Inflation (increase in supply of money/credit) leads to huge distortions in valuations. Speculative type things that don't add intrinsic value get rewarded than real production and savings is one basic generalization. Costs of outright ownership of say a house go up as this ZIRP is about cheap financing with teaser rate as opposed to putting down a legit down payment. Homes are not 'affordable' just because rates are low. The Keynesian definition of inflation is wrong and in measuring one of the effects of it--rising prices--they are using sleight of hand and substitutions and hedonics to keep it lower to save face. I don't buy TVs daily. Measuring rising prices means measuring changes over time of the SAME exact good, not what is 'now acceptable' a la smaller box sizes etc.
Anything can happen. Goldilocks 2014 for long stocks and short bonds ? Why not. Higher inflation expectations and real rates on going for months now . Rates are not close To high enough to de-rail stocks , and are a tailwind IMO, historically that is. CPI is all that counts. Forget basket of goods. Yeah retail, consumer spending,wages, loans,V of money and corp earnings are not well But who cares?. Its all about CB's managing taper, rates, emerging markets and Europe. Seems to me a gradual taper is quickly being priced in. We are ignoring weak PA in commodities and most emerging markets due to taper and USD strength now. That/this was a hell of a 1.8% correction in the Sp500 we just had and IWM is super strong. My prediction for 2014 is worldwide CB response to volatility. Just jawbone a pause in tapering during any volatility or stress and stocks will soar. I have a baseball cap with a CB moniker.
This regime of 'deficits/debt doesn't matter' will end, and I don't think it's far off. They can print currency, but they can't print purchasing power. Things like CPI and unempl. rate are huge farces. Look at this past month's NFP. That narrative is getting exposed and always was predicated on pure posturing 'control of things' when in reality nothing has been fixed because instead of letting the recession run its course and learning lessons from it about cheap credit, malinvestments, etc., they just doubled down on ZIRP and the spending hasn't stopped one bit. It has taken astonishing measures on the parts of the big banks to suppress the gold price--look at what happened to silver once it approached $50 a few years ago--but the physical/paper discrepancy is about to get exposed. More and more corporations are on the government dole themselves in some form or another, and only they are able to deal with the huge compliance costs of all the red tape and 0bamacare, so their ascent is not really a free market phenomenon of competition breeding the best, but rather rent-seeking and getting to build moats around competitors. This is corporatism/fascism.
Wasnt it Bernanke that said he could stop inflation in 15 minutes.? I am curious as to what the mechanics of this would be. I dont know. Seize reserves short term? Bump overnight rate? Thanks.
hahahah. capitalzm is good if you on the receiving side. now US is on losing side and faschism seems much better option. Funny thing they copying germans ww2 style they are bashing. new world emerging, with old winners becoming new losers.
the inflation has already been unleashed. The central banks have bought tons of toxic debt off the books of their shareholder banks that the private markets wouldn't touch, but wait until they try to offload their balance sheets and have to mark to market these 'assets'. Reality will set in eventually. This has been on the credit card as the U.S. is no longer an economic powerhouse based on industriousness and productivity as it was in the 19th and early 20th century. Instead it has spent all that wealth and lost its way and is using force and cabals of western nations to try to preserve a standard of living that cannot be afforded. People have fallen for the siren songs of 'security' in exchange for their liberties.
Capitalism is synonymous with voluntaryism, or it can be put as anarcho-capitalism. There is no state. The state is done at gunpoint; market transactions are conducted with handshakes. Fascism is merging of state and big business. The spectrum runs from anarcho capitalism to statism.
Although it seems that the actual price inflation experienced by middle class Americans reflects the Williams numbers more closely than the official government CPI, Williams can be fairly criticized for his very empirical means of adjusting the government CPI to what he considers to be the CPI as it would have been computed by the government in the mid 1980s. He does it by simply adding a constant to the government figure! Another point that he can be fairly criticized on is his ignoring of the legitimate reasons for, and advantages to the economist, of changing the method of computing price increases to take quality into account. Nevertheless his numbers seem closer to the everyday experience of most of us. And too when the Williams numbers are compounded they reproduce to high accuracy the actual increase experienced in College and University tuitions. I have done those calculations myself, and was rather astounded at the good agreement.
Again, inflation is the increase in the supply of money and credit. Rising prices, along with the malinvestments, are symptoms, not inflation itself. But in measuring the effect of rising prices, I want to see what is happening to commodities over time. Things like fuel, staple foods, etc. TVs and things like that are subjective, and also people don't buy TVs daily like they do food and fuel. TVs going down in price despite the inflation out there attests to what happens in a free market where tech improvements lead to falling prices as it takes less inputs (a blessing of capitalism--and think how much cheaper these things would be if there were sound money, too). Yes commodities have supply/demand idiosyncrasies, but they are paid for with Federal Reserve Notes, whose supply has grown hugely, meaning it takes more of them to buy these goods. It's unbelievable how stupid people are for falling for the deflationary bogeyman story. Yeah, countries throughout history have always suffered ills when their currency gets too strong, /sarc. Prices falling reflects productivity gains being reaped by the real value creators out there. But under this usurious system of central banking, the people at the top get the newly printed fiat first and spend it and eventually it works its way through into higher prices. They are siphoning wealth away covertly. They have already unleashed the inflation. It is taking foreigners willing to import US inflation for now to keep the system afloat, and those days are ending.
OKI-DOKI, so when you say "the everyday experience of most of us", I am genuinely curious. Tuition fees apart (the official CPI for tuition, school fees and childcare has in fact been running at well above 5% YoY throughout the 1990s and 2000s), have you collected any data on your "everyday" experience? The reason I ask is that I am actively involved in the inflation mkts. I spend a great deal of money and effort to collect timely and accurate data on prices. So I am always very curious for whatever information on actual inflation people might have.