Raul Paul Roasts Bernanke

[DcifrThs]

i just watched the bernanke Q&A w/ the banking committee and he did a very bad job.

ron paul, on the other hand, while confusing himself a bit with his own rhetoric, delivered a great speech and bernanke didn't address the central question at all.

the give & take got me thinking though.

CPI/PPI etc. is definitely not correct int erms of measuring inflation.

but neither is MZM or any other money supply measure.

we need to take into account how much things actually cost on the street (obviously including food & energy, even in a volatility reducing trend pattern...like a 6MMA or something), i.e. the price that is paid in dollars for them.

but we should also consider the amount of money pouring into the system since that does have an important impact on the economy...though not directly to prices.

to say that one is 100% right is absolutely retarded. both have serious setbacks to getting down to what inflation *should* actually measure/how it should be measured.

the debate really brings forth the question of how should we measure inflation? there are claims that we are currently in a recession since RGDP as measured (GDP deflator) is actually negative when you "really" count "true" inflation. i don't think these claims are correct, but i also don't think the CPI/GDP deflator sufficiently captures "true" inflation.

so how do we fix this? perhaps a combo measurement? maybe 1/3 change in some measure of money, 1/3 change in headline prices, 1/6 new independent measure of change in actual money in the system intended for use, 1/6 new independent measure of overall price changes in the economy.

the last 1/3 (1/6 + 1/6) should obviously be conducted independently of the govt and any other organisation. it should be blanket funded by the govt but not tied to annual budget increases (don't know how this would work though [img]/images/graemlins/frown.gif[/img] )

anyways, those are some thoughts on the subject. i'm sure responses will run the gamut from "OMG YOU BELIEVE ANY CPI #S lol @ U" to "CPI IS KING" to "MONEY IS KING, just measure MONEY and you'lll get inflation"

but before writing anything like that, please consider that the point of this thread is to move forward, i.e. how do we best measure an important factor in the economy?

thanks and i hope this generates some good discussion.

Barron

[tomdemaine]

Why should we measure inflation?

[TomCollins]

Raul Paul lol.

[Scary_Tiger]

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Raul Paul lol.

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Wow I've been in this thread a bunch of times looking for YouTube and I never noticed that. [img]/images/graemlins/confused.gif[/img]

[wtfsvi]

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Why should we measure inflation?

[/ QUOTE ] Boom headshot.

[j555]

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Raul Paul lol.

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Wow I've been in this thread a bunch of times looking for YouTube and I never noticed that. [img]/images/graemlins/confused.gif[/img]

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http://www.youtube.com/watch?v=yAwvlDJgJbM

Here you go! Ron Paul schooling Bernake!

[Borodog]

IMO, the best measure of price inflation is not a gigantic "basket of goods" that is heavily subject to manipulation, but rather the prices of homogeneous (or mostly so) goods that have many suppliers and many consumers and are not subject to great innovations in quality, like milk, eggs, white bread, newspapers, etc.

Including things like cell phones and consumer electronics in a price inflation index is ridiculously dumb. Costs fall so fast while quality increases so fast that you are artificially depressing the inflation index by conflating in a productivity component.

The idea that you need to substitute out goods because consumers would make substitutions in the face of rising prices (a Greenspan gimmick) is clearly designed to artificially lower measured inflation. Sure, a housewife might start buying less steak and more hamburger because the price of steak is rising, but the reason she made that choice is BECAUSE THE PRICE OF STEAK IS RISING.

The removal of so-called "volatile" goods from the index, like food and energy, is a similar tactic. Rarely do I see a newsreport anymore that actually reports CPI; they all seem to report "core inflation", i.e. with food and energy removed. By removing goods that are "volitile" in the short run, you also remove their LONG TERM contribution, which is large. Have any of you people gone to the grocery store lately? A gallon of milk is about $6 where I live. Don't [censored] try to tell me inflation is at 2%!

Lastly, I will say that these sorts of aggregate measures of the economy are always problematic, because they presume to do things that simply cannot be done (like add apples to oranges), and they are completely subject to manipulation in their definition and implementation by government bureaucrats. For instance government spending is included in GDP. In fact monetary inflation is pretty much the main driver of GDP growth, at least in the US. The same is true of unemployment numbers. Print a lot of money and hire people to dig ditches, for example, or build pyramids or WPA projects or bombs and tanks and dead little brown foreign people. GDP goes up, unemployment goes down, the economy is booming, right? But the capital stock is being consumed, productive capacity is being diverted from its most highly valued uses to lower valued uses, and people's real standards of living must eventually suffer drastically to pay for it all. But the numbers looked great!

That's the recession. The bill has come to the table and it's time to pay the tab. The moral of the story is that these economy wide econometric numbers really AREN'T that useful. The only number that is useful, imo, really IS the money supply. That's the one that drives the rest. It's the one that allows you to see the man behind the curtain and what he is doing to you and the economy.

[Borodog]

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Raul Paul lol.

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He only went by "Raul" during that brief stint doing pornos in college.

[adios]

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The only number that is useful, imo, really IS the money supply. That's the one that drives the rest. It's the one that allows you to see the man behind the curtain and what he is doing to you and the economy. ...

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Money supply in conjunction with a couple of other things but yeah I agree.

This has been discuseed before on this forum but I'll repeat it anyway, the U.S. government has a vested interest it would appear in understating inflation due to the fact that many government handouts have COLA increases based on the rate of inflation.

[TomCollins]

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IMO, the best measure of price inflation is not a gigantic "basket of goods" that is heavily subject to manipulation, but rather the prices of homogeneous (or mostly so) goods that have many suppliers and many consumers and are not subject to great innovations in quality, like milk, eggs, white bread, newspapers, etc.

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I think you have a huge potential problem in this in that the cost of many of these goods is directly dependent on other factors that ARE subject to great innovations. For example, if fuel costs decreased tremendously due to a new invention, the cost of milk would go down quite a bit. Newspapers are very dependent on the cost of labor, which clearly has huge impacts based on productivity (the computer made the costs of producing a newspaper go down tremendously), and cost of newspapers is usually a less important factor in their revenue as advertising.

I agree you are right that the way things are done poorly now, but even your basket of goods is still subject to much of the same problems.