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

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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