Hiding a Recession
 

I've been wondering for a while if the final frontier of government economic management would not be to simply fudge away recessions via statistical hocus pocus. After all, the government is the organization that gathers and reports the statistics. How hard could it be? Manipulation of the CPI has become more intense for the past twenty-odd years, to the point where I find the number to be completely ridiculous. Until recently I thought it was being under-reported to the tune of maybe 50%. Now I believe it may be much worse. Consumer price inflation is probably hovering near double digits, as anyone who has been shopping for the past four or five years can attest to.

Intermission: My wife is watching a youtube video where some [censored] just said that lewrockwell.com is "totally in bed with the islamofascists." Ahahahahaha! And now back to our OP.

What is the significance of a 10% CPI? Well, the CPI is used to "deflate" GDP, which we are told was nearly 4% last quarter. Uh, what? How is this absurd number arrived at? Well, they only deflated the nominal GDP by 0.8%. That's right. You read that right. In calculating GDP last quarter, the government assumed price inflation was 0.8%. That's the lowest since the Eisenhower administration.

So let me get this straight. "Consumer confidence" is in the toilet. 92% of people say they are spending less on the holidays than last year. Oil is $100/barrel, Gold is almost $850/ounce, the dollar is at an all time low versus yak turds and every other currency in the world, the Fed just cut rates (twice) and is printing money (it's a figure of speech, Barron) like there's no tomorrow, and price inflation is supposed to be at its lowest point in 50 years?

My point is, that some people (iron81 comes to mind, bless his heart) have previously stated on these boards that they buy into the idea that Fed control of the money supply has led to a "smoothing out" of the business cycle, as evidenced by the last twenty years. I say, no. The last twenty years are evidence of ever better manipulation of economic data and hiding of the business cycle.

In fact, here is my claim:

The last recession has never ended. The US economy has been contracting for some 7 years, give or take a couple of quarters, and this has been hidden by truly heroic inflation of the money supply, running at something like 15% per year, which has itself been hidden by, among other things, massive manipulation of government economic statistics.

Flame on.

Re: Hiding a Recession
 

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This post has been reported to the Department of Homeland Security.

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Re: Hiding a Recession
 

The Jr. Bacon Cheeseburger is still 99 cents, but I did notice some strange guy the other day tipping a stripper $2. The nerve of that guy... He's going to drive prices up for the rest of us.

Seriously though, I think inflation is probably higher than the government reports, but I don't know if we've been in a recession the last 7 years. I don't know too many people having a rough go of it. Give the housing bust a couple more quarters and that could change.

Re: Hiding a Recession
 

[ QUOTE ]
I've been wondering for a while if the final frontier of government economic management would not be to simply fudge away recessions via statistical hocus pocus. After all, the government is the organization that gathers and reports the statistics. How hard could it be? Manipulation of the CPI has become more intense for the past twenty-odd years, to the point where I find the number to be completely ridiculous. Until recently I thought it was being under-reported to the tune of maybe 50%. Now I believe it may be much worse. Consumer price inflation is probably hovering near double digits, as anyone who has been shopping for the past four or five years can attest to.

Intermission: My wife is watching a youtube video where some [censored] just said that lewrockwell.com is "totally in bed with the islamofascists." Ahahahahaha! And now back to our OP.

What is the significance of a 10% CPI? Well, the CPI is used to "deflate" GDP, which we are told was nearly 4% last quarter. Uh, what? How is this absurd number arrived at? Well, they only deflated the nominal GDP by 0.8%. That's right. You read that right. In calculating GDP last quarter, the government assumed price inflation was 0.8%. That's the lowest since the Eisenhower administration.

So let me get this straight. "Consumer confidence" is in the toilet. 92% of people say they are spending less on the holidays than last year. Oil is $100/barrel, Gold is almost $850/ounce, the dollar is at an all time low versus yak turds and every other currency in the world, the Fed just cut rates (twice) and is printing money (it's a figure of speech, Barron) like there's no tomorrow, and price inflation is supposed to be at its lowest point in 50 years?

My point is, that some people (iron81 comes to mind, bless his heart) have previously stated on these boards that they buy into the idea that Fed control of the money supply has led to a "smoothing out" of the business cycle, as evidenced by the last twenty years. I say, no. The last twenty years are evidence of ever better manipulation of economic data and hiding of the business cycle.

In fact, here is my claim:

The last recession has never ended. The US economy has been contracting for some 7 years, give or take a couple of quarters, and this has been hidden by truly heroic inflation of the money supply, running at something like 15% per year, which has itself been hidden by, among other things, massive manipulation of government economic statistics.

Flame on.

[/ QUOTE ]

interestingly, inflation and the business cycle can occur with prices never rising. If prices were meant to fall but remain stable there is inflation, for example.

Regarding the feds data, they distort almost every statistic they produce. Employment is very controversial as is CPI, to name a couple. I heard Peter Schiff say that if you used the 70's data and applied todays CPI the result would be no more than ~3% inflation throughout.

Re: Hiding a Recession
 

Forsooth, Borodog, forsooth. It really makes you wonder why the Federal Reserve had been hiking interest rates in a recessionary period (making it harder to borrow against real goods), why the dollar-yen exchange rate was at historic lows till February of this year, and the Gulf Nations have been committed to dollar peg since the '90s. It only makes sense that foreign private investors, with no responsibility or allegiance to the United States government, would continue to buy and peg to a depreciating currency.

Re: Hiding a Recession
 

[ QUOTE ]

Seriously though, I think inflation is probably higher than the government reports, but I don't know if we've been in a recession the last 7 years. I don't know too many people having a rough go of it.

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A recession can occur without people having a rough time on the surface for quite a while. If you look at the past few years the savings rate has continued to fall, if the standard of living isn't increasing with the increased spending rates then we are essentially in a recession as we are paying more for the same lifestyle.

Re: Hiding a Recession
 

[ QUOTE ]
Forsooth, Borodog, forsooth. It really makes you wonder why the Federal Reserve had been hiking interest rates in a recessionary period (making it harder to borrow against real goods), why the dollar-yen exchange rate was at historic lows till February of this year, and the Gulf Nations have been committed to dollar peg since the '90s. It only makes sense that foreign private investors, with no responsibility or allegiance to the United States government, would continue to buy and peg to a depreciating currency.

[/ QUOTE ]

I suppose this is supposed to be sarcasm. No, it doesn't make me wonder why the Fed was hiking interest rates in a recessionary period, since that is what one has to do to avoid hyperinflation. It's not like the Fed increased the target with the purpose of increasing interest rates, either. It's that the market increased the rates and the Fed either had to (a) up the target to not look foolish, or (b) pump more and more money in to try and maintain the lower target. For a while there they chose the former route, but with the recession becoming more and more obvious, they have chosen the latter; lower the target and pump money like mad to paper it over through the end of the administration. I doubt they will make it.

Your $-yen ex. rate point makes little sense to me. I don't have data past 5 years back at my fingertips, but it looks like the low in the $-yen ex. rate was in late 2004. I'm not sure how a single exchange rate would negate my point about the general international weakness of the dollar, which I don't see as being disputable, especially versus the yen of all currencies, seeing as Japanese monetary policy has been FUBAR for the better part of twenty years.

I also don't understand your point about "private investors, with no responsibility or allegience to the United States government, would continue to buy and peg to a depreciating currency." A) private investors don't do the pegging, foreign governments and central banks do, and they do have some responsibility and allegiance to the US government, at least when it comes to monetary policy. And B) the currency didn't start to rapidly depreciate until recently, and lo and behold, those vary nations are either dropping or threatening to drop their pegs left and right around the world.

So, I don't get your point.

Re: Hiding a Recession
 

Do you mention your wife in every post? LOL, just asking; seems like it (=@

Re: Hiding a Recession
 

[ QUOTE ]
The Jr. Bacon Cheeseburger is still 99 cents,

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But the weight and quality of the ingredients has probably declined.

[ QUOTE ]
but I did notice some strange guy the other day tipping a stripper $2. The nerve of that guy... He's going to drive prices up for the rest of us.

Seriously though, I think inflation is probably higher than the government reports, but I don't know if we've been in a recession the last 7 years. I don't know too many people having a rough go of it. Give the housing bust a couple more quarters and that could change.

[/ QUOTE ]

A recession in its technical meaning doesn't necessarily require anyone to have a rough go of it, if it's hidden. It simply means two or more consecutive quarters of negative GDP growth. This can be hidden by manipulation of economic data, and we can all merrily go on our way consuming, consuming, consuming. Consuming the capital stock.

Did some digging and found some interesting data, from shadowstats.com.

http://i27.photobucket.com/albums/c1...og/sgs-cpi.gif

"The CPI on the Alternate Data Series tab here, reflects the CPI as if it were calculated using the methodologies in place in 1980."

And, the deflated GDP using the original CPI calculation:

http://i27.photobucket.com/albums/c1...og/sgs-gdp.gif

Re: Hiding a Recession
 

I don't get it. If they're fudging the data why doesn't someone go and buy a basket of goodies and compare it to last year?

edit: graphs didn't load before. Very interesting.

Re: Hiding a Recession
 

[ QUOTE ]
I don't get it. If they're fudging the data why doesn't someone go and buy a basket of goodies and compare it to last year?

[/ QUOTE ]

Someone has. Perhaps you missed the graphs.

Re: Hiding a Recession
 

But Boro, computers are twice as fast as last year. Doesn't that mean prices declined 50%.

Re: Hiding a Recession
 

[ QUOTE ]
But Boro, computers are twice as fast as last year. Doesn't that mean prices declined 50%.

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Ahahaha hedonic adjustment is a crock of [censored].

Re: Hiding a Recession
 

Hmm an alternative to the hiding hypothesis is that there has been massive inflation shown by reliable metrics.

Look at the housing market for example. This has inflated alot in the USA (till recently). Not saying that CPI isnt fudged to a high degree, just that it isnt a case of omfg where is all the new money going why aint it showing up on the radar. It went into assets etc of which housing would be a prime example,that definitely showed up on the radar.

Re: Hiding a Recession
 

[ QUOTE ]
[ QUOTE ]
The Jr. Bacon Cheeseburger is still 99 cents,

[/ QUOTE ]

But the weight and quality of the ingredients has probably declined.

[/ QUOTE ]

I had one the other day and it was aboslutely delicious. The quality of service sucked, which I think is a pretty strong indicator of economic conditions. Low-wage employees take their jobs more seriously when they are in fear of not being able to find another.

Re: low dollar vs yak turds - Falling dollar against foreign currency isn't all bad. American exporters should be having a heyday.

Re: Hiding a Recession
 

And educational expenses, and medical expenses, and military expenses.

Let's not forget that the Chinese buy a lot of our inflation.

Re: Hiding a Recession
 

[ QUOTE ]
Hmm an alternative to the hiding hypothesis is that there has been massive inflation shown by reliable metrics.

[/ QUOTE ]

Oh, yes. I agree 100%. It's just that the inflation is showing up everywhere EXCEPT the CPI. I'm not saying that it is ONLY manipulation of economic data that is hiding monetary expansion.

[ QUOTE ]
Look at the housing market for example. This has inflated alot in the USA (till recently). Not saying that CPI isnt fudged to a high degree, just that it isnt a case of omfg where is all the new money going why aint it showing up on the radar. It went into assets etc of which housing would be a prime example,that definitely showed up on the radar.

[/ QUOTE ]

Of course. This is what I've been saying all along. But that is, in fact, "hidden" from consumers, who are mainly interested in consumer prices. In fact, they think that a bubble in their stock portfolio or the value of their home is a good thing, at least until the bubble bursts.

Price inflation is also offset by productivity increases in certain sectors (see for example consumer electronics), and monetary inflation is also hidden offshore as foreign held dollar reserves, which also reduces pressure on the CPI, at least until that bubble bursts, which is now occuring.

Re: Hiding a Recession
 

[ QUOTE ]
Re: low dollar vs yak turds - Falling dollar against foreign currency isn't all bad. American exporters should be having a heyday.

[/ QUOTE ]

Sure. But what about American consumers who now have to compete with those foreigners buying up American goods? They are getting crunched with higher domestic prices.

Re: Hiding a Recession
 

Post some numbers please. I think I follow your argument but we should at least see the numbers you're working with to come to those conclusions.

National Economic Accounts

Re: Hiding a Recession
 

Since these graphs are out there I am pretty sure there would be some articles written about this. I am packing for a move, so I don't really have the time to do any actual research into what is going on.

Re: Hiding a Recession
 

[ QUOTE ]
Post some numbers please. I think I follow your argument but we should at least see the numbers you're working with to come to those conclusions.

National Economic Accounts

[/ QUOTE ]

adios,

The best numbers I have are anecdotal, and the charts I've already posted, compiled by John Williams at www.shadowstats.com. Note that I am NOT claiming that the original CPI calculation is perfect, since I don't really believe that aggregates such as the CPI show what econocrats would like them to show. What I am saying is that the CPI has been changed numerous times over the last 30 years, and each change has been in favor of a decreasing measure of price inflation. I find this to be not only far from coincidental, but right in line with my actual experience of price changes over the past 4, 5 or 6 years.

Peter Schiff's assessment of the deflated inflation situation is in agreement, and I have always found him to be right on the ball:

http://www.europac.net/externalframeset.asp?id=10462

[ QUOTE ]
For example, on Wednesday the government told us that consumer prices as measured by the CPI rose by only 2.8% over the past year. My estimate is that the actual rise was at least three times as great. The report showed that energy prices only rose by only 5.3%. Given that crude oil prices are up over 35% and heating oil prices are up 20% during that time period, how is it possible that energy prices are up only 5%? Are other energy costs falling to compensate -- firewood perhaps? The same CPI report claimed that medical costs rose by 4.6%. As a small business owner, I can't remember the last time my company’s health insurance premiums rose less than 5% per year, and they typically rise at an annual rate of more than twice that. Perhaps the most incredulous of all the data in this week's CPI report is that food prices only rose by 4.5% during the past year. I don’t know where the guys at the Bureau of Labor Statistics buy their groceries, but I’m spending at least 15% - 20% more for food this year than last. Wheat prices alone have practically doubled in the past year! The last time I checked, people tend to eat a lot of wheat. Does anyone really believe food prices are only up 4.5%?
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As the U.S. dollar weakens, a few analysts are beginning to wonder whether we will now be “importing” inflation as the cost of imported goods rises to reflect the lower value of the dollar. Once again, Wall Street still doesn’t get it. Our inflation problem is home grown. The reason the dollar is losing value in the first place is that we are creating too many of them. Since our biggest export is U.S. dollars, which foreign central banks have been foolishly monetizing, if anything it is our nation that exports its inflation to the rest of the world.
<font color="white"> . </font>
My guess is that right now inflation is already as bad as anything we experienced back in the 1970’s. Some may argue that rising prices for food and energy are being offset by falling prices for such things as cell phones, iPods, digital cameras, plasma TV, etc. However, back in the 1970’s, prices for similar items, such as television sets, clock radios, digital watches, calculators, etc. were also falling in price. However, despite such price declines, the more honest CPI yardsticks we used at that time still recorded double digit annual gains.
<font color="white"> . </font>
Still, the intoxicating effects that inflation has on nominal asset prices and GDP figures will eventually fade. When this happens Wall Street will sober up to the reality that the U.S. economy has actually been mired in recession for years, and that U.S. stocks have been in a stealth bear market all along. Priced in gold, euros, or Canadian dollars, (which are more accurate ways to adjust for inflation than phony government numbers) both the U.S. stock market and U.S. GDP have declined by approximately 58 %, 17 % and 21% respectively since January 2000. No wonder the government and Wall Street hang their hats on official inflation measures.
<font color="white"> . </font>
Like a student allowed to grade his own report card, he can ditch his classes, not do his homework, flunk his exams, yet still bring home straight A’s. As long as Wall Street and the media continue to represent government inflation numbers as if they had any validity whatsoever, inflation is only going to get worse.


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Re: Hiding a Recession
 

In your OP you wrote:
[ QUOTE ]
What is the significance of a 10% CPI? Well, the CPI is used to "deflate" GDP, which we are told was nearly 4% last quarter. Uh, what? How is this absurd number arrived at? Well, they only deflated the nominal GDP by 0.8%. That's right. You read that right. In calculating GDP last quarter, the government assumed price inflation was 0.8%. That's the lowest since the Eisenhower administration.

[/ QUOTE ]

Actually I found the data you're citing:

GDP Data


Could come at this a couple of other ways but all the data is generated by the government so it probably wouldn't mean much one way or the other to you.

I'm not saying you're wrong necessarily. If you look at all the data inflation in the 70's was much worse. How long do you think the government may have been erroneously reporting the data? Inflation in the 70's could have been understated as well.

Re: Hiding a Recession
 

[ QUOTE ]
Sure. But what about American consumers who now have to compete with those foreigners buying up American goods? They are getting crunched with higher domestic prices.

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This is probably true, but I was just pointing out that there's another side to the story. A "weak" dollar isn't bad for US exporters and their employees and stockholders.

Re: Hiding a Recession
 

[ QUOTE ]
In your OP you wrote:
[ QUOTE ]
What is the significance of a 10% CPI? Well, the CPI is used to "deflate" GDP, which we are told was nearly 4% last quarter. Uh, what? How is this absurd number arrived at? Well, they only deflated the nominal GDP by 0.8%. That's right. You read that right. In calculating GDP last quarter, the government assumed price inflation was 0.8%. That's the lowest since the Eisenhower administration.

[/ QUOTE ]

Actually I found the data you're citing:

GDP Data


Could come at this a couple of other ways but all the data is generated by the government so it probably wouldn't mean much one way or the other to you.

I'm not saying you're wrong necessarily. If you look at all the data inflation in the 70's was much worse. How long do you think the government may have been erroneously reporting the data? Inflation in the 70's could have been understated as well.

[/ QUOTE ]

As someone has already pointed out, if the current CPI definition had been in place, inflation during the 70s would never have exceeded 3%.

I have no reason to believe that there was any systematic manipulation of inflation metrics prior to the early 1980s.

Re: Hiding a Recession
 

boro,

can you reconcile these two things for me?

1) Poster says "The Jr. Bacon Cheeseburger is still 99 cents" and you say "But the weight and quality of the ingredients has probably declined."

and

2) different poster says "But Boro, computers are twice as fast as last year. Doesn't that mean prices declined 50%" to which you reply "Ahahaha hedonic adjustment is a crock of [censored]. "

isn't it the case that the logic used in your 2nd reply (adjusting prices for quality, productivity etc. is a "crock of sh*t") completely differ from the logic used in your first reply (that the same 99cents buys you "less" of a burger in the sense of quality and weight)? correct me if i'm wrong or misunderstood you in any way.

thanks,
Barron

Re: Hiding a Recession
 

[ QUOTE ]
I have no reason to believe that there was any systematic manipulation of inflation metrics prior to the early 1980s.


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why? what changed?

thanks,
Barron

Re: Hiding a Recession
 

[ QUOTE ]
isn't it the case that the logic used in your 2nd reply (adjusting prices for quality, productivity etc. is a "crock of sh*t") completely differ from the logic used in your first reply (that the same 99cents buys you "less" of a burger in the sense of quality and weight)? correct me if i'm wrong or misunderstood you in any way.

[/ QUOTE ]

::butts head in::

Computer technology will improve substantially as time passes, so you should expect more for the same price. Bacon cheeseburger technology advances rather slowly.

Re: Hiding a Recession
 

[ QUOTE ]
[ QUOTE ]
isn't it the case that the logic used in your 2nd reply (adjusting prices for quality, productivity etc. is a "crock of sh*t") completely differ from the logic used in your first reply (that the same 99cents buys you "less" of a burger in the sense of quality and weight)? correct me if i'm wrong or misunderstood you in any way.

[/ QUOTE ]

::butts head in::

Computer technology will improve substantially as time passes, so you should expect more for the same price. Bacon cheeseburger technology advances rather slowly.

[/ QUOTE ]

why should the speed of advancement be a factor?

if inflation could be seen as getting lower quality or less of something for the same price, then why can't deflation be seen as getting more or something or higher quality at the same price? and why shouldn't those factors be taken into account when measuring economy wide price changes?

Barron

Re: Hiding a Recession
 

[ QUOTE ]
why should the speed of advancement be a factor?

[/ QUOTE ]

Why shouldn't it be?

If it's easier/cheaper to produce something, then (surely you agree) this will effect the price of said good or service.

Since computer technology will naturally improve upon itself over time (and it will thus be cheaper to produce), the natural result is that you get more for the price, so getting faster computers for the same price doesn't necessarily mean anything. I don't know what exactly Boro had in mind, but that's what jumps out to me as the obvious reason why the computer/cheeseburger things are not contradictory.

It's like watching a ball roll, and we're observing the force of friction. It would make sense to say "Well, that ball is rolling on a slight decline, so we should expect a different result than the ball rolling on a flat surface."

Re: Hiding a Recession
 

[ QUOTE ]

http://i27.photobucket.com/albums/c1...og/sgs-cpi.gif

"The CPI on the Alternate Data Series tab here, reflects the CPI as if it were calculated using the methodologies in place in 1980."

[/ QUOTE ]

one thing i find odd about this claim of yours is the following.

you've stated many things that lead yout o believe we have much higher inflation than we "officially" do.

to name a few: dollar in the toilette, gold high, crude oil high etc.

but look at the above chart. according to this, 10 years ago (well, 1998), the infaltion was supposedly "really" only 3 percentage points less than it is today. how is it possible that with all of the turmoil you quoted as evidence of the inflation we have today that in 1998 there was virtually the same infaltion rate (According to your own source) yet not a single one of those turmoils were in effect?

bascially, my poitn is that with all of these hugely inflationary issues, one would think that the source you quoted would show much more than a 3percentage point differential between 1998 (a vastly different period of time regarding the evidence you claim towards the current inflationary period) and today.

Barron

Re: Hiding a Recession
 

[ QUOTE ]
why should the speed of advancement be a factor?
Barron

[/ QUOTE ]

Because we're looking at the value of money? When something gets cheaper because of factors other than money being worth more, it's completely extraneous to the debate. If you study something scientifically you try to eliminate as many variables as possible. Something as unstable as the price of computing technology should definitely not be looked at to measure the value of money.

Re: Hiding a Recession
 

[ QUOTE ]
[ QUOTE ]
why should the speed of advancement be a factor?

[/ QUOTE ]

Why shouldn't it be?

If it's easier/cheaper to produce something, then (surely you agree) this will effect the price of said good or service.

Since computer technology will naturally improve upon itself over time (and it will thus be cheaper to produce), the natural result is that you get more for the price, so getting faster computers for the same price doesn't necessarily mean anything. I don't know what exactly Boro had in mind, but that's what jumps out to me as the obvious reason why the computer/cheeseburger things are not contradictory.

It's like watching a ball roll, and we're observing the force of friction. It would make sense to say "Well, that ball is rolling on a slight decline, so we should expect a different result than the ball rolling on a flat surface."

[/ QUOTE ]

i don't see that as answering the issue.

if the "natural result" is that you get more for the price, how does that "not mean anything." to me that means that you have, in effect, reduced the price of the good.


now what about the second part of my post:

[ QUOTE ]
if inflation could be seen as getting lower quality or less of something for the same price, then why can't deflation be seen as getting more or something or higher quality at the same price? and why shouldn't those factors be taken into account when measuring economy wide price changes?

[/ QUOTE ]

i mean i'd think getting faster computers does mean something. but more generally, getting higher quality higher productivity goods (machinery, appliances, whatevers...) for similar prices should be reflected in the economy wide price level. if you disagree, then why shouldn't they be?

i haven't read exactly on what hedonic pricing is, but from the context i think it includes some kind of inflation correction for higher productivity, higher quality goods.

thanks,
Barron

Re: Hiding a Recession
 

[ QUOTE ]

but look at the above chart. according to this, 10 years ago (well, 1998), the infaltion was supposedly "really" only 3 percentage points less than it is today. how is it possible that with all of the turmoil you quoted as evidence of the inflation we have today that in 1998 there was virtually the same infaltion rate (According to your own source) yet not a single one of those turmoils were in effect?

[/ QUOTE ]

The problem is not high inflation over a small time period, but high inflation consistently over a long time period. We've had large inflation the last 10 to 15 years and it has debased the US currency. The inflation in 1998 helped get gold and crude oil so high.

(inflation percentage in 1998) * (inflation percentage in 1999) * (inflation percentage in 2000) * ... * (inflation percentage in 2007) is how much less our currency is worth today.

Re: Hiding a Recession
 

[ QUOTE ]
[ QUOTE ]

but look at the above chart. according to this, 10 years ago (well, 1998), the infaltion was supposedly "really" only 3 percentage points less than it is today. how is it possible that with all of the turmoil you quoted as evidence of the inflation we have today that in 1998 there was virtually the same infaltion rate (According to your own source) yet not a single one of those turmoils were in effect?

[/ QUOTE ]

The problem is not high inflation over a small time period, but high inflation consistently over a long time period. We've had large inflation the last 10 to 15 years and it has debased the US currency. The inflation in 1998 helped get gold and crude oil so high.

(inflation percentage in 1998) * (inflation percentage in 1999) * (inflation percentage in 2000) * ... * (inflation percentage in 2007) is how much less our currency is worth today.

[/ QUOTE ]

your own analysis/evidence negates your conclusion.

think about it...with all those problems and the cumulative effect of all those years of infaltion, how is it possible that today's inflation only 3 percentage points bigger? there would have to be soem deflationary force there somewhere.

Barron

Re: Hiding a Recession
 

[ QUOTE ]

i haven't read exactly on what hedonic pricing is, but from the context i think it includes some kind of inflation correction for higher productivity, higher quality goods.

[/ QUOTE ]

Yes, thats right.

Its use is an excuse to justify any loosening monetary policy by defining the current state as low inflation when true inflation is in fact much higher. The economic numbers are distorted since GDP seems higher and employment levels seem more sustainable among other things. On top of this they get a break on anything indexed to inflation, including TIPS ,when they understate inflation.

Re: Hiding a Recession
 

[ QUOTE ]
[ QUOTE ]

i haven't read exactly on what hedonic pricing is, but from the context i think it includes some kind of inflation correction for higher productivity, higher quality goods.

[/ QUOTE ]

Yes, thats right.

Its use is an excuse to justify any loosening monetary policy by defining the current state as low inflation when true inflation is in fact much higher. The economic numbers are distorted since GDP seems higher and employment levels seem more sustainable among other things. On top of this they get a break on anything indexed to inflation, including TIPS ,when they understate inflation.

[/ QUOTE ]

remove monetary policy from the discussion and remove the fed's motives.

why shouldn't productivity enhancing, price reducing (or productivity reducing, price inflating) things be taken into account when calculating an economy wide inflation figure?

Barron

Re: Hiding a Recession
 

[ QUOTE ]

why shouldn't productivity enhancing, price reducing (or productivity reducing, price inflating) things be taken into account when calculating an economy wide inflation figure?


[/ QUOTE ]

because relative inflation is the only things that is important. Who cares about absolute inflation?

Re: Hiding a Recession
 

[ QUOTE ]
[ QUOTE ]

why shouldn't productivity enhancing, price reducing (or productivity reducing, price inflating) things be taken into account when calculating an economy wide inflation figure?


[/ QUOTE ]

because relative inflation is the only things that is important. Who cares about absolute inflation?

[/ QUOTE ]

doesn't productivity/quality improvements speak directly to relative inflation?

Barron

Re: Hiding a Recession
 

[ QUOTE ]
[ QUOTE ]
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why shouldn't productivity enhancing, price reducing (or productivity reducing, price inflating) things be taken into account when calculating an economy wide inflation figure?


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because relative inflation is the only things that is important. Who cares about absolute inflation?

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doesn't productivity/quality improvements speak directly to relative inflation?

Barron

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i wasn't very clear in my last post.

If prices remain stable due to fed injections when they wouldve have fallen without those injections due to increased productivity then there is inflation. The point of thinking in terms like this because this tells us the effect of the fed's money injections. In example above, to say the fed affected the value of money by 0%, which is implied from a CPI reading of price stability, is a distortion of the truth.

Re: Hiding a Recession
 

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but look at the above chart. according to this, 10 years ago (well, 1998), the infaltion was supposedly "really" only 3 percentage points less than it is today. how is it possible that with all of the turmoil you quoted as evidence of the inflation we have today that in 1998 there was virtually the same infaltion rate (According to your own source) yet not a single one of those turmoils were in effect?

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The problem is not high inflation over a small time period, but high inflation consistently over a long time period. We've had large inflation the last 10 to 15 years and it has debased the US currency. The inflation in 1998 helped get gold and crude oil so high.

(inflation percentage in 1998) * (inflation percentage in 1999) * (inflation percentage in 2000) * ... * (inflation percentage in 2007) is how much less our currency is worth today.

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your own analysis/evidence negates your conclusion.

think about it...with all those problems and the cumulative effect of all those years of infaltion, how is it possible that today's inflation only 3 percentage points bigger? there would have to be soem deflationary force there somewhere.

Barron

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You're misunderstanding the graphs presented to you. Integrate inflation over time and you have what worries us. If we had alternating years of 2% inflation and -2% inflation then money is staying at the same value. If we have 2% inflation every year, then our money is getting less valuable at that rate. If inflation is at 10% our money is worth half as much every seven years. Wages aren't rising nearly that quickly to outpace it. Oh at 2% our money is worth half as much every 35 years. That's what retirees have to prepare for and it's hard enough, but the higher you go the less realistic that gets.