Hiding a Recession

[Borodog]

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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

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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

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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.
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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.
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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.
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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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[adios]

In your OP you wrote:
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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.

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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.

[Misfire]

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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.

[Borodog]

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In your OP you wrote:
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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.

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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.

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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.

[DcifrThs]

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

[DcifrThs]

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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

[ALawPoker]

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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.

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::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.

[DcifrThs]

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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.

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::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.

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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

[ALawPoker]

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why should the speed of advancement be a factor?

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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."

[DcifrThs]

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

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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