Yeah, sure, if a large supply of new money is created and goes into financial assets and not consumer items, you can say there's no inflation. Just like if there are 93 million unemployed people but you only count the ones who are looking for a job. Then it's only 5% unemployed. A much tinier number. Funny how these things work, isn't it? It's almost makes a guy suspicious that there may be some kind of agenda lurking behind these new and improved definitions when they undergo an "update".
If the banks are not lending it, there is no "new" money. It sitting at the Fed as excess reserves. Look guys, you can define things however you want, do you see rising price levels out there? Of course not. Done and done. Don't tell me some shit that just because NFLX stock doubled and that condo in Del Poca Vista is up 20% year over year that suddenly we have inflation. Firms are and consumers need to get legitimate price level information to make decisions. These people don't care about your figures or mine, they are making these decisions based on the facts in front of them. Same thing with jobs. If you are not looking for a job, how the hell Huckleberry am I suppose to know you can't get one. You guys are really over complicating this.
No, mav. We're not the ones saying that if money increases the price of one thing it's inflation and if it increases the price of another thing it's not. And we're not the ones saying that an unemployed person isn't unemployed if they haven't been looking for a job the last six weeks. We're keeping things nice and simple. It seems to be your side that wants to add extra factors into everything to make sure the desired end result is obtained.
God no the yield curve isn't steepening, its flattening. The spread between 2s and 10s is currently 145bps, thats way down from the 265bps high in early 2014, or the more recent 175bps high in June. And no the fed isn't going to hike in Oct, fed fund futures indicate a near zero % probability of that happening.
This is just blatantly untrue, Mav (not the part about the banks not lending, etc...that's true). But there are rising prices out there. There are some in food, there is rent, there is medical costs, etc. These things are affecting the poor and middle class something fierce. Granted, there are falling costs like gas. The inflation exists in pockets (and of course depends on your time frame). Wages, however, are quite stagnant. The difference is that the inflation we see is cost-push, not demand-pull. I read the syndicated data reports each week, dude. I see how many price points are rising in the food aisle and how many are falling. Do you?
I don't think the Fed is going to hike for a long, long time. And forget about normalization. Didn't Bernanke say we wouldn't see rates normalize in his lifetime? They're stuck. They've screwed themselves (and us) in this liquidity trap. Mav said it earlier in this thread (and I concur). Debt is merely future consumption pulled forward and is deflationary. Well, eventually you get to a point where no more debt can be taken and added to the existing burden. At that point there is no present OR future consumption without a reset of debt (or inflating the debt away).
A good read on why Rent is so vastly under reported in the CPI/PCE. Hooray! Huge Rent Hikes Coming; How Will It Affect Price Inflation? In news that is bound to make the inflationists at the Fed as well as property owners happy, Landlords Will Hike Rents by 8% this Year. Some 88% of property managers raised their rent in the last 12 months and 68% predict that rental rates will continue to rise in the next year by an average of 8%, according to a survey of more than 500 of Rent.com’s property management customers, which the site says represents thousands of rental properties and hundreds of thousands of rental units. That’s nearly three times the wage increase that most employees can expect this year. What’s more, 55% of property managers said that they are less likely to offer concessions or lower rents in order to fill vacancies. One reason why they’re getting even tougher: They are in a stronger position than they were this time last year. More than 46% of property managers surveyed reported a decrease in rental vacancies in Rent.com’s survey and, in the second quarter of 2015, vacancy rates in the U.S. for rental housing was 6.8%, the lowest it has been in almost 20 years, according to data from the U.S. Census Bureau. Despite this, many renters are spending more than 30% of their income on rent (the amount generally recommended) and need help qualifying for the lease. Yardi Survey Reader "BJ" is retired but works part-time a number of hours each week, surveying apartments for rent. He reports ... Hi Mish I am retired but work part-time for Yardi from my home, surveying apartments for rents. Yardi runs a full survey 3 times a year, Jan, May and Sept. These generally run about 6 weeks. Yardi has the country divided into 24 sectors and we normally work 6-7 sectors once a month for a week on a rotating basis. Toward the end of the survey, we can work any market and I've been keeping track of a few select places. From what I see, rents are up and up a lot. Some of the places I watch are up 7% or more than last year for the same apartments. The absolute worst places to be looking for a rental unit are San Fran and North LA. If anyone does answer the phone in those areas, it's either a new building just opening, or they don't have anything. You can't even get on a waiting list. I've seen apartments in tight areas where they want you to make 3X net before they will talk to you. Portland, Seattle, Washington DC, northern NJ, Miami and Boston are also difficult. I talked to a complex in Portland last week that had 3500 apartments under management with a total of 7 open apartments. I am amazed by the amount of apartments that are either tax credit or subsidized in some manner. All of them have long waiting lists. Measuring Housing Inflation The Fed wants inflation. But how do they measure it? The Fed's preferred measure is PCE (personal Consumption Expenditures) price changes, not the CPI. The housing components are quite dissimilar. Sam Ro writing for Business Insider explains the Difference Between PCE And CPI. Why does the Fed prefer PCE over CPI? Societe Generale's Aneta Markowska explained in a June 19 research note: "The official switch from CPI to PCE occurred in 2000 when the FOMC stopped publishing CPI forecasts and began to frame its inflation projections in terms of the PCE price index. This shift, announced by Alan Greenspan during his testimony to Congress, came after extensive analysis done by the Fed. The conclusion was that the PCE has several advantages over the CPI, including (1) the changing composition of spending which is more consistent with actual consumer behavior, (2) the weights, which are based on a more comprehensive measure of expenditure, and (3) the fact that PCE data can be revised to account for newly available information and improved measurement techniques." PCE vs CPI Doug Short at Advisor perspectives Deconstructs the CPI as follows. That pie chart was produced from the December 2014 BLS PDF on the Relative Importance of Components in the Consumer Price Index But housing contains shelter, insurance, fuel, rents, and other items. Here is a breakdown of shelter. Housing Components in CPI 42.173 ….Shelter 32.711 ……..Rent of Primary Residence 7.159 ……..Lodging Away from Home 0.839 ……..Owners' Equivalent Rent 24.339 ……..Tenants' and Household Insurance 0.375 ….Fuels and Utility 5.273 ….Furnishings 4.189 Please note that home prices are nowhere to be found. The Fed believes homes are a capital expense. The BLS also ignores home prices, and neither accurately count rents. Of the 32.711% weighing to CPI "shelter" only 7.159 percentage points are assigned to rent. The largest single item is Owners' Equivalent Rent (OER) accounting for a whopping 24.339% of the CPI. Owners' Equivalent Rent The BLS Explains How the CPI Measures Price Change of Owners' Equivalent Rent. The expenditure weight in the CPI market basket for Owners’ equivalent rent of primary residence (OER) is based on the following question that the Consumer Expenditure Survey asks of consumers who own their primary residence: “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?” The following questions, asked of consumers who rent their primary residence, are the basis of the weight for Rent: “What is the rental charge to your [household] for this unit including any extra charges for garage and parking facilities? Do not include direct payments by local, state or federal agencies. What period of time does this cover?” From the responses to these questions, the CPI estimates the total shelter cost to all consumers living in each index area of the urban United States. Essentially the BLS asks home owners how much rent they would pay if they rented their own homes from themselves. And that is the single largest component in the entire CPI. Not only does the Fed and BLS miss housing bubbles, they do not even accurately measure "rent". But hip, hip, hooray! This will have at least some impact on the CPI and PCE so the inflationist fools will be cheering as the average renter gets crushed. Mike "Mish" Shedlock
A "few" people on this thread claim to have a "side". I don't have a side. I am not pro-fed or anti-fed. I'm not in anyone's camp. I'm looking at data. There is NO price inflation. There is ASSET inflation. These two things are NOT the same thing and no, one does not lead to the other. God it's so frustrating explaining this to some people on here. Yes Tsing, I agree rental rates are to some degree under-reported but there is a reason for that. Some part of the economy is "benefiting" from that. So your rental pain is someone else's rental gain. In the aggregate economy these are offsets. That's another thing many are struggling with here. Higher asset prices actually hurt some and benefit others. Same with rates. Same with CPI levels. The Fed is trying to target long term GDP growth at a stable inflation level. THAT is their objective. Well, we are not at our long term growth target on either. That is a irrefutable fact. Now there are many complex factors at work that muddy the waters and most of them are on the fiscal side. We outsource labor to poor countries so our input costs are dirt cheap and that is contributing to a lack of growth on several levels. It affects prices directly through cheap labor causing product prices to be lower and it also means those high paying manufacturing jobs that could add to output are not adding to aggregate output for us. I think some of you guys needed to be drawing your focus to government policies and not to the Fed. The Fed does not make government policies. You guys lump everything into one bucket and make an argument. That doesn't work for me. Look at long term bond yields and show me where the inflation is. You know bond traders are pretty good at picking up on this stuff, their livelihood kind of depends on it.
No, but there is no incentive for government policies to change or for fiscal policy to act when monetary policy is papering over all the issues. As for inflation, you can play semantics games and call it asset inflation or price, I don't really care. But I see prices rise on things the poor and middle class are more impacted by, and then I see the Fed say there's no inflation. That's a problem, and you can ignore it if you want - but it doesn't make it go away.