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"I Sure Am Glad There's No Inflation"

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

I sure am glad there's no inflation, because these "stable prices" the Federal Reserve keeps jaw-jacking about are putting us in a world of hurt.

We are constantly bombarded with two messages about inflation:

1. Inflation is near-zero

2. This worries the Federal Reserve terribly, because stable prices are deflationary and deflation is (for reasons that are never explained) like the financial Black Plague that will wipe out humanity if it isn't vanquished by a healthy dose of inflation (i.e. getting less for your money).

Those of us outside the inner circles of power are glad there's no inflation, because we'd rather get more for our money (deflation) rather than less for our money (inflation). You know what I mean: the package that once held 16 ounces now only holds 13 ounces. A medication that once cost $79 now costs $79,000. (This is a much slighter exaggeration than you might imagine.)

Our excellent F-18 Super Hornet fighter aircraft cost us taxpayers $54 million a piece. Now the replacement fighter, the wallowing collection of defective parts flying in close proximity known as the F-35 costs $250 million each--unless you want an engine in it. That'll cost you extra, partner.

Despite all these widely known examples of rampant inflation, every month we're told there's no inflation. Just to reassure myself there's no inflation, I looked up a few charts on the St. Louis Fed's FRED database.

I have to say, I'm scratching my head here because the cost of things has gone up a lot since 2000.

The consumer price index is up 38% from 2000. Now if somebody were to give me a choice between getting 10 gallons of gasoline and 10 gallons minus 3.8 gallons of gasoline, I'd take the 10 gallons. So how the heck can a 38% increase be near-zero inflation?

If I took $38 of every $100 you earned, would you reckon I'd taken next to nothing from you? Do you earn 38% more than you did in 2000? If so, congratulations; most people can't answer "yes."

Urban-area rents are up 56% from 2000. Now this is even worse inflation, because you just paid $156 for what used to cost you only $100.

State and local government taxes are up 75% since 2000. And this doesn't even include the rip-off fishing license fees that have gone through the roof, the boat registration fees that have shot to the moon, and the legal-looting parking ticket that used to be $12 and is now $60.

Taxes naturally rise with the economic expansion due to rising population, which has gone up about 13.8% since 2000: from 281 million residents of the USA to 320 million in 2015. So taxes rising a few percentage points each year along with growth and population would make sense. But 75%?

I've got a real treat for all you parents, uncles, aunts and grandparents who are planning to put the kids through college: the costs have only risen about 100% since 2000. That means instead of scraping up $80,000 per kid (assuming they can get all their required classes and grind the thing out in four years) you now need to scrape up $160,000 per kid.

The price index for college tuition grew by nearly 80 percent between August 2003 and August 2013. Now to make this apples to apples with the rest of the data here, we need to add in the nearly 5 missing years: from 1/1/2000 to 8/1/2003 and from 8/1/2013 to 8/1/2015. I'd say putting the increase at 100% is being conservative.

I sure am glad there's no inflation, because these "stable prices" the Federal Reserve keeps jaw-jacking about are putting us in a world of hurt. If we had honest-to-goodness inflation, that would push us right over the edge.

 

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Wed, 08/05/2015 - 14:48 | 6394344 Crocodile
Crocodile's picture

Then you get the kids on all the sports teams and cheerleader knocking at your door selling discount coupons that no one wants and one can already get so they can have "uniforms" and "travel".  Makes me miss talking to the window and vacuum salesman.   I wonder what would happen if I asked all those parents for money to help my child with his piano, the tuning of the piano and the lessons.

Wed, 08/05/2015 - 16:08 | 6394693 Baby Eating Dingo22
Baby Eating Dingo22's picture

F those cookie baking sluts

Thu, 08/06/2015 - 02:20 | 6396366 buzzkillb
buzzkillb's picture

As an engineer I see almost no need for a student to have a PC, tablet or calculator in a classroom. Digital books if they were cheaper in a college course is the only thing I can come up with. Obviously a programming class or something that requires a PC would be different.

You are right about the blackboard. I had a structural engr professor who would always harp on trying to work out the problems without a calculator. Because its faster to do math in your head that push buttons. I rarely meet, outside of my profession, people that can do basic math in their head. Like 10% of $100. I have looked at that new teaching style, whatever it's called, and that just turns people into idiots. I get the dumbfounded replies when I say how does this prepare a student to do calculus? Why calculus? Because once you can do that, everything before just became that much easier.

Nah lets go call little kids pushing their touchscreens smart. I stare off into the distance around a lot of parents, since every kid is now a genius because they can recognize 10 words. When I baby sit the niece, 2 years old, I go over things like the stock market. She seems more entertained than with her iPad.

Wed, 08/05/2015 - 13:03 | 6393915 MsCreant
MsCreant's picture

Post inflation.

Wed, 08/05/2015 - 13:23 | 6394002 rejected
rejected's picture

They Live!

We subsist.

Wed, 08/05/2015 - 14:44 | 6394330 Crocodile
Crocodile's picture

There is One who will judge in righteousness and He is not a respecter of persons and if one is not right with this coming King, then they are guilty already.

Wed, 08/05/2015 - 12:57 | 6393874 NoWayJose
NoWayJose's picture

I am always amazed how gleeful anal-ysts and the Fed are when touting the recovery/boom/bubble in home prices. A home is one of your biggest expenses - so how can home prices rise 10% a year while the CPI sits at 1.2%? Same things with rents - hitting an all time high.

Wed, 08/05/2015 - 12:58 | 6393881 Reaper
Reaper's picture

The sheeple fear the pain of thinking. They expect some god, destiny or hero. Their media trained with imagines of supermen, American heroes and noble destinies.

They're opiated with indoctrined trust. Stupidity and stupor are their lot.

Wed, 08/05/2015 - 14:41 | 6394319 Crocodile
Crocodile's picture

Jesus Mr. Reaper.

Thu, 08/06/2015 - 02:29 | 6396372 Dude-dude
Dude-dude's picture

Deep down inside millennials lurks the fantasy of becoming a super hero.  The fantasy is what the corporate education system has brainwashed into millennials from Kindergarten through their Bachelors degrees.  They've watched super heros for leizure in theatres and on tv all their lives.  More recently they've -become- superheros in games on the xbox and playstation (which is infinitely more stimulating than their jobs at Walmart)...         

Wed, 08/05/2015 - 13:05 | 6393929 Banker Buster
Banker Buster's picture

Stagflation!!!  

Good job Bernanke, well done.  Your mom would be proud of what you did to the greatest country on earth, you are a true patriot.  

I'm sure in 100 years we will see some benefit out of what you did to the USD with zirp and QE.  Maybe that benefit will be that the central bank was found incompetent in what they do and were taken out of the decisions that are made in the U.S.A.

 

Keep telling yourself you did the right thing and everyone else is just wrong.  

Wed, 08/05/2015 - 13:17 | 6393972 rejected
rejected's picture

Okay,,, once again,,, the FRN is NOT the USD. The REAL USD is not fiat.

Just like at&t is NOT AT&T.

 

Wed, 08/05/2015 - 13:06 | 6393933 Sanity Bear
Sanity Bear's picture

Of course there's no inflation. My shipping container costs exactly the same as my luxury penthouse apartment did 15 years ago.

Wed, 08/05/2015 - 13:14 | 6393961 rejected
rejected's picture

And my Mo-Ped has reduced my transportation costs!

Wed, 08/05/2015 - 14:39 | 6394311 Crocodile
Crocodile's picture

and emmisions...job well done; you may live even if you starve.

Wed, 08/05/2015 - 13:18 | 6393979 I Write Code
I Write Code's picture

Even my rent-controlled apartment goes up 3% per year, let's see, compounded over seven years since Barry usurped office, that's, um, zero, right?

Wed, 08/05/2015 - 13:22 | 6393995 newsoutlet
newsoutlet's picture

Just a little while ago, the spectacular fall in the ruble was pushing inflation sky high and scaring Russians into hoarding luxury goods to protect their wealth. Then, things calmed down. But now inflation is rearing its head again.

 

Capital Economics pointed out in a note to clients that utilities have a big part in this—Russia’s economy minister said as much a few days ago. Still, a renewed fall in oil prices is driving down the ruble against major currencies:

 

That means it’ll be harder for the Russian central bank to bring down interest rates from their current highs, since it estimates in its policy statement that oil needs to reach $70 per barrel for Russia to register even 0.7% GDP growth.

 

Last month, the central bank said it was “ready to continue cutting the key rate as inflation risks abate and inflation declines further,” but now it has inserted more cautious language this time. Rate decisions now depend on “the balance of inflation risks and risks of economy cooling.”

Wed, 08/05/2015 - 14:15 | 6394202 Berspankme
Berspankme's picture

What's a potato in Latvia cost potatoutlet?

Wed, 08/05/2015 - 13:23 | 6394000 madcows
madcows's picture

a 38% increase in cost over 15 years equates to about a 2% rate of inflation.

Wed, 08/05/2015 - 13:47 | 6394098 numapepi
numapepi's picture

38% over 15 years is 2.53% actually... but who's counting? 100% over 10 years is 10%, but look at the the diminishing value.

Wed, 08/05/2015 - 14:01 | 6394149 madcows
madcows's picture

it's 2.17% annually.

10 years at 10% is 159% increase.  not 100.

The Key point here:  if inflation over the last 15 years was Only 2%, things wouldn't be so bad.  My salary has kept up with a 2% rate of inflation.

However, inflation in many essentials has been well over 2%.  Real inflation for our family has been over 6% for several years now.  I calculate this year currently running at 5.25%.  It's 67% over the last 5 years. I just cut my 401k to zero, again.  Looking for any way to keep "costs" down.  So, my generation will see no social security and we're being destroyed by inflation, so we can't possibly save for our own retirement.

Wed, 08/05/2015 - 14:14 | 6394197 Berspankme
Berspankme's picture

That's how they control the message. TV's have gone down in price, computers would be cheaper and other things you rarely buy. But necessities you need daily have skyrocketed. Remember that fucking cocksucker Bernanke and the Ipad example? Fuck you Ben, ass cancer yet?

Thu, 08/06/2015 - 02:23 | 6396368 buzzkillb
buzzkillb's picture

I was going to pick up basketball shoes for some real life sports and could not believe that top of the line Jordan's are cheaper than they were in the early 90's, late 80's. Wish I could eat those instead of steaks. Since steaks are now doubled from 3 years ago.

A stick of butter was $10!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! last night. True there were some other choices for $4, but $10?? I am scared to look at egg prices.

Maybe I should forego food to buy another cheap TV?

Wed, 08/05/2015 - 14:36 | 6394296 Crocodile
Crocodile's picture

You bring up something that is inflationary in a backdoor way; the returns on the 401K' for those who are very conservative or for regular savers who don't like the risk associated with the stock markets is problematic upon retirement. 

-------------

If 10% of the population march down to Washington while there was a full session of politicians and threw them out; they would all escape underground like the NYC sewer rats that they are.  No worries; no one escapes judgment.

Wed, 08/05/2015 - 13:33 | 6394051 Haka Matohi
Haka Matohi's picture

But, but, the parabolic curve is starting to lessen, just like the deficit.  Just think what Obama could have done if things weren't so screwed up from Bush.

I think he is prophetic and will run for a third term.

Wed, 08/05/2015 - 13:52 | 6394116 numapepi
numapepi's picture

The price of meat is lower though... oh yea, it's much higher. Then the price of corn must be lower? No it's gone up by an order of magnitude. I guess the price of cars must be the same? Darn, they have gone up a ton too... It would seem that everything I buy is much more expensive in the last 10 years, despite zero inflation.

The only price that has gone down is the fairly unmanipulated traded gold market.

BTW... if inflation is under counted, how does that effect the calculation of GDP growth?

Let's see, GDP is growing at around 1-2% since Obama got anointed, and inflation is under counted at 2.5%. Therefore GDP growth is...

Wed, 08/05/2015 - 13:58 | 6394137 joseJimenez
joseJimenez's picture

How about lead, gun power, self lighting torches and armor piercing tipped pitch forks?

Wed, 08/05/2015 - 13:53 | 6394119 headhunt
headhunt's picture

None of those graphs are relevant to the D.C. crowd.

If we could see the graphs on Hookers and Blow, it may be of concern to them and they may actually respond with something constructive.

Wed, 08/05/2015 - 14:11 | 6394183 Berspankme
Berspankme's picture

Yep, ask Boehner how much he is now paying for his LGBT hookers? How much McCain is paying for his depends briefs? Ask Lindsey what a gay male hooker is costing him these days? These are the only things congress cares about

Thu, 08/06/2015 - 02:26 | 6396370 buzzkillb
buzzkillb's picture

Are there any websites that track this?

Wed, 08/05/2015 - 14:08 | 6394172 Redart
Redart's picture

That is called progress. /sarc
But regarding s&p, you should buy this dip because tomorrow the employment data will send s&p up 2% up /no sarc
The guys are buying, this dip is feke

Wed, 08/05/2015 - 14:28 | 6394256 Crocodile
Crocodile's picture

Short squeezing once again.  They locked and reloaded rather early this time; usually they allow it to touch the 18K on the DJIA.  I think they are running out of "fuel" and perhaps they will just keep the up/down/flat game on the way to a slow and steady decline until their are no more players...time reveals all.

Wed, 08/05/2015 - 14:10 | 6394176 juggalo1
juggalo1's picture

38% over 15 years is 2% which is on or just below target.  Through much of the naughts it was running hotter around 4%, which is why with the near zero% we have now it averages out to around 2% over the longer period.  You guys and your "Cash loses 90% of its value over 100 years" ranting seem to have no concept of geometric growth / deterioration.

Wed, 08/05/2015 - 15:55 | 6394621 fed_depression
fed_depression's picture

No it's not. 2% compounded over 15 years is much higher than 38%!

Wed, 08/05/2015 - 20:23 | 6395516 crusty curmudgeon
crusty curmudgeon's picture

I think the point is that an average increase per year of 2.2% yields a total increase of 38% over 15 years.

We're simply talking about multiplying an initial number by some number multiplied by itself 15 times.

If you take the 15th root of 1.38, you get about 1.0217 -- which is an increase of about 2.2 percent per year.

Wed, 08/05/2015 - 14:11 | 6394182 Redart
Redart's picture

Regarding the charts in the topic, those indicators are what they are. If M1 M2 M3 are alwayis incresing so are those numbers. Nothing here to analyze or to draw conclusions. It s all normal.

Wed, 08/05/2015 - 14:19 | 6394214 Crocodile
Crocodile's picture

At the workplace; you do not get an inflationary adjusted increase, you get to work the same or more for less and less each year regardless if you got that 1% raise or if you had that "most excellent" review, then you may have got 2.5% and told to keep it quiet.  Meanwhile your health care premiums ate up all the 0%-2.5% raises for the past 15 years and that is before you use it or before you travel to the grocery store.............blah blah blah.

--------------

The Veterans and disabled or other "fixed income" people who were never taken care of are left to struggle even more...meanwhile the contractors and bankers and politicians...don't touch the oil or the wine....more blah.

Wed, 08/05/2015 - 14:22 | 6394232 Crocodile
Crocodile's picture

All businesses that are government subsidized ALWAYS increase exponentially because of fraud.  Always under the guise of helping the poor rather than the truth of increasing the wealthy and creating more poor.  Moar-poar.

Wed, 08/05/2015 - 14:34 | 6394282 SSRI Junkie
SSRI Junkie's picture

And now do we understand why they must beat down gold?

Wed, 08/05/2015 - 14:36 | 6394292 thebigunit
thebigunit's picture

How many Keynesians does it take to change a light bulb?

None:  They don't change light bulbs. They live in the dark and just revise it to be light.

Wed, 08/05/2015 - 16:18 | 6394745 d4pwnage
d4pwnage's picture

Brilliant!

Wed, 08/05/2015 - 14:41 | 6394320 Baby Eating Dingo22
Baby Eating Dingo22's picture

Less than a year ago, you could get 16 oz of Aparagus water for under 2 dollars

Now look how much!

https://instagram.com/p/57PD0DBEP6/?taken-by=marielle.m.n.o.p

I'm gonna have to give up the coffee enemas if I want to continue drinking this

Thu, 08/06/2015 - 00:10 | 6395214 thebigunit
thebigunit's picture

Try substituting clumps of crabgrass for the asparagus.

That should bring the cost down in most places.

Probaby not in Washington, D.C, though.  I'm sure there's a procurement spec on crabgrass that will keep the price up.

Thu, 08/06/2015 - 02:32 | 6396374 buzzkillb
buzzkillb's picture

Had to look that up. That wasn't a mistake. Why would someone go through the trouble of making that, shipping that ish, and say whoops our bad.

Wed, 08/05/2015 - 14:46 | 6394335 TheAntiProgressive
TheAntiProgressive's picture

With a Pprogresssive tax system inflation is nothing more than a hidden tax increase with zero political cost.

The Politicians like that.  Ever expanding "revenue" for new "investments".  We are governed by crooks and criminals.

Under inflation scenario a dollar today is always worth more than a dollar tommorow.  The banks always get todays dollar first.

Wed, 08/05/2015 - 15:12 | 6394426 Chuck Knoblauch
Chuck Knoblauch's picture

The cost of hair plugs just went up 15%!

Wed, 08/05/2015 - 15:31 | 6394464 BoPeople
BoPeople's picture

There are stealthy inflation things that only affect certain people.

My cost of telecommunications has gone up about 500% since the year 2000.

Healthcare prices have gone up more than 200%. However, my cost of insurance with my company and my company's costs have only gone up about 50%. This is because insurance companies have rigged the market and one cannot have medical treatment without insurance now.

As my salary has increased to keep up with inflation, I have gone into higher tax brackets, even though I cannot afford to buy more. The fact that the government does not recognize the actual rate of inflation is their way to increase tax on individuals and to reduce the cost of labor, relative to the cost of goods.

The cost of high end foods has more than doubled and low end foods have become lower in quality.

My property taxes on the same house that I owned in 2000 have more than doubled. This is primarily due to average teachers salaries doubling and administrator salaries tripling during the same period... and the taxpayer being forced to foot the bill for their full pensions when they stop working at 55.... same with police and other government jobs, who get full pensions at 55.

My gas and electric costs have increased about 110% since 2000.

Ask a politician if he can live on the money he made in 2000. He will most likely say no. It is my belief that their costs have skyrocketed, which have forced them to become corrupt and infinitely bribable... or so their rationale would say.

Sales taxes have increased in my area by more than 50%(from 5.5% to 9%), added on top of the inflation. If the cost of goods have gone up 50% and the tax rate has gone up 50%, that is a total increase in taxes of 75%.

New taxes have been added onto telecom and utility bills. Since the bills have gone up hugely, the taxes on them have gone up as well.

Why can't most millenials afford a house. It is not the cost of the house or the cost of borrowing It is the cost if everything else that they need.

Wed, 08/05/2015 - 15:39 | 6394558 the grateful un...
the grateful unemployed's picture

its the cost of everything else. well put, two people both put their income into a mortgage who maintains the house, cleans, mows the lawn, etc etc. a post yesterday highlighted goldmans confusion that more children were living with their parents even though the average wage for that demographic was rising.in a service economy you come to a place where the product costs less than owning the product, the car costs more to drive than the car. just to highlight the feds lipservice to employment, but their golden handshake to asset ownership, just demonstrates how far wrong their policy is

Wed, 08/05/2015 - 15:39 | 6394555 SmittyinLA
SmittyinLA's picture

They* dont count tax increases as inflation, we** should tax govt as a "commercial activity" and raise taxes on raising taxes, beat them* at their own game. 

*them 

**us 

Wed, 08/05/2015 - 15:46 | 6394592 ramgold2206
ramgold2206's picture

price inflation AKA fiat depreciation caused by Ctrl P happy central bankers/politico's/physco's/thief's

Its simply THEFT!

Physical gold is only realistic protection for everyday joe but everyday joe knows fuck all about gold... so he's fucked then really... 

 

www.teamramgold.com

Wed, 08/05/2015 - 16:03 | 6394663 BoPeople
BoPeople's picture

Sorry, IMO gold has no real value. There are assets that are productive and valuable (the things we need and that produce more) but gold is not one of them.

Gold is a thing that is priced by the bankers. I cannot control its price. The bankers do. It has no use to me ... so I will never own it.

Wed, 08/05/2015 - 16:23 | 6394774 ramgold2206
ramgold2206's picture

@BoPeople - yeah TBH I cannot disagree with anything you say; Gold is an oxymoron for sure... i hoard it and will not part with it (unless the family become sick etc) so i value it for some illogical reason...am I right? ... TBH i havent a fuckin clue,,just like everyone else because no one knows the future .... but it makes life really fucking interesting trying to figure it out..  

 

www.teamramgold.com

Wed, 08/05/2015 - 19:38 | 6395429 Clowns on Acid
Clowns on Acid's picture

Dude...I can tell your are into submission. Master told you gold is a relic. 

Wed, 08/05/2015 - 22:52 | 6396048 crusty curmudgeon
crusty curmudgeon's picture

So please enlighten us -- what assets that are productive and valuable do you own?

Wed, 08/05/2015 - 16:08 | 6394650 fed_depression
fed_depression's picture

Figure out the basic problem for today. Why in the world would the Fed want the treasury values to go down and interest rate up?

It has nothing to do with confidence in the USD.

 

Or think of it another way. Why would anyone pay 20 times or 18 times what something is worth. These are stocks. Would you ever pay 18 or 20 times your house value because they tell you that's normal?

 

There's no reason stocks should ever be valued at 18 times earnings without a dividend payment or other means of repayment.

 

When they tell you it's worth 18 times and nobody wants them look what happens every single time. This is the biggest scam in over 200 years.

Wed, 08/05/2015 - 16:05 | 6394680 optimator
optimator's picture

Yes, the FED bombards us with.

with two messages about inflation:

One is "We're fighting hard to get inflation to 2 percent"

Wed, 08/05/2015 - 17:34 | 6395020 FeedTheHogs
FeedTheHogs's picture

38% increase in the CPI over 16 years corresponds to about 2% per year.

Wed, 08/05/2015 - 19:35 | 6395421 Clowns on Acid
Clowns on Acid's picture

Right. But wha 'bout the workers ??!

The real measure is CPI - the average increase  in wages. We need more illegal Mexicans and Somali's I tell you !

Unless of course you are well placed in front of the immoral Fed money printing machine. Then indeed compensation has absolutely outstripped CPI when the Stalingrad and Poorsky Index is running up 30% per year !

Exert yourself...complete your thoughts.....

Wed, 08/05/2015 - 16:15 | 6394728 d4pwnage
d4pwnage's picture

Good overall article, however,

"Taxes naturally rise with the economic expansion due to rising population..."

That's not exactly true.  If the money supply were constant, an increase in the population would not "naturally" increase taxes, as the money supply would be divided amongst more people.  Therefore, on average, each person would have less money and hence less that could potentially be taxed.

(As a sidenote though, that's not necessarily a bad thing to have less money.  So long as people are producing REAL goods and services, living standards can be maintained or even increased regardless of how many US$'s exist.)

Wed, 08/05/2015 - 16:23 | 6394778 MuleRider
MuleRider's picture

Anybody know or understand how to apply the hedonic adjustments getting from the F-18 cost to the F-35?

Wed, 08/05/2015 - 19:32 | 6395404 Clowns on Acid
Clowns on Acid's picture

Yes. Just like the Greeks ...with a crowbar.

Wed, 08/05/2015 - 16:29 | 6394804 d4pwnage
d4pwnage's picture

Am I reading correctly that ZH'ers don't believe in the Cherry-Picked Index (CPI) numbers?  I'm shocked!!

Wed, 08/05/2015 - 16:37 | 6394833 Bemused Observer
Bemused Observer's picture

We really can't tell WHAT we have anymore. None of the normal indicators are trustworthy, numbers are carefully manipulated so they are more propaganda than indicator.

We see obvious signs of both inflation and deflation. But how can they co-exist?

It has occurred to me that we have never had both physical AND digital currency before...Perhaps the two are exerting effects on each other that we did not anticipate.

It IS true that digital transactions allow TPTB to hide a lot of indicators from us. We don't see long soup lines on our way to work because they all have EBT cards and shop individually all over the place.
But those same transactions also make it harder to hide other things from them. All our digital transactions can be tracked, and the info stored...We actually have 2 currencies, although it seems like it's just 2 versions of the same currency...each behaves differently, has a different effect that is both bad and good at the same time.

We have 2 economies...one in actual shit we need and use, and another virtual economy, where we basically play a video game with real-world consequences...

What's the historical precedent here? Because I can't find it...this shit is brand fucking NEW! The truth IS, no one has any idea of the possible consequences of all the wonderful magic tricks they are using, the whole new paradigms they are introducing into one of the critically important areas of our lives.

Wed, 08/05/2015 - 18:06 | 6395047 mouthbreather
mouthbreather's picture

Here's how us jazzers keep it in perspective:  30 yrs ago a car cost 5k, a house 50k, and a jazz gig paid 100 bucks.  Today a car is 30k, a house 300k, and a jazz gig still pays 100.

Wed, 08/05/2015 - 18:28 | 6395166 Conax
Conax's picture

If I faced that dilemma, I would play poorly on Saturday night. The manager says, 'Hey, you guys stunk tonight, man!'  I'd say, "That was our hundred dollar show.  You get what you pay for."

Wed, 08/05/2015 - 20:15 | 6395303 mouthbreather
mouthbreather's picture

@ conax - An interesting approach.  How has it worked out for you in your line of work?  You got a raise when you told your boss he'll only get the truly incisive data when he pays you more?  You save your good advice for clients who pay the most?  You give better care to wealthy patients?  In my field we work because of our reputation.  Maybe that doesn't matter in yours.

Wed, 08/05/2015 - 19:08 | 6395325 khakuda
khakuda's picture

This highlights part of the trick the Fed uses.  Inflation should be measured not in quarters or years, but in 5, 10, 15, 20 year increments and compared with wages/income over the same period.  That will show the real  devastation the Fed has wrought.  And, look at the actual big ticket items in life like he did, not BS stats like the PCE which eliminates inflating items from the index.

Well done.

Wed, 08/05/2015 - 19:29 | 6395398 mouthbreather
mouthbreather's picture

Thank you.

Wed, 08/05/2015 - 22:56 | 6396056 buzzy_the_pirate_dog
buzzy_the_pirate_dog's picture

Fishing licenses?  Fisting licenses I think. 

Wed, 08/05/2015 - 23:18 | 6396118 Mediocritas
Mediocritas's picture

Cost can be considered absolutely (the $ value on the sticker) or relatively (how affordable the $ value is, ie, prices relative to income).

Official inflation loosely tracks the $ numbers on stickers, but that alone is not what people worry about when it comes to "cost". What matters is affordability (purchasing power), which must account for incomes.

So in addition to all the bullshit statistical fudges like hedonics, CPI understates costs of living, hence well-being, general happiness and economic weakness, because it doesn't include various reductions in incomes, nor does it consider the distribution shape of costs and incomes across the population.

For example, what % did you earn as interest on deposits in 2000 vs now? What were real incomes in 2000 vs now?

Every reduction in income has the same effect as an increase in prices when it comes to relative costs (what matters), so the CPI number needs to be summed with the amount of income reduction to provide a better read on things.

A bullshit number that various economically and socially impactful policies are shaped by leads only to poor social outcomes.

Thu, 08/06/2015 - 00:33 | 6396256 wksmos
wksmos's picture

can anyone tells how this near zero percent be calculated?

Thu, 08/06/2015 - 01:19 | 6396328 BerlinBusiness
BerlinBusiness's picture

Chickens are up 36.47% since 2011. That's a huge component of our core diet and it's been increasing at a rate of 9.11% over the past four years. No inflation? Yeah right.

Source: http://www.indexmundi.com/commodities/?commodity=chicken&months=60

Thu, 08/06/2015 - 03:13 | 6396409 Dude-dude
Dude-dude's picture

Deflation is undesirable by governments and banks for a few reasons (assuming no change in tax rates and no government bailouts): (1) the value of debt and servicing debt (both public and private) is increased inverse to the deflation-rate (and debt-collateral loses value at the deflationary rate).  This puts pressure on highly-leveraged S&Ls and investment banks as it could lead to insolvency (even if they technically are); (2) until paycuts begin, the population experiences an automatic (tax free) wage raise at the rate of deflation (or in otherwords the purchasing and sservicing power of tax revenue goes down).  Demand for non-essential goods and services drops as more consumers come to expect lower prices in the future.  If uncorrected, as the prediction comes true, more and more people hold-off buying: both because people feel if they purchase on credit, their debts will further increase relative to the depreciation of items purchased (though this is potentially dampand by consumer ignorance). Hyper-deflation can occur if the cycle persists.  Such deflation increasingly leads to defaults at all levels (including sovereign).  People begin to hoard cash outside banks as banks run out of money and bailins become seen as inevitable.       

Thu, 08/06/2015 - 10:10 | 6397092 DrNybble
DrNybble's picture

At this point in time, the economy is almost totally dependent in consumption.  The need for spending in lieu of saving.
Deflation will cause people and businesses to delay purchases to reap the benefits of potentially lower prices in the future.  This will slow the economy by reducing demand with will further lower prices.
Deflation is something the government fears the most and will do whatever it takes to spur inflation at some modest rate while trying to keep it under control.  And that's task is difficult when so much "new money" is being created to cover obligations.  The Fed's only hope is to keep most of the newly created money under their control and not let it get into the economy where it increase the dreaded "velocity of money."

Thu, 08/06/2015 - 07:20 | 6396561 J J Pettigrew
J J Pettigrew's picture

THe Federal Reserve promoting inflation is directly against their mandate.  Inflation is NOT stable prices.

SO, add in the price of fish, meat, and health insurance and what do you get??

Thu, 08/06/2015 - 08:57 | 6396776 VW Nerd
VW Nerd's picture

Sadly, Americans have become so dumbed down they can't remember how much they paid for something in the past.  And if they do, they don't see the change in percentages but in raw numbers.  For instance, if something that was $1.00 goes to $1.10, their response is "well, it's only 10 cents.".  Even a lot of smart people I know are blissfully ignorant of the price creep we're witnessing.  With the government intervening and in the food market, education market, housing market, medical market, etc., you are being forced to compete directly against your tax dollars for goods and services due to the bulge being created in these markets from profligate government funding

Thu, 08/06/2015 - 09:58 | 6397057 DrNybble
DrNybble's picture

Let's keep things in perspective.
A 38% increase over 15 years is just barely over 2%/yr - compounded, as it should be.

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