Why inflation may be worse than you think it is

[Dukasaur]

https://www.npr.org/sections/money/2021/10/26/1048892388/meet-skimpflation-a-reason-inflation-is-worse-than-the-government-says-it-is?

"And I was on the New Jersey Turnpike, and I went through rest stops. And I noticed little things that were off," Cole says. Stores had spotty hours. Napkin, utensil and condiment dispensers were empty. Fast-food restaurants weren't fast. He could see Help Wanted signs everywhere. "The rest stops were struggling to keep up the same level of service that they had before."

On his way back from Vermont, he stayed at a hotel in Poughkeepsie, N.Y. The morning after his stay, he woke up to a "sad and pitiful" breakfast that consisted of a plastic-wrapped, mass-produced pastry, prepackaged Raisin Bran and lukewarm milk. The hotel was now skimping on its hot-breakfast buffet as well as maid service for guests who stayed for more than one night. This, Cole realized, was happening across the entire economy — and he began to think the government wasn't fully capturing the decline of quality in official statistics.

Cole was formerly a senior economist at the Joint Economic Committee of the U.S. Congress, where he used to advise Sen. Mike Lee, R-Utah, and write official economic reports. These days he's a writer at Full Stack Economics. For most of his economics career, he says, he had believed that official government statistics actually made inflation seem worse than it really was. He had thought they didn't fully capture improvements in the quality of products and services when quantifying changes in prices.

For example, a couple of decades ago, you had to fork over a lot of money to buy physical albums if you were a music lover. Now you can use Spotify and listen to basically every album ever recorded in history for free or a low monthly fee. Some products, like electric skateboards, didn't even exist in the recent past. The government tries to capture such innovations and product improvements with a process called "hedonic quality adjustment."

But Cole believed that the government, while accounting for quality improvements, still failed to capture how much better products and services were getting. He didn't believe it was some sort of Illuminati conspiracy of Satan-worshipping pedophiles juicing the statistics. It's just super-hard to systematically account for changes in quality when measuring changes in prices. How do you gauge the priceless improvements to our lives brought about by things like Google's search algorithm, the Onewheel electric skateboard or baguette slippers?

Mismeasuring inflation has important implications. For example, it's common to hear people argue that the real, or inflation-adjusted, wage of the typical American worker has stagnated in recent decades. But if the government has been overstating inflation in its statistics, this means American workers' paychecks actually go further and living standards have gotten better than official statistics say.

[jusplay4fun]

More demand (a) while a constant or even declining supply (b) = inflation.

(a) (more "FREE" money from the government for those who "qualify")

(b) (ever hear of "supply chain" issues? that will be in the News for the next 6-15 months, in some form, imo)

More money chasing fewer goods and services = inflation.

AND then (in the USA, and elsewhere, most likely) the government PAYS people NOT to work to produce those needed Goods and Services. INFLATION.

Thanks, stooopid liberal Democrats. Take a course in and remember basic economics; maybe learning this by owning and running a business will help. This is what happens when some elect bartenders to Congress.

THANKS, Joe Biden.

[HitRed]

FRONTLINE has some good reporting. Attached is the link for the episode about the Federal Reserve during the pandemic.

https://www.pbs.org/video/the-power-of-the-fed-zzeu12/

[jusplay4fun]

Manchin fires back at progressives: Trillions in spending 'fiscal insanity'
BY JORDAIN CARNEY - 09/29/21 05:46 PM EDT

Sen. Joe Manchin (D-W.Va.) fired back at his progressive critics on Wednesday, warning that he views trillions in spending to be “fiscal insanity.”

Manchin issued a lengthy statement on Wednesday that reiterated his concerns about the sweeping size of the spending bill being pushed for by progressives, but with few new specifics on what he would support.

“What I have made clear to the President and Democratic leaders is that spending trillions more on new and expanded government programs, when we can’t even pay for the essential social programs, like Social Security and Medicare, is the definition of fiscal insanity,” Manchin said in the statement.

https://thehill.com/policy/finance/574574-manchin-fires-back-at-progressives-trillions-in-spending-fiscal-insanity

more from the same source:

Manchin, however, argued that he had been clear about supporting changes to the tax code and wanting work requirements on benefits included in the bill.

“Since the beginning of this reconciliation debate, I have been consistent in my belief that any expansion of social programs must be targeted to those in need, not expanded beyond what is fiscally possible,” he said.

“Our tax code should be reformed to fix the flaws of the 2017 tax bill and ensure everyone pays their fair share but it should not weaken our global competitiveness or the ability of millions of small businesses to compete with the Amazons of the world,” he added.

[HitRed]

https://fred.stlouisfed.org/series/M2V

Interesting

[HitRed]

This one is critical

https://fred.stlouisfed.org/series/WM2NS

[jusplay4fun]

More interesting and could be critical, too:

https://www.politico.com/news/magazine/2021/10/27/kyrsten-sinema-ambition-loyalty-517224

Chaos isn’t a bad way to describe her impact in Washington right now; she’s not only holding up her own party’s biggest national priority, but she’s famously unclear about her reasons why. Joe Manchin (W.Va.), the other most-intransigent Democrat, can’t stop talking about his motives. Sinema isn’t even calling her friends. She’s rocketed into the national zeitgeist as an enigma, one of the least understood politicians in Washington.

also:
https://en.wikipedia.org/wiki/Kyrsten_Sinema

[Dukasaur]

Thanks, stooopid liberal Democrats..

It's funny how you're the first one to complain when people substitute name-calling for argument, but you're not afraid to do it yourself.

Take a course in and remember basic economics; maybe learning this by owning and running a business will help.

Does it occur to you that maybe people know basic economics quite well?

Nobody is unaware that with big spending projects there is a probability of inflation. Perhaps you may ponder that people are aware of it, but that they consider it the lesser of two evils. That the small harm caused by inflation, balanced against larger harms that the spending projects are attempting to fix, and that some people, fully intelligent and economically-educated, have compared the two and quite soberly assessed the inflation as the lesser of the evils.

[jusplay4fun]

Thanks, stooopid liberal Democrats..

It's funny how you're the first one to complain when people substitute name-calling for argument, but you're not afraid to do it yourself.

Take a course in and remember basic economics; maybe learning this by owning and running a business will help.

Does it occur to you that maybe people know basic economics quite well?

Nobody is unaware that with big spending projects there is a probability of inflation. Perhaps you may ponder that people are aware of it, but that they consider it the lesser of two evils. That the small harm caused by inflation, balanced against larger harms that the spending projects are attempting to fix, and that some people, fully intelligent and economically-educated, have compared the two and quite soberly assessed the inflation as the lesser of the evils.

I complain when name-calling is the ONLY argument some make. I do think I offered more analysis and not such a cursory attack that is only a poor attempt at distraction.

I am not sure most have gone that far in their analysis, Duk. They would rather complain about the rising prices of food and gasoline and BLAME IT ALL on Biden.

Of course everyone has some economic sense about money and spending. I am not sure many know how to manage money well. Thank God my wife does...!

You, Duk, you know basic economics (and other topics, too). I will argue that many do not. And when I say 'basic economics " I do NOT mean what you cited above. I mean understanding (1) supply, demand, and how they relate to price; (2) the role of money and the money supply; (3) fiscal policy and taxation, too, as they relate to economic activity; (4) how the stock market and investments impact the economy; (5) macro economic issues; (6) other topics that are important to economic matters (that I am too tired to think about at this time). These are what one learns in a Basic Economics course, Econ 201 and 202.

Note that Econ is usually not a freshman level course. I will add that took 300 level classes in Econ as I investigated what such classes offer as I explored Econ as a possible major for me in college.

Further, one reason I decide NOT to major in Economics in college was that there was no real way to test the theories offered. There are two major schools of economics (Keynesian and monetarists) and there is no way to know with any certainty which one better explains behaviors, results, and future economic outcomes. I do not like its ambiguity. I opted to major in Chemistry instead.

[HitRed]

Second quarter real GDP in the U.S. grew at 6.5% on an annualized basis, lower than consensus estimates.

Steve Hanke, professor of Applied Economics at Johns Hopkins University, told David Lin, anchor for Kitco News, that market participants are not accurately factoring in inflation growth.

“It is lower than the consensus number and my take is that it would be a bit lower than the consensus. I wasn’t surprised by that, but you have to put it in context” he said. “6.5% is about three times higher than the normal potential growth rate of the U.S. economy, which is more or less, back of the envelope, around 2%. So, the real economy is hot. 6.5% is a hot number.”

Hanke said that inflation is likely to persist upwards and reach 9% by year-end.

[jusplay4fun]

https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20210922.htm

Economics and inherent Uncertainty

Forecast Uncertainty
The economic projections provided by the members of the Board of Governors and the presidents of the Federal Reserve Banks inform discussions of monetary policy among policymakers and can aid public understanding of the basis for policy actions. Considerable uncertainty attends these projections, however. The economic and statistical models and relationships used to help produce economic forecasts are necessarily imperfect descriptions of the real world, and the future path of the economy can be affected by myriad unforeseen developments and events. Thus, in setting the stance of monetary policy, participants consider not only what appears to be the most likely economic outcome as embodied in their projections, but also the range of alternative possibilities, the likelihood of their occurring, and the potential costs to the economy should they occur.

[HitRed]

I’m making another large silver purchase on Monday. I may double it. The past few days I have been reviewing the 1970’s and 2009. On this current M2 chart (see link below) they are almost impossible to see. Then look at Mount Everest starting in 2020.

https://fred.stlouisfed.org/series/M2SL

[jusplay4fun]

Updates on inflation:

#1

BREAKING|Nov 10, 2021,11:19am EST|1,374 views
Biden: Reversing Inflation ‘Top Priority’ After Consumer Report Shows Climbing Prices

TOPLINE President Joe Biden responded to the Consumer Price Index report Wednesday, which showed U.S. consumer prices had their largest surge in more than 30 years, saying there is “more work to do before our economy is back to normal,” and using the opportunity to urge lawmakers to pass his Build Back Better plan.

https://www.forbes.com/sites/annakaplan/2021/11/10/biden-reversing-inflation-top-priority-after-consumer-report-shows-climbing-prices/?sh=2cf7dd654a65

BIG NUMBER
6.2%. That’s how much inflation has increased in the past 12 months, according to the Consumer Price Index report.

CHIEF CRITIC
Republicans have honed in on inflation concerns, and some have argued that Biden’s plan will make the problem worse. Senate Minority Leader Mitch McConnell (R-Ky.) said earlier this month that inflation is a “direct result of flooding the country with money,” adding that Biden’s plan would add “another massive, reckless tax and spending spree.” House Minority Leader Kevin McCarthy (R-Calif.) echoed a similar sentiment in a tweet Wednesday, saying that the Build Back Better plan will spend “trillions that will only make this crisis worse.” Rep. Jim Banks (R-Ind.) wrote in a memo that focusing on inflation and supply chain issues is “hitting home with voters,” and referenced the results of the Virginia gubernatorial election. “We need to keep hammering away and work on bringing solutions to the table to address their concerns,” he wrote.

CRUCIAL QUOTE
Sen. Joe Manchin (D-W.Va.) said in a tweet “the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse.” Manchin has been one of the major holdouts on passing Biden’s Build Back Better plan, first saying the $3.5 trillion price tag was too much, and last week adding that he needed more time to evaluate the lowered proposed cost of $1.75 trillion. Manchin added that Washington can “no longer ignore the economic pain Americans feel every day.”

SURPRISING FACT
More than two-thirds of Americans said inflation is a “very big concern,” outpacing worries on Covid-19, according to a Reuters/Ipsos poll released last week.

#2

Remarks by President Biden in Press Conference
NOVEMBER 02, 2021
•
SPEECHES AND REMARKS

https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/11/02/remarks-by-president-biden-in-press-conference-5/

Q And then, a follow-up: You mentioned the word “inflation” there. You recently said you have no short-term answer to bring down gas prices. But, as you know, it’s not just gas prices now. Rents are up. The cost of everyday items are up. Inflation in the U.S. is at a 13-year high.

So, when specifically should Americans expect those prices to come down?

THE PRESIDENT: Well, look, first of all, the significant reason why prices are up is because of COVID affecting the supply chain. I mean, I know you — I’m not trying to be instructive; I know you know this. Number one.

Number two, if you take a look at, you know, gas prices and you take a look at oil prices, that is a consequence of, thus far, the refusal of Russia or the OPEC nations to pump more oil. And we’ll see what happens on that score sooner than later.

Number three, I think if you take a look at what we’re talking about — you look to this coming Thanksgiving — you know, we’re in a situation where we find that we are in a very different circumstance.

Last Thanksgiving, you know, I — as I said, this year, we’re working on the supply chain issue. But last Thanksgiving, I sat down with my wife, my daughter, and my son-in-law. This Thanksgiving, we’re all in a very different circumstance. Things are a hell of a lot better, and the wages have gone up higher — faster than inflation. And we have generated real economic growth.

It doesn’t mean these dislocations aren’t real. They do affect people’s lives. For example, one of the reasons why I decided to talk about the need to deal with the operation and the gouging that occurs in some of the pricing of beef and chicken and other things is that that’s why I think I indi- –that’s why I indicated to you we’re going to look at whether or not there’s a violation of antitrust laws and what they’re doing.

So, there’s a lot to look at. But the bottom line is that I think that — and anyone who would prefer, as bad as things are in terms of prices helping — hurting families now, trade this Thanksgiving for last Thanksgiving.

Q Thank you, sir.

#3

Biden again rejects inflation concerns, claims price spikes are temporary

https://nypost.com/2021/07/22/biden-again-rejects-inflation-concerns-claims-its-temporary/

President Biden on Wednesday night again rejected concerns that inflation could be more severe and longer-lasting than previously thought — even as a chorus of voices on Wall Street have begun to accept that recent price spikes could stick around.

Danielle Lippi, a student and a registered Republican, asked Biden about the latest inflation data at CNN’s town hall in Ohio on Wednesday evening.

“Are you concerned about the higher inflation prices, especially as we see gasoline, automotive, and food prices increase rapidly?” she asked.

“What is your administration doing to help prevent the economy from overheating, such as the poor and middle class are not hurt by the higher prices of goods in the long run?”

Biden’s dismissal of inflation echoes comments made by Federal Reserve Chairman Jerome Powell, who acknowledged last week in front of Congress that inflation will likely stick around at high levels for a few months, but will eventually come down.

Despite Powell’s view, some of the biggest players on Wall Street have raised the alarm that inflation could be worse than the feds are prepared for.

“I worry about inflation. I do not believe inflation is going to be transitory,” BlackRock CEO Larry Fink told CNBC last week. Instead, he said, “It’s going to be more systematic over time.”

“How the Federal Reserve and how other central banks navigate that is going to be very important,” he added.

[jusplay4fun]

I’m making another large silver purchase on Monday. I may double it. The past few days I have been reviewing the 1970’s and 2009. On this current M2 chart (see link below) they are almost impossible to see. Then look at Mount Everest starting in 2020.

https://fred.stlouisfed.org/series/M2SL

This graph of M2 that HitRed has found and referenced gives a good indication of the high rate of inflation about to get EVEN WORSE. Please examine this graph.

There are too many Stooopid Politicians that think that throwing money at problems is the only answer to solve any and ALL problems. They do not realize the impact of such foolishness on the Economy.

They are borrowing or merely PRINTING money, thus increasing demand while enacting policies to reduce supply. And then DISCOURAGE workers working to PRODUCE some or MORE goods and services to meet that demand. More Demand and less Supply leads to higher prices; i.e., INFLATION.

https://www.forbes.com/sites/rcarson/2021/10/19/what-does-the-largest-social-security-cola-increase-in-40-years-mean-for-your-retirement/?sh=4e21b51539d9

Oct 19, 2021,11:15am EDT|6,010 views
What Does The Largest Social Security COLA Increase In 40 Years Mean For Your Retirement?

Americans receiving Social Security benefits in 2022 will see the largest increase in their payments in four decades, according to the Social Security Administration. The 5.9% cost-of-living adjustment (COLA), announced in mid-October, will translate to an additional $92 for retirees’ average monthly benefit next year, bringing that estimated amount to $1,657. While that’s a significant increase over the 1.3% COLA that went into effect in January 2021—and is certainly good news for those seniors who rely on Social Security benefits for all or a portion of their income in retirement—it comes with a caveat. The increase is driven by the steep rise in inflation over the last 12 months, which reduces the buying power of consumers, especially those living on fixed incomes in retirement.

How does inflation factor in?
In October, the U.S. Department of Labor (DOL) announced that its broader measure of inflation, the consumer-price index, rose 5.4% in September from a year earlier, marking the largest annual gain since 2008. According to the DOL, prices have increased significantly from a year ago for gas (+42.1%), used cars (+24.1%), furniture (+11.2%), appliances (+7.1%), and meat, fish, poultry and eggs (+10.5%), among other consumer goods. As a result, much of the Social Security COLA increase will be absorbed by the rising cost of goods and services and the projected annual increase in Medicare Part B premiums, which rise from $148.50 in 2021 to $158.50 in 2022. For most retirees, Medicare Part B premiums are automatically deducted from their monthly Social Security benefit payments.

[HitRed]

The Velocity of Money

The velocity of money is a measure of the number of times that currency is used to make purchase within a given time period. This morning consumer spending was higher than excepted. This might be good news for the economy. It also might be consumers are concerned about inflation.

Excerpt from Kitco News

One caveat to the numbers released today is that spiraling inflationary pressures greatly enhanced the amount of spending, which inflated the retail sales numbers that were reported today.

[jusplay4fun]

U.S. inflation hit a three-decade high in October, delivering widespread and sizable price increases to households for everything from groceries to cars due to persistent supply shortages and strong consumer demand.

The Labor Department said the consumer-price index—which measures what consumers pay for goods and services—increased in October by 6.2% from a year ago. That was the fastest 12-month pace since 1990 and the fifth straight month of inflation above 5%.

Again:

1) Look at HitRed's graph of M2; it is cogent.

2) HitRed mentions velocity of money, something I have not even THOUGHT about in many years. Good Point, HR.

3) and note basic economics of how prices are determined when compared to Supply and Demand. THAT is NOT rocket science.

4) I do know a BIT of Rocket Science , but I am not a Rocket Scientist. I do know one, personally, too.

[HitRed]

https://www.kitco.com/news/2021-11-17/C ... e=fullsite

[thegreekdog]

The Velocity of Money

The velocity of money is a measure of the number of times that currency is used to make purchase within a given time period. This morning consumer spending was higher than excepted. This might be good news for the economy. It also might be consumers are concerned about inflation.

Excerpt from Kitco News

One caveat to the numbers released today is that spiraling inflationary pressures greatly enhanced the amount of spending, which inflated the retail sales numbers that were reported today.

Anecdotally, I suspect people are doing holiday shopping early (not because of inflation directly, but because of a lack of supply compared to demand... which is probably related to inflation).

An interesting byproduct of COVID and damaged supply chain is whether US companies will begin manufacturing again in the US to solve the supply chain problem. I have not seen it written nor have I seen any bills proposed to encourage this type of US-based manufacturing.

[HitRed]

An interesting byproduct of COVID and damaged supply chain is whether US companies will begin manufacturing again in the US to solve the supply chain problem. I have not seen it written nor have I seen any bills proposed to encourage this type of US-based manufacturing.

I heard of one. Konica-Minolta had a toner plant in China caught fire and then moved production to Japan. Now KM is going to have two plants. One in Japan and one in the USA.

[riskllama]

always nice to see you around, tgd - stay cogers...

[jusplay4fun]

Money Growth, Money Velocity, and Inflation

Low, stable inflation optimizes economic growth.

Inflation results when aggregate demand exceeds aggregate supply.

Aggregate demand is influenced both by the supply of money and the velocity of money.

The classical theory of inflation states that money growth causes inflation.

Inflation depends on money growth and the velocity of money.

The velocity of money equals the average number of times an average dollar is used to buy goods and services per unit of time.

https://thismatter.com/money/banking/money-growth-money-velocity-inflation.htm

[mookiemcgee]

Money Growth, Money Velocity, and Inflation

Low, stable inflation optimizes economic growth.

Inflation results when aggregate demand exceeds aggregate supply.

Aggregate demand is influenced both by the supply of money and the velocity of money.

The classical theory of inflation states that money growth causes inflation.

Inflation depends on money growth and the velocity of money.

The velocity of money equals the average number of times an average dollar is used to buy goods and services per unit of time.

https://thismatter.com/money/banking/money-growth-money-velocity-inflation.htm

I find it interesting you haven't once brought up tarrifs and the trade war with China as a fundamental source of our recent inflation pressure. yet you've listed 'stoopid dems and joe biden' and 'gov't spending'. The supply of money certainly has an impact, as does the inelasticity of our supply chain. But maybe you need to dig a little deeper in your research. People talk alot about the 'causes' of inflation, but lets not forget the definition itself is 'prices go up'. We still buy almost everything from China except for our food, and virtually all of those good are still being 'tarrifed' at 25% or higher which one way or the other means massive inflationary pressure. I guess since the media doesn't talk about tarrifs and the trade war anymore people have forgotten? For a while companies were able to absorb those costs and not directly pass them on to the consumer, but the supply chain disruptions due to covid and rising transport costs means there is no more room for companies to absorb it and consumer prices rise. Congrats republicans, you've stoped the globalist agenda but now you are paying more for things... time to ignore what you've spent four years doing and blame newly elected democrats!

[riskllama]

but wait a sec, mook...i thought Trump won the trade war w/china.