Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
"Biflation"
Old 08-28-2010, 01:45 PM   #1
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
"Biflation"

So there *is* a word for this phenomenon we discuss from time to time:

Biflation - Wikipedia, the free encyclopedia

Quote:
With biflation on the other hand, the economy is tempered by increasing unemployment and decreasing purchasing power. As a result, a greater amount of money is directed toward buying essential items and directed away from buying non-essential items. Debt-based assets (mega-houses, high-end automobiles and stocks) become less essential and increasingly fall into lower demand. As a result, the prices for them fall due to the decreased volume of money chasing them. The decreasing costs to purchase these non-essential assets is the price-deflationary arm of biflation.
That about covers it. Biflation is a killer for people on moderate incomes tied to the CPI. Almost all of the stuff they buy rises in price, but their monthly income isn't growing because the price of a cruise vacation is falling. And "biflation" is how one can feel like their standard of living is falling despite being told there is no inflation.
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-28-2010, 02:12 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,614
Great find! I think we're gonna have another "CPI is rigged vs CPI is legit" discussion now.

Of course, there will be spinoffs:
Bibikeflation (Alt: Buybikeflaton): Prices for regular commodities declines due to low demand, but the populace is so poor that they eschew automobiles and seek out bicycles as replacements, driving up the price of two-wheeled transportation. (Derivative: Increase in bicycle thefts due to increased demand: Byebikeflation)
Triflation: The cost of luxury goods and nonessential declines, the price of essential staples increases, and the price of items which are nonessential but which may bring solace in tough economic times (MD 20-20, fishing gear, etc) escalates still more.

Sorry, hope I didn't cr*p on a perfectly good thread.
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 08-28-2010, 02:15 PM   #3
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by samclem View Post
Great find! I think we're gonna have another "CPI is rigged vs CPI is legit" discussion now.
....
Sorry, hope I didn't cr*p on a perfectly good thread.
But should I rent or buy?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 08-28-2010, 02:25 PM   #4
Thinks s/he gets paid by the post
John Galt III's Avatar
 
Join Date: Oct 2008
Posts: 1,283
Thanks very much for posting that! I'm one of those folks who are tired of hearing that inflation is low. Using my local beer prices as an example of inflation, I have noticed the cheap beer has gone up about 15 % over the last 2 years but the expensive stuff has gone up a good 25% over the last 2 years. The typical $7.99 per case stuff is now $9.25 and the typical $23.99 a case stuff is now $30.99. Interestingly, I have started buying more of the expensive beer than I used to. I look for one of the expensive beers that has risen less than the others in price, and buy it.

I used to buy a locally brewed beer for $6.99 a case of 24 bottles 5 years ago. The very same case now costs $11.99. I stopped buying it when it hit $10.99 a case.
__________________
John Galt III is offline   Reply With Quote
Old 08-28-2010, 02:35 PM   #5
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,069
Quote:
Originally Posted by ziggy29 View Post
But should I rent or buy?
I think you should bi....
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 08-28-2010, 02:47 PM   #6
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,240
So, if I understand the term "biflation", I suppose the appropriate response would be "Let them eat cake".

But seriously, I've always had an issue with the gummint's inflation numbers. They sure don't square with my experience.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 08-28-2010, 03:07 PM   #7
Thinks s/he gets paid by the post
Rustic23's Avatar
 
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 3,624
2 liter Walmart soda, $.50 two years ago, $.72 yesterday, thats a 44% increase!
__________________
If it is after 5:00 when I post I reserve the right to disavow anything I posted.
Rustic23 is offline   Reply With Quote
Old 08-28-2010, 03:08 PM   #8
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by samclem View Post
Great find! I think we're gonna have another "CPI is rigged vs CPI is legit" discussion now.(snip)
Instead, let's have an "investing strategies to cope with biflation" discussion. Not TIPs, because they are linked to the CPI, not the "EPPI" (essential purchases price index). Somebody mentioned in another thread (I don't recall which one at the moment) that they had bought stock in their local utility and were now receiving more in dividends than they were paying on their bill. That made me wonder if the same thing couldn't be done aimed at the ever-worrisome health-care expense. I suspect it might be possible also to arrange a portfolio that would track the EPPI in the same way, by tilting it toward the relevant industries. Suppose a big portion of a portfolio is in sector funds that include the things on the EPPI: food, health care, housing, transportation, utilities, consumer staples and so on. If these are going up, wouldn't profits be expected to rise along with prices, resulting in a portfolio that tracked the EPPI rather than the CPI?
__________________
kyounge1956 is offline   Reply With Quote
Old 08-28-2010, 03:24 PM   #9
Thinks s/he gets paid by the post
Rustic23's Avatar
 
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 3,624
"With biflation on the other hand, the economy is tempered by increasing unemployment and decreasing purchasing power"

"In economics, the term stagflation refers to the situation when both the inflation rate and the unemployment rate are high. "

Is there a difference? Seems to me Biflation is a rename of Stagflation.
__________________
If it is after 5:00 when I post I reserve the right to disavow anything I posted.
Rustic23 is offline   Reply With Quote
Old 08-28-2010, 03:24 PM   #10
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 10,137
I would think basic consumer goods could do well in that environment -- PG, CLX, BUD, MO, KFT
__________________
Living an analog life in the Digital Age.
Gumby is online now   Reply With Quote
Old 08-28-2010, 03:32 PM   #11
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by Rustic23 View Post
"With biflation on the other hand, the economy is tempered by increasing unemployment and decreasing purchasing power"

"In economics, the term stagflation refers to the situation when both the inflation rate and the unemployment rate are high. "

Is there a difference? Seems to me Biflation is a rename of Stagflation.
Not quite, because in traditional stagflation, the price of everything is rising and the CPI will be "hot". With biflation, two distinct subsets of the economy are moving in opposite directions so the CPI will appear much tamer.

And in reality, someone on Social Security or a COLA'd pension would likely prefer to have full blown inflation or stagflation than biflation, because with biflation their true cost of living is probably rising but their monthly check isn't. At least when the price of *everything* is rising, so too will their CPI-indexed income stream.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 08-28-2010, 03:52 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by ziggy29 View Post
So there *is* a word for this phenomenon we discuss from time to time:

Biflation - Wikipedia, the free encyclopedia

That about covers it. Biflation is a killer for people on moderate incomes tied to the CPI. Almost all of the stuff they buy rises in price, but their monthly income isn't growing because the price of a cruise vacation is falling. And "biflation" is how one can feel like their standard of living is falling despite being told there is no inflation.

I'm not sure if I agree with the article on a couple of points or maybe it is just the explanation.

Quote:
Since most essential commodity-based assets (food, energy, clothing) remain in high demand, the price for them rises due to the increased volume of money chasing them. The increasing costs to purchase these essential assets is the price-inflationary arm of Biflation
The demand for the items mentioned above is inelastic. So, the volume of money will not affect the demand. But, if there is a speculative surge, flight to safety into those items or a decrease in the value of the $; I could see the prices rising. (Not mentioned)

I would agree with the statement that the cost of the items above remain relatively constant while the items mentioned below decrease in price - they have an elastic demand curve.

Quote:
As a result, a greater amount of money is directed toward buying essential items and directed away from buying non-essential items. Debt-based assets (mega-houses, high-end automobiles and stocks) become less essential and increasingly fall into lower demand.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 08-28-2010, 05:10 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RonBoyd's Avatar
 
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 5,280
Quote:
Originally Posted by REWahoo View Post
I think you should bi....
Until the price hits $10.99.
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
RonBoyd is offline   Reply With Quote
Old 08-28-2010, 05:15 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RonBoyd's Avatar
 
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 5,280
Quote:
Originally Posted by samclem View Post
Great find!
+1
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
RonBoyd is offline   Reply With Quote
Old 08-28-2010, 05:30 PM   #15
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by samclem View Post
Great find! I think we're gonna have another "CPI is rigged vs CPI is legit" discussion now.

Of course, there will be spinoffs:
Bibikeflation (Alt: Buybikeflaton): Prices for regular commodities declines due to low demand, but the populace is so poor that they eschew automobiles and seek out bicycles as replacements, driving up the price of two-wheeled transportation. (Derivative: Increase in bicycle thefts due to increased demand: Byebikeflation)
Triflation: The cost of luxury goods and nonessential declines, the price of essential staples increases, and the price of items which are nonessential but which may bring solace in tough economic times (MD 20-20, fishing gear, etc) escalates still more.

Sorry, hope I didn't cr*p on a perfectly good thread.
Wouldn't the price of items which are nonessential but which may bring solace in tough economic times - be dependent on what you could carry while still able to ride the bike
__________________
fritz is offline   Reply With Quote
Old 08-28-2010, 05:46 PM   #16
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,823
Whatever name we want to pin on it, I think the concept is right on the money.

Prices are rising at my grocery store, but when I hired a well regarded local landscaping company to take down a tree and do some very labor-intensive landscaping work this week, the price was about 1/2 to 1/3 of what I think they would have charged several years ago. (This is not a national company, but a local family-owned small business).

Surely the reason for the low price is that they are having a hard time finding work lately and their laborers are willing to work for lower wages. Landscaping is usually something one can put off, but grocery shopping isn't.

I don't expect to receive cost of living increases in my federal pension or Social Security, once I claim it, for years. If COLA'd pensions don't get a COLA, then it seems to me that they are on a similar footing as non-COLA'd pensions. Interesting.

The only thing that doesn't seem to fit with this Biflation model, is that rents do not seem to be rising very fast. Well, they are not rising fast in my area, anyway.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 08-28-2010, 05:50 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Amethyst's Avatar
 
Join Date: Dec 2008
Posts: 5,872
$69 three years ago to have someone come to look at a non-working major appliance.
$112 today. This was just the "come to the door" price - everything else extra.

Amethyst
__________________
If you understood everything I say, you'd be me ~ Miles Davis
'There is only one success to be able to spend your life in your own way. Christopher Morley.
Amethyst is offline   Reply With Quote
Old 08-28-2010, 05:54 PM   #18
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,823
Quote:
Originally Posted by Amethyst View Post
$69 three years ago to have someone come to look at a non-working major appliance.
$112 today. This was just the "come to the door" price - everything else extra.
Wow! I'm glad I don't live where you live, in the D.C. suburbs according to your profile. That's so exorbitant.

Here, all my estimates for "fix-up" work to prepare my house for selling, have been not only free, but prompt. I guess that's a regional difference maybe.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 08-28-2010, 05:54 PM   #19
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,069
Quote:
Originally Posted by samclem View Post
Of course, there will be spinoffs:
Bibikeflation (Alt: Buybikeflaton): Prices for regular commodities declines due to low demand, but the populace is so poor that they eschew automobiles and seek out bicycles as replacements, driving up the price of two-wheeled transportation. (Derivative: Increase in bicycle thefts due to increased demand: Byebikeflation)
You omitted the most obvious...

Bifurked: What we is.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 08-28-2010, 05:55 PM   #20
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by W2R View Post
Wow! I'm glad I don't live where you live, in the D.C. suburbs according to your profile. That's so exorbitant.
Of course, the D.C. area is highly recession-resistant when you consider their main industry...
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 09:50 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.