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Hatzius' Take On CPI: "Very Soft Outside Energy"
Core inflation kept flat thanks to....tobacco prices? Aside from that, deflation rules. The only question is: does Bernanke take secret smoke breaks inbetween think tank sessions on how to destroy the US middle class quickly and clinically.
KEY NUMBERS:
CPI +0.254% in Aug (mom, +1.1% yoy) vs. GS +0.17%, median forecast +0.3%.
Ex food and energy +0.046% in Aug (mom, +0.9% yoy) vs. GS +0.10%, median forecast +0.1%.
MAIN POINTS:
1. Consumer prices rose 0.3% in August, largely on energy costs. Gasoline prices rose 3.9% on a seasonally adjusted basis (on an unadjusted basis, they barely increased, but they normally decline in August), contributing about 2/3 of the headline CPI gain.
2. Core inflation was just low enough to round to zero on the month. Shelter costs were a key item keeping inflation down: residential rents fell 0.1%, lodging away from home was down 1.3%, and owners' equivalent rent was flat. In prior research we have found shelter costs to be one of the most persistent categories of inflation, so today's readings suggest continued low core inflation in the near future. (Tobacco prices, which are much more volatile but have seen large gains in recent months in part because of higher taxes, rose a more modest 0.4%.)
3. On the surface, the composition of price changes suggests a slightly higher core PCE inflation reading, as rent/OER receive a lower weight and medical care (+0.2%) receives a higher weight in the PCE price index.
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I will bet you my cousin's round ass real inflation (defined as the amount of money and marked-to-market credit) is -20%.
Yep, Middle Class will be gone. Yet, he will protect the Wall Street Oligarch with Tax Payer Money.
Reverse Robin Hood. Take from the Poor and give to the Rich.
Roben hood..:-)
Reverse Robin Hood doesn't live in Nottingham forest. He owns it and keeps poor people out.
I know it sounds odd, but if tobacco has a volatile behavior, why is it not part of the food & energy equation?
Baltic Dry is continuing its decent that started the other day.
From the EIA: Average price of gas on 7/30 was 2.73 (oil was 74.40). Average price of gas on 8/27 was 2.68 (oil at 71.60).
Even in the "unadjusted". gas prices DECLINED in August according to the EIA. They didn't "barely increase".....
Just some facts for y'all to smoke on.
And the machines go WILD!!
+3.141592653589793238462643383279502884197
Why does increased purchasing power destroy the middle class? If prices are dropping on consumables and people purchase more, doesn't that add to production needs?
@Djirk - the problem is debt. Falling prices do not induce more spending because the middle class is overburdened by debt service. Only those who are debt-free and have sufficient cash see increased purchasing power. Most in the middle class are not in this situation I imagine...
Well shame on them! They need to get a life and pay off their debt or just default so someone else can buy the asset (if any). Let's get on with it. Cash is king!
Exactly correct. Falling prices are also correlated to falling hourly wages and falling average salaries. These incomes are falling against debt loads that were barely payable for many with their prior incomes and now they must cut back to even tread water.
People who are debt free and who have cash on hand are going to be increasingly in positions to pick up things cheaper but how many Americans are debt free? Not many. That is the key to the problem.
Until the excess debt, which cannot be repaid, is formally flushed from the system (which means the banks also have to eat their side of these losses), there can be no real recovery. It's that simple. So long as we play extend-and-pretend games, this is nothing more than war on the middle class by Wall Street. And that's a dangerous game for oligarchs to play. They should ask Marie Antoinette how that turned out.
Ahhh...is that the sweet aroma of deflation on the morning breeze? Hard to explain a trillion dollars in stimulus and the lowest inflation rate in 44 years unless you're actually paying attention to the forbidden M3 data, which good Americans do not do.
M2 has been on a steady rise per the Federal Reserve sight. Will this not lead to inflation at some point?
Total money in a fiat system is cash and credit, and credit has been significantly for the first time since the Great Depression. The amount of credit far exceeds the amount of cash in the system, so creation of cash and equivalents (M2) is offset by far larger crashes in M3, which the Fed no longer prints.
So, for example, go look at John Williams money supply charts, where he has documented the massive collapse in M3 if you want to see the bigger picture.
Take a look at that link Greyzone supplied. If you focus on M1 or M2 alone, you'd never know that we had an economic meltdown. Look at M3, and you clearly see the destruction that put Lehman in bankruptcy etc. Which measure is most useful? Seems pretty obvious to me, but the Fed says you don't need to see this.
I just don't buy this "low inflation" story. Just look at commodity prices! Check out a chart for sugar, corn, or cotton. Many commodity prices are skyrocketing, including soybeans, wheat, gold, oats, rice, cofee, cattle, hogs, milk. Even lumber, cocoa, and natural gas have now turned bullish.
I watch commodity prices as a leading indicator of future inflation. They lead by 6-9 months. Inflation is coming -- SOON!
bi-flation is already here and has been for a long time. Bi-flation will eventually seccumb to deflation... which will eventually seccumb to hyperinflation.
Grain prices are not being driven primarily by inflation but by loss of supply. Russia has halted exports of wheat which causes countries that depended on Russian wheat to bid up soybeans, corn, and other alternate grains.
Also, oil is not being driven primarily by inflation but by a supply crisis. Oil has risen from $18 per barrel in 2000 to nearly $80 per barrel today but supply has not appreciably increased. That, right there, is the sign of a tight supply and therefore basic supply and demand dictate increased prices even in a zero inflation market.
The only commodities that appear to really be driven by monetary issues are gold and silver.
Does Ben smoke Splifs? Highlights at 11
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