |
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If inflation is really in the range of '9%' how can we still get loans for 6-8%? This doesn't make economic or rational sense.
Food prices and energy are highly volatile. They shouldn't be included in the official inflation statistics as they already are in the form of secondary goods, which give a more accurate picture of where we are headed in the long run.
Oil goes up to 150 then down to 75 (give or take) However, everything that requires oil goes up in price (although less) but doesn't fall. The same is for food. Restaurant prices and processed foods will go up, they won't go down.
If inflation jumps up and down with the speculation in the gas markets and agricultural markets the financial markets would only become more unstable.
It is very hard to achieve a low inflation target as has been the main goal of most central banks, while accumulating large debts and essentially devaluation the currency. Frankly speaking it is only natural that the indebted countries will experience high inflation as a result of fiscal irresponsibility. It's the best way to get out of a hole.
And to all those who think it will help them with personal debts, just hope you work for a good union or have superior negotiating skills. I don't think ESL wages will increase with inflation. |
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No_hite_pls
Joined: 05 Mar 2007
Location: Don't hate me because I'm right
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| Posted: Thu Apr 29, 2010 1:23 pm Post subject: |
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| chellovek wrote: |
| About bloody time. Was thinking my debts would never be devalued. |
lol |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Apr 29, 2010 8:03 pm Post subject: |
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| If inflation is really in the range of '9%' how can we still get loans for 6-8%? This doesn't make economic or rational sense. |
I don't know if inflation is 9%. In truth, I don't agree that a single inflation number is possible to build. That said, I do not understand why you would say that doesn't make economic or rational sense. Central banks exist to push rates around as they please.
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| Food prices and energy are highly volatile. They shouldn't be included in the official inflation statistics as they already are in the form of secondary goods, which give a more accurate picture of where we are headed in the long run. |
I'd rather see the single CPI broken into components.
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| Oil goes up to 150 then down to 75 (give or take) |
30$, I think.
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| However, everything that requires oil goes up in price (although less) but doesn't fall. The same is for food. Restaurant prices and processed foods will go up, they won't go down. |
Keynes said "prices are sticky on the downside". It is true (works for mating as well). Prices do drop if competition exists, it just takes time. The major fast food/pizza franchises in the US have found ways to lower prices. The more competitive a market is the more easily deflation is reflected in consumer prices. Or so the story goes.
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| If inflation jumps up and down with the speculation in the gas markets and agricultural markets the financial markets would only become more unstable. |
You mean the reflection of inflation in the CPI metric, I assume. Inflation is the expansion of credit/money. The expansion of credit/money does not impact all good equally. During the last boom consumer goods decreased in price and houses doubled. Which is a bigger expense for consumers? Does the CPI reflect this? Best, a component system would be better. A housing CPI, renters CPI, energy, food, entertainment, sin etc.
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| It is very hard to achieve a low inflation target as has been the main goal of most central banks, while accumulating large debts and essentially devaluation the currency. |
It's impossible.
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| Frankly speaking it is only natural that the indebted countries will experience high inflation as a result of fiscal irresponsibility. It's the best way to get out of a hole. |
There are good arguments that states can not inflate debt away:
http://www.zerohedge.com/article/willem-buiter-issues-his-most-dire-prediction-yet-sees-unprecedented-fiscal-crises-rampant-u
http://www.georgewashington2.blogspot.com/2010/03/if-we-cant-inflate-our-way-out-of-debt.html
^ Great links in Washington's Blog. |
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