Wow, inflation has been low!

[audreyh1]

About this time annually, I usually review the real returns of my investments and net worth. I took a look at the recent three years of CPI-U inflation data today:

2014 inflation - 0.76%
2013 inflation - 1.50%
2012 inflation - 1.74%

Cumulative inflation over those three years - 4.05%

Man, inflation is low and still dropping! The annual number for 2014 is incredible.

Data is from InflationData.com's Cumulative Inflation Calculator

 

[audreyh1]

from Annual Inflation Rate Chart

 

[ERhoosier]

Many feel Gov't "inflation" stats have been underestimated BS for some time. Low reported CPI is in Gov't's best interest. It minimizes increases in many gov't payments (SS, food stamps, TIPS bond interest, etc.) and makes "real" GDP growth look better.
http://www.zerohedge.com/news/2014-01-06/inflation-understated
Why The Consumer Price Index Is Controversial
Problems with the Consumer Price Index | Chapwood Index - The Real Cost of Living Increase Index | Founded by Ed Butowsky of Chapwood Investments
Consumer Price Index

In the real world, folks actually have to eat
Rising food prices pinching consumers

Read about Gov't CPI methodology here and decide for yourself how relevant (or irrelevant) CPI is to your personal situation.
Consumer Price Index Frequently Asked Questions

 

[audreyh1]

Many feel Gov't "inflation" stats have been underestimated BS for some time. Low reported CPI is in Gov't's best interest. It minimizes increases in many gov't payments (SS, food stamps, TIPS bond interest, etc.) and makes "real" GDP growth look better.
Is Inflation Understated? | Zero Hedge
Why The Consumer Price Index Is Controversial
Problems with the Consumer Price Index | Chapwood Index - The Real Cost of Living Increase Index | Founded by Ed Butowsky of Chapwood Investments
Consumer Price Index

In the real world, folks actually have to eat
Rising food prices pinching consumers

Read about Gov't CPI methodology here and decide for yourself how relevant (or irrelevant) CPI is to your personal situation.
Consumer Price Index Frequently Asked Questions

On the other hand, some of us retired folks haven't increased our spending at all in over a decade.

Probably best not to reference shadowstats. He admits he made some of his numbers up.* An overall rebuttal: Regression to Trend: Debunking the Alternate CPI | Doug Short | FINANCIAL SENSE

*The Trouble With Shadowstats | azizonomics

 

[ERD50]

Many feel Gov't "inflation" stats have been underestimated BS for some time. ....
In the real world, folks actually have to eat

Inflation Myths Debunked – AARP

Myth two: The CPI excludes food and energy. I’ve heard this one countless times, usually in the context that the government is manipulating inflation. The Consumer Price Index for All Urban Consumers (CPI-U), the all-items index, increased 1.7 percent from October 2013 to October 2014. The all-items index includes eight major expenditure categories: food and beverages; housing; apparel; transportation; medical care; recreation; education and communication; and other goods and services. ...

-ERD50

 

[rbmrtn]

About this time annually, I usually review the real returns of my investments and net worth. I took a look at the recent three years of CPI-U inflation data today:

2014 inflation - 0.76%
2013 inflation - 1.50%
2012 inflation - 1.74%

Cumulative inflation over those three years - 4.05%

Man, inflation is low and still dropping! The annual number for 2014 is incredible.

Data is from InflationData.com's Cumulative Inflation Calculator

My personal spending has been flat for number of years. Japan has been in deflation for years, Europe is following. Falling oil will add to deflation.

Dr Hunt at hoisington research has been on this http://www.hoisingtonmgt.com/pdf/HIM2014Q3NP.pdf

 

[RetireBy90]

Despite any failures of CPI I think the premise is sound that inflation has been too low for some time. I think it has to do with velocity of The money supply. Come up with any reason you want, but something is holding down business investing.

Paying down debt? Numbers don't support that.
Using corporate cash to do buybacks? Perhaps part of it.
Regulation of banks keeping them from lending? Perhaps part of it.

Any insights?

 

[Mulligan]

Many feel Gov't "inflation" stats have been underestimated BS for some time. Low reported CPI is in Gov't's best interest. It minimizes increases in many gov't payments (SS, food stamps, TIPS bond interest, etc.) and makes "real" GDP growth look better.
http://www.zerohedge.com/news/2014-01-06/inflation-understated
Why The Consumer Price Index Is Controversial
Problems with the Consumer Price Index | Chapwood Index - The Real Cost of Living Increase Index | Founded by Ed Butowsky of Chapwood Investments
Consumer Price Index

In the real world, folks actually have to eat
Rising food prices pinching consumers

Read about Gov't CPI methodology here and decide for yourself how relevant (or irrelevant) CPI is to your personal situation.
Consumer Price Index Frequently Asked Questions

Amen to that ER.... Inflation is running rampant in my personal situation. Counting food, cable, and mostly Obamacare my personal inflation rate is 10%. I could live on $3000 last year, now it's $3300!


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[photoguy]

I think one drawback of the BLS inflation numbers is that they are quite complicated to compute and hence easy to misunderstand and easy to attack (with strawmen). I was once interested in how the chained CPI was computed (to understand the substitution effect) but I stopped when I realized I'd have to read 20-30 pages of equations.

I am dismayed by how many people reference shadowstats. It should be obvious from their alternate inflation graph that the numbers are bogus and simply involve adding a constant to the government figures.

I've tracked our expenses for several years now and they have remained flat. I don't have enough data to tell if inflation is 1%, 2% or even negative. But if inflation were much higher (say 6-10%) that would definitely show up in my records.

 

[imoldernu]

US Debt

 

[GreenER]

Amen to that ER.... Inflation is running rampant in my personal situation. Counting food, cable, and mostly Obamacare my personal inflation rate is 10%. I could live on $3000 last year, now it's $3300!


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I suggest you drop the cable!

 

[Lakewood90712]

Despite any failures of CPI I think the premise is sound that inflation has been too low for some time. I think it has to do with velocity of The money supply. Come up with any reason you want, but something is holding down business investing.

Paying down debt? Numbers don't support that.
Using corporate cash to do buybacks? Perhaps part of it.
Regulation of banks keeping them from lending? Perhaps part of it.

Any insights?

The industrialized world is awash in excess capacity, including excess labor capacity , and just plain nothing worth investing in that will produce results in less than a year ( time frame I assume western businesses expect to see a return). China certainly has more patience than a year, but they can't hide from lack of growth in world demand forever. My 2.6 cents worth , including inflation.

 

[audreyh1]

I suggest you drop the cable!

His health insurance premiums took a big leap recently. Now he is paying closer to everyone else, but of course that's still a big jump in his personal inflation.

 

[razztazz]

Come up with any reason you want, but something is holding down business investing.

Too much money in too few hands

 

[Mulligan]

His health insurance premiums took a big leap recently. Now he is paying closer to everyone else, but of course that's still a big jump in his personal inflation.

Yes, of course a 250% increase will do that! But as far as that cable goes... I haven't had to be in a hospital since I was born but I haven't been a day without tv in decades... And I'm not giving up the tv.


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[audreyh1]

Despite any failures of CPI I think the premise is sound that inflation has been too low for some time. I think it has to do with velocity of The money supply. Come up with any reason you want, but something is holding down business investing.

Lack of demand? It's one of those vicious circles.

 

[Sunset]

Yes, of course a 250% increase will do that! But as far as that cable goes... I haven't had to be in a hospital since I was born but I haven't been a day without tv in decades... And I'm not giving up the tv.

We dropped cable 8 years ago by switching to the free HD over the air plus netflix.
We get about 25 HD channels, and have in Netflix over a 100 shows and movies lined up to watch. Too much really.

So our viewing cost is $7.99/mo

 

[ejman]

Japan has been in a deflationary cycle for a couple of decades now. Europe appears to be @ the start of such a cycle now. China is slowing down and the US appears to be headed for a political cycle that would favor tighter fiscal policies. Sure looks like a deflation direction for the entire world right now.

 

[NW-Bound]

Japan has been in a deflationary cycle for a couple of decades now...

Just out of curiosity, I look at Japan's M1 and M2. Holy money!

Between 1980 and now, its money supplies grew several fold. Add deflation on top of that, and that's a lot of cash sitting there. Cash that people hoard and not used for anything. Cash that is hoarded the same way that gold is hoarded by some people. You keep it just because it's good to have, and not because you want to exchange it for something else that is truly useful.

Hmmm... Why does that ring a bell? Is it because that's what we misers often talk about in this forum; hoarding money just for the pleasure of counting it?

Oh, I am a guilty one too!

No, I am not. Not at my 4%WR.

PS. Come to think of it, hoarding gold makes more sense than hoarding paper money. Gold is shiny, heavy, and durable. Paper money is combustible. Stuffed in a mattress or a seat cushion and a goat may eat it. Worse, nowadays money is just a number stored in the bank computers. An EMP (Electromagnetic Pulse) would wipe out those bits and bytes and what do you have left? And an EMP would get shunted by gold, with it being an excellent electrical conductor. You can make a good shield out of gold.

 

[KeithN]

Stuffed in a mattress or a seat cushion and a goat may eat it.

You have a goat?

 

[Meadbh]

Below is a chart showing inflation in Europe...well actually, the onset of deflation. The ECB is about to do some QE.

And in other news, the Bank of Canada yesterday shocked everyone by dropping its prime lending rate by 25 basis points, to 0.75%. It had been steady at 1% since 2010. Inflation data for Canada are here: http://www.bankofcanada.ca/rates/in...ion-pressures/inflation/inflation-cpi-graphs/

 

[Gatordoc50]

Inflation been berry berry good to me. It's like a beautiful wave to ride to the shoreline!

 

[imoldernu]

Quantitative easing (QE) is monetary policy where a central bank creates new money electronically to buy financial assets. The aim is to stimulate an economy when standard monetary policy has become ineffective.

Where does the (creates new money electronically) come from?

... does anyone else see a relationship between low CPI and this?

 

[audreyh1]

Europe just announced a major QE effort to combat deflation, projected to last until Sept 2016.

 

[Mulligan]

We dropped cable 8 years ago by switching to the free HD over the air plus netflix.
We get about 25 HD channels, and have in Netflix over a 100 shows and movies lined up to watch. Too much really.

So our viewing cost is $7.99/mo

Sorry I wasn't clear. The 250% increase in one month was the health insurance. The cable bill I will complain and pay as I watch too much regional sports that require it.


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