October had the biggest U.S. inflation surge in more than 30 years(cnbc.com)
cnbc.com
October had the biggest U.S. inflation surge in more than 30 years
https://www.cnbc.com/2021/11/10/consumer-price-index-october.html
204 comments
Agreed, so far this looks like it's a bull-whip effect in many many supply chains.
For example, lumber is still priced fairly high, but far far down from its peak level. And if this podcast is to be believed (and I think it is), mere lack of metal trusses for home building is holding back a lot of builders from continuing with their projects, meaning a ton of lumber is being held in places that it's not usually held, which will lead to further bull whip price swings:
https://www.bloomberg.com/news/articles/2021-11-08/stinson-d...
For example, lumber is still priced fairly high, but far far down from its peak level. And if this podcast is to be believed (and I think it is), mere lack of metal trusses for home building is holding back a lot of builders from continuing with their projects, meaning a ton of lumber is being held in places that it's not usually held, which will lead to further bull whip price swings:
https://www.bloomberg.com/news/articles/2021-11-08/stinson-d...
Counter point:
Inflation due to large monetary stimulus may appear through a bullwhip affect as demand eventually stresses fixed-capacity capital intensive industries. Once these industries are strained higher costs may radiate outwards.
Inflation due to large monetary stimulus may appear through a bullwhip affect as demand eventually stresses fixed-capacity capital intensive industries. Once these industries are strained higher costs may radiate outwards.
Isn’t this what we’re seeing? Semiconductors strained leading to rising auto prices? (For example.)
What evidence is there that it will radiate outwards at a rate significantly above the Fed’s target for an extended period of time?
What evidence is there that it will radiate outwards at a rate significantly above the Fed’s target for an extended period of time?
Evidence? This is economics we're talking about. I think we can make some guesses, but the system is too complex to make reliable predictions.
A single advancement in worker automation could easily provide enough productivity gains to offset wage growth. A single plant disease or new political treaty could massively effect food and or energy costs. The system is chaotic.
A single advancement in worker automation could easily provide enough productivity gains to offset wage growth. A single plant disease or new political treaty could massively effect food and or energy costs. The system is chaotic.
I don't know of a good measure for how long it takes price signals to be transmitted across the economy - particularly not inflationary price signals. I'd be willing to bet that the speed at which supply reacts to changing price signals depends highly on the current expectations for how long price changes will persist and how much of the price change is inflationary.
Offhand however, the top capital constrained industries that I can think of (in rough order) include.
1. Semi 2. Housing 3. Automotive/heavy manufacturing 4. Energy
Which are all experiencing shortages/rapid price increases. If the hypothesis holds we would see price increases in other fields which depend on the above. If the supply disruption/demand disruption hypothesis holds then we should see a normalization of prices in the above industries.
Offhand however, the top capital constrained industries that I can think of (in rough order) include.
1. Semi 2. Housing 3. Automotive/heavy manufacturing 4. Energy
Which are all experiencing shortages/rapid price increases. If the hypothesis holds we would see price increases in other fields which depend on the above. If the supply disruption/demand disruption hypothesis holds then we should see a normalization of prices in the above industries.
It’s probably a little of a, a little of b.
It is still less of a school to the economy than the beginning of the pandemic was. Threading the needle to manage this period has to be extremely difficult for policy makers.
It is still less of a school to the economy than the beginning of the pandemic was. Threading the needle to manage this period has to be extremely difficult for policy makers.
Wasn't our stimulus minuscule compared to other countries? I believe most countries paid at least partial wages of employees during lockdown while the US got $2000 for going on 2 years of lockdown now.
I've heard that on the contrary, the US had some of the highest covid stimulus payments in the world across different metrics (% of GDP, $ per capita, etc.).
That's when considering "stimulus" as broader than the unconditional (but means-tested) direct payments--colloquially "stimmy checks." Following is from a quick search and to the best of my knowledge; I'm in a high cost of living area and fortunate to have kept a job past the individual cutoff for stimulus checks:
Direct stimulus was $3200 to eligible individuals across three checks. Some amount of that was banked for dependents too.
Increased refundable child tax credit was increased from $2000 to either $3000 or $3600 per child per year and the Democrats are trying to persist that in the build back better act.
The US also did increased unemployment -- $300 a week in extended unemployment benefits. Which totals $15,600 a year on top of existing amounts. The first $10k in unemployment was made tax-free. I've heard e.g. Canada had a high percentage of salary backed by the government in unemployment, however there was a total dollar cap that was fairly low.
US had PPP loans that lefties (disclaimer: I'm one) on social media (disclaimer: I'm not) complained about going to businesses, but very likely let some business keep people on the payroll in the first place as intended.
Mortgage forbearance, eviction moratoriums.
Freezing of payments and interest accrual on student loans that is still going on, and when (if?) it restarts will have stopped the accrual of interest for about two years.
That's when considering "stimulus" as broader than the unconditional (but means-tested) direct payments--colloquially "stimmy checks." Following is from a quick search and to the best of my knowledge; I'm in a high cost of living area and fortunate to have kept a job past the individual cutoff for stimulus checks:
Direct stimulus was $3200 to eligible individuals across three checks. Some amount of that was banked for dependents too.
Increased refundable child tax credit was increased from $2000 to either $3000 or $3600 per child per year and the Democrats are trying to persist that in the build back better act.
The US also did increased unemployment -- $300 a week in extended unemployment benefits. Which totals $15,600 a year on top of existing amounts. The first $10k in unemployment was made tax-free. I've heard e.g. Canada had a high percentage of salary backed by the government in unemployment, however there was a total dollar cap that was fairly low.
US had PPP loans that lefties (disclaimer: I'm one) on social media (disclaimer: I'm not) complained about going to businesses, but very likely let some business keep people on the payroll in the first place as intended.
Mortgage forbearance, eviction moratoriums.
Freezing of payments and interest accrual on student loans that is still going on, and when (if?) it restarts will have stopped the accrual of interest for about two years.
This is nice talk, but have you really not bought groceries, electronics, filled up your tank or paid an electrcity/natgas bill in the past 6 months?
It tends to be the well off people who dismiss inflationary pressures.
I certainly don't look at my heating bill every month.
But inflation is devastating to the working poor. Funny that it's so easily brushed aside by those who claim to advocate for them.
Consumer perception of the economy is roughly equivalent to 2009 numbers now, in a recent study. The public by and large thinks the economy is terrible, primarily due to the inflationary pressures.
Consider that unemployment affects the marginal job seeker, but inflation affects everybody. From a purely political lens, vying for higher employment at the expense of inflation, once past a reasonable threshold, seems like a losing move.
I certainly don't look at my heating bill every month.
But inflation is devastating to the working poor. Funny that it's so easily brushed aside by those who claim to advocate for them.
Consumer perception of the economy is roughly equivalent to 2009 numbers now, in a recent study. The public by and large thinks the economy is terrible, primarily due to the inflationary pressures.
Consider that unemployment affects the marginal job seeker, but inflation affects everybody. From a purely political lens, vying for higher employment at the expense of inflation, once past a reasonable threshold, seems like a losing move.
If inflation is supply-side (e.g. oil runs out, a ship gets stuck in Suez, etc) then workers lose.
If it's demand-side, then their wages should rise up together with inflation so they don't win or lose (except for whatever savings they have and whatever time it takes for wages to adjust).
If it's demand-side, then their wages should rise up together with inflation so they don't win or lose (except for whatever savings they have and whatever time it takes for wages to adjust).
Wage numbers come out with the monthly jobs report. Only one month this year did wages rise higher than inflation, IIRC.
So wages are rising, but slower than inflation, e.g. people getting poorer. And of course, many stay in the same job and don't get a raise, or get a paltry raise.
Many seniors living off of fixed income investments which are yielding lower than ever. And so on...
Workers are only better off if wage is strongly above inflation. I do see people cheering on wage gains, even though they've been persistently below inflation, which is a bit of a headscratcher.
It seems the public perception is finally starting to bubble up though, rather than the headline narratives.
https://www.nytimes.com/2021/11/06/upshot/inflation-psycholo...
So wages are rising, but slower than inflation, e.g. people getting poorer. And of course, many stay in the same job and don't get a raise, or get a paltry raise.
Many seniors living off of fixed income investments which are yielding lower than ever. And so on...
Workers are only better off if wage is strongly above inflation. I do see people cheering on wage gains, even though they've been persistently below inflation, which is a bit of a headscratcher.
It seems the public perception is finally starting to bubble up though, rather than the headline narratives.
https://www.nytimes.com/2021/11/06/upshot/inflation-psycholo...
Poor people often have a negative net worth. If both inflation and wages are rising, it makes their debts easier to pay off.
I'm not arguing that inflation is good for poor people, just that "Inflation = Bad" is reductionist. There are winners and losers with inflation, and the lives of most individuals are affected in nuanced ways, both positively and negatively.
I'm not arguing that inflation is good for poor people, just that "Inflation = Bad" is reductionist. There are winners and losers with inflation, and the lives of most individuals are affected in nuanced ways, both positively and negatively.
>Consumer perception of the economy is roughly equivalent to 2009 numbers now, in a recent study.
Source? Searching for "Consumer perception of the economy" leads me to consumer confidence index, which seems to be significantly higher than in 2009.
https://www.conference-board.org/data/consumerconfidence.cfm
Source? Searching for "Consumer perception of the economy" leads me to consumer confidence index, which seems to be significantly higher than in 2009.
https://www.conference-board.org/data/consumerconfidence.cfm
These aren't prices we haven't seen before. Electronics, sure, but there's a pretty good non-general-inflationary explanation for that. This (still) ain't the 70s.
I’m not sure that’s a compelling counter argument. Those are simply other supply chains also experiencing bull whips.
What non-supply chain expenses would need to inflate to qualify this as broad-based inflation then?
Seems like the narrative is that inflation isn't happening, and it if is happening, it's transitory, and if it's not transitory, it's irrelevant
>and if it's not transitory, it's irrelevant
who's claiming that?
who's claiming that?
Well, I believe it is. The original argument was that it is a very large price increase of small number of not that widely consumed goods causing the numbers to look that bad.
Housing, transportation, energy and food are the majority of expenditure for most people, which is in a direct contradiction of what OP claims.
I don't think the cost of propane nearly doubling is bull whip, not out here. Therr are going to be a lot of people wearing extra layers and looking at getting wood stoves out here this winter.
It is a good point. Inflation can be argued as an effect that impacts different people differently. If you're a vegetarian, rising beef prices do not affect you. So using an inflation indicator such as produced by the Fed and other organizations is not accurate for you as a person. I do indeed see inflation and it seems much more than the 5 to 8 percent that is published by the various inflation gauges. I'm not an average person and there really isn't an average person out there and we get impacted in different ways.
Food prices does not mean much when houses go for a few hundred thousand more within a couple years, or daycare prices increase from $15k/year to $16k to $17k or health insurance deductibles go from $3k to $5k to $7k.
For a young family that is interested in buying a house, food/gas does not even register.
For a young family that is interested in buying a house, food/gas does not even register.
Also the issue with aggregates indicators is that some expenses can be more easily adapted than others: it’s easier to buy a less powerful smartphone/TV/GPU than to heat or eat less.
I have. I haven't noticed a change.
And where do you live if I might ask? Even Iran and Russia are experiencing galloping inflation. North Korea maybe?
Same, and New York. Anecdotal evidence doesn't really amount to much though, since prices fluctuate wildly from place to place (i.e. Pittsburgh is cheaper than New York, regardless of the inflation index).
USA. I've noticed a few restaurants bumping prices up a buck, but most haven't changed yet.
By galloping inflation, I hope that means wage increases. Inflation is neither bad nor good, until it changes people's behavior. Even then, it's not strictly bad until it spirals out of control. Until then, inflation is in many ways a good thing: higher wages, higher revenues, transferring money from creditors to debtors. These are things many people want more of.
By galloping inflation, I hope that means wage increases. Inflation is neither bad nor good, until it changes people's behavior. Even then, it's not strictly bad until it spirals out of control. Until then, inflation is in many ways a good thing: higher wages, higher revenues, transferring money from creditors to debtors. These are things many people want more of.
Switzerland has had very limited inflation so far, I think the annual inflation is expected to be around 1.5% for 2021. Though to be fair, Switzerland has had about 0% inflation on average since 2015, with a few years of deflation in that interval, so it's still quite a big increase.
Electric generation charge has basically doubled for me (.045 to .085). Beef prices are about 50% higher, chicken at least 10%, pork about 15%. Etc.
I also know people buying cars at or close to MSRP that would have gotten them for much less before. So the sticker prices might be the same, but actual prices paid are going up.
I also know people buying cars at or close to MSRP that would have gotten them for much less before. So the sticker prices might be the same, but actual prices paid are going up.
As papi used to say, “follow the money.” If you’re a retailer, why not raise prices and blame inflation? I’m not saying increased labor costs and higher costs for raw materials don’t play into the equation, but if I can charge $7 for a gallon of milk instead of $6.50 and pocket the extra $0.50, seems like a good deal to me!
The shrinkflation on grocery items has been extremely obvious for a while as well.
I make the median US household income and I don’t even think about the prices of any of those things, I’m more worried about housing prices, not being a homeowner.
Past 6 months? What are you talking about? It's been the past 30 months - ever since Trump declared a trade war with China and then the pandemic hit. My grocery bills and the price of everything else have been rising noticeably ever since. The problem we're experiencing now is demand is surging and the supply chain hasn't recovered from the pandemic. High demand/low supply is a nice problem to have if you're a policymaker. That's why the policymakers aren't too worried about inflation.
This is a great point. But a counterpoint is that housing is not included in consumer price index. Real estate prices have rocketed to outer space for the past year and housing constitutes the biggest monthly expense for most people.
Not predicting disaster, but what's going on is very unusual and no one can predict how or when it will shake out.
Not predicting disaster, but what's going on is very unusual and no one can predict how or when it will shake out.
> Real estate prices have rocketed to outer space for the past year
In the Netherlands it's about 20% YoY. And this is starting to become true all throughout the country even though it started in urban areas. I really feel bad for people who aren't homeowners yet, because becoming one right now is getting damn near impossible.
In the Netherlands it's about 20% YoY. And this is starting to become true all throughout the country even though it started in urban areas. I really feel bad for people who aren't homeowners yet, because becoming one right now is getting damn near impossible.
I don't know how the 'average joe' is tolerating it right now. I rent, but I also work in tech so there's still a chance I'll be able to buy a house one day(not anywhere near my job, but still).
If I were middle class and saving for a home, I think I would be angry to the point of revolution and violence right now. There are people who have worked like crazy their whole lives and they just had their hopes and dreams set on fire by runaway money creation and the resulting inflation.
If I were middle class and saving for a home, I think I would be angry to the point of revolution and violence right now. There are people who have worked like crazy their whole lives and they just had their hopes and dreams set on fire by runaway money creation and the resulting inflation.
I think this is a large part of why people are moving further left and right in the past few years.
Social media adds gasoline to the fire, but that fire was already burning, in part due to the middle class getting wiped out.
The ends are expanding and middle is disappearing.
Social media adds gasoline to the fire, but that fire was already burning, in part due to the middle class getting wiped out.
The ends are expanding and middle is disappearing.
> There are people who have worked like crazy their whole lives and they just had their hopes and dreams set on fire by runaway money creation and the resulting inflation.
Would they be happier under a repeat of 2008 or 1928 instead?
Would they be happier under a repeat of 2008 or 1928 instead?
I would figure from a self interested perspective a repeat of 2008 would be pretty advantageous to an aspiring homeowner. Home prices peaked at $262,600 median in March 2007 and bottomed at $205,100 in March of 2009.[1] Rates were even about a % lower in 2009.[2][3]
Of course if the hypothetical aspiring homeowner with excellent market timing lost their job the point would be moot, but if their income stayed the same and they put 20,000 down their monthly payments would have gone from $1,302 to $994.
[1]http://www.fedprimerate.com/new_home_sales_price_history.htm
[2]https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Reports-...
[3]https://www.marketwatch.com/story/us-mortgage-rates-hit-2007...
Of course if the hypothetical aspiring homeowner with excellent market timing lost their job the point would be moot, but if their income stayed the same and they put 20,000 down their monthly payments would have gone from $1,302 to $994.
[1]http://www.fedprimerate.com/new_home_sales_price_history.htm
[2]https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Reports-...
[3]https://www.marketwatch.com/story/us-mortgage-rates-hit-2007...
Is it pretty advantageous to new retiree who has followed orthodox investment advice, and has started to live off their investments, only to see the value of half of them crash? Even if they recover in six years, they have still lost a mountain of principal in the meantime.
Is it advantageous to a new graduate who will see no work, and maybe a decade of depressed wages (which, between loans and compounding interest in savings, is devastating to their future prospects)?
Is it advantageous to a new homeowner that just lost their job?
Some people got burnt by that flood of money that stabilized the economy. Some people benefited. Some people avoided harm. Focusing on the first group without regard for the latter is missing a large part of the picture - which was that the economy as a whole remained more or less stable through this crisis.
Is it advantageous to a new graduate who will see no work, and maybe a decade of depressed wages (which, between loans and compounding interest in savings, is devastating to their future prospects)?
Is it advantageous to a new homeowner that just lost their job?
Some people got burnt by that flood of money that stabilized the economy. Some people benefited. Some people avoided harm. Focusing on the first group without regard for the latter is missing a large part of the picture - which was that the economy as a whole remained more or less stable through this crisis.
For sure, some people will benefit from such policies and some people wont. My figuring is that those in the parent comment's category of "middle class and saving for a home" are probably not in the camp of those benefiting from current policies (holding cash). Those policies are, what I can tell, keeping valuations high instead of raising rates, and providing an incentive not to hold cash and instead purchase and invest.
Whether that's fair vs protecting those who already have homes and other assets is I suppose a different question. I agree things have remained fairly stable so far as the result of printing but I suspect we likely haven't felt it's effects yet and the stabilization will continue well into the next year, though the future is always fickle to predict.
Whether that's fair vs protecting those who already have homes and other assets is I suppose a different question. I agree things have remained fairly stable so far as the result of printing but I suspect we likely haven't felt it's effects yet and the stabilization will continue well into the next year, though the future is always fickle to predict.
Wouldn't a prudent retiree have exited the market and experienced gains in their bond backed portfolio?
Right now we're fueling a tsunami of moral hazard which will eventually bite us in the ass anyway. We're just prolonging the inevitable and making the crash even worse when it finally appears.
Right now we're fueling a tsunami of moral hazard which will eventually bite us in the ass anyway. We're just prolonging the inevitable and making the crash even worse when it finally appears.
Investment orthodoxy recommends having ~50% stocks if you are retiring at 65, and are planning on living past 80. Cash/bonds lose value too fast.
As for punting the problem back, no, that does not follow as a required consequence of QE.
As for punting the problem back, no, that does not follow as a required consequence of QE.
I fall into that category, and am still mildly hopeful there might be one or two more chances to hop on board. My rent increased by close to 20% this year (US, FL) to the point where paying my old rent with a $250 month to month penalty is actually cheaper.
I think this is part of the rampant speculation on crypto and the like - $1,000 isn't really going to do me that much good, but if I hit a 100x I could be a homeowner.
I think this is part of the rampant speculation on crypto and the like - $1,000 isn't really going to do me that much good, but if I hit a 100x I could be a homeowner.
> My rent increased by close to 20% this year (US, FL) to the point where paying my old rent with a $250 month to month penalty is actually cheaper.
I have never heard of this type of rental agreement. Your contract says you can stay indefinitely if you pay $250 per month extra over the expired contract’s rent?
I have never heard of this type of rental agreement. Your contract says you can stay indefinitely if you pay $250 per month extra over the expired contract’s rent?
The lease automatically converted to a month to month after the one year term ended. This thread seems to cover a similar scenario.[1]
I suppose the downside is they could give me the boot with 30 days notice. FWIW I've contacted them several times to try and just sign a lease but the property has been bought out and had it's management office staff swapped out a few times so the whole thing is a mess.
[1]https://www.city-data.com/forum/renting/1261828-fixed-term-l...
I suppose the downside is they could give me the boot with 30 days notice. FWIW I've contacted them several times to try and just sign a lease but the property has been bought out and had it's management office staff swapped out a few times so the whole thing is a mess.
[1]https://www.city-data.com/forum/renting/1261828-fixed-term-l...
CPI does include housing, weighted at 32% in the CPI-U [1].
[1] https://www.bls.gov/news.release/pdf/cpi.pdf, Table 1
[1] https://www.bls.gov/news.release/pdf/cpi.pdf, Table 1
And the CPI figure is severely lagging public rent data
https://www.apartmentlist.com/research/national-rent-data
OER is a hugely flawed metric that is somewhat designed to suppress true cost increases. E.g. they include rent controlled units in the figure. Small portion, but clearly that's not a useful lens to analyze through.
Many other methodological flaws that can be enumerated
https://www.apartmentlist.com/research/national-rent-data
OER is a hugely flawed metric that is somewhat designed to suppress true cost increases. E.g. they include rent controlled units in the figure. Small portion, but clearly that's not a useful lens to analyze through.
Many other methodological flaws that can be enumerated
If I'm reading apartmentlist's methodology correctly, they're tracking average prices for apartments that were vacant and have newly been rented (what they call "transacted rent prices"). But they don't track prices for existing leases to long-term tenants, which are typically much more stable than newly turned over units. Depending on the market, that can significantly overestimate rent increases in the broader market. For example, in NYC, about 50% of renters are in rent-controlled units, but they account for a relatively small percentage of new listings, because the units don't turn over often. So you'd get different answers if you average rent for newly turned over units vs. average rent for all current tenants.
(I'm not in NYC, but also in that category: I've rented my place for years, and my rent has increased 0.0% this year.)
(I'm not in NYC, but also in that category: I've rented my place for years, and my rent has increased 0.0% this year.)
Yes, exactly. Why would you ever want to weight in rent controlled units?
The much more useful number is, what is the cost of living for somebody plopped into the economy. Because eventually almost everybody ends up moving and bearing that cost.
Should our price data be forward looking or backwards looking? Obviously from a policy perspective having forward looking pricing data is much more useful and relevant.
Including rent controlled units and existing leases is a methodological flaw of OER. You're right though, if you game the measurement and design the methodology just right, you can produce lower numbers.
If the CPI formula were unchanged from the 70s, we would have roughly equivalent inflation numbers now that we had then.
The much more useful number is, what is the cost of living for somebody plopped into the economy. Because eventually almost everybody ends up moving and bearing that cost.
Should our price data be forward looking or backwards looking? Obviously from a policy perspective having forward looking pricing data is much more useful and relevant.
Including rent controlled units and existing leases is a methodological flaw of OER. You're right though, if you game the measurement and design the methodology just right, you can produce lower numbers.
If the CPI formula were unchanged from the 70s, we would have roughly equivalent inflation numbers now that we had then.
For apartmentlist's purposes it makes sense they do it that way, because their target audience is presumably people who are looking to rent a new unit, and those people care about what newly rented units go for. But if we're looking at changes in cost of living in the broader economy, most people don't move constantly, so it doesn't make any sense to exclude the cost of living of people who are staying in the same unit. You end up massively exaggerating both increases and decreases in cost of living, e.g. apartmentlist showed huge deflation in rents in my city during 2020, even though most people didn't move and most people's actual cost of living didn't decrease. But there were a lot of vacant units listed cheaply as people left for the suburbs during covid. Now the vacant units are back up again as people come back into the city, but my rent still hasn't changed either way, and neither has most people's. So you could tell a story of massive deflation followed by massive inflation, but that is not in fact what most people who actually live in the city experienced. So for an overall cost of living number I'd much prefer just an average of all rents.
So you prefer backward looking to forward looking metrics then. That's not useful from a policy perspective.
The Fed is meant to head off inflationary pressures. If they take a full year to materialize in the data, that's a flawed metric IMO. A 20% market rate rent increase will almost by definition feed into a 20% rent increase for everybody in the longer run.
The market rate rent will dictate rents for all over the longer run. Yes, maybe 10% of the population got a good deal on their renewal or whatever. Including that information is not useful or helpful from a policy perspective.
At the very least, they should produce two figures. Market rate CPI and existing tenant CPI.
The Fed is meant to head off inflationary pressures. If they take a full year to materialize in the data, that's a flawed metric IMO. A 20% market rate rent increase will almost by definition feed into a 20% rent increase for everybody in the longer run.
The market rate rent will dictate rents for all over the longer run. Yes, maybe 10% of the population got a good deal on their renewal or whatever. Including that information is not useful or helpful from a policy perspective.
At the very least, they should produce two figures. Market rate CPI and existing tenant CPI.
CPI doesn't include the stock market, either. Real estate is an asset. Rent is included, however. They estimate how much a home owner is effectively paying in rent.
I don't know, but I think if you want to see where inflation is headed you should look at labor costs. Unless we see a corresponding increase in productivity(maybe from automation), I think prices will have to rise to compensate. Lots of things can transiently spike in price, like energy or raw materials, and you can eat those increases by taking less profits if you don't have the pricing power, but once labor costs go up it seems you are stuck with them.
If those labor costs drive the price of goods and services beyond some psychological tipping point, you then have more demands for higher wages, at least until those start to get rejected and we find a new zone of relative pricing stability.
I'm not arguing for hyperinflation or anything, but I don't think we'll see the price increases of the last year go away. If you're like me and had your assets in cash, well, a good percentage of that buying power is gone and not coming back.
If those labor costs drive the price of goods and services beyond some psychological tipping point, you then have more demands for higher wages, at least until those start to get rejected and we find a new zone of relative pricing stability.
I'm not arguing for hyperinflation or anything, but I don't think we'll see the price increases of the last year go away. If you're like me and had your assets in cash, well, a good percentage of that buying power is gone and not coming back.
Food prices are up.
https://finance.yahoo.com/news/consumer-price-index-shows-fo...
https://finance.yahoo.com/news/consumer-price-index-shows-fo...
One thing I've seen repeated is that increased shelter costs are problematic if rents rise (on locked in leases) because wage expectations would rise in response.
I don't know, last year my oil change was around forty bucks, this year it's been closer to a hundred. I think we're just seeing the tip of the spear and the shaft is going to show up pretty soon, though I hope you are right and we don't get the shaft.
That's just it, the guy on the skateboard who pays a buck more a day for his Chipotle and SBUX isn't going to notice shit. The guy who feeds his family of 4 (vehicle, cloths, energy, taxes, life) is feeling it.
How is your oil change more expensive? Oil itself doesn't seem to be more expensive so is it the labor in your case?
I’m not an operator. All I am is a run of the mill automobile owner who needs the car serviced. The prices have gone up why the shops upped the price is not something I’m privvy to.
On the other hand fuel prices are up considerably too.
On the other hand fuel prices are up considerably too.
I'm just curious because oil changes do not appear to be more expensive because of supplies. Oil and oil filters cost the same as they did before. Is it possible you just got ripped off?
That's the price for full synthetic 6 qts. If you like search Groupon for their non-discount prices. Sometimes you can get a 40% discount at the shop near you, but not always. I don't always have the time to drive to the place with a discount.
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I just looked at the prices for motor oil at a large chain near me, and 5 qts of full synthetic is $20 (so 6 would be $24). That's a retail price, presumably shops pay less for bulk purchases.
If your prices went up by $60 this year, it wasnt because the oil is more expensive.
If your prices went up by $60 this year, it wasnt because the oil is more expensive.
You just overpaid. That’s not inflation.
I’d recommend your local dealership or Walmart in the future. Oil changes might be the only thing dealerships typically have reasonable prices for.
I’d recommend your local dealership or Walmart in the future. Oil changes might be the only thing dealerships typically have reasonable prices for.
It’s not. Just canvass your local locations. They have gone up.
They haven’t around here, speaking as someone who just had the oil changed on two vehicles for the second time this year. The prices here are the same as they have been in recent years, but I don’t use Groupon.
Public market rent data shows rents up ~17% YTD, while CPI shows ~3%.
https://www.apartmentlist.com/research/national-rent-data
There's a huge lag to reflect certain data in the headline numbers. Owners equivalent rent measurement technique, only sampling 1/6 of housing stock per month and so on lead to about a 12 month lag in cpi.
Rents alone will fuel high baseline inflation for at least a year or two, once the value starts getting priced in.
You are right that we'll likely see some decline from cars normalizing, but not enough to offset rents and more broad based pressures. Baseline inflation will likely remain well above the Feds 2% target
https://www.apartmentlist.com/research/national-rent-data
There's a huge lag to reflect certain data in the headline numbers. Owners equivalent rent measurement technique, only sampling 1/6 of housing stock per month and so on lead to about a 12 month lag in cpi.
Rents alone will fuel high baseline inflation for at least a year or two, once the value starts getting priced in.
You are right that we'll likely see some decline from cars normalizing, but not enough to offset rents and more broad based pressures. Baseline inflation will likely remain well above the Feds 2% target
Average market rent represents a segment of rent prices that responds much more quickly to market price shocks than rent prices as a whole. Your link is effectively the price change for people moving into a new apartment. The other 50-60% of the market (people renewing their lease or continuing tenancy at will) has much smoother price growth over time.
Doesn't square 17% and 3%, but it could definitely mean the lagging CPI rent growth we see over the coming year is more like 9 or 10%.
Doesn't square 17% and 3%, but it could definitely mean the lagging CPI rent growth we see over the coming year is more like 9 or 10%.
The market rate forecasts the rent increases for the broader market.
If market rate of new units is 20% higher, almost by definition you'll see 20% higher rents for all in the long run.
Why should we use backward looking methodology in computing the CPI? It's an extremely flawed way to analyze the state of the market. Forward looking metrics are more useful to policy makers.
The methodology for OER and rent analysis in the CPI acts to suppress true price increases. Though those price increases eventually materialize as people renew their leases, move etc. It comes with a year or longer lag though.
The Fed drives their policy based on this data. Why should the data have a one year lag and potentially put them behind the curve?
If we used the same CPI formula as in the 70s, we would be seeing similar CPI numbers too.
If market rate of new units is 20% higher, almost by definition you'll see 20% higher rents for all in the long run.
Why should we use backward looking methodology in computing the CPI? It's an extremely flawed way to analyze the state of the market. Forward looking metrics are more useful to policy makers.
The methodology for OER and rent analysis in the CPI acts to suppress true price increases. Though those price increases eventually materialize as people renew their leases, move etc. It comes with a year or longer lag though.
The Fed drives their policy based on this data. Why should the data have a one year lag and potentially put them behind the curve?
If we used the same CPI formula as in the 70s, we would be seeing similar CPI numbers too.
> If market rate of new units is 20% higher, almost by definition you'll see 20% higher rents for all in the long run
Well, yes, but that's not very meaningful without knowing over what time period you'll see that increase.
> Why should we use backward looking methodology in computing the CPI?
I mean that's literally just what CPI is. You're welcome to use leading indicators if you want, and economists certainly do. One slight problem with predicting the future is we don't know what will happen then.
> If we used the same CPI formula as in the 70s, we would be seeing similar CPI numbers too.
This is completely unsupported by the data. Yes, the switch to geometric mean effectively deflated CPI when compared to measures taken using the previous formula, but not remotely close to a level that would bump our current ~6% rate into the high teens.
Well, yes, but that's not very meaningful without knowing over what time period you'll see that increase.
> Why should we use backward looking methodology in computing the CPI?
I mean that's literally just what CPI is. You're welcome to use leading indicators if you want, and economists certainly do. One slight problem with predicting the future is we don't know what will happen then.
> If we used the same CPI formula as in the 70s, we would be seeing similar CPI numbers too.
This is completely unsupported by the data. Yes, the switch to geometric mean effectively deflated CPI when compared to measures taken using the previous formula, but not remotely close to a level that would bump our current ~6% rate into the high teens.
Home prices used to be included in the CPI formula, which is how you get to similar number.
Not OER, but actual home prices.
But even if CPI reflected rents fully, today, we would be at similar numbers.
And the Fed primarily looks at core PCE which is based on the backward looking CPI data. It's very obvious from a policy perspective, they should be considering market rate and not existing tenant rates for forecasting forward inflation.
Yes, the Fed forecasts the backward looking CPI, but their forecasts were also so far off this year, I wouldn't put any stock into them. I believe they predicted 3% inflation for 2021 earlier this year.
Not OER, but actual home prices.
But even if CPI reflected rents fully, today, we would be at similar numbers.
And the Fed primarily looks at core PCE which is based on the backward looking CPI data. It's very obvious from a policy perspective, they should be considering market rate and not existing tenant rates for forecasting forward inflation.
Yes, the Fed forecasts the backward looking CPI, but their forecasts were also so far off this year, I wouldn't put any stock into them. I believe they predicted 3% inflation for 2021 earlier this year.
> Home prices used to be included in the CPI formula, which is how you get to similar number.
Sorry, I thought you were making the geometric mean argument. Yeah that would definitely add significantly for this year in particular. Home price inflation is about 20%, and is replacing housing inflation at maybe 3% in the CPI calc. Owner occupiers are ~64% of the housing market which contributes around ~33% to CPI. So including that would add (.2 - .03) x .33 x .64 = .036 so 3.6% to CPI.
So around 10%. Comparable to most of the 70s, but not the high-teens emergency points.
And yes the Fed doesn't always accurately predict inflation, but in the long run no one else does either (and one could make billions doing so, it's not like no one's trying).
Sorry, I thought you were making the geometric mean argument. Yeah that would definitely add significantly for this year in particular. Home price inflation is about 20%, and is replacing housing inflation at maybe 3% in the CPI calc. Owner occupiers are ~64% of the housing market which contributes around ~33% to CPI. So including that would add (.2 - .03) x .33 x .64 = .036 so 3.6% to CPI.
So around 10%. Comparable to most of the 70s, but not the high-teens emergency points.
And yes the Fed doesn't always accurately predict inflation, but in the long run no one else does either (and one could make billions doing so, it's not like no one's trying).
> So around 10%. Comparable to most of the 70s, but not the high-teens emergency points.
Except this is not comparable to most of the 70s at all.
Household leverage and disposable income change how serviceable debt is at different rates.
The numbers I saw puts a 2021 mortgage rate of 3% at an equivalent benchmark rate "in your pocketbook feels" as a 6% rate in pre gfc 2007.
Are you sure 10% doesn't warrant the same emergency as the high-teens of the 70s?
Except this is not comparable to most of the 70s at all.
Household leverage and disposable income change how serviceable debt is at different rates.
The numbers I saw puts a 2021 mortgage rate of 3% at an equivalent benchmark rate "in your pocketbook feels" as a 6% rate in pre gfc 2007.
Are you sure 10% doesn't warrant the same emergency as the high-teens of the 70s?
Renting has gotten a lot worse lately.
I’m also seeing my health plan options are a lot worse. High deductibles me co insurance with prices staying the same.
On the plus side all the restaurants around us are terrible now due to lack of workers, so we cook at home much more.
I’m also seeing my health plan options are a lot worse. High deductibles me co insurance with prices staying the same.
On the plus side all the restaurants around us are terrible now due to lack of workers, so we cook at home much more.
>If we’re having inflation due to a tiny number of goods having large price spikes
I take issue with this. Hotel rooms and airfare can often be forgone for the average American. New (or used) cars to a lesser extent. However we are seeing increases in prices of ag commodities increasing dramatically. On a year-on-year basis, prices were up 32.8% in September[1]. Oil prices are at a three year high[2]. Not to mention soaring housing costs. It may indeed be to early to predict disaster, but things are not as good as your comment seems to suggest.
[1] https://www.reuters.com/business/world-food-prices-hit-10-ye...
[2] https://www.reuters.com/business/energy/oil-prices-rise-tigh...
I take issue with this. Hotel rooms and airfare can often be forgone for the average American. New (or used) cars to a lesser extent. However we are seeing increases in prices of ag commodities increasing dramatically. On a year-on-year basis, prices were up 32.8% in September[1]. Oil prices are at a three year high[2]. Not to mention soaring housing costs. It may indeed be to early to predict disaster, but things are not as good as your comment seems to suggest.
[1] https://www.reuters.com/business/world-food-prices-hit-10-ye...
[2] https://www.reuters.com/business/energy/oil-prices-rise-tigh...
Food costs more because freight costs went up.
This article points out the CPI increased, not simply some rare items. This increase reflects exactly the basket of goods people buy.
[deleted](1)
Groceries and gas are up. This is devastating for those who think $50 left over at the end of the month is a good month.
Housing sticks out like a sore thumb. 2% increase? Over what period? Case Schiller is double since the last dip (circa 2012), and a solid 45% up since the peak of the 2008 bubble. It has a sharp uptick in the past couple of years, sharper than the 2006 run up. Sure, 2% housing inflation, nothing to see here.
https://fred.stlouisfed.org/series/CSUSHPINSA
https://fred.stlouisfed.org/series/CSUSHPINSA
> Case Schiller
...measures home ownership (asset) prices, CPI housing measures housing consumption (rent or imputed rent) prices.
...measures home ownership (asset) prices, CPI housing measures housing consumption (rent or imputed rent) prices.
All items seem to be contributing to it. Exception are Medical Services. Probably because this latest item is already so expensive anyway...
https://www.bls.gov/news.release/cpi.nr0.htm
https://www.bls.gov/news.release/cpi.nr0.htm
> In a separate report, the Labor Department said real wages after inflation fell 0.5% from September to October, the product of a 0.4% increase in average hourly earnings that was more than offset by the CPI surge.
This is the thing to watch. Inflation beaten by wage increases is sustainable. Inflation not beaten by wage increases ends with higher prices being rejected and a recession at least.
Given the hyper-inflated nature of just about every asset, including housing, far worse is on deck.
> Escalating inflation could cause the Fed to tighten policy more quickly than it has indicated. The central bank has indicated that it will within the next few weeks start reducing the amount of bonds it buys each month, though officials have indicated that interest rate hikes are still off in the future.
The Fed has been on the transitory bandwagon since the beginning of this mess. The idea that it would act to cause a recession by either tapering or raising rates is hard to believe right now. They will talk the tough talk for now. But they will not walk the tough walk.
Why not? Consider the positions at the Fed that have been vacated. Consider that Powell's term ends soon. There was already a meeting at the White House with Powell and one of his most likely successors. The last thing the administration will tolerate is a recession and asset price collapse at this point.
Also consider the effect of raising interest rates on the precarious US fiscal position. The entire Build Back Better initiative is based on the availability of low interest rates. Raising them means even less money to spend into the economy, not to mention resistance within the Democratic Party.
Bottom line: something is going to break. There will be massive resistance to this idea for a time. Rates will not rise. QE will not be scaled back. Asset and CPI inflation will shoot higher. Consumer prices will be rejected and to stave off the inevitable collapse, still more government transfers ("helicopter money") will be injected.
The result will be something common in third-world countries which follow this playbook with boring regularity, but quite new to the US. But the IMF won't be able to fix this.
This is the thing to watch. Inflation beaten by wage increases is sustainable. Inflation not beaten by wage increases ends with higher prices being rejected and a recession at least.
Given the hyper-inflated nature of just about every asset, including housing, far worse is on deck.
> Escalating inflation could cause the Fed to tighten policy more quickly than it has indicated. The central bank has indicated that it will within the next few weeks start reducing the amount of bonds it buys each month, though officials have indicated that interest rate hikes are still off in the future.
The Fed has been on the transitory bandwagon since the beginning of this mess. The idea that it would act to cause a recession by either tapering or raising rates is hard to believe right now. They will talk the tough talk for now. But they will not walk the tough walk.
Why not? Consider the positions at the Fed that have been vacated. Consider that Powell's term ends soon. There was already a meeting at the White House with Powell and one of his most likely successors. The last thing the administration will tolerate is a recession and asset price collapse at this point.
Also consider the effect of raising interest rates on the precarious US fiscal position. The entire Build Back Better initiative is based on the availability of low interest rates. Raising them means even less money to spend into the economy, not to mention resistance within the Democratic Party.
Bottom line: something is going to break. There will be massive resistance to this idea for a time. Rates will not rise. QE will not be scaled back. Asset and CPI inflation will shoot higher. Consumer prices will be rejected and to stave off the inevitable collapse, still more government transfers ("helicopter money") will be injected.
The result will be something common in third-world countries which follow this playbook with boring regularity, but quite new to the US. But the IMF won't be able to fix this.
Entirely the other way around. Price rises beaten by wage increases is actual economic inflation: 'true inflation'.
Price rises without wage increases is a redistribution either away from wages towards profit, or more likely towards those workers in demand and away from those that are not. Or 'semi-inflation' as it is known.
And playing around with interest rates will affect neither issue, because, as it should be clear after more than a decade, interest rates aren't actually that effective a policy tool.
The economic rebalancing has to play out so that the new normal can re-establish.
Price rises without wage increases is a redistribution either away from wages towards profit, or more likely towards those workers in demand and away from those that are not. Or 'semi-inflation' as it is known.
And playing around with interest rates will affect neither issue, because, as it should be clear after more than a decade, interest rates aren't actually that effective a policy tool.
The economic rebalancing has to play out so that the new normal can re-establish.
The causes of inflation are fairly straightforward. It's a shortage of labor, international supply chain issues, and an unbalanced labor market due to a demand profile that changed rapidly over the pandemic (essentially a huge shift to goods over services).
Since the interest rates work by encouraging investment (usually long term), it doesn't look like interest rate changes will have any impact on inflation at least in the short term, since any investments in the labor market will take years to show results.
Since the interest rates work by encouraging investment (usually long term), it doesn't look like interest rate changes will have any impact on inflation at least in the short term, since any investments in the labor market will take years to show results.
> The causes of inflation are fairly straightforward. It's a shortage of labor, international supply chain issues, and an unbalanced labor market due to a demand profile that changed rapidly over the pandemic (essentially a huge shift to goods over services).
So the trillions printed out of thin air have nothing to do with the inflation currently experienced?
So the trillions printed out of thin air have nothing to do with the inflation currently experienced?
We've been printing like crazy people for at least the last ten years. Why haven't we see inflation before this?
I do agree that asset price inflation has been a real thing, but if it's just money printing, then why didn't we see broad based inflation from 2008 onwards? (Serious question).
I do agree that asset price inflation has been a real thing, but if it's just money printing, then why didn't we see broad based inflation from 2008 onwards? (Serious question).
Supply chain problems because of virus & fiscal stimulus (as opposed to monetary).
Monetary can't cause inflation since velocity of money drops. Fiscal can)
Also the overall consumption basket suddenly flipping from 60% services to 60% goods on a dime in April 2020)
Monetary can't cause inflation since velocity of money drops. Fiscal can)
Also the overall consumption basket suddenly flipping from 60% services to 60% goods on a dime in April 2020)
The asset prices aren't inflating. They are returning to their true market determined level.
Interest rate setting is an artificial market intervention that suppresses market prices by giving people a 'free money' alternative paid for by taxpayers.
As long as you are a bank of course.
Interest rate setting is an artificial market intervention that suppresses market prices by giving people a 'free money' alternative paid for by taxpayers.
As long as you are a bank of course.
[deleted]
Nothing. All government spending is done by printing out of thin air. That's how monetary system clearing works.
It's offset by taxes collected and people saving in excess of borrowing (net financial savings).
If you want trillions in savings you have to have trillions in debt because the accounting needs to sum up to zero
It's offset by taxes collected and people saving in excess of borrowing (net financial savings).
If you want trillions in savings you have to have trillions in debt because the accounting needs to sum up to zero
It's not an inflation, it's a redistribution - due to those changes in demand patterns. It'll play out and settle down over time.
Interest rates changes have nothing to do with investment.
Nobody who has ever risked their own money on a venture would ever say that a 0.1% change in the cost of liquidity changes the investment case.
The estimate error on the sales projections swamps that by several orders of magnitude.
Interest rates changes have nothing to do with investment.
Nobody who has ever risked their own money on a venture would ever say that a 0.1% change in the cost of liquidity changes the investment case.
The estimate error on the sales projections swamps that by several orders of magnitude.
No, not really.
Inflation refers only to the decrease in value of money, it has nothing to do with wages.
"In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money."
https://en.wikipedia.org/wiki/Inflation
It says "reduction in the purchasing power of money", not "people can now buy less stuff for their salary".
Inflation means you can buy less for the same amount of money, but how much money people earn is a separate matter.
Inflation refers only to the decrease in value of money, it has nothing to do with wages.
"In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money."
https://en.wikipedia.org/wiki/Inflation
It says "reduction in the purchasing power of money", not "people can now buy less stuff for their salary".
Inflation means you can buy less for the same amount of money, but how much money people earn is a separate matter.
That's not an economic inflation.
An economic inflation is when wages and prices go up together so nothing much changes other than numbers.
If people can buy less stuff with their wages that's a redistribution away from the wage share and towards the profit share.
Guess which share pays people to write the definitions on Wikipedia?
An economic inflation is when wages and prices go up together so nothing much changes other than numbers.
If people can buy less stuff with their wages that's a redistribution away from the wage share and towards the profit share.
Guess which share pays people to write the definitions on Wikipedia?
I actually went to school (which included economics in its curriculum).
I have also worked for many financial institutions over past 20 years including banks, brokerage houses and insurance companies. Currently for Citi Group as a tech lead for one of its risk systems. My work requires me to understand what inflation is because it has very deep impact on everything we do.
Here you have other reputable source: https://www.investopedia.com/terms/i/inflation.asp
"Inflation is the decline of purchasing power of a given currency over time."
I have also worked for many financial institutions over past 20 years including banks, brokerage houses and insurance companies. Currently for Citi Group as a tech lead for one of its risk systems. My work requires me to understand what inflation is because it has very deep impact on everything we do.
Here you have other reputable source: https://www.investopedia.com/terms/i/inflation.asp
"Inflation is the decline of purchasing power of a given currency over time."
"I actually went to school (which included economics in its curriculum).
That'll be your problem. Any training in economics or financial institutions leads to a skewed view of how the world actually works.
You don't understand what inflation is. You understand what financial institutions want to consider inflation to be because it affects the returns on the debt instruments.
For everybody else in the economy that isn't a problem. In fact it is of benefit to them since it redistributes away from financial institutions towards actual people doing stuff.
Inflation is more than just a narrow view of price changes.
"When a further increase in the quantity of effective demand produces no further increase in output and entirely spends itself on an increase in the cost-unit fully proportionate to the increase in effective demand, we have reached a condition which might be appropriately designated as one of true inflation. Up to this point the effect of monetary expansion is entirely a question of degree, and there is no previous point at which we can draw a definite line and declare that conditions of inflation have set in. Every previous increase in the quantity of money is likely, in so far as it increases effective demand, to spend itself partly in increasing the cost-unit and partly in increasing output."
The General Theory of Employment, Interest, and Money; John Maynard Keynes' Ch 21, V
That'll be your problem. Any training in economics or financial institutions leads to a skewed view of how the world actually works.
You don't understand what inflation is. You understand what financial institutions want to consider inflation to be because it affects the returns on the debt instruments.
For everybody else in the economy that isn't a problem. In fact it is of benefit to them since it redistributes away from financial institutions towards actual people doing stuff.
Inflation is more than just a narrow view of price changes.
"When a further increase in the quantity of effective demand produces no further increase in output and entirely spends itself on an increase in the cost-unit fully proportionate to the increase in effective demand, we have reached a condition which might be appropriately designated as one of true inflation. Up to this point the effect of monetary expansion is entirely a question of degree, and there is no previous point at which we can draw a definite line and declare that conditions of inflation have set in. Every previous increase in the quantity of money is likely, in so far as it increases effective demand, to spend itself partly in increasing the cost-unit and partly in increasing output."
The General Theory of Employment, Interest, and Money; John Maynard Keynes' Ch 21, V
Whether prices or wages are the true measure of inflation is a class marker. If you are a (0.)1%er making most of your money from stocks, it's wages. If you are working for a living, it's prices. Guess which side dominates the US public discourse.
> The last thing the administration will tolerate is a recession and asset price collapse at this point.
It really doesn't matter what they will "tolerate." They do not have the power to stop it if it's coming, just like they don't have the power to stop the surge in inflation. The current economic situation was set in motion by policy decisions made months and over a year ago (as far back as April 2020), as well as the worst of the pandemic, that we are still feeling the effects of.
It really doesn't matter what they will "tolerate." They do not have the power to stop it if it's coming, just like they don't have the power to stop the surge in inflation. The current economic situation was set in motion by policy decisions made months and over a year ago (as far back as April 2020), as well as the worst of the pandemic, that we are still feeling the effects of.
[deleted]
Or you're just being incredibly pessimistic. We had a massive trade war, a reduction in immigrants coming into the country, and a massive pandemic all contributing to a goods and labor shortage that will work itself out as businesses adapt to the new environment
My own pet, amateur theory is this is just a continuation of the expansion of the money supply from the 2008 crisis. It just took 13 years, Covid and another massive expansion for it to blow up.
This is a pretty solid theory to be honest. On top of that the goalposts constantly keep moving. Here is what CPI would look like today without all the changes to the formula:
http://www.shadowstats.com/alternate_data/inflation-charts
>Here is what CPI would look like today without all the changes to the formula
...which they undid, by adding a constant number?
>Responding to prior criticisms made by economist James Hamilton, John Williams explained in a private phone call that Shadowstats does not actually recalculate BLS data, rather, the Shadowstats CPI merely adds a constant to the officially reported numbers.[25]
>I’m not going back and recalculating the CPI. All I’m doing is going back to the government’s estimates of what the effect would be and using that as an add factor to the reported statistics.
...which they undid, by adding a constant number?
>Responding to prior criticisms made by economist James Hamilton, John Williams explained in a private phone call that Shadowstats does not actually recalculate BLS data, rather, the Shadowstats CPI merely adds a constant to the officially reported numbers.[25]
>I’m not going back and recalculating the CPI. All I’m doing is going back to the government’s estimates of what the effect would be and using that as an add factor to the reported statistics.
I don't see how a random person claiming something was shared with them in a phone call with another person, who probably has neither respect nor desire to talk to them is a geniune information. On top of that the person in question does not appear that trustworthy in my eyes. There is a serious possibility that he might be correct, but I would certainly not take it as established.
On top of that, they have their methodology described on their website[1] and the charts match that.
Here is another random quote from Wikipedia[2]:
"Wikipedia is not a reliable source for citations elsewhere on Wikipedia. Because it can be edited by anyone at any time, any information it contains at a particular time could be vandalism, a work in progress, or just plain wrong"
1. http://www.shadowstats.com/article/no-438-public-comment-on-...
2. https://en.wikipedia.org/wiki/Wikipedia:Wikipedia_is_not_a_r...
On top of that, they have their methodology described on their website[1] and the charts match that.
Here is another random quote from Wikipedia[2]:
"Wikipedia is not a reliable source for citations elsewhere on Wikipedia. Because it can be edited by anyone at any time, any information it contains at a particular time could be vandalism, a work in progress, or just plain wrong"
1. http://www.shadowstats.com/article/no-438-public-comment-on-...
2. https://en.wikipedia.org/wiki/Wikipedia:Wikipedia_is_not_a_r...
>I don't see how a random person claiming something was shared with them in a phone call with another person, who probably has neither respect nor desire to talk to them is a geniune information. On top of that the person in question does not appear that trustworthy in my eyes. There is a serious possibility that he might be correct, but I would certainly not take it as established.
The "random person" is a Professor of Economics at the University of California, San Diego.
The "another person" is the owner of the site.
>On top of that, they have their methodology described on their website[1] and the charts match that.
So are you conceding that it's a constant number being added or not? It sure looks that way according to one of the tables in the page you linked. The "Cumulative Annual Inflation Shortfall" has been ~5.1% for more than a decade. Eyeballing the more recent figures (raw figures are paywalled) seems to confirm this as well.
The "random person" is a Professor of Economics at the University of California, San Diego.
The "another person" is the owner of the site.
>On top of that, they have their methodology described on their website[1] and the charts match that.
So are you conceding that it's a constant number being added or not? It sure looks that way according to one of the tables in the page you linked. The "Cumulative Annual Inflation Shortfall" has been ~5.1% for more than a decade. Eyeballing the more recent figures (raw figures are paywalled) seems to confirm this as well.
Paul Krugman is also a professor of economics and AOC is a graduate. Let's leave it at that.
Beside, after having seen the table you should know very well that you're wrong and have some decency.
Beside, after having seen the table you should know very well that you're wrong and have some decency.
You should review the site guidelines about giving the best possible interpretation to others' posts, and avoiding personal attacks. You're out of line here.
No, that's a site run by someone who publishes misinformation that appeals to people due to emotional reasoning.
Could you please expand on that? This is a very strong claim with literally zero arguments.
(I edited this post to be less confrontational). Sorry, for an argument you can read this forum post:
https://www.bogleheads.org/forum/viewtopic.php?p=1025266#p10...
https://www.bogleheads.org/forum/viewtopic.php?p=1025266#p10...
This is incorrect. I am this person and the argument I made by saying "the goalposts are moving" is that the many changes to the calculation methodology are consistently pushing the numbers down. I will also give a very strong example - 7 years ago ECB totally dropped housing costs from their inflation calculations[1]. How is this realistic?
I am not reading a phpBB called bogleheads.com, could you please provide some actual arguments to your claim?
1. https://www.reuters.com/business/euro-zone-housing-cost-may-....
I am not reading a phpBB called bogleheads.com, could you please provide some actual arguments to your claim?
1. https://www.reuters.com/business/euro-zone-housing-cost-may-....
I apologize for my tone and edited my post. I'm not going to infringe the copyright of the person at the link by pasting it here. I'm also not going to paraphrase it because I wouldn't be able to add anything by doing so. It's a few paragraphs long, if you want to learn more I invite you to read it.
If your argument is that the calculation of CPI has changed, that is not controversial. If it is the information on Shadowstats about how it has changed is real, you may want to read the link I provided.
If your argument is that the calculation of CPI has changed, that is not controversial. If it is the information on Shadowstats about how it has changed is real, you may want to read the link I provided.
The money supply expansion of 2008 was loans which were repaid, thus not likely to be a big factor inflation (and it wasn't). The money given to the populace this time around is a much more likely culprit.
Inflation is not likely to take 12 years to show up. Markets and people are not that slow or dumb.
Inflation is not likely to take 12 years to show up. Markets and people are not that slow or dumb.
Kind of puts the labor strikes in perspective. Next week's nurses' strike is over a proposed three-year, 1% annual wage increase. Price levels are sticky, so inflation is a fast way to erase real income.
https://thehill.com/business-a-lobbying/576456-more-than-100... (edit: better source)
The nursing union's own ask is +4% per year, and even that would have been real-negative over the past 12 months (according to OP's +6.2% CPI figure).
https://thehill.com/business-a-lobbying/576456-more-than-100... (edit: better source)
The nursing union's own ask is +4% per year, and even that would have been real-negative over the past 12 months (according to OP's +6.2% CPI figure).
Wouldn't their wages plummet without unions inflating their salaries? They earn as much as doctors in UK, Germany and France.
Always remember, inflation is the goverment printing (inflating) currency to the market in order fund it's agenda by stealing your savings. Basicaly inflation is just another process how government steals your money. Inflation is NOT rising prices, they are trying hard to derail the definition.
I agree with this. However, it becomes difficult to argue when definitions are shifting under you: https://www.wsj.com/amp/articles/SB1000142405274870373080457...
True. If the government cannot tax you for what they want, they will just print it and increase the water level of the economy.
These trillion dollar packages put forth by politicians probably aren’t helping either.
These trillion dollar packages put forth by politicians probably aren’t helping either.
Inflation can also happen when a country’s productivity falls compared to other competing countries.
If you want to see how this work, look at Argentina. Here politicians are always trying to find something else to blame for inflation: international prices increase, supply chain problems, monopolies trying to destabilize the economy, commodity prices that increased due to bad weather, the "greed" of businessmen, and any kind of nonsense. They always try to remove responsibility for the increase of money supply they dictate.
Don't be like Argentina, keep a healthy economy.
Really, I don't understand how in this site, where so many intelligent people participate, there are so many comments about trying to disregard the link between inflation and money supply.
Don't be like Argentina, keep a healthy economy.
Really, I don't understand how in this site, where so many intelligent people participate, there are so many comments about trying to disregard the link between inflation and money supply.
As somebody also from South America, seeing people from the US having to come to grips with the idea of inflation is cute.
Inflation has always been defined as a rise in the general price level. Consult any economics textbook or econometrics monograph in the 20th century.
"inflation is the goverment printing (inflating) currency to the market in order fund it's agenda by stealing your savings"
You are summarizing a policy theory called "monetarism" and presenting it as the consensus theory that is only now being departed from. This is inaccurate.
https://en.wikipedia.org/wiki/Monetarism
"inflation is the goverment printing (inflating) currency to the market in order fund it's agenda by stealing your savings"
You are summarizing a policy theory called "monetarism" and presenting it as the consensus theory that is only now being departed from. This is inaccurate.
https://en.wikipedia.org/wiki/Monetarism
If we're getting all theoretical: On the other hand, your money and property wouldn't exist if the government didn't declare it so. Was it ever really yours?
Yes. My family has been free for 20+ generations and will continue without relying on anyone or anything's permission.
Amazing! I'm surprised you're able to use the internet under those conditions.
You don't own the definition of inflation. I agree that it's confusing that economists and laymen use the word differently, but the vast majority agree that inflation is defined by increases in price.
Leaving your attempt to redefine inflation aside - no government forces you to hold your savings in cash. If you are afraid of inflation just buy other assets. Governments are much more constrained in "stealing your money" than you make them out to be.
I am glad I put most of my investments and cash into btc under $1000. I can peacefully go about my life with a currency which gains purchasing power.
There is still plenty of time to opt out of government fiat money. Get off zero or HFSP.
There is still plenty of time to opt out of government fiat money. Get off zero or HFSP.
buy other assets, which then "increase in value" compared to $ prices and then you get charged on capital gains.
The bastards have also been devaluing my debt.
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I read a lot of reassuring articles saying it's not a big deal, it's just temporary, etc.
What's a plausible, non-doomsday scenario in which things turn bad; what does it look like?
What's a plausible, non-doomsday scenario in which things turn bad; what does it look like?
Part of me wants to say that the Covid supply disruptions and mass money printing are not that extraordinary, at least if you look at things on a long enough scale. We've had pandemics, world wars, and social upheavals throughout history, and usually fundamentals assert themselves eventually. In other words, the inflation we're seeing was expected, and eventually the system will return to some sort of normal, as consumers and businesses adjust to price changes and change their behaviors.
On the other hand I can't help but wonder if exponential population growth is now starting to influence things in a way we haven't seen before.
I remember the analogy they used to explain exponential growth in middle school - most have heard something similar - where 1 bacteria is in a jar at 11am, and it's doubling in quantity every minute and will fill up the jar by noon. Students are asked to guess when the jar is half full, and most believe it would be around 11:30. They're shocked to discover that it hits the halfway point at 11:59, and by then it's too late to fix.
Roughly, it took from the time of Columbus arriving to the new world 'till the Civil War to go from a population of a few million Europeans to 30M, and we had a whole continent to expand and extract resources.
We'll increase more than that in just the next 10 years.
What was normal for even lower class Americans historically - single family home, couple kids, fossil-fuel burning car with big, open roads and lots of high-energy consumption may just not be possible anymore for anyone but the wealthy.
And that new normal is being manifested by massively rising home, car, food, etc. costs that won't necessarily cool off, even when the money supply is constrained. There's just too much demand, and not even natural resources to supply it.
* https://www.youtube.com/watch?v=x5OYmRyfXBY
On the other hand I can't help but wonder if exponential population growth is now starting to influence things in a way we haven't seen before.
I remember the analogy they used to explain exponential growth in middle school - most have heard something similar - where 1 bacteria is in a jar at 11am, and it's doubling in quantity every minute and will fill up the jar by noon. Students are asked to guess when the jar is half full, and most believe it would be around 11:30. They're shocked to discover that it hits the halfway point at 11:59, and by then it's too late to fix.
Roughly, it took from the time of Columbus arriving to the new world 'till the Civil War to go from a population of a few million Europeans to 30M, and we had a whole continent to expand and extract resources.
We'll increase more than that in just the next 10 years.
What was normal for even lower class Americans historically - single family home, couple kids, fossil-fuel burning car with big, open roads and lots of high-energy consumption may just not be possible anymore for anyone but the wealthy.
And that new normal is being manifested by massively rising home, car, food, etc. costs that won't necessarily cool off, even when the money supply is constrained. There's just too much demand, and not even natural resources to supply it.
* https://www.youtube.com/watch?v=x5OYmRyfXBY
Indeed, I believe the distribution of inflated prices is a stochastic function wherein elements of the economy are impacted much more quickly, if at the foundation of their business, there are quickly depleting raw costs and expenses. These are usually seen, in comparison to acquisitions, tech, staff; hiring, etc. confoundingly minute. The problem in my opinion is the psyche of the market. Is this market knowledgeable of inflation risks and Causes? Have they experienced inflationary periods? If the answer is no, the propaganda coupled with not really knowing, exacerbates confidence in participating in said economy
I wonder what happens to the housing market. In the early 80's people literally swapped mortgages because getting a new mortgage came with rates >15%. Even if rates go back up to only 7.5% what happens to housing prices? It also seems like there may be a massive bubble of hedging in leveraged real estate by big institutional investors. Something like 25% of all purchases are by investors right now. What happens when regular people (who need a loan) can't afford the higher interest rates?
> Even if rates go back up to only 7.5% what happens to housing prices?
Prices go down 40-50%?
Normalizing for household leverage and disposable income, a 3% mortgage in 2021 is close to a 6% mortgage in 2007. Assuming it scales linearly (not sure it does), what you're talking about would mean an equivalent effect of around a 15% rate in 2007 against 2007 prices.
I tried to track down where I saw these slides but couldn't find them, I think it was a morgan stanley presentation looking at comparison rates and leverage normalization to predict how bad different rises in rates would be in terms of how the rate "feels" to the average mortgage holder.
Prices go down 40-50%?
Normalizing for household leverage and disposable income, a 3% mortgage in 2021 is close to a 6% mortgage in 2007. Assuming it scales linearly (not sure it does), what you're talking about would mean an equivalent effect of around a 15% rate in 2007 against 2007 prices.
I tried to track down where I saw these slides but couldn't find them, I think it was a morgan stanley presentation looking at comparison rates and leverage normalization to predict how bad different rises in rates would be in terms of how the rate "feels" to the average mortgage holder.
The used car I purchased five years ago is worth as much today as it was back then, despite a tripling of its mileage. What's going on is rather astounding.
What's interesting about this is that it seems that certain products are changing in price due to the bull-whip effect in supply chains. This is rather than the traditional form of inflation where it's a monetary effect of more money being in circulation.
It's one of those times where viewing economics in terms of its steady state behaviors missed out on the true dynamics.
It's one of those times where viewing economics in terms of its steady state behaviors missed out on the true dynamics.
I have a 2000 4Runner that has provided a nice return on investment from when I bought it 12 years ago!
As someone in their early 20s starting their career, is there anything I should be doing with my personal finances to protect myself from this?
Buy assets that have value independent from currency such as stocks, real estate, commodities. Just keep enough cash to buy the things you need for a few months at a time. Save as much as possible as in an inflationary environment your wage is going down in real terms each day and prices of goods are rising.
PCE may be the better measure, as it allows for the substitution of similar goods.
This is from last month's report. Am waiting for it to be updated.
https://econbrowser.com/archives/2021/11/economic-activity-a...
This is from last month's report. Am waiting for it to be updated.
https://econbrowser.com/archives/2021/11/economic-activity-a...
Here is their updated post
https://econbrowser.com/archives/2021/11/october-cpi-inflati...
PCE went up too (as nowcast)
PCE went up too (as nowcast)
Not surprising, I wouldn't doubt it's not by accident.
Massive spending, government cash handouts, purposeful restrictions on energy commodities.... this seems predictable.
So who gets hurt, and who gains?
Younger earners (who will get pay raises) and equity holders (who hold businesses that will pass along the costs) surf the wave upward.
People on fixed or inelastic incomes get burned.
But the $15 wage won't seem unreasonable shortly.
Massive spending, government cash handouts, purposeful restrictions on energy commodities.... this seems predictable.
So who gets hurt, and who gains?
Younger earners (who will get pay raises) and equity holders (who hold businesses that will pass along the costs) surf the wave upward.
People on fixed or inelastic incomes get burned.
But the $15 wage won't seem unreasonable shortly.
If the interest rate on your debt is less than the rate of inflation, you make money by holding a loan. The current rate of inflation is 5%, the interest rate of a margin loan on IBKR is 1.5% and under. When inflation finally slows, expect a ton of money to come out of the stock market.
That presumes your pay is rising with inflation, or some tangible asset you hold.
You don’t make money having a debt. You’re still accruing interest to pay. I think another way to think about it is that the lender is not making a profit when inflation is factored in. It’s a bad deal for them and a good deal for you.
Additionally if you invest the debt into something that beats your loan’s interest rate then you’ll make money, which is more likely now, since any worthwhile investment would have a rate at least inflation (for example, I-bonds).
Additionally if you invest the debt into something that beats your loan’s interest rate then you’ll make money, which is more likely now, since any worthwhile investment would have a rate at least inflation (for example, I-bonds).
Assets can already rise 30% in anticipation of 5% inflation above risk-free interest for 6 years. Then you can buy in right at the time that interest rates rise to counter that inflation. Congrats you've just purchased assets that now drop due 30% due to interest rate increases at the same time you're margin loan interest increases to 5% to hold it.
Whee, and I'm getting FDN'd at work, so there's no chance I get a 6.2% raise/adjustment over the past year. Looks like I'm taking a pay cut.
Thoughts on a possible upcoming hyper-inflation?
I don't think we have seen any sign of that yet. Car prices are inflated because production is only at, say, 12M cars not 17M cars, and there's not much reason to decide that future production of cars should be lower than it historically has been. It's not a huge amount of new money flowing into the system, it's just a bunch of mismanagement of supply chains.
(Well, I want car production to be far lower for political reasons, but I'd rather change city structure to accomplish that, not artificially limit car production because of supply chain effects. That's a completer separate issue.)
Additionally, we are flushing out a lot of low-productivity employers, and bringing far more people into the workforce. This is a recipe for a far stronger economy in the future, with happier and wealthier people. I'm optimistic of the course of the future.
(Well, I want car production to be far lower for political reasons, but I'd rather change city structure to accomplish that, not artificially limit car production because of supply chain effects. That's a completer separate issue.)
Additionally, we are flushing out a lot of low-productivity employers, and bringing far more people into the workforce. This is a recipe for a far stronger economy in the future, with happier and wealthier people. I'm optimistic of the course of the future.
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Sensationalized headlines during an extrodinary time in economic history.
We've literally just come off the biggest DEFLATIONARY shock of our lifetimes (the pandemic), of course you're going to see tailwinds the year after unprecidented stimulus and consumer demand.
I recommend people focus on the long term trends rather than looking at outliers to predict the future. You could very well argue wage inflation couteracts these effects, on top of supply chain shortages.
We've literally just come off the biggest DEFLATIONARY shock of our lifetimes (the pandemic), of course you're going to see tailwinds the year after unprecidented stimulus and consumer demand.
I recommend people focus on the long term trends rather than looking at outliers to predict the future. You could very well argue wage inflation couteracts these effects, on top of supply chain shortages.
We also literally printed trillions of dollars. What are the longterm trends in your opinion?
This is a very very good point. If the short-term effects are supply-side (including labour) crisis and massive resource misallocation, how is it going to get any better once demoralisation, loss of trust kick, etc in?
Deflationary means prices going down, not demand going down.
This inflation is real, and isn't just a COVID rebound. It's bad policies leasing to lack of business confidence leading to fear of the future.
If you are posting here, odds are you work in software. Seek out some friends who work in hardware and ask them what they are seeing.
This inflation is real, and isn't just a COVID rebound. It's bad policies leasing to lack of business confidence leading to fear of the future.
If you are posting here, odds are you work in software. Seek out some friends who work in hardware and ask them what they are seeing.
Prices did go down! Oil was negative last year.
Yes, you're right. I was only calling out that the parent poster incorrectly referred to the COVID related demand slump of 2020 as a deflationary period. It wasn't.
The poster didn't refer to the demand slump as a deflationary period. They referred to the time period where prices decreased as a deflationary period.
It wasn't deflationary because of the unprecedented stimulus.
It would have been.
It would have been.
Demand went down during covid, prices absouletly went down as well.
For hardware: Demand goes up, supply goes down, prices go up. Inflation, but not related to monetary policy.
For hardware: Demand goes up, supply goes down, prices go up. Inflation, but not related to monetary policy.
>prices absouletly went down as well.
Where? On what? Prices everywhere stayed flat or increased.
Where? On what? Prices everywhere stayed flat or increased.
At the beginning of the pandemic lots of prices went down especially rents in major cities and travel.
>Demand goes up
Do you think that free / easy money had anything to do with this?
Do you think that free / easy money had anything to do with this?
I think it has more to do with individuals not having their traditional outlets for spending money (dining, bars, travel, etc) and chose to invest in covid-safe hobbies causing huge demand.
For GPUs yes, but the free money was called Bitcoin and completely unrelated to fed policy.
Is the very temporary covid deflation a bigger deflationary shock than The Great Contraction of the 1930s?
> I recommend people focus on the long term trends rather than looking at outliers to predict the future.
Both short and long term trends are important. Short term trends help us understand current situation that is different from what was happening maybe a year ago. If you only look at long terms you are blind to a lot of important processes.
Both short and long term trends are important. Short term trends help us understand current situation that is different from what was happening maybe a year ago. If you only look at long terms you are blind to a lot of important processes.
Outlier
Well, you could say that current political situation in US is an outlier. Nothing to worry about, US has had a stable democracy for centuries, the recent data is just abnormal and can be ignored.
It's an outlier until it isn't. If the trend continues then you can argue for normality.
So I understand you say that general price increase is just a statistical fluke. A lot of business owners decided to increase their prices for no underlying, common reason?
The fact is understanding the common underlying reason for the price increase is very valuable and that is why we measure short term inflation.
Would you prefer the government wait now and ignored the situation until later when it is going to be more difficult to deal with it? I thought most people usually argue the other way and claim governments are too slow to react.
The fact is understanding the common underlying reason for the price increase is very valuable and that is why we measure short term inflation.
Would you prefer the government wait now and ignored the situation until later when it is going to be more difficult to deal with it? I thought most people usually argue the other way and claim governments are too slow to react.
I figured it was related to COVID, but thanks for giving a few words to what it might be.
I have lots of data on home services, and can say with confidence they average a 20-40% increase since 2019 (they were pretty stable the prior 10 years). Housing is 20-50% more expensive since the same period. Labor costs have increased a ton. It's very hard to price as a business owner right now.
I agree it's an odd year, but it's fairly clear that the Jan 2020 to Jan 2023 inflation will be materially higher in the US than any other 3 year period since the 70s. I think most likely it will land about 40% increase over that period.
I agree it's an odd year, but it's fairly clear that the Jan 2020 to Jan 2023 inflation will be materially higher in the US than any other 3 year period since the 70s. I think most likely it will land about 40% increase over that period.
40% over a period of 3 years would be a annualized rate of ~13%.
That would indeed be unprecedented, and highly highly unlikely. Remember housing isn't the only factor in CPI calculations.
We're currently seeing ~6% annualized this year. Target goal of ~2-3%.
That would indeed be unprecedented, and highly highly unlikely. Remember housing isn't the only factor in CPI calculations.
We're currently seeing ~6% annualized this year. Target goal of ~2-3%.
> they were pretty stable the prior 10 years
Prices in popular or economically booming areas were increasing for many years before the pandemic, at a greater rate than whatever national government statistics were claiming.
Prices in popular or economically booming areas were increasing for many years before the pandemic, at a greater rate than whatever national government statistics were claiming.
Is inflation occuring in other areas as well? EU, Australia, China, etc?
[deleted]
The thing about this that always shocks me is that when they calculate prices to then compute inflation they always forget to report on quantities sold.
It's not the case with inflation, but for example with deflation economists are very scared about prices collapsing , but if that's due to a positive supply shock with quantities sold rising then it's a good news which doesn't warrant any correction.
An example is cars. Sure the price of cars maybe is rising slightly compared to the 70s-80s-90s-00s....but you are buying a totally different animal in terms of metal mass, semiconductors mass and so forth.
The term "car" is just not enough to properly describe a vehicle in 2021, because it's the exact same term used in 1970 but the they are not the same thing.
It's not the case with inflation, but for example with deflation economists are very scared about prices collapsing , but if that's due to a positive supply shock with quantities sold rising then it's a good news which doesn't warrant any correction.
An example is cars. Sure the price of cars maybe is rising slightly compared to the 70s-80s-90s-00s....but you are buying a totally different animal in terms of metal mass, semiconductors mass and so forth.
The term "car" is just not enough to properly describe a vehicle in 2021, because it's the exact same term used in 1970 but the they are not the same thing.
to my own way of thinking, the post-industrial world has always had internal efforts to prop-up the prices of mass produced goods, to repay the capital used to build factories. I think this is known but not often acknowledged in public.
>An example is cars. Sure the price of cars maybe is rising slightly compared to the 70s-80s-90s-00s....but you are buying a totally different animal in terms of metal mass, semiconductors mass and so forth.
BLS uses hedonic adjustments to account for this.
BLS uses hedonic adjustments to account for this.
I think sticking to raw materials is the answer
The periodic chart doesn't lie. Each and every element on that has a price.
If there is sand in the cogwheel that transforms raw materials into products that is surely of social nature and once you are in that realm, then all predictions and analysis capability are off. You'd be better off throwing darts in a pitch black room
The periodic chart doesn't lie. Each and every element on that has a price.
If there is sand in the cogwheel that transforms raw materials into products that is surely of social nature and once you are in that realm, then all predictions and analysis capability are off. You'd be better off throwing darts in a pitch black room
Labour isn't free.
Why would it shock you? Think about it for a minute. Collecting CPI data is simple, although a big logistical exercise: go to the shops and write down current prices (for 1000 shops and 1000 goods).
Collecting aggregate sales data has to be done at a different point - more easily done by surveying companies or collecting export/import volume data. This is done too - but only quarterly and only published way after the end of the quarter, rather than prices that are collected monthly and published after 2 weeks.
It is also done by a different agency, the BEA calculate Personal Consumption Expenditure (the volumes consumed) while the BLS collects CPI (price inflation data).
Collecting aggregate sales data has to be done at a different point - more easily done by surveying companies or collecting export/import volume data. This is done too - but only quarterly and only published way after the end of the quarter, rather than prices that are collected monthly and published after 2 weeks.
It is also done by a different agency, the BEA calculate Personal Consumption Expenditure (the volumes consumed) while the BLS collects CPI (price inflation data).
What is surprising?
All governments in the world are printing money. When the money supply increases a lot, the purchasing power is deminished for sure
All governments in the world are printing money. When the money supply increases a lot, the purchasing power is deminished for sure
If only there were non fiat currencies that resist self defeating monetary policy and hyper inflation.
“In the quarter to August used cars, hotel rooms and airfares made up less than 5% of America’s consumer-price index, but together accounted for the majority of overall inflation”
If we’re having inflation due to a tiny number of goods having large price spikes, it might be too early to predict disaster
https://www.economist.com/graphic-detail/2021/11/06/a-handfu...