Your Pension Is Under Attack From All Sides. Here’s 10.

 

Home Forums The Automatic Earth Forum Your Pension Is Under Attack From All Sides. Here’s 10.

This topic contains 50 replies, has 1 voice, and was last updated by  davefairtex 6 years, 4 months ago.

Viewing 11 posts - 41 through 51 (of 51 total)
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  • #9313

    Variable81
    Participant

    @ilargi,

    Price inflation is a useless term. It completely ignores any and all different reasons why some prices go up or down, even though it should be obvious that this is crucial information if you really want to know what goes on in an economy. It’s a tool for the analytically challenged. It’s also a mistaken term of course, because it doesn’t describe inflation at all, which is money and credit supply x velocity, not what happens to some random basket of goods, or cookies becoming more expensive because the baker has the flu.

    Thank you sir. You’ve summed up the argument I’ve had about a thousand times with people when trying to explain to them how price changes are not as important as the amount/velocity of money within the system. It’s an argument I suspect I’ll continue to have to make with most people…

    @Sid,

    Interesting ZH link, and curious why so much physical cash is being sent overseas. Perhaps from a population standpoint it makes sense, but from a wealth-allocation standpoint I think most of the world’s wealth (paper/electronic anyway) is held in North America and Europe? Perhaps some in the Middle East given the oil revenues flowing in there?

    I do know if I were to flee North America to hide out in South-East Asia, South America or some other out-of-the-way place I’d probably want to have a big stack of cash as opposed to electronic promises from half-way around the world, however.

    And the majority of people here in North America seem to have so much faith in the system that they don’t see the value in keeping physical cash as opposed to putting everything on credit… :S

    Cheers,
    Variable

    #9315

    Nassim
    Participant

    Ilargi, Dave & VSA,

    Perhaps price inflation is a useless term to you, but not to many others. The FPO index is pretty useless to people who see something different on an almost daily basis – either higher prices or smaller measures. Frankly, I don’t even know what FPO stands for – https://www.abbreviations.com/FPO

    I accept that 10 years is perhaps too long for your tastes, so here is some data for shorter periods:

    The price of gasoline has gone up from $2.60 a gallon when the recession ended to $3.68 today. That’s a 41% increase in four years, or an annualized rate of 9%.

    https://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much

    Food Inflation Everywhere, But Not A Bit In CPI (Yet)

    https://www.zerohedge.com/news/2013-04-10/food-inflation-everywhere-not-bit-cpi-yet

    The price of a Big Mac, for instance, has risen faster than the official rise in consumer prices and has been doing so since the late ’90s. In 1998, the average price of a Big Mac was about $2.50. Today, the average Big Mac is $4.56. If we were using the Consumer Price Index (CPI), the price of a Big Mac today should be about $3.40.

    https://advisorperspectives.com/dshort/guest/James-Cornehlsen-130717-Big-Mac-Index.php

    Supermarket prices have soared by more than twice the rate of inflation to six per cent in a year, a survey for the Sunday Mirror reveals. And some everyday items have increased even faster with the cost of fresh meat rising by 18 per cent, cheddar cheese 12.2 per cent and fruit 10.4 per cent. Bread is up 5.3 per cent.

    https://www.mirror.co.uk/news/uk-news/supermarket-prices-rocket-more-twice-2118309

    Supermarket prices have risen by an average of 6.8 per cent over the past year, with eggs, infant formula and canned fish soaring above the prices of other household basics, the latest consumer watchdog survey has revealed.

    https://www.scmp.com/news/hong-kong/article/1215492/supermarket-prices-surge-above-rate-inflation

    What John Williams of Shadowstats has to say about hyperinflation is quite irrelevant to the point I am trying to make – I am only using his data since it seems to be more meaningful than the most recent official versions. I accept entirely that tax increases are deflationary – that is pretty obvious.

    #9317

    davefairtex
    Participant

    Nassim-

    I’m fine with doing prices. Food prices overall are down since the peaks in 2008, even in nominal terms.

    As for gasoline, if you pick prices from the trough of the recession (mid-2009) that’s cherry picking once again. If you picked it from the top of the bubble in 2008, prices are lower now than they were.

    Likewise, picking McDonalds beef prices from 1998 includes the bubble years.

    If you look at the UN FAO general food price index (nominal prices) since they peaked in 2008 they’re down. To me, the UN FAO which studies global prices in dozens of different commodities over a decade timeframe is a much more compelling data source than some newspaper in one country quoting the price of eggs over the past year.

    https://www.fao.org/worldfoodsituation/foodpricesindex/en/

    Again, my point was simple: there has largely been DEFLATION since the bubble pop. Which means, if you are going to argue there’s been INFLATION since the bubble popped, your data sources need to draw a broad selection of price inferences from time period starting at the TOP of the bubble to NOW.

    Not from 1998. Not from 2004. Not from the trough in 2009. From the TOP, to NOW.

    In some countries, inflation may have continued for local items: India, China, Thailand, etc, because they didn’t have a bubble pop, and their inflation is still going on because borrowing is still happening there. No debt bubble pop = inflation continues.

    Hope that makes sense.

    #9318

    Perhaps price inflation is a useless term to you, but not to many others.

    It’s useless to everyone, it makes people see things that are not real. Price inflation is really as useless a term as cookie inflation is.

    If you can’t tell what makes a price rise or fall, than what use is your data? Scarcity of a product may raise its price, but you’d have to put it down to that: scarcity. A tax increase may raise a price, but that also has to be correctly labeled.

    If prices rise across the board, and that’s a consequence of either the money/credit supply going up, or velocity, or both, then you have inflation.

    I accept entirely that tax increases are deflationary – that is pretty obvious.

    No it’s not. Tax increases raise prices, but they have nothing to do inflation. They can’t, because it would give governments absolute control over inflation/deflation, and they don’t have that.

    #9321

    Viscount St. Albans
    Participant

    The metals — both base and precious are deep in Bear Market Territory revealing a 56% – 25% price collapse in 2years. Hardly indicative of credit growth and price pressure. Rather, overcapacity and credit contraction is the overwhelming conclusion.

    Lead: $1.25/pd in ’11 — $0.93/pd in ’13 (25% drop)
    Nickel: $12.50/pd in ’11 — $6.27/pd in ’13 (50% collapse)
    Zinc: $1.10/pd in ’11 — $0.85/pd in ’13 (33% fall)
    Aluminum: $1.10/pd in ’11 — $0.85/pd in ’13 (33% fall)
    Copper: $4.50/pd in ’11 — $3.23/pd in ’13 (29% drop)
    Silver: $48.7/oz in ’11 — $21.77/oz in ’13 (56% collapse)
    Gold : $1771/oz in ’11 — $1309/oz in ’13 (26% drop)

    #9322

    Variable81
    Participant

    I accept entirely that tax increases are deflationary – that is pretty obvious.

    No it’s not. Tax increases raise prices, but they have nothing to do inflation. They can’t, because it would give governments absolute control over inflation/deflation, and they don’t have that.

    @ilargi,

    Please correct me if I’m wrong, but is a good way to look at it is thinking of a big pie (all the money currently in circulation), and taxes are simply the government’s ‘take’ of the pie? They neither increase nor shrink the total size of the pie (inflation/deflation), but just lay claim to a piece of it?

    Cheers,
    Variable

    #9323

    gurusid
    Participant

    The price of a Big Mac, for instance, has risen faster than the official rise in consumer prices and has been doing so since the late ’90s. In 1998, the average price of a Big Mac was about $2.50. Today, the average Big Mac is $4.56. If we were using the Consumer Price Index (CPI), the price of a Big Mac today should be about $3.40.

    Oh no – not ‘burgernomics’… :sick:

    I mean c’mon, it shows the level of analysis that has been stooped to when this initially ‘jokey’ comparison was made back in the 1980s:

    The Big Mac index was created by Ng Yat-chiu[1] and introduced in The Economist in September 1986 by Pam Woodall[2] as a semi-humorous illustration and has been published by that paper annually since then. The index also gave rise to the word burgernomics.

    Talk about empirical hegemony – let them eat BMs… The analysis is more full of holes than a mad cows brains. Y’know like the ‘local’ costs of beef production/shipping beef patties half way round the world, the ‘local’ costs (or not – zero hours contracts etc) of labour, flour cooking energy gas electric or dried cow dung yet alone if the locals want to eat this sh*t in the first place. Its the ultimate farce analysis of the whole ‘globalisation project’:

    One [strike]Ring[/strike] burger to rule them all, One [strike]Ring[/strike] burger to find them, One [strike]Ring[/strike] burger to bring them all and in the darkness bind them

    Wolf nipple chips anyone?:

    [video]https://www.youtube.com/watch?v=NrDVsprWRCQ[/video]

    Bag of otters noses! 😆

    L,
    Sid.

    #9324

    Nassim
    Participant

    It would be easy enough to list price inflation for medical care and education in the USA, but I don’t really want to be part of this any more. Enjoy your low prices 🙂

    #9325

    davefairtex
    Participant

    Nassim-

    Education and medical care are perfect examples of inflation that continue in a deflationary environment because of government support and increasing credit money. You could have added to this list defense products and the Federal Bureaucracy.

    The only area of expanding household credit right now is education loans. These loans ensure a constant stream of money to higher education institutions, insulating them from the overall deflation which would force them to cut their administrative fat. (Although more likely, they’d keep the administrators and they’d fire the teachers). CHS at oftwominds has done some excellent writing on this, I encourage you to go read it.

    Medicare & medicaid has continued to provide funding for medicine independent of any economic downturn and/or overall deflationary environment. Without all the support from government on the low end, and insurance companies (making the consumer completely price-insensitive) at the higher end, its unlikely hospital administrators would be pulling down $3 million salaries, and we’d see a correction in medicine prices soon enough.

    Just a thought: if you really “don’t want to be a part of this anymore,” you might consider not responding! Otherwise a comment which appears to continue the discussion might be seen as some sort of lame attempt to stifle any response while still trying to get in one last shot! 🙂

    But I’m sure you weren’t trying to do that!

    #9326

    gurusid
    Participant

    Hi Dave, Nassim,

    Another factor often missed, besides the fact that ‘price increase’ does not equal ‘inflation’ in the technical economic term of increasing monetary supply, is the ‘profiteering’ (as opposed to the ‘profit problem’) by companies especially ‘middle men’ such as the giant ‘food chain’ supermarkets, who up their prices to offset declining spending by their customers. This heavily distorts the deflation picture and coupled with the increase in energy prices due to the exhaustion of the easy to get ‘cheap’ stuff (its more expensive to extract and so more expensive to end customer) leads to increasing costs of production and ultimately prices regardless of speculation (as discussed here just short while ago). This is why it is so deadly to clear understanding when ‘price increase’ is conflated with ‘inflation’. Today’s price increases have nothing to do with an increasing money supply but everything to do with increasing energy cost, market manipulation and profiteering. But your average dumbed down Jo is only interested in ‘strictly come bake off’ and accepts the terms the ‘good news’ people provide that price inflation is a fact of life and prices always go up, unlike their wages which can go down as well as up. But then sheep apparently like to be fleeced… :dry:

    As regards medical and educational establishments, there is also the ‘demographic’ shifts of increasing medical hyper-complexity and a general systems creep in all things medical where the system has become its own raison d’etre. And in ‘education’ where degree inflation (the factual lowering of standards and general dumbing down) and the demographic shift upwards of age of entry into the work place due to an increasing population living longer coupled with fewer ‘manual labour’ jobs being available disguised as a policy of ‘betterment’ by having more [strike]people[/strike] sheep being fattened on debt before they even start earning is the main ‘raison’ for the huge increase in ‘higher’ education. Ultimately its all symptomatic of a sclerotic system on the verge of collapse… though the way things are going it could grind on on life support for decades. :unsure:

    L,
    Sid.

    #9328

    davefairtex
    Participant

    Here’s a deflation chart – US total bank loans outstanding.

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