[Tail Gunner]

(05-04-2014 07:14 AM)Vicious Wrote:  

Tail Gunner has tried pulling up that conspiracy site as a legitimate source before. Like most conspiracy kooks they get some things right but end up adding so much of their own conjecture that in the end most of their "resources" are garbage. The notion that the government can lie about inflation while the rest of the world's economies wouldn't catch on is hilarious.

Personally I say it's not really worth arguing with someone that is not using the same figures that everyone else recognizes.

I am not sure why this concept is so difficult to understand. The government began calculating inflation in a different manner in the midst of two different recessions to make economic conditions appear better than they actually were. Here is an excerpt from the web site, which is run by an actual economist:

Quote:

The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.

The new formula for calculating inflation purposely excludes those items that increase the most during bouts of inflation: such as food and energy. As mentioned by Beserk, it also excludes housing. All economists recognize these changes to the formula made over the years.


Here is an excerpt from a random article that I just pulled up off the web (the term "core items" means a component of the current inflation formula):

Quote:

Nevertheless, food and energy prices have increased at a much quicker pace than core items. Food prices increased at nearly twice the rate of core inflation over the past year, rising 1.8 percent compared to the core inflation rate of 1 percent for the year ending in January.

But that's nothing compared to fuel costs. "The big culprit has been energy prices, which are up 7.3 percent" over the same time frame, says Hampel.

http://www.bankrate.com/finance/personal...ink-1.aspx


So, food prices increased almost twice as much as those items included in the current inflation formula and fuel costs rose 7.3 times as much. So, do you think that not including those items in the current inflation formula might be a problem for those on a budget?

Another question: when fuel costs rise by 7.3 percent, do you think that might affect the price of anything that might need to be transported? -- which, of course, means almost everything else that you buy.



BTW: the current inflation formula also uses a substitution component. That was not the case under the old formulas. For example, if the price of steak doubles from $5 to $10 per pound, the formula assumes that people will substitute hamburger, which might be $3 per pound. So, using the current formula under that scenario, inflation has actually decreased because the formula simply assumes that people are now buying $3 hamburger instead of $10 steak -- when, in actuality, then are still buying steak at the higher cost. You just can't make this stuff up.

Economists typically use food to explain this concept (as I did), even though food is excluded from the current CPI formula. If you want more information, see section six of this document, which describes this craziness from the perspective of the proponents of this process:

Quote:

They will substitute away from chicken and toward ham . Given the conditions described in the problem, they will find themselves buying no chicken at all. Since they are indifferent between two chickens (which now cost $10) and one ham (which now costs $ 7), they could buy 25 hams and 10 steaks and be just as well off as before .

The "cost of living," here meaning the cost of maintaining the same standard of living , will have risen from the initial $230 to $7 (25 hams) + $8 (10 steaks) = $175 + $80 = $255.

If we use this new cost of living to create a "cost of eating" index, we would report an index of:

Price of basket giving same utility
--------------------------------------------------
Price of consumption basket in the BASE year

http://www.pitt.edu/~mgahagan/Bern7.htm


WTF! Will they really buy no chicken? What if they really like chicken? What if they are Jewish and cannot eat pork? What if most of the population is wealthy enough to buy exactly what they want to eat, so they fail to exercise their right to substitute foods despite the rising cost of chicken. Has inflation not increased? Seriously? WTF! Is that real life?

So, do yourself a favor. Stop labeling everything a conspiracy -- and learn to think for yourself. And when someone like myself comes along and tells you the truth, try to extend the benefit of the doubt and do your own research before applying the conspiracy label.

[speakeasy]

(05-04-2014 09:03 AM)berserk Wrote:  

(05-04-2014 07:14 AM)Vicious Wrote:  

Tail Gunner has tried pulling up that conspiracy site as a legitimate source before. Like most conspiracy kooks they get some things right but end up adding so much of their own conjecture that in the end most of their "resources" are garbage. The notion that the government can lie about inflation while the rest of the world's economies wouldn't catch on is hilarious.

Personally I say it's not really worth arguing with someone that is not using the same figures that everyone else recognizes.

It's not really lying if you change the definition. The new definition of inflation would then simply be accepted by scholars and others. If there was a lie it would be saying that the two numbers are similar.

For what it is worth, I also think the inflation numbers are cherry picked. Why is housing and rent prices not included in inflation numbers?

Look at this table showing rent as percentage of income:



We spend way more now on housing than before. That IS inflation.

http://www.zillow.com/research/rent-affo...13q4-6681/

What about gas prices?

"...The Energy Department’s statistical arm reported Monday that the average household spent $2,912 for gasoline in 2012, which makes up almost 4 percent of pre-tax income, tying 2008 for the highest percentage in roughly 30 years..."

http://thehill.com/policy/energy-environ...z30kunpPeI

Any theories on why we are seeing such a rapid nationwide inflation of housing costs? Supply and demand is usually what drives costs, but why isn't the market responding to demand? I understand that supply is always going to be constrained in places like NYC and SF that are built out and there are really few if any places left to construct new apartment towers. But in places like Dallas and Atlanta, I can't see a reason that supply can't meet demand there.

[Tail Gunner]

(05-04-2014 01:34 PM)speakeasy Wrote:  

(05-04-2014 09:03 AM)berserk Wrote:  

(05-04-2014 07:14 AM)Vicious Wrote:  

Tail Gunner has tried pulling up that conspiracy site as a legitimate source before. Like most conspiracy kooks they get some things right but end up adding so much of their own conjecture that in the end most of their "resources" are garbage. The notion that the government can lie about inflation while the rest of the world's economies wouldn't catch on is hilarious.

Personally I say it's not really worth arguing with someone that is not using the same figures that everyone else recognizes.

It's not really lying if you change the definition. The new definition of inflation would then simply be accepted by scholars and others. If there was a lie it would be saying that the two numbers are similar.

For what it is worth, I also think the inflation numbers are cherry picked. Why is housing and rent prices not included in inflation numbers?

Look at this table showing rent as percentage of income:



We spend way more now on housing than before. That IS inflation.

http://www.zillow.com/research/rent-affo...13q4-6681/

What about gas prices?

"...The Energy Department’s statistical arm reported Monday that the average household spent $2,912 for gasoline in 2012, which makes up almost 4 percent of pre-tax income, tying 2008 for the highest percentage in roughly 30 years..."

http://thehill.com/policy/energy-environ...z30kunpPeI

Any theories on why we are seeing such a rapid nationwide inflation of housing costs? Supply and demand is usually what drives costs, but why isn't the market responding to demand? I understand that supply is always going to be constrained in places like NYC and SF that are built out and there are really few if any places left to construct new apartment towers. But in places like Dallas and Atlanta, I can't see a reason that supply can't meet demand there.

You are looking at it from the wrong vantage point. The higher costs do not stem from the supply of housing, but from the higher costs of building that housing -- even if demand is met. That is why is important to know the real cost of inflation versus the government propaganda.

I am not saying that demand and supply will not play a role in price. What I am saying is that if there is enough demand to substantiate a need for more supply, the higher costs associated in building new units will be reflected in the final rental prices -- based on what builders are truly paying for building supplies (i.e., based on the real inflation rate and not some government propoganda).

Why does the government lie? Everyone who receives social security checks or welfare payments gets an annual cost-of-living increase based on the CPI. The USG is going broke based on its current budget. What would happen if those annual cost-of-living increases were based on the real rate of inflation?

Do the math. At two percent, based on the lie, five years of increases equals ten percent. At nine percent, the real inflation rate, five years of increases equals 45 percent. That is based on simple interest, not compound -- which would be substantially higher. How could the nation economically survive a fifty percent cost increase over five years versus a ten percent increase?

Both political parties have an incentive to maintain the status quo and not have the nation face economic reality. So both parties fail to tell the truth. When market forces eventually overcome the political pandering, there will be a very hard landing indeed.

[berserk]

I don't know if this applies to the US, but in some parts of Europe, what happened was that due to easy credit flooding the markets from Alan Greenspan (and later Bernanke), that money created a surge in housing prices since the low interest rates allowed more people to be able to pay off a mortgage with low interest (or temporarily no interest in some cases).

When housing prices rose, a lot of homeowners saw their homes increase rapidly in value - on paper - which meant more equity (value-mortgage debt). As people got greedy, they would take out loans in their home equity and either spend frivolously on consumption or 'upgrade' their homes with new kitchens/bathrooms etc.

What next happened with the credit crunch is well known, but that also meant the banks and financial institution stopped lending money to new homebuyers. When the banks stopped lending money to first time buyers, it also meant there were no one to buy all these houses/apartments, which to a large degree were heavily mortgaged as mentioned above. Prices drop, owners can't sell their properties because they are technically insolvent, if they sell they will lose a lot of money.

Owners therefore are left with high mortgage payments due to their own doing and if they rent out at pre-bubble prices, they wouldn't be able to pay their loans. In essence, the poor investments/consumption of property investors and owners are passed on to renters.

And all this is a consequence of money printing = inflation, from the Federal Reserve, but as rents and housing costs are not calculated in inflation, Bernanke and co. wants you to believe that money printing |= inflation, even though that is exactly what happens.

The same can be said for much to high stock price valuations. Just another inflation bubble.

Of course, when inflation numbers are kept hidden like this, employees can't negotiate on an informed basis, which means they don't get as high raises as they would have and everyone gets poorer except those who trade their dwindling dollars into physical assets.

[nomadicdude]

I think the entire travel industry post 9-11 got good at limiting supply and driving up prices. Airlines have become experts at this shit, when was the last time you were on a half empty US based flight. Hotels I guess are doing the same thing. A lot of them did not expand for years post 9-11 so bam as soon as traveling picked up there was excess demand and then the recession hit so they again stopped expanding. When the economy picked up again you had excess demand.

You see this shit in the Bay Area. Try getting even a Motel Six in the Bay Area for a Monday through Friday. They are charging over $100 bucks. Fucking hotels out in the boonie suburbs like Pleasanton are charging $250. The fucking Marriott in Downtown ghetto Oakland charges $350 on some weekdays. That is partly because of the tech boom but it's also cause there have not been a lot of new hotels built in the last ten years.

[kosko]

In America many counties and cities have been taxing hotel and hospitality services out the ass as means to avoid taxing the local population. In many places that built Stadiums that cost upward of $500-$1 billion dollars much of the costs were raised by issuing hotel taxes and fees.

Plus with the introduction of online bookers whom get cash to direct reservations to certain chains this has made the modern hotel no different then a airline where seldom on a flight do more then two people pay be same price, as some pay nothing, while others have steep markups.

Lastly in *some* markets hotel volume is down or sporadic and they gouge the regular folks whom just roll through. Condos and self-rents have contributed but also the reality that wit less debt people are traveling less or saving up/using debt for one big trip versus the regular random trip to Chicago just because.

(05-04-2014 07:14 AM)Vicious Wrote:  

Tail Gunner has tried pulling up that conspiracy site as a legitimate source before. Like most conspiracy kooks they get some things right but end up adding so much of their own conjecture that in the end most of their "resources" are garbage. The notion that the government can lie about inflation while the rest of the world's economies wouldn't catch on is hilarious.

Personally I say it's not really worth arguing with someone that is not using the same figures that everyone else recognizes.

What are you even saying??

The formula shadow stats uses for inflation is the formula the Govt used OFFICIALLY to measure inflation for close to 60 years. It was modified in the 80s as completely shelved during the Clinton era because it couldn't keep inflation rates at realistic rates the Govt could report on safely. The CPI is a made up fluff index from the BLS that assumes the prime rib is the same as a Mcdolands hamburger and thus in choosing the Mcdolands hamburger at a lower price your not making a substitute and thus not seeing the price increases.

Inflation is easily the most sensitive metric the Govt can release. People are to oblivious to see 9% increases yearly unless they can make a mental note of it. It has been propaganda by the Government to teach people that price increases are normal. You used to learn about inflation in grade school. Now most adults with homes and kids to feed have no idea what it is.

For data America just sets the benchmarks. When America cooks it's books it gives other countries incentives to do the same, mostly by force. If counties are seeing cash reserves wither away in American $USD money they have really no choice but to misrepresent their data also. Canada started messing with it's inflation indexes barley even 4 years after America changed theres. America has one of he worst stats agencies around which releases nearly all politically motivated and doctored data all the time. The CDC for instance is nothing more then a race bait shop that reminds Americans which race is doing better or worse in any said metric each month just to troll. The only viable data in America comes from the State level as most Federal stuff is junked the fuck up.

Inflation in the field:
Go to the store. Peanut butter costs me 7$ a jar when it was 3-4$ only a few years ago. A pack of gum is nearly $2.00 ($1.85) when in 2002 it was a $.90-$1.10. Gas prices have been at record highs for months, yet there is no oil shortages, peak driving, or wars to warrant it. If you grew up counting pennies you have noticed these price increases.

It's easy as day to spot it in food products, but it's easy to dismiss because the price is still "low" and folks don't take into account paying upwards of 9% a year more on items if it's only going up 70 cents a year. Also, go compare package sizes as many manufactures have had to cut sizing in a effort to avoid raising prices. One of my old favorite Quaker Brand cereals I used to eat went from 900grams in a box down to 350grams. Frozen pizzas I used to by went down from 845 grand to 500 with less meat/cheese and more bread to cut costs, while things like chicken are pumped full of salt solution to add on "weight" without raising the price per Kilo. A apple will cost you a dollar each these days. It's getting ridiculous with good as it's obvious if you have been shopping for yourself and cooking meals for a long time. It's obvious to see the price increases when you match it up to the real data. The Govt has very reason to understate inflation as inflation fears cause people to actually attempt to save more and start to pay down debts. The consumer heavy American economy could no survive unless it's people pissed away money and consumed.

And yes wages have stagnated or regressed and have not increased since the 70s. For example butcher or a Janitor in 1974 makes the equivalent of $17.00/hr today. They were still low level positions as they are now but back then you could pay your bills and support a house on those wages. Tell me what has changed since then? The first job my father did when he came over was stocking shelves under the table and his wage in today's dollars is $14.00/hr... He fed 4 kids off that wage....

Lol keep believing what the Govt tells you. They have no interest in telling people the truth -- Red Pill 101.

[spalex]

Somebody is making a fuck-load of money!

I walk past these travel agents in Poland and see deals for like $500-800 you can fly to Greece, Turkey, Cyprus, Tunisia, Turket and Grand Canaria and stay in a 4-5 star hotel for a week with everything included.


I see similar deals here in Norway for like $1800 - $2500

[Seadog]

(05-04-2014 09:03 AM)berserk Wrote:  

For what it is worth, I also think the inflation numbers are cherry picked. Why is housing and rent prices not included in inflation numbers?

Look at this table showing rent as percentage of income:



We spend way more now on housing than before. That IS inflation.

Not at all. Inflation would be that the "percentage of income" stays the same, and you just are paying $2k/mth instead of 1k.

Seems like a lot of misinformation on this thread, getting side tracked into housing/economics.

Here is an excellent article interviewing Robert Shiller about why housing is a bad long term investment.

http://www.huffingtonpost.com/the-motley...55101.html

Logically, housing (or any other asset) cannot outpace real inflation (+ growth I think?) for long. Otherwise you get to a point where housing would represent more than 100% of the GDP. The argument could alao be made that since housing is a manufactured good, it should trend downwords like others, as better production methods come online.

The thing is the economy works in a big circle, and in a very real sense is a huge team effort. Katrina hits and causes $10b in damage. Who pays for that? You and me, via investments, or even deposits at banks, or pension plans who then have it trickle into insurance companies.

Real growth basically means making life easier or better for people. Just sitting on a propery for ten years, why should that make it worth more? (Barring any major external factor like an announced huge gov't works project)

[Tail Gunner]

(05-06-2014 01:14 AM)Seadog Wrote:  

Just sitting on a propery for ten years, why should that make it worth more? (Barring any major external factor like an announced huge gov't works project)

Uh . . . because of artificially low interest rates and inflation caused by an increased money supply caused by a trillion dollars in stimulus. There is simply too much institutional money floating around. It has to go somewhere. Have you missed all the news stories over the past few years about real people not owning all the excess property created by the Great Recession, but being owned -- instead -- by large institutional investors? Those are the people with cheap money burning a hole through their pocket.

Quote:

Nearly half of all home purchases in the month of September were paid for in cold hard cash, as tight lending conditions continue edge out traditional buyers and investors continue to scoop up inventory.

All-cash deals accounted for 49% of sales across the U.S., according to a new report from RealtyTrac. That’s up from 40% in August and 30% in September of 2012.

“The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” says Daren Blomquist, vice president at RealtyTrac.

http://www.forbes.com/sites/morganbrenna...-new-high/


You did inadvertently hit the nail on the head when you stated that "The argument could alao be made that since housing is a manufactured good, it should trend downwords like others, as better production methods come online."

Not only could that argument be made, but it was the way that things used to work before government interference in the economy. Deflation (i.e., lower prices) was historically a good thing and the result of emerging technology and more efficient production methods. That good type of deflation provided more purchasing power, not less, and it is how the economy worked before the government took control of the economy, devalued the dollar (so that the dollar bought less), and created an inflationary environment.

[berserk]

Inflation - the word - does not mean 'rising prices' it is the consequence of the act to 'inflate' something. You inflate a balloon for example.

That is the origin of the word, to inflate something means to grow it in size, without changing the underlying thing.

Inflation used to mean "rising prices as a result of an increasing money supply".

At the very least it must mean "ricing prices that can't be explained by supply and demand".

Not just "ricing prices".

Ricing prices are ricing prices, we don't need a new word for that.

[Seadog]

(05-06-2014 01:39 AM)Tail Gunner Wrote:  

(05-06-2014 01:14 AM)Seadog Wrote:  

Just sitting on a propery for ten years, why should that make it worth more? (Barring any major external factor like an announced huge gov't works project)

Uh . . . because of artificially low interest rates and inflation caused by an increased money supply caused by a trillion dollars in stimulus. There is simply too much institutional money floating around. It has to go somewhere. Have you missed all the news stories over the past few years about real people not owning all the excess property created by the Great Recession, but being owned -- instead -- by large institutional investors? Those are the people with cheap money burning a hole through their pocket.

Quote:

Nearly half of all home purchases in the month of September were paid for in cold hard cash, as tight lending conditions continue edge out traditional buyers and investors continue to scoop up inventory.

All-cash deals accounted for 49% of sales across the U.S., according to a new report from RealtyTrac. That’s up from 40% in August and 30% in September of 2012.

“The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” says Daren Blomquist, vice president at RealtyTrac.

http://www.forbes.com/sites/morganbrenna...-new-high/


You did inadvertently hit the nail on the head when you stated that "The argument could alao be made that since housing is a manufactured good, it should trend downwords like others, as better production methods come online."

Not only could that argument be made, but it was the way that things used to work before government interference in the economy. Deflation (i.e., lower prices) was historically a good thing and the result of emerging technology and more efficient production methods. That good type of deflation provided more purchasing power, not less, and it is how the economy worked before the government took control of the economy, devalued the dollar (so that the dollar bought less), and created an inflationary environment.

I would call artificially low interest rates, and a trillion dollars of stimulus a pretty major 'external factor'.

Like the post following yours, deflation doesn't simply mean 'lower prices'. It specifically means 'lower prices due to a contracting money suppply'. If all the baby boomers want to sell their houses, but no one can get any new credit, then the economy deleverages it's cash. (people spend their cash, other's pay off loans) with no new loans, the net amout of debt/cash in society decreases.

This means there is physically less cash out there, so if people like my parents want to sell, they can take the same slice of a smaller pie (lower price) or not sell. Well some people are forced to sell, and prices decrease.

The danger in this is that people see it, and hold off buying things (because they know the price will be 10% cheaper in a year) this in turn causes businesses to fail, lay people off, people have even less cash, credit is ever harder to come by, the situation spirals out of control.

Contrast this with the discovery of how to make cheap aluminum. It used to take lets say 100 man-years of work to make a pound of aluminum. The method of electricaly seperating it was discovered, and boom, aluminum for a dollar a pound. Now more people have jobs, mines, refineries, producers etc. And everyone in society has access to a reasonably strong light weight metal, excellent for aeronautical applications. More jobs, more people have money, more people can get credit.

That is an example of prices plumetting, despite an inflationary environment, (and touches on my previous statement about true economic growth being making life actually better)

[Tail Gunner]

(05-06-2014 07:31 AM)Seadog Wrote:  

(05-06-2014 01:39 AM)Tail Gunner Wrote:  

(05-06-2014 01:14 AM)Seadog Wrote:  

Just sitting on a propery for ten years, why should that make it worth more? (Barring any major external factor like an announced huge gov't works project)

Uh . . . because of artificially low interest rates and inflation caused by an increased money supply caused by a trillion dollars in stimulus. There is simply too much institutional money floating around. It has to go somewhere. Have you missed all the news stories over the past few years about real people not owning all the excess property created by the Great Recession, but being owned -- instead -- by large institutional investors? Those are the people with cheap money burning a hole through their pocket.

Quote:

Nearly half of all home purchases in the month of September were paid for in cold hard cash, as tight lending conditions continue edge out traditional buyers and investors continue to scoop up inventory.

All-cash deals accounted for 49% of sales across the U.S., according to a new report from RealtyTrac. That’s up from 40% in August and 30% in September of 2012.

“The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” says Daren Blomquist, vice president at RealtyTrac.

http://www.forbes.com/sites/morganbrenna...-new-high/


You did inadvertently hit the nail on the head when you stated that "The argument could alao be made that since housing is a manufactured good, it should trend downwords like others, as better production methods come online."

Not only could that argument be made, but it was the way that things used to work before government interference in the economy. Deflation (i.e., lower prices) was historically a good thing and the result of emerging technology and more efficient production methods. That good type of deflation provided more purchasing power, not less, and it is how the economy worked before the government took control of the economy, devalued the dollar (so that the dollar bought less), and created an inflationary environment.

I would call artificially low interest rates, and a trillion dollars of stimulus a pretty major 'external factor'.

Like the post following yours, deflation doesn't simply mean 'lower prices'. It specifically means 'lower prices due to a contracting money suppply'. If all the baby boomers want to sell their houses, but no one can get any new credit, then the economy deleverages it's cash. (people spend their cash, other's pay off loans) with no new loans, the net amout of debt/cash in society decreases.

This means there is physically less cash out there, so if people like my parents want to sell, they can take the same slice of a smaller pie (lower price) or not sell. Well some people are forced to sell, and prices decrease.

The danger in this is that people see it, and hold off buying things (because they know the price will be 10% cheaper in a year) this in turn causes businesses to fail, lay people off, people have even less cash, credit is ever harder to come by, the situation spirals out of control.

Contrast this with the discovery of how to make cheap aluminum. It used to take lets say 100 man-years of work to make a pound of aluminum. The method of electricaly seperating it was discovered, and boom, aluminum for a dollar a pound. Now more people have jobs, mines, refineries, producers etc. And everyone in society has access to a reasonably strong light weight metal, excellent for aeronautical applications. More jobs, more people have money, more people can get credit.

That is an example of prices plumetting, despite an inflationary environment, (and touches on my previous statement about true economic growth being making life actually better)

Words have meaning. There is a reason that I mentioned the "good type of deflation," because there are several types of deflation. It can mean lower prices from a deflating money supply or lower prices from increased industrial or technological efficiency. I discussed the one stemming from increased efficiency, which results in periods of deflationary growth. Deflation itself is neither good nor bad, but depends on the underlying cause of the deflation.

So, you are wrong when you say "That is an example of prices plummeting, despite an inflationary environment." If prices drop because of industrial efficiency then that is a form of deflation, as described below. Despite your assertion to the contrary, if prices do not rise, then by definition there can be no inflation -- period. Regardless of how you define the word "inflation" one of the absolutely necessary components of inflation is rising prices. Good conversation. Thanks.

Quote:

The Great Deflation occurred at the beginning of the period sometimes called the Second Industrial Revolution. It was characterized by dramatic increases in productivity made possible by the transition from agriculture to industrialization in the leading economies. The new leading industries were Bessemer and open hearth steel, railroads, the machinery industry, efficient steam shipping and animal powered agricultural mechanization. The prices of most basic commodities fell almost continuously; however, wages remained steady. Goods produced by craftsmen, as opposed to in factories, did not decrease in cost.

http://en.wikipedia.org/wiki/The_Great_Deflation

[berserk]

The deflation scare imo is without good merit. I'd like to see some serious studies for the claim that deflation as a whole is bad. I feel that a lot of modern economics operate under assumptions that are flawed, for example assuming a central bank, when a central bank is not a necessary condition in economic theory.

Deflation is a market response and most problems arise when politicians and central banks want to meddle in market responses. This fear that the economy will grind to a halt because if deflation is a Keynesian falsehood, because it uses false methods for understanding growth. Keynesians believe that the money multiplier is real, that printing more money will lead to a direct higher demand which in return will lead to higher investments, which will lead to higher production. That is simply not true as evidenced by the recession despite trillions in quantitative easing.

Besides, people buy things all the time even if they know it will be cheaper soon. Cell phones and computers are good example. People also buy food today, not tomorrow to save a penny or two. Which consumption goods are we even talking about will be postponed? If it is about housing, then I see postponing buying a house as a good thing, because it lowers cost of living in the long run and makes more money available for capital investment and consumption.

[Tail Gunner]

(05-06-2014 08:51 AM)berserk Wrote:  

If it is about housing, then I see postponing buying a house as a good thing, because it lowers cost of living in the long run

That is the key point that most people do not understand. The right type of deflation actually lowers the cost of living and increases the quality of life.

Inflation seldom increases the quality of life, because it raises the cost of living. When is that ever good -- unless wages rise faster than inflation? That is certainly not happening in the current economic climate. We are in a period of stagflation and most people do not even realize it.

[Tail Gunner]

An article posted today, for those of you who still believe the government's fantasy numbers in regards to inflation.

What is most interesting about the article is the report that the core PPI, which excludes food and energy, increased 0.5 percent in JUST one month! That is an annualized inflation rate of six percent, yet it does not include those items that increase the most from inflation (food, energy, housing, transportation, etc.)

Quote:

No Inflation … Unless You Eat!
by Mike Larson on May 14, 2014

Or drive.

Or travel.

Or buy health insurance, rent an apartment, and plan to purchase a truck, among other things!

That’s the verdict from today’s Producer Price Index. The report on wholesale inflation was plug-ugly throughout. The overall PPI rose 0.6 percent in April, the biggest rise since September 2012. The “core” PPI that excludes food and energy increased 0.5 percent, more than double the average forecast of economists who never leave their Ivory Towers to shop.

More to chew on: Meat costs jumped 8.4 percent, the biggest rise since 2003. The gasoline additive ethanol rose the most in history. Plane ticket prices climbed almost 5 percent from a year ago, while the cost of renting a car jumped 23.4 percent.

There’s nothing sunny side up about egg prices — they surged 44.3 percent from a year ago last month. And while pork may be the other white meat, it’s going to take a lot more green to buy it. Prices jumped almost 21 percent in ONE MONTH!

Look, you don’t need to be the world’s best technical analyst to see a trend here in year-over-year wholesale core inflation — the indicator central banks follow closely. It has been climbing recently and just broke out to a fresh two-year high, as you can see here:

Again, this is coming as no surprise to you and me. When my wife and I go to the grocery store, we’re increasingly shocked when it’s time to check out. My 15-year-old stepson lives with us full-time, and he’s a bottomless pit when it comes to eating, like most active teenagers. And when my 8- and 11-year-old daughters are at the house with us, too, costs really add up!

“You don’t need to be the world’s best technical analyst to see a trend here in year-over-year wholesale core inflation — the indicator central banks follow closely.”

Heck, we hosted a barbecue the other weekend and the meat alone was pushing $50! Ground beef packages that used to cost around $4 are now going for $7, while a small slab of my family’s favorite grilled option (baby back ribs) is in the double digits, easy.

We go to our grocer’s website and electronically “clip” coupons before we shop to save some money. We also stock up when our standard items go on sale, so we don’t have to buy during weeks they’re selling for regular price. The store accepts competitors’ coupons, too. So if another area retailer has things like “$5 off $50 or more” coupons in its circular, we’ll clip that out and use it at our neighborhood store.

That helps. But the only thing that will get inflation under control over the longer term is sound monetary policy. We’ll have to see if central bankers get the message from data like this … or if they don’t notice because their “help” does the shopping, cleaning, and cooking!

What about you? Are there money-saving tips YOU can share to make everyone’s weekly outing to the grocery store a little less painful? And how is the rising cost of living affecting your wealth and spending habits?

http://blog.moneyandmarkets.com/interest...-eat-5141#

[rekruler]

I think a part of it is people like me: business travelers. I spend 4 days a week, every week, in hotels, and I can say that at least during the weekdays, it's always 90%+ business travelers. It doesn't matter how much the sticker price is when the corporation is picking up the tab.

[HungWeiLo]

Not to hijack the thread from the conspiracy bend it's taken, but we've been going over some good ways to bring down the cost of hotels on miles and points for players thread of you haven't seen it. http://www.rooshvforum.network/thread-35892-...24434.html

[Cattle Rustler]

I find it amusing that I can get a much better room at a Best Western Premier for 89 bucks than at a 4.5 star downtown hotel for 99 bucks.

Then again, the lizard does a facebook check in at the 4.5 than at the BWP.....no worries, I'm not paying for it.

[babelfish669]

Deepdiver's explanation is good.

Funny, so much talk about inflation in the thread, but no mention of the boom in new hotels thanks to low interest rates.

Two things:

a) Avoid events. There are always things going on during weekends, conferences are often held Monday - Wednesday. When inventory is tight the prices double or more. Multiple events are killer. At worst, there aren't rooms available.

b) Not everyone is paying the advertised price. Many guests are paying $0 for their rooms thanks to credit card points. Some people are getting discounted rates like Deepdiver described. Check out Hotwire and HotelTonight for last minute pricing. I knew a guy who would walk in late and ask for discounted prices, sometimes it worked.

My complaint, 5 star hotels which suck. Weird or dirty rooms, hard mattresses, noises, blood stains on sheets, drapes which won't keep out the light. Common problems, no clue how they are keeping their ratings.

[bounce]

I wasn't aware that the government falsified inflation rates. Given that this appears to be the case, what advice would you give to a young man starting his professional life? Invest in physical assets?

When inflation is high, from my understanding, we should take out loans because tomorrow the money that we owe will be worth less, no?

If the real inflation rate is 9% and the interest rate is 6% then one would be wise to take out as much loans as possible?

As far as investments go, what should we do? Physical assets?

Sorry if these questions are basic, but why would banks lend money below the real inflation rate?

[Basil Ransom]

As some have already alluded, hotels are getting to be like airlines where there are a thousand different prices charged to patrons depending on when and how you book. Hotels and every other business can boost profits by segmenting the market by how much each demographic is willing to pay.

Also, you can use government hotel reimbursement rates as an index of how much different area hotels cost. Eg, http://www.gsa.gov/portal/category/100120

You can even ask for the government rate when you book your stay, which tends to be a lot cheaper, if the hotel offers it (not all do, especially the more lux ones). Some hotels will ask to see proof of your employment with the government, others won't.

[ChasInSin]

That's a good point about the government rates. They can be significantly lower than published rates. Some hotels do require id and others only a .gov email address on the reservation.

Use the meta-search sites to search rates, like Trivago or Kayak. They pull rates from multiple sites and sometimes you can find much lower rates than on the hotels own site due to some sites offering rooms that were basically contracted in bulk by wholesale agents to sell to tour operators and travel agents.. Hotels hate this but it's legit.

Hotels learned a tough lesson after 9/11 and know that lowering rates does not necessarily increase demand when there is already very little demand. They just ended up lowering rates for the few people who would have traveled anyways. It's very hard to get rates higher or back to previous levels in an improving economy after slashing rates in a poor economy. You'll probably never see much lower rates in NYC for example, unless there is a huge increase in the supply of rooms.

[mastauser]

Think also about all the safety procedures that hotels have to be able to perform and all the safety regulations that are required for hotels.

[heavy]

Inflation

Or in other words, redistribution of wealth to those with government influence (most $) or whom the government throws a bone to for votes (very little $).