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GMO's James Montier On The Rise Of The Aust(e)rians: "Any Deflationist Victory Would Result In The Rapid Arrival Of QE2"
The ever insightful James Montier of GMO presents a short, sweet, certainly controversial (he espouses stimulus over austerity) and to the point essay on what everyone at Zero Hedge realizes (or should by now) all too well: "If the Austerians and their ilk win the day, we may see some short-term deflationary pressures and, as noted above, they will be even more dangerous than they were previously because we are starting with no margin of safety in terms of the inflation rate. However, the U.S. at least has a central banker who seems to understand the risk. Despite his complicity in getting us into this mess in the first place, Ben Bernanke has shown he understands the risks that deflation poses, especially in a debt-laden economy, and believes that he has sufficient tools to prevent deflation from gaining traction in the economy (even with rates at zero). Indeed, he has given speeches where he has laid out a menu of policy options in the event of deflation risk. First on the menu was aggressive currency depreciation; second was the introduction of an inflation target; third was money-financed transfers (effectively, tax cuts financed by printing money); and, finally, quantitative and qualitative easing. Ergo, the “good news” arising from an Austerian victory would be the rapid arrival of QE II. Thus any short-term deflation will ultimately lead to long-term inflation pressures." Montier once again brings up the ever more critical Current Account equation. By now it is more than clear that deleveraging by both private and public sectors will not end well, however throw in the inability to fund the Current Account, and you can see where our concerns about the $1.3 trillion collapse in shadow banking lending in Q1 2010, and the ramifications on our CA as foreign banks null and void their shadow exposure, will soon be the most discussed topic by pundits. So aside from the obvious investment choices, how does a professional
money manager (it is kinda tough to tell your LPs "all your 2 and 20
generating assets are tied up in zero cash yielding gold" unless one's
last name ends in -aulson, -horn or -rott), how does one plan for "A
flight path that contains short-term deflation and long-term
inflation?" Read on to find out (and no, it's not US Treasurys).
h/t Adam
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whether the road we take is stimulus street, or austerity avenue... the destination is ruin, regardless.
But if you want to keep your soul, there only one path to follow even if the material result is the same...
[this comment if only for those who have a soul]
[and no basement cat jokes, please :) ]
Ok, I'm gonna lay it out there for everyone, including the goldbugs. First of all, people need to realize that long before America crashes into some smoldering ruin, our Caesar is going to literally & figuratively cross the Potomac.
It doesn't matter who it is, and it also doesn't matter what you or I want. (Please note that I am not advocating this action, merely observing that it will come to pass.) History always turns out this way for the simple reason that people are biological beings, and our internal programming goes way, way back. All the way back to yeast, in fact, but the point being is that a "strong man" always emerges.
Now, what is the first thing our Caesar is going to do? Why, he's gonna jail around 10,000+ bankers, politicians & bureaucrats, including Bernanke and other dual passport holders. This means the Fed will be terminated. What is going to replace FRNs? Gold? I don't think so. Denninger is right (as usual) on this one. Treasury will issue new money backed by a composite of hard assets, gold being part of the overall basket.
These Keynesien nuts are just that - nuts. There is only one possible way out to save their collective hides, and that is if 3-6B souls on this lonely planet all wake up one day and figure out they're gonna get rich.
Again, it doesn't matter what the fuck the asset class is, it only matters that there's a mad rush to acquire as much financing as possible. Unless & until we start reading stories about people camping out in line, praying that their loan applications are accepted, and bragging to friends/family about how rich they are becoming, this mofu is gonna crash.
Potomac = Rubicon?
Bluebacks!
What if there is a crash and the MSM doesn't report it?
Douchinger hasn't predicted the end of the FRN, in fact, exactly the opposite.
Any asset-backed currency is functionally equivalent to any other. The market determines the ratio between commodities
Dave, Dave, It's me man. Open the door!
Keynsian nutballs don't know how the economy works, so they burp up batshit stuff like the fable of the bees to prove it. He should also advocate carpet bombing major US cities as the rebuilding would be a splendid..ahem...BOOM!....LOL I crack myself up!
Mises rightly wrote that for a bubble to continue, not only must the credit expansion contimue, but it's rate of change must be positive as well.
T'aint any longer. Implosion inevitable.
Cheers,
They just don't get it.
There is no lasting victory against the equation. Humans win many battles along the way but the equation always wins the war.
For the system to continue the system must expand exponentially which is an impossibility for humans.
"and believes that he has sufficient tools to prevent deflation from gaining traction in the economy (even with rates at zero)"
Hahahahah, what is that a swiss army knife.
Mises got it right. There is no avoiding the final collapse of a credit bubble. Bernanke can try but he will fail. The bond market will collapse and gasoline will spike to 5 dollars a gallon if he tries to fight deflation with his ridiculous little tools. Bernanke is fucked and he's beginning to realize it. I half expect him to declare victory and change jobs at this point.
I half expect him to declare victory...
When it's all kabuki theatre, you can choose your own ending. He should land on an aircraft carrier wearing - quite ridiculously - full combat garb and a codpiece, and stand in front of a banner that says "mission accomplished." I've heard that works well, and Americans love a good fairy tale.
http://padresteve.files.wordpress.com/2009/12/george-bush.jpg
i see it coming as a ride in a tank. ala dukakis.
Oil is a cause not a symptom. Not to disagree that a rudimentary flaw such as price fixing is not a root cause of oil's dangerous manipulation through its age, but the price of oil will rise none the less.
Also not to say that the Fed has not caused problems....many problems...
You see, oil's production has flatlined, this since '05, and when its growth ceased it wrecked havoc on all markets.
Understand that Bernanke is playing with fire, and he is at a fill 'er up....think Zoolander.
Freak gasoline fight? (who's Brint and who's Meekus? LOL!) Good bye "recovery" hello to stealth tax and a cover to take cap and trade off the shelf and implement it.
Tim Geithner wants an orange frappacino!
Mako, what exactly is "the equation"? I don't think you have a clue what you are talking about. You would do well to learn some basic economics before you go spouting off about it. I recommend reading Hazlitt, Bastiat, and Mises.
"Hahahahah, what is that a swiss army knife."
No, the tool used will be monetary diarrhea, just like in Weimar and Zimbabwe. It costs no more to print $1 quadrillion dollar notes than it does to print $1 notes.
And just who is gonna be on the $Billion FRN?
I nominate Cheeky Bastard's avatar
a system of creditmoney, yes...
that is not the only system
Maybe it's time to stop talking about the "economy" and start talking about the "economies." In the economy GS inhabits, credit is expanding all the time. Not so much for the underclass. It's sentimental to talk about the "economy." Makes NO sense. doesn't reflect the facts.
It is still one economy.
Millions of dollars in stolen funds may have been transferred to the wall street bankers, but they still are competing with the main street peasants by bidding for goods in a single market.
It would be unwise to say that keynesians do not understand the economy. They do. They know quite well where it's going. For them the main question is to perpetuate it far enough to be able to cash out/finish tenure/retire....
He absolutely wrong. Both paths are bad outcomes for most investors and citizens. With the deleveraging and austerity plan at least one can say with much better odds that "some" future generation may yet have a chance. Where the money printing cavilers of finance crowd we and every future generation are doomed to eternity with a debt burden and no possiblity of a job or growth for decades upon decades. The money printers want you to believe that by printing growth will be so large that it will keep people employed and at some point even fast enough to pay off the debt (of course first they have to service the debt). There is absolutely no assurance or any history that this will work and not just make things worse exponentially. It is always a fools game to spend money you don't have for todays instant gratification (of course you have to understand the bias here is "just make it good for me and screw the future".
There is no honest discussion about what our economy should look like and how to get there. There's just a panicked and desperate attempt to save [an unsustainable] status quo irrespective of the question of whether we really want or should go back to it.
We need a restructuring of our economy, and a long-range vision for the future. Don't think this will happen tho...
Transfinite numerology to the rescue!
http://en.wikipedia.org/wiki/Transfinite_number
Excellent Work. I'll have to come back to read this.
Till then: Everyone CLICK ON THE AD. Don't profit with Cramer, PROFIT FROM CRAMER!
Newbie. Test Message. Over and out.
At least your arithmetic skills came in handy eh?
The numbers didn't add up. I persisted. Uncle Ben would be proud.
I think you'll do just fine...
Sometimes you just need to go back and "revise" the inputs to get the desired output.
Depends who you are. Sometimes revising the "outputs" means you can claim the inputs were successful.
Welcome aboard. Enjoy yourself, and make a fool now and then so we can make fun of you. It's the initiation requirement. Must get junked within the next 10 posts to be qualified. Then we let you in on the secret handshake.
David Berman
As economists grow more skeptical about the U.S. economic recovery, a number of corporate executives are sounding more upbeat these days, making the two groups look at odds with one another. Who’s right?
On Monday, FedEx Corp. (FDX-N83.394.435.61%) became the latest company to express optimism after it raised its guidance for the current fiscal quarter and full year.
“Our revenue and earnings growth are exceeding original expectations,” said Alan Graf, FedEx’s chief financial officer, in a statement that sent the share price surging 5.6 per cent and also helped lift major indexes.
He attributed the forecast boost, in part, to FedEx’s superior execution. But wait a minute: Rival United Parcel Service Inc. (UPS-N64.881.211.90%) also raised its full-year earnings forecast last week, suggesting that there is more going on here than reliable, courteous service.
As global shippers of anything you can put into a box or envelope, these are bellwether stocks that reflect economic activity in general, and consumer spending in particular. Their raised guidance suggests that the fretting over the possibility of slowing economic growth, stubbornly high unemployment and the rising risks of a double-dip recession look offside.
The shippers aren’t alone in their optimism. General Electric Co. (GE-N16.140.432.74%) raised its dividend last week, citing strong cash generation and surprising observers with the timing. And closer to home, Canadian National Railway Co. (CNR-T64.74-0.24-0.37%) raised its earnings expectations for the second half of the year – again, partly due to what it sees as a continuing economic recovery.
Paul Hickey, co-founder of Bespoke Investment Group, has been looking at the number of so-called triple plays this earnings season, counting the number of U.S. companies that have beaten earnings and revenue expectations and raised their forecasts. So far, 10 per cent of the companies within the S&P 500 have qualified, up from 7 per cent in the first quarter reporting season. Put another way, the number of triple plays has risen 43 per cent.
This strikes a contrast with what a number of high-placed economists have been saying about the economic recovery recently. No less an authority than Ben Bernanke, chairman of the U.S. Federal Reserve, cautioned in official testimony last week that the economic outlook “remains unusually uncertain.”
Jan Hatzius, chief economist at Goldman Sachs, sees a slowdown in the second half of the year, with U.S. gross domestic product growing by less than 2 per cent at an annualized rate, along with an unemployment rate hovering just below 10 per cent through to the end of 2011 – both ugly statistics.
And if you really want to see what gloomy looks like, read anything Paul Krugman has written lately. The New York Times columnist and economics professor at Princeton University believes that the global economy is in the early stages of depression, with demands for government budget cutbacks arriving at a time when long-term unemployment is catastrophically high.
These views don’t sound like the ideal backdrop to better earnings. “There’s a disparity: Who do you turn to, the economists or the companies?” Mr. Hickey said. “That’s the ultimate choice for investors.”
He thinks that investors should put more emphasis on what companies are saying, given that executives are better suited than economists to looking at future trends.
But that’s not to say that chief executives are consistently prescient. Tobias Levkovich, chief U.S. equity strategist at Citigroup, pointed out that chief executives were also confident about earnings in early 2000 and 2008 – key turning points in the economy when profits were about to vanish.
“When CEOs are wildly confident or desperately afraid, these are probably very good signals to go the other way,” he said. “Human beings have a tendency to extrapolate, so when stocks are riding high and everybody is bullish, they feel really confident. And when stocks are collapsing, they get aggressively despondent.”
The problem, Mr. Levkovich added, is that chief executives don’t reside in the corporate trenches and often fail to see the shifts in business activity that might suggest trouble ahead.
Of course, the same can be said of economists, who are notoriously bad at predicting important shifts in the economy. As well, chief executives aren’t table-pounding bulls right now. In the case of FedEx, its revised forecast still leaves its quarterly earnings below what were seen as far back as 2005 and well below the peaks in 2007.
“You have to look at where these things are coming from,” said Carl Weinberg, chief economist at High Frequency Economics. “If a company raises its forecast by 20 per cent but they are still running at only half of where they were three years ago, then conditions still aren’t good. They’re just better.”
Still, for many investors, “better” is a sweet word.
http://www.theglobeandmail.com/globe-investor/markets/markets-blog/chief-executives-sound-upbeat/article1652298/
IMO the fascination on 'corporate' profits is one more example of the ruling of society by the mega-corporations. They've invented non-GAAP earnings, can manipulate earnings and expectations, have tremendous economies of scale, arb tax regimes, labor, costs, revenues, have lobbyists, politicians, etc.
The top 200-300 companies rule the country. As they get more and more powerful, all of the smaller business get squeezed further, including the employees, towns, etc. If you follow it all to its logical conclusion, you'll essentially have 100 companies running the world and making good profits, with vast swaths of society destitute.
If that was going to happen, it already would have by now.
Always assume that a CEO and other executives of a public company have a motive to pronounce a better picture of their company's performance. Outlook is such a vague benchmark.
The CEO's probably sold massively stock as insiders since last year and their personal bank accounts are replenished. Of course their world is rosy and they hope to sell more stock into the performance of their company.
Overall this article expresses how clueless everyone really is. Everyone knows the stimulus cash and programs expire and aren't being extended. What they've got is hope that the wheels don't fall off later this year.
All it takes is a sovereign default, a bank implosion or a failed auction and the chickens will run wild.
There is no confidence, no sense of a direction, no leadership.
Everyone tells a good main stream story. Don't upset the people! Don't upset the investors!
Why is Euribor at August 2009 highs? That's where the meat is. The banks don't trust each other. On the one hand there's propaganda and lies, on the other hand there's where the rubber meets the road.
The profits, in general, are from cutting the pay, closing the branches, merging with competitors, and juggling the books to show improvements. And we’re talking,, at the most, a bounce off the bottom of the cellar . Case in point: The news that housing is better is just a huge lie; the figures show it’s worse, yet the financial spin says it’s better.
I heard a realtor last week say: The housing market’s really low, but that means we can grow from here.
You’ve got to be five years old to buy that.
There's no call for suggesting that the recovery may be here when the news is so bad, particulary with unemployment at 22% (configured government method prior manipulations post 1980 by Shadow Government Stats).
Fed Ex and UPS both see cheap gas for the foreseeable deflationary future.
This is cause for celebration, why?
What are high quality equities, and how do you distinguish them from their low quality brethren?
I originally thought they were equities that GMO selected according to a proprietary alogrithm, but if that's true where does the index versus value added by active management come from?
It’s bad enough to agree with “the ever insightful James Montier,” but, please, don’t make such an obvious mistake that “everyone at Zero Hedge” believes “the Austrians and their ilk” provide a dangerous monetary philosophy as opposed to Keynesianism.
By the way, the choice between “stimulus” and “austerity” is a fool’s puzzle, the politicians’ trick: stimulus means money for the banks; austerity means higher taxes and reduced standards of living for the taxpayers. A better choice would be: austerity for the banks and stimulus for the private sector—lower taxes and incentives for small businesses.
And speaking of austerity, here’s “Where Keynes Went Wrong” by Hunter Lewis.
As Lewis says in his chapter, Spend More, Save Less, and Grow Poorer, Keynes did not practice what he preached. Comments Lewis:
“Perhaps Keynes was preaching to himself. He was certainly ‘purposive.’ He was himself (dare we say it?) a saver. His investment capital did not have an immaculate conception—the original stake was mostly saved prior to 1919. Keyne's pere did rescue his son at one point from debts related to catastrophic investment losses, but did not otherwise stake him.
“After Keynes had accumulated investment capital, he did not spend it, but instead carefully nursed and tended it until, after several major investment setbacks, he finally became rich. When rich, he seems to have lived off his income, and did everything he could to become richer. Moreover, Keynes was childless. Apart from caring for his wife, he had no particular reason to want to die with a large estate.”
"A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings." - LvM
Same could be said about Austrianism and Keynesianism.
As Rothbard noted: Keynes' most famous quote "In the long run, we're all dead" has been used to justify all kinds of short run policies. Well he's dead, and we're living in his "long run".
Keynes FTW!
austerity for the banks and stimulus for the private sector
Brilliant line, JR
Now that Grantham has come out as a newly-minted deflationist, Montier has no choice but to say he favors stimulus. Meaning more (nominal) AUM, more asset circle-jerk etc.
Montier is now officially useless.
IMHO
I would add "austerity for gov't" to that list.
If Bernanke was capable of preventing deflation, we would not be in the present situation. The Fed has spent most of the last decade trying to prevent the collapse of prices. They have run out of bullets...
As economist Steve Keeen has written, everyone who can borrow has already reached the debt saturation point. Only Washington remains.
This is beautiful - Exhibit A for how desperate Washington and Wall Street have become...
Next up -- FRNs printed on Kevlar, for making your own bullet-resistant apparel!
Montier, like all keynesians, doesn't get it. To define inflation as an increase in consumer prices is to make a useless concept. You can't go anywhere from that.
For example, why is a decline in consumer prices bad? The price of computer memory has been declining for decades, with no apparent harm done. Krugman and Montier would seem to offer no reason as to why this is bad. (hint: companies are constantly improving efficiency, so all prices would fall if we had stable money. Look at wheat, I bet we need less land today and less labor to produce a bushel than we did in 1910.)
What keynesians don't seem to want to admit, even to themselves, is that inflation is an expansion in the money+credit supply. Deflation, being the opposite, suddenly comes into focus. Why would a decrease be bad? If everyone (especially banks) has debt (and even the "assets" on bank balance sheets are really just someone else's debt), then falling credit makes it impossible to pay the debt. Which is indeed the problem.
The problem as I see it as that currency debasement (which is a deliberate reduction in the value of the currency unit) does not offset deflation (which is contract credit). In the same way that eating a deep-fried hamburger with french fries does not offset a tapeworm in your intestine.
Correct. Deflation doesn't kill every monetary system. But it certainly will kill ours.
Bear, add wind-powered ships, railroads, steam power, internal combustion engines.
Of course, it might be better for us if 1/3 of the population were down on the farm and hadn't seen Paree, vs. what? 2%? of U.S. population.
Comes a time when we [will/will not] [allow?] food exports? Wisconsin Progressives dumping milk while people starving c. 1935.
Looks like uncreative destruction going on now, just kill it all. It has been my profession to do that, but no one ever accused the misguided children of improving the local economy.
- Ned
"For example, why is a decline in consumer prices bad? " because taxes a calculated on a percentile scale. Declining prices = less tax income. Less tax incoming means fewer bullshit social programes politicians can promise to get elected.
Stop indulging yourself.
"“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” "
— -Murray N. Rothbard
The nineteenth-century success of free trade ideas was effected by the theories of classical economics... It is useless to argue with mystics and seers. They base their assertions on intuition and are not prepared to submit them to rational examination... It is insolence that those groping in darkness dare to contradict the inspired ones. Decency should impel them to creep into a corner and keep silent.
-Ludwig V. Mises
Yep. Ignorance would be tolerable. Arrogance would be tolerable. It's the arrogant ignorance I'm sick to fucking death of.
"Ergo, the “good news” arising from an Austerian victory would be the rapid arrival of QE II. Thus any short-term deflation will ultimately
lead to long-term inflation pressures."
Well, yes, of course.
The other point which is so often ignored is the one of "real growth". In an inflationary regime, there is always a lot of inflation masking "real growth". In the mature West, growth is much more due to inflation than in economies that genuinely grow. If it's growth you seek, I suspect you will need to go overseas for it at some point. Preservation of purchasing power in the West, on the other hand, means real assets.
Ding, ding, ding! We have a winner!
The growth story can be continued only if the US passed on the "burden" of consumption to an economy with real potential growth, read China. But, for China to step up to the plate, they will demand the privilege of having the reserve currency status if they are to open their consumer market. That would also cause the USD to devalue and will make the US economy competitive (of course we will get a taste of third world labor rates).
But, the US is addicted to the reserve status and will not give up even if it is the most logical step. The US Treasury Secretary has constantly exhorted China to increase domestic consumption but without agreeing to pass on the baton of reserve status. China will not open it's market without greater weightage for their currency (namely denomination of energy and commodities in yuan).
China might not be in a hurry for reserve status, as they probably don't want what goes along with it. I, for one, will be happy to cede this "honor" to someone else:
Economic collapse, precipitating passing the "baton" onto the next sucker (sovereign)!
Unreal moves in some of the IBD Top 100 the last few days:
Off topic, but is Jim Cramer advertising on Zero Hedge a form of irony or just another sign that we've slipped into Bizarro World?
I'll surmise that you've never encountered/used/considered (heard of) Adblock Plus, nor AdSense???
Not to even discuss what a "job" is anymore, or a "living wage". What ever happen to the real Helicopter Ben dishing C-Notes to the bewildered herd. Just cut to the chase - QE2 should just be personal debt forgiveness; school loans, first mortgages, whatever. Lit it trickle up and eff the banks. The whole deflation/de-leverage process will grind along while there is systemic unemployment. Ever been to Somolia? Instead of cash for clunkers, how about a $1,000/head bounty for illegals. Make money by thinning out the job market. Circle the wagons. Move your partents in with you, kill off debt and never let these money worshipers into your life again.
Bank-"living wage" = Union job. Personal debt forgiveness=moral hazard, but the forgiven won't cut up their credit cards. Head money? Sounds like veetnam body count nonsense. Besides, Eric Holder would be all over your six.
and y'know, I can't stand my partents, not one little bit.
- Ned
MUTTERING AUSTERIANS: ce labon a bunny do
wha?
un cadeau?
a present!
oh, un cadeau.
oui oui hurry!
wha-?
let's go!
[rumble rumble squeak]
OBUMBLE: What happens now?
BERNUTTY: Well, now, uh, TIMMAH, KRUGMAN, and I wait until nightfall,
and then leap out of the QE2.0, taking the Austerians by surprise --
not only by surprise, but totally unarmed!
OBUMBLE: Who leaps out?
BERNUTTY: Uh, Timmah, Krugman, and I. Uh, leap out of the QE2.0, uh
and uh....
OBUMBLE: Oh....
BERNUTTY: Oh.... Um, l-look, if we built this large wooden badger--
[twong]
ALL: Run away! Run away! Run away! Run away!
[splat]
AUSTERIANS: Oh, haw haw haw.
I don't know what that was supposed to be, but it was horrible.
"The best-laid plans of mice and men have oft gone agly!"
Ultimately there's no victory against the truth.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
You fuckin' child."
@ SWRichmond: The other point which is so often ignored is the one of "real growth". In an inflationary regime, there is always a lot of inflation masking "real growth".
“Almost 90% of the Dow's gain since 1963 is inflation.”—Now and Futures
http://www.nowandfutures.com/inflation_long_term.html
From Now and Futures: A long term inflation picture
The charts are fairly self explanatory, and simply show the actual prices plus show two additional lines; one for the price corrected by CPI and the other corrected by CPI + lies.
Thanks to John Williams of Shadow Stats for his excellent work on the CPI lies, but also note that we are not using his full adjustments (as of 1/2007, his "CPI" level was around 500 where ours was around 340... and the pre Clinton methodology CPI was about 275... and the actual BLS CPI-U was 202). This page updated on an irregular basis, approximately monthly.
As of August 2007, we changed the basis to the year 2000 on all charts to avoid issues of clarity due to having had two scales.
Per the CPI (alone and without 'lies' factored in), inflation has averaged 4.5% per year since 1963 and 4.7% since 1970 as of 2006 - for reference. That's a total of about 600% and 500%, respectively. -- Now and Futures
THE CONSUMER PRICE INDEX, A BIG LIE
What is the "real" CPI or cost of living? Is the CPI extraordinarily understated?
Average inflation rate per the CPI (2002-2004) is 3.3% (per the chart)
Item -- Average inflation per year, 2002-2004 -- DataHousing -- 14%+ -- Median US house 2002 = $158,000. Mid 2005 $240,000. (source = US Census and OFHEO data)(see hedonics in the glossary)
Food -- 7%+ -- (52% - 2002-9 per the CRB Food index)
The agricultural price index (all farm products) has moved from 95 to 140, about 47% per here
Also ask yourself how much more you're paying for dining out (for the exact same meal) than a few years ago..
7/2007: 23% food price in last 18 months per the IMF
Health care -- 9.5% -- "Total national health expenditures increased by 7.7 percent in 2003...In 2004, employer health insurance premiums increased by 11.2 percent" (source). The Health Care Index is also up over 80% in the two year period ending in August of 2005. Health insurance costs doubled since 2000.
See a health care popup chart here, click here for regular link.
See a premiums/benefits popup chart here, click here for regular link.
An early 2007 Washington Post article here.
A mid 2007 article about very large price increases here and here.
9% price increases for health insurance in 2009
Education -- 6%+ -- College education has gone up 5-6%+ per year since mid '90s per here and here. 2005 - Increases in tuition, fees, room and board by the schools ranged from 4.3 percent at Ithaca, N.Y.-based Cornell University, which will charge $41,767, to 5.5 percent at Yale University…, which will cost $41,000… Harvard… raised its rate by 4.5 percent to $41,675. “The University of Colorado’s board of regents approved a 28 percent tuition increase for the 2006 fiscal year", the Denver Post reported.
As of 2009, education costs are still increasing well above the reported CPI rate. Per BLS and BCES data, 4 year university costs have increased at 7.7% per year. Late 2009, University of California tuition prices increase 42%. Coast-to-coast double-digit college tuition hikes
On average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years.
Gasoline -- 20%+ -- Wholesale unleaded gas without any taxes in 2002 was about $.75 per gallon average. Late 2004 - $1.40. Mid 2009 - $2.80.
Taxes -- -1% -- Tax freedom day remained about the same per the Tax Foundation.
As of the Obama administration, taxes & fees, etc. are slated to rise significantly.
New Cars -- 2.3% -- Per Edmunds's data, the increase from 2003-2004 was 2.3%. Overall, new cars have been only slightly inflating on average for many years.
"Other" -- -10%+ -- Many consumer items that are infrequent purchases like computers, clothing, DVD players & microwaves have gone down in price. But one doesn't buy them every week or month, and they are not essentials like food, housing, etc.
On the other hand, postal rates and UPS prices are up about 5% per year (2009 UPS rate increase averages 4.9%).
What is this on the inflation "core rate" which excludes food and energy too? Does someone seriously think that a broad price index should not include daily use items like food and energy? We fail to see any purpose for the concentration on it other than political and similar ones. If the concern is truly erratic changes in food and energy, just use a simple moving average.
Note that there are no factors for quality changes, either up or down, so add or subtract your own adjustments as desired.
Does that look like an average of 3.3%, like the CPI states, to you?
We maintain that it has been severely understated for years, by at least half.
In other words, we think it has been at least 6.6% (not 3.3%) during the 2002-4 period. – Now and Futures
My local state university raised tuition 14% two years in a row - the maximum allowed by law.
I know a financial professional (don't laugh) who for years has kept detailed personal expenditure records to keep track of his real inflation rate. As of 2 years ago, he calculated a 7% personal CPI rate for some years.
So, well done, JR/Now and Futures.
Can't make head or tail of what he's trying to say: a rubbishy mish-mash of "spend-lots-of-money-you-don't-have-now-so-equities-will-soar" plea for more taxpayer money...
No, I will not be told "you don't understand the details," blah, blah...I know a Keynesian when I see one. All I needed to see was that ridiculous
"6.5% Long-term historical U.S. equity return"
Congress doesn't have the votes or the time to deliver QE2.
The plan is to pump the markets to show we don't need QE2.
Bens doing a backdoor qe 2.. the man has no shame..lol
Crawford says its all going to blow to smithereens.. the planets are lined up in some once in a hundred yr formation that was to start today! maybe tomorrow?
Deflation is GOOD. Deflation is success. Deflation is lower prices (who wants higher prices... duh).
Also, deflation helps destroy unproductive, overleveraged, destructive activities... which removes their burden on everyone else, and frees those people and resources to be applied to productive endeavors. This is SORELY needed.
http://www.google.com/#hl=en&source=hp&q=secret+of+oz&aq=f&aqi=g8&aql=&oq=&gs_rfai=CuwD0LztOTJSrLZG6hATIvbz-CgAAAKoEBU_QczjB&fp=ef15fa2e12aeb723
The "paradox of thrift" seems a little like the "self-actualization" of the past 40 years. It gives people cover for acting selfishly while claiming it is in society's best interest.
No one should ever live beyond their means (when averaged over even a relatively short period, say, a year).
If you are going to college, figure out how to pay as you go. Don't get sucked in by the "prestigious college costs more but pays for itself."
Don't go to college if all you can think of to study is some new-age BS (as in bulls%$t) program like half the students take now. The central question is not "what do I want to study?" but "what leads to a viable job that I would be satisfied doing?" Work rather than study until you figure out something worthwhile to study. Don't go to graduate school because you can't get a job (unless the extra training will almost certainly get you a job). Even in a depressed job market people that work hard and dedicated can do OK. There are very few easy paths to success. Grow up and get to work doing something.
Drive your first old car until you have saved enough to buy a new one.
Buy houses you can afford and only move up when you afford to. You should be paying cash for your house before you are fifty.
Don't buy any hobby gear you can rent until you have been very involved in the hobby for at least two years.
Don't buy anything on a whim. Wait a week and see if you still want it.
Try to develop hobbies that are practical (making things you use) or not costly (hiking, chess, etc.).
Learn how to do useful things (cook, clean, sew, electrical repairs, plumbing) and learn to enjoy doing things for yourself.
Remember the Dickens character who said: "Income: $20,000 dollars, expenditure: $19,000 dollars, result: happiness, income: $20,000, expenditure: $21,000, result: misery. (changed the monetary units but same idea).
We as a society are going to reap misery from our (collective) lack of thrift.
The real paradox of thrift is that people that are thrifty, don't enjoy life less, they enjoy it more. Happiness comes not from having what you want, but enjoying what you have.
Being "sold" is being taken advantage of. No one will ever try to convince you to save because saving benefits you. Spending benefits them.
We need to get some adults in charge that know that the simple knowledge that will guide you to a happy life will also guide us to a happy society. Don't let hucksters like this writer (and Cramer) drive you actions. They got rich by convincing you to do stupid things that benefited them.
Wise words. Thank you. Delayed gratification is a good thing.
The problen with putting adults in charge is that it will not be popular with children and the children are the ones who vote.
QE II a very crowded trade...
Damn... and I thought I was poor before.
EURO buying support mentioned since June continues and further upside is expected.
http://stockmarket618.wordpress.com