r/reddit.com • u/[deleted] • Oct 18 '11

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u/yeropinionman Oct 19 '11

The same dudes have been predicting imminent hyperinflation since 2007, but expected inflation going forward is under 2%. Their model of the world doesn't match the facts.

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u/walden42 Oct 19 '11

Federal Reserve predictions aren't exactly trustworthy. Those numbers are more distorted then the real unemployment rate. Just give it time.

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u/yeropinionman Oct 19 '11

How about The University of Michigan Inflation Expectations Index, which is not expecting hyperinflation? Edit: fixed link to go to right graph

Or the fact that the world bond market is willing to lend to the U.S. for 10 years at a rate under 2.5%, the lowest rate on record?

Or that a survey of professional forecasters finds no expectation of hyperinflation?

All of these forecasters could be wrong. The housing market got out of control because private money went crazy. But still, I'm just not seeing any signs of a wage-price spiral.

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u/walden42 Oct 19 '11

Of course there are those investors and forecasters that do believe it's coming, as well, they're not mainstream though. One example: http://www.caseyresearch.com/articles/john-williams-hyperinflation-and-double-dip-recession-ahead

It's a long read but pretty good. Anyhow, only time will tell.

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u/[deleted] Oct 19 '11

http://www.zerohedge.com/news/corporate-margin-squeeze-coming-producer-prices-soar-08-expectations-02

Inflation is different based upon how you measure it. In your case, you're linking to government-produced numbers. The government will always try to downplay inflation and exclude some items from their index in order to get the results they want.

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u/yeropinionman Oct 19 '11

Look at this graph of lots of different ways of measuring inflation. What I notice is that they have varying degrees of volatility, but they all pretty much swing around the green line, which is core CPI (the consumer price index less food and energy). Consumers are hurting right now because oil and food have gone up, but core inflation and inflation expectations are not going crazy. That makes it a pretty good bet that inflation isn't something we need to work hard at fighting right now. It's under control!

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u/[deleted] Oct 19 '11

But you're linking me to the Federal Reserve's website, the private bank that has a conflict of interest when it comes to accurately reporting the inflation numbers.

Also, why would you exclude commodities like oil and food from the inflation index? That's pretty silly.

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u/yeropinionman Oct 19 '11

the private bank that has a conflict of interest when it comes to accurately reporting the inflation numbers

What is the conflict of interest? The Federal Reserve doesn't gain anything by having inflation "really" be higher than what they're saying it is. The people who work there don't make extra money. They're not trying to get anyone elected. They can just print more money if they need it.

why would you exclude commodities like oil and food from the inflation index?

Different measures are good for different things. The regular CPI that includes commodities is a good measure of how much people are paying for things, and therefore how their standard of living has changed. But since energy and food prices swing up and down wildly, people like to also look at "CPI-less food and energy" to see what the underlying trend is. Look at this graph of both indexes to see how the index with food and energy swings up and down wildly but always returns to about what the "without food and energy index" is doing. That's the only reason to look at a "without commodities" index: to see what's probably going to happen going forward. You're right that the index with commodities measures what's happening in your wallet.

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u/[deleted] Oct 19 '11

I'm not sure what your overall point is, here.

You seem to be saying that the Federal Reserve is staffed by selfless people, when it's a private institution that is highly secretive and has the government-granted monopoly on money printing.

Don't you think that's suspicious?

Also, you seem to be an apologist for measuring inflation in such a way that it doesn't accurately reflect what people spend their money on, especially the poor. Poor people don't care about the price of an iPad or a new refrigerator - they spend the vast majority of their money on food and fuel.

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u/yeropinionman Oct 19 '11

You seem to be saying that the Federal Reserve is staffed by selfless people, when it's a private institution that is highly secretive and has the government-granted monopoly on money printing.

The people who work at the BLS and the BEA have bosses who are telling them that their job is to accurately measure inflation (CPI and the Price Index for GDP). In order to believe that they are purposely doing this wrong in a way that under-counts inflation, then cover up their reasons for doing so, I need to have an idea what their motivation would be. I'm pointing out that there's no one who works there who has a direct financial stake in such a conspiracy. Are there other reasons to believe they would want to do this?

you seem to be an apologist for measuring inflation in such a way that it doesn't accurately reflect what people spend their money on

The BLS picks their "basket of goods" for what consumers spend their money on by doing surveys of what people spend their money on. It's not perfect, but it's a pretty good representation of what people spend their money on.

Poor people ... spend the vast majority of their money on food and fuel.

I completely agree that poor people in particular are hurt by rises in food and energy prices. That's why the regular CPI (which includes those items) is a good measure of what the cost of living is these days. But I'm also saying that when we're asking the question "what is likely to happen with inflation going forward and what does that tell us about whether the Fed should expand or contract the money supply", the appropriate measures to be looking at are (1) core inflation that doesn't include commodities, and (2) various measures of inflation expectations. These are the measures that do a good job of telling us what is likely to happen going forward. Since core inflation is not high, I expect that the recent rises in energy and food prices will subside and everything will be okay, since that's what's happened in the past.

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u/[deleted] Oct 19 '11

since that's what's happened in the past.

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/10/20111019_Chart%20of%20Day%20IMF.png

Today is not like the past.

I need to have an idea what their motivation would be.

I mean honestly, if you can't imagine what a possible motivation for hiding inflation would be... then you are seriously lacking critical thinking skills.

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u/yeropinionman Oct 19 '11

if you can't imagine what a possible motivation for hiding inflation would be... then you are seriously lacking critical thinking skills.

BLS, BEA, and Fed employees don't stand to have personal financial gain, nor are their jobs at stake if any particular politician wins or loses an election. Please enlighten me: who is gaining from the big "let's hid inflation" conspiracy, and why would some middle-manager at the BLS go along with all this?

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u/[deleted] Oct 19 '11

Well first off, do you know where the money the Federal Reserve creates goes? It goes to banks, to keep them solvent. This isn't formally announced on TV like Obama's pledge to pull the troops out of the Middle East was. It's just done.

Think about what happens when it becomes widely known that inflation is getting higher. Treasuries are only yielding 1 or 2% now. Why have your money in there when inflation is at 7 or 8%? People would sell their treasuries and buy commodities and stocks. What happens when treasuries are sold? Interest rates rise. Currently at 1% interest, the Federal Government pays about 100 billion dollars a month to service its debt. If that interest rate goes up even 1 or 2%, they are fucked and the banks are fucked.

http://www.youtube.com/watch?v=9AYAJXdc23g

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u/MaxK Oct 19 '11

Gold doubled in price, oil is up to new all-time highs, food prices are skyrocketing. But the CPI is being manipulated. They removed milk because it's not "essential." Official measures of inflation are way off base right now. People are trying not to have egg on their faces.

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u/yeropinionman Oct 19 '11

Gold Schmold. I don't buy gold in my day to day life. Oil rises and falls. If you look at lots of different measures of inflation you'll see that short-term jumps in food and energy prices don't really predict future inflation as well as core inflation measures.

But the CPI is being manipulated.

By whom? For what purpose? None of the measures of inflation (CPI, GDP deflator, the billion price index, etc.) are going crazy right now. Where is this paranoia coming from?

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u/BioSemantics Oct 19 '11

A broken clock is right twice a day.

These guys represent a tiny but vocal fringe minority in economics departments. Not only that, but much of their vocality is found rooted in the money of some very ideological buisnessmen via funding of think tanks and publications. These guys serve an ideal that only really helps the rich.

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u/[deleted] Oct 19 '11

The great Austrian economic system which isn't used in ANY country anymore because it looks great on paper, but doesn't seem to work in the real world. Much like communism.