Economist suggests that inflation may be low for a while

[MrsHaloFIRE]

I see groceries healthcare and housing going up in my area. What's this deflation talk? My basket of goods is increasing in expense.

[meierlde]

Here is a plot of the us consumer price index as well as the total change from 1913
https://en.wikipedia.org/wiki/Consum...ndex_Graph.svg
All be it that the choice of a linear scale for average consumer price index may not be the best, as perhaps a log scale of something that goes as an exponential always runs in slope.

[meierlde]

Quote:

Originally Posted by Koolau Heh, heh, I guess that news about the returning meat packers hasn't made it here yet.

the wall street journal claims that the shortage of meat is over and prices are falling "after spring time shortages supermarkets are selling meat for lower prices, as supplies rebound and exports decline". This chart from the bls shows hamburger prices peaking in July and declining in aug. Note that the year over year cpi is up 1.3% Here is a link to the bls report https://www.bls.gov/news.release/cpi.nr0.htm

[Koolau]

Quote:

Originally Posted by MrsHaloFIRE I see groceries healthcare and housing going up in my area. What's this deflation talk? My basket of goods is increasing in expense.

Stick with me while I suggest a theory 'splainin' why the gummint numbers never match up with my (our??) inflation reality: The gummint "says" we're going to buy "this much" gas, "this much" food, this much movie tickets, "this much" health care, "this much" housing, etc. etc. Here is where I think "they" are wrong: If food and health care go up in price - we still buy 'em, 'cause we really need 'em. If movie tickets, travel, entertainment in general, shoes, etc. etc. go up, we DON'T buy 'em. Folks have only so much money.

So every thing we don't buy may be cheap (and that can be self fulfilling as folks don't buy 'em) but everything we actually need may be expensive (partly because EVERYONE needs 'em.) The gummint doesn't actually notice what we DO buy and what we QUIT buying within a year. So the gummit's estimates look "good" because of their assumptions. "OUR" numbers look "bad" cause we don't follow the assumptions when we have a choice. So there you have it. Ko'olau's theory of gummint vs real inflation. Don't forget, YMMV.

[SecondCor521]

Quote:

Originally Posted by Koolau Stick with me while I suggest a theory 'splainin' why the gummint numbers never match up with my (our??) inflation reality: The gummint "says" we're going to buy "this much" gas, "this much" food, this much movie tickets, "this much" health care, "this much" housing, etc. etc. Here is where I think "they" are wrong: If food and health care go up in price - we still buy 'em, 'cause we really need 'em. If movie tickets, travel, entertainment in general, shoes, etc. etc. go up, we DON'T buy 'em. Folks have only so much money. So every thing we don't buy may be cheap (and that can be self fulfilling as folks don't buy 'em) but everything we actually need may be expensive (partly because EVERYONE needs 'em.) The gummint doesn't actually notice what we DO buy and what we QUIT buying within a year. So the gummit's estimates look "good" because of their assumptions. "OUR" numbers look "bad" cause we don't follow the assumptions when we have a choice. So there you have it. Ko'olau's theory of gummint vs real inflation. Don't forget, YMMV.

Except that's not how the CPI is calculated. It's calculated on what people (on average in aggregate) actually buy, not on what the gummint things we buy "this much" of.

See:

https://www.bls.gov/cpi/questions-an...htm#Question_2

and

https://www.bls.gov/cpi/factsheets/a...ces-differ.htm

It is true that people will substitute goods and that goods have varying demand curves, but that's supposed to be accounted for in the CPI.

[RenoJay]

Anyone else doubting the “wisdom” of Keynesian economics? Central banks were installed, at least partly, to supposedly moderate the business cycle by loosening in bad times and tightening in good times. At least in the past 25 years I’ve seen lots of loosening, but barely any tightening and the ups and downs of the business cycle seem as alive as ever. So to my way of thinking, this leaves asset prices far above their natural equilibrium so of course there’s deflationary pressure. I understand how hazardous deflation can be, but had Greenspan allowed a natural reset (as opposed to inflating the housing bubble) in the early 2000’s I don’t think we’d have huge societal issues now like massive wealth inequality. I think we would have had a very slow recovery but eventually would have found a natural level for asset prices. But the game continues with central bankers simply using more and more credit creation to fight the ill effects of the last round of credit creation. So the question becomes: At what point do we take our economic medicine for sins of the past, stop money printing, rate lowering and otherwise manipulating the natural desires of market participants, and allow a painful and slow reset so that future generations don’t have to deal with the mess we’ve made?

[stepford]

Quote:

Originally Posted by RenoJay Anyone else doubting the “wisdom” of Keynesian economics?

Perhaps the problem isn't with Keynesian economics but with the "wisdom" of allowing politics rather than just economic data to influence monetary policy.

[audreyh1]

Quote:

Originally Posted by RenoJay Anyone else doubting the “wisdom” of Keynesian economics? Central banks were installed, at least partly, to supposedly moderate the business cycle by loosening in bad times and tightening in good times. At least in the past 25 years I’ve seen lots of loosening, but barely any tightening and the ups and downs of the business cycle seem as alive as ever. So to my way of thinking, this leaves asset prices far above their natural equilibrium so of course there’s deflationary pressure.

Yep!

Even though my investments are way up there, asset inflation caused by endless QE bugs me because it seems inevitably unstable.

So I keep taking my full annual withdrawal and rebalancing, because you never know when we’re going to hit a big air pocket.

[bolt]

I've always recalled one thought.

"A country is only as valuable as its currency".
I concur wholeheartedly.
Remember the 1851 civil war single gold dollars on EBay over 100.00.

STRANGE ; a $1.00 gold piece(1850s) attracts (its smaller than a dime 1.6gm of 9.99 24k GLD over $ 100+ on EBay!
Good luck & Best wishes....

[Amethyst]

I have seen the greatest inflation in the cost of services. This cost is now being influenced by all the COVID-19 preparations, cleaning, scarcity of spare parts, etc. so I'm not sure how much is genuine "inflation," and how much is simply that it costs businesses more to run because of COVID.

Quote:

Originally Posted by Koolau No idea if inflation will be low or rage a la 70's/80s. I just know I no longer trust the inflation numbers that are published. I see what I see and inflation is much higher (here) than the numbers would suggest. It's been that way for several years. YMMV

[jkern]

Even though the CPI may be low, my Medical Insurance Premium has increased by 30% this year and 175% over the last four years. Medical Insurance represents over 20% of my total cost for Essentials.

Official CPI rates have little to do with my actual inflation rate.

[Car-Guy]

From my POV, with the exception of gasoline, just about everything has gone up... Insurance, cars, food, etc.... I just switched insurance companies after being with them for more than 25 years because the bill went up so much this year. The DW and I went to McDonalds the other day and had a bit of a laugh when the bill was just over $20.

[Tadpole]

Maybe all you need to do to produce the inflation of the 70s is to delink interest rates and true inflation. If the diesel price goes down but the merchandize in the haul doesn't, lower diesel price has only aided the shareholders of the shippers, not the buyers of the haul.

[sengsational]

Look on the bright side of inflation....that pallet of 100's the war lord has or drug lord has is getting less valuable, whereas legit money can be moved to things that keep up better.

My deflation market segment is eBay stuff from the far east. So much cool stuff for so cheap! I got an Arduino that runs an amazingly huge TV tuning free over the air signals with multiple digital tuners, scheduled to record my choices....a low, one-time cost, and now I have on-demand movie theater like experience whenever I want. Free.

[Koolau]

Quote:

Originally Posted by Amethyst I have seen the greatest inflation in the cost of services. This cost is now being influenced by all the COVID-19 preparations, cleaning, scarcity of spare parts, etc. so I'm not sure how much is genuine "inflation," and how much is simply that it costs businesses more to run because of COVID.

Yep, I noticed at local restaurant that the menu items have been curtailed and the prices have increased (guessing 20%). Sad, really. I understand it, but it's counter productive if things don't improve fairly soon. Paying more to get less and risk Covid is not a good business model. YMMV

[Spanky]

Quote:

Originally Posted by Koolau Yep, I noticed at local restaurant that the menu items have been curtailed and the prices have increased (guessing 20%). Sad, really. I understand it, but it's counter productive if things don't improve fairly soon. Paying more to get less and risk Covid is not a good business model. YMMV

We do mostly takeout food and have not noticed any significant increases - keeping our fingers crossed.

[VFK57]

I do not see signs of deflation while bit coins / Gold prices indicate the fear of inflation.

[GenXguy]

Quote:

Originally Posted by cyber888 This is clearly not an issue of inflation, but an issue of Taxation.

I have to disagree. The 7% increase in my homeowner's insurance has nothing to do with taxation. And when you are figuring your drawdown using the 4% rule, you MUST include taxes. You can't separate that out as if it doesn't exist as a real expense. That's ridiculous. Property taxes are a real expense and must be calculated in. That's part of my personal inflation that is figured as part of the 4% rule. The paid off house does NOT affect my drawdown related to the 4% rule at all and would work against me if I was to sell because in most areas that I would consider moving to, home values have actually gone up. So it's a negative all the way around which would require me to increase my spending.

I wasn't thinking about it earlier, but someone else mentioned health care insurance premiums. My insurance premiums through work went up 60% in July, along with higher deductibles and coinsurance! Grocery bills are up, electric bill is up. I don't drive much, so gas prices don't affect me much, but the gubment decided to raise taxes on that to offset some of the price drop along with increasing many other fees like car registrations by 50%.

As many experts are predicting, inflation is expected to soar, and is already higher than the government figures in terms of real inflation.

[pb4uski]

I dunno about inflation because we don't have much that we can compare apples-to-apples... but I do know that our spending is way below a year ago.

For those that I can compare apples-to-apples.... electric rate per KW is 8.8% higher. Insurance (home, auto, umbrella, et al) is the same as last year. Property tax rate is actually a hair lower than 2019, but property tax is higher due to town-wide reappraisal hitting lakefront property more than total.

[VFK57]

Quote:

Originally Posted by pb4uski I dunno about inflation because we don't have much that we can compare apples-to-apples... but I do know that our spending is way below a year ago. For those that I can compare apples-to-apples.... electric rate per KW is 8.8% higher. Insurance (home, auto, umbrella, et al) is the same as last year. Property tax rate is actually a hair lower than 2019, but property tax is higher due to town-wide reappraisal hitting lakefront property more than total.

Our property Taxes went up, despite the rental market had slowed down. It is on the top of "special assessments" what every year adds new bonds, "approved by majority" voters who hardly pay any Taxes. Gas with $40 p barrel is $3.50. Once again, the best indicator of inflation or rather expectation of high inflation are "alternative money": Bitcoins and Gold. They clearly indicate that even if we do not see high inflation, many investors and Central Banks are designing cryptocurrency and purchasing Gold in expectation of high inflation at some point IMO.