O Inflation, Inflation! Wherefore Art Thou Inflation?

Secular Investor's picture

A lot of eyes were on Janet Yellen’s testimony in front of the Senate Banking committee last week, as investors wanted to hear more clues about a potential change in the economic and monetary policy of the Federal Reserve. People seemed to be particularly interested in finding out more about the expected rate hike pace and the reduction of the size of the Fed’s balance sheet.

Alas, no new statements were made on these topics (Yellen rarely provides ‘scoops’ in official hearings and testimonies), but she did confirm the inflation expectations remained on track thanks to the ‘strong’ labor market and the rising prices of imported goods (undoubtedly helped by the weakening US Dollar versus the Euro, as you can see on the next image).

Source: stockcharts.com

Surprisingly, the mainstream media jumped all over this quote to point out why  the gold price was going down that day. Morningstar (copied from the Dow Jones newswires) went as far as using as title: ‘Gold Falls After Yellen Says Inflation May Rise‘ . Most news outlets tend to forget a lot of people actually buy gold as a hedge against that very same inflation as it’s one of the best ways to maintain a certain purchase power (it’s a hedge against inflation and economic and geopolitical shocks).

Literally the next day, an updated Consumer Price Index and so-called real earnings report was released by the Bureau of Labor Statistics. Yellen might have to do her homework again, as the CPI data points out the situation remained completely unchanged in June. Not only does this de-rail Yellen’s previous statement, connecting the rate hikes to the inflation rate, it also means there’s a bigger problem.

Whilst everybody was focusing on the CPI data, we compared those with the Real Earnings data. This taught us two different things which are completely contradicting each other. On the short term basis (Month on Month), the average hourly earnings for all employees increased by 0.2%. Is that surprising? Yes, considering the higher (hourly) income did not result in a higher inflation rate.

Source: stockcharts.com

One potential explanation could be there will be a ‘delayed reaction’ and we will see the inflation rate picking up again in July, but we think the recent weakness of the US Dollar is to blame here. As you could see on the chart we previously used in this article, the US Dollar has lost approximately 10% of its value versus the euro in the past year and this makes it more expensive for the average American to pay for imported products. So whilst this might not lead to an increase in the CPI results, it’s definitely possible people are spending as much money as before as the total dollar index is moving down as well.

A second explanation could be based on the second variable of a monthly or annual income. Whilst a wage per hour is one part of the equation, the total amount of hours worked obviously is as important and even though the wages increased, it’s absolutely not impossible this was connected to a lower amount of hours per employee.

Was Yellen too optimistic? And if she is; gold traders seem to like low inflation rates more than high inflation rates these days!

>>> Click here to read our Guide to Gold, FOR FREE!

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jharry's picture

Recently I exchanged ideas about what's really going on in the economy with Old Dick Eastman, a social credit economist.  It explains a lot.  This is how the QE money buys real assets and how our nation is being taken over.

"They are spending it (QE) on the real assets that are sold cheap because of default and cash flow distress resulting from less revenue than expected because the real economy loop, the "bottom tier" is in monetary deflation while the QE money the Fed gave out when it bought the securitized-mortgages from those international investors who were stuck with them was plentiful.   So the real economy (lower tier) is in distress and sells its assets (homes, businesses, privatized public assets) at depressed prices which the upper loop, flush with QE cash, then buys up.  In other words, I agree with your statement, yes.  Yes, the keep us in recession and buy up our stuff.  You ask, where is all the money going?  Only some of the money the creditor elite is getting is being used to buy up real-economy assets  -- the rest of it is held in idle cash balances or loaned to foreign countries.  The idle cash balances become worth more just by being idle, because of real deflation.  Especially as "austerity" (cutting government spending and entitlement disbursements) results in more and more deflation.  If they sit on cash, they can buy the assets even cheaper by waiting still more -- and they do. "

Rick Cerone's picture

There is inflation with every QE release. Don't confuse dilution with deflation. None of it matters because a dollar with zero value can still buy a dollar worth of goods with a gun pointed at the seller's head.

Manipuflation's picture

What happened?  I need to buy more gold and silver?  OK.  Will do.

I Write Code's picture

My index has always been a sit-down burger lunch, and that has gone up about two bucks in two years, about ten percent, due to minimum wage increases.

nukedc's picture

Do any of you degenerates actually know what the word "wherefore" means?

Zarbo's picture

"O Romeo, Romeo, wherefore art thou Romeo?"

el buitre's picture

Everyone on this site knows that the Bureau of Lying Statistics claim that price inflation is under 2% is a load of crap.  The Chapwood Index's claim that it is running about 10% per year in the major cities has the air of truthiness.  But the question remains as to why Mr. dual citizen Stanley Fischer (former president of the Israel central bank) has decided to use this as a rubric.  My theory is that while price inflation and credit expansion are interrelated, they can be separated by quite some distance in time, which can cause “stagflation."  A debt based monetary Ponzi scheme requires a constant expansion of credit, or like the Ponzi it is, will collapse in upon itself.  As the brilliant Lynette Zang has pointed out with her FRED charts, monetary velocity peaked in 1999 and is now lower than any time during the Great Depression (as opposed to the Greater Depression which one can see by looking out the window).  Velocity, IMO is the second derivative of credit, or the rate that credit is growing or contracting.  So I think that while price inflation is in all out expansion, the rate of credit growth has been contracting since 1999.  Our Masters have tried to compensate for this by inventing new types of faux money called derivatives, but these are now balanced on a knife edge.  Any further increase in real or even nominal interests rates will trigger a derivative "event," which at 2 quadrillion dollars, would bring down the whole house of cards.  While Yellen herself is a muppet, our Masters knew this since well before August of 1971 when they ended any semblance of real money to the dollar and turned it over to the moneychangers in toto.  So, of course, they have planned this collapse from the beginning.  It appears that they wish to replace the dollar with a block chained SDR as the world's reserve currency, as indicated by CIA affiliated smooth-talking scumbag Jim Rickerts.  What is amusing about this is that the dollar is a major part of the SDR “basket.”  So the IMF is going to have to throw in some BIS/Vatican gold to the basket or it would appear as ridiculous as an AAA MBS sold to a Norwegian pension fund in 2006.  This means that the IMF will replace the Fed as our immediate money masters.  And of course the IMF is controlled by the BIS when they are not sacrificing children in satanic rituals.  Perhaps our orange Mother Mary can give us another lesson about the number 7.

NAV's picture

O Inflation, Inflation! Wherefore Art Thou Inflation?

The latest Chapwood Index reports that the cost-of-living in America in 2015 increased 9.60%,  averaging 10.2% a year from 2011-2015.  Yet the official CPI inflation rate for 2015 was 0.73%, making the Nominal GDP of 2.22% for 2015 minus inflation a real GDP of -7.38%. For 2014 the Nominal GDP of 5.6% becomes real GDP of -4.1%. The revised real GDP for years 2011 to 2013 work out to -6.2%, -6.5%, -6.5% respectively.

Chapwood's 5-year 10.2% cost-of-living average is comparable to the Bureau of Labor Statistics’ reported 5-year CPI of 1.50%.

The Chapwood Index “reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.”

"The Index shows the fluctuation in each city in the cost of items such as:
"Starbucks coffee, Advil, insurance, gasoline, sales and income taxes, tolls, fast food restaurants, toothpaste, oil changes, car washes, pizza, cable TV and Internet service, cellphone service, dry cleaning, movie tickets, cosmetics, gym memberships, home repairs, piano lessons, laundry detergent, light bulbs, school supplies, parking meters, pet food, underwear and People magazine."

According to Chapwood, the U.S. national average cost of living rate increase for 2015 was nearly 14 times higher than the Bureau of Labor Statistics' reported 2015 Consumer Price Index (CPI) increase of 0.7%..

San Jose, California's cost of living increase was the highest in the 50 cities Chapwood monitors:

“Over the past 5 years (2011-2015), San Jose, California experienced the greatest cost of living increase, with an average annual increase of 13.24% per year. In fact, California cities saw the 8 highest cost of living increases from 2011 to 2015, with their average annual increases as follows: Long Beach (12.88%), Oakland (12.86%), San Francisco (12.86%), San Diego (12.60%), Fresno (12.30%), Sacramento (12.00%), and Los Angeles (11.96%). Ed Butowsky, the founder of the Chapwood Index, asserts that the Index should replace the Consumer Price Index (CPI) when consumers look for an accurate measure of their true cost of living increase.”

http://www.chapwoodindex.com/

http://www.inflation.eu/inflation-rates/united-states/historic-inflation/cpi-inflation-united-states-2015.aspx

cynicalskeptic's picture

The Chapwood index seems to be more accurate than the Shadowstats numbers.   Real inflation is a hell of alot higher than what's being officially reported.   Between actual price increases and smaller quantities, inflation is all too real.   The big scoop out of the back of Dial Soap bars, and Sugar being sold in 4lb bags instead of  5 lbs, everything costs more.   Wages aren't close to keeping up, and things like Social Security and pensions are falling far behind.

TeethVillage88s's picture

The Bankers permitted 'big govt' and growth of big govt with no real deterent on Financial Ratings.

- Inflation every year, Fiat based on debt, unlimited money creation, money created out of thin air by all banks
- Usury Requirements on all Souls
- No Natural Law, Tort Law okay, Liability Unlimited Law okay, Property law only for the powerful okay, Criminal Law for those outside of govt, outside of wealthy or powerful class okay
- Property Tax Increases for no reason other than govt spent treasury or used it for investments for benefits, No Treasury at low level local govt, "okay they said"
- 100 Different kinds of taxes in USA... okay they said

http://www.zerohedge.com/news/2014-03-25/list-97-taxes-americans-pay-eve...
http://www.zerohedge.com/news/2017-02-12/fed-insider-exposes-evils-us-mo...

http://www.wnd.com/2016/08/6-5-trillion-missing-from-defense-department/
http://www.thefiscaltimes.com/2016/07/31/Pentagon-s-Sloppy-Bookkeeping-M...
http://thefreethoughtproject.com/audit-reveals-pentagon-6-5-trillion/
http://www.dodig.mil/pubs/report_summary.cfm?id=7034

We've become a Caribbean Financial Center Economy.

We have wealthy capitals, but we have reams of poor people and the trend in the 'War on the Middle Class' is heavy losses of wealth and compensation for work.

- Pensions long a joke to those who lost factory jobs
- Pensions $6 Trillion under funded
- Insurance, Trusts, Foundations, Pensions, 401Ks all deprived of relatively safe investments due to LIRP/ZIRP/NIRP

http://www.marketwatch.com/story/why-your-states-public-pension-plan-is-...

Jeff Reeves editor InvestorPlace.com. ( @JeffReevesIP )
http://www.marketwatch.com/story/why-your-states-public-pension-plan-is-...
Ed Bartholomew consultant pension financial management ( @e_bartholomew )
Jeremy Gold Society of Actuaries / American Academy of Actuaries ( @jeremygold )

http://www.pensiontsunami.com/

--

Jekyll Island Treaty (1910)
The London Treaty (1920)
The Second Plan of the Experts (1929)
The Hague Agreement (1930)
The Far East Combined Depositories Agreement (1932 1945)
The Bretton Woods Agreement (1944)
The B.I.S. / Allies Agreement (1948)
The Green Hilton Agreement (1963)
The Schweitzer Conventions (1968)
The Election / Appointment of Sole Arbiter Agreements (1995)
The Washington Panel (1998)
The Treaty for Respecting the Rights (2003)

TeethVillage88s's picture

Having Fun:

History of Banking 930 BC... King Solomon:

Considering that, he knows his country will fall apart after his death and selects one of his most trusted wives, Queen
Shaba or Balquish, to protect the assets, bloodline and traditions.

oops!

Sometime after, she leaves with everything back to where she probably came from. Jawa. There she established the courts of what later became known as Solo, Jawa.

Does this have anything at all to do with the Lombards? Usury? Okay, sorry please continue. lol

Duc888's picture

 

 

Loaf of bread was 5 cents in 1913, what does it cost now?

4x4 1/2 ton pick up truck was $6000.00 in 1970, now they're $40.000.00

 

Yup, no inflation here...

Money_for_Nothing's picture

The Fed was waiting for restaurants and other businesses to go under or raise prices or both.

That is what core inflation means. Sorta like people believe you when you tell them you are sick if you die soon afterward.

Till then it is just money laundering to the Fed. And the money that is being laundered is coming from the Fed by way of US Treasury.

That is the primary business of the US of A right now. Money laundering Federal Reserve Notes. It is for the children and the (insert your own bad group). But mostly for the (insert your own bad group).

TeethVillage88s's picture

"Inflation, Inflation!" Exclaimed Mr Yellen in unison with Mr. LaGuarde & Mr. Merkle, "my Kingdom for Inflation". "No, er wait...I want my wealth & Diplomatic Status." Yellen added.

lol

silverer's picture

Want some better number inflation numbers? This site is more like it:

www.chapwoodindex.org

Bricker's picture

That index is more like it. When I see a bag of chips for 8 oz and that same price use to be for a 16 oz bag 2-3 years ago I know I am getting hosed. In fact, my deoderant went up 12% from the last time I bought it 2 months ago. Hell, Crest tooth paste was 4.69 last week and 6 months ago it was 2.99, so I switched to Colgate.

It is a sham what we are sold about low inflation. It actually pisses me off that they change the matrix to keep people fooled.

I bought a Toyota 2 wheel drive truck in 1984 for $5999.00, today that two wheel drive is 28k. Under normal inflation rates it should be priced at $14685. But is nearly double that.

silverer's picture

I worked the same exercise, bringing a standard cab base pickup truck forward, using the "official" inflation rate of each year. Math is math, and that truck was nearly $5000.00 more over a span of 15 years than what the numbers stated it should have been. Then add on the extra interest charges to finance it.

spdrdr's picture

Don't forget about mandated improvements - anti-lock brakes, airbags, fuel efficiency standards, electronic stability control, etc etc.  These things all add up.  There is no comparison between the 1984 truck (carburettor, leaded fuel, rear drum brakes) and today's version.

TeethVillage88s's picture

Yeah, and try looking for vegis like tomato & lettuce when you order food at rush hour. Apparently most restaurants are all in on the trade custom to reduce use of produce in food.

Micro tomato slices are in.

- Margins have to stay high just like overhead for executive compensation
- Health Care, Hospitals, Health Insurance, Prescript drugs
- Didn't drug companies write ACA, Obama Care?
- Didn't Health Insurance Write Obama Care?
- Bankers Bullshitted on 2008 Financial Crisis and whined for TARP Bailout & Fiscal Stimulus & QE...
- Now Health Insurance Whines for Premium Increases & Fight Republican plan too... "Total Bullshit, scam, propaganda"
- Next Universities need bailout
- Next Local, State Govt need bailout, but keep overhead!

** TeethVillage ** Need bailout! but keep overhead! ** SCAM on TAXPAYER! **

el buitre's picture

If you want to keep your synapses firing properly, switch to a fluoride free brand.

Kayman's picture

Use the Economist Magazine's comparative purchasing power of the Big Mac index. But change the comparison of the cost of a Big Mac today vs previous years. Inflation is rampant. Over the past 40 years inflation is 600 to 800% (and I don't need a supercomputer to tell you that isn't 2% compounded)

Quantity (size) down, Price up.  Inflation double digit.

And Quality, which for a Big Mac I don't think you can measure it, but for other things, they simply do not last. Especially crap from China.

 

TeethVillage88s's picture

Low inflation and low average compensation... equals opportunity for Foreign Mega-Buyers/China State/Sovereign Wealth Funds/Saudi Arabia... Kings and Queens of Europe...

http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm (Foreign Ownership in the USA)(the bigger number is liability of foreign ownership)

So yeah... people are not doing their job for the nation:

Pope, Treasury, FDIC, Comptroller of the Currency, The Financial Stability Oversight Council (FSOC), OMB, CBO, GAO, SEC, FINRA, DOJ, FBI, DNC/RNC, US Congress, Chamber of Commerce, K-12 & University System.

Consuelo's picture

 

 

"Especially crap from China."

 

Here we go again...

Oh well, someone has to do it.    See that keyboard down at your fingertips, mate?  And the computer it is connected to?   I'll bet that piece of crap has lasted you quite a while already.   And where is it made again...?

A little take home from somebody who knows:

China will manufacture anything you want.   Perhaps more importantly, they will manufacture that anything to any quality you want as well.   Just ask floor supervisors at the plant who manufactured Lumber Liquidator's crap 'Formaldehyde' flooring for them, which later brought $$$suit...

Cut the China crap.

If you want real 'Crap', point fingers at (2) entities:

#1. Congress, for creating a regulatory environment which is not only hostile, but essentially prohibitive for many businesses to conduct business here domestically.

#2. Large multinationals (the corporate heads and board members) who put shareholders first and customers last.

 

CRM114's picture

Not convinced this is entirely true. 

I've noticed several things in the last 3 years, and heard about quite a few more, where the Chinese factories are changing internal components for cheaper versions. The external shell and the packaging stays the same. I'm not convinced the buyers are aware of this. These changes do seem to have quite an effect on seviceability/lifespan though. It's also pretty obvious that whoever did the redesign has never used the product. I've found a couple of problems with lighting units where doing the right thing would actually have been cheaper.

I Write Code's picture

You're mostly right, but the point is pretty much anything brought in and sold by a Chinese entity tends to be at the lowest end of things, and that's apparently how most Chinese citizens see their own culture and why they still worship western logos, for good reason.

We can also just hope that China cannot really make high reliability, bleeding-edge tech, or we are hosed.

mrdenis's picture

Is that with or without pink slime ......

el buitre's picture

You can get any topping you want including pink slime.  All that ammonia cleans out your system.

BlueGreen's picture

Sometimes, as in the Shillary polls it seems that a lot of people who should know better actually believe the propaganda........ makes me wonder if the conspiracy is really limited to just a few sociopaths that get it, or they are just really that delusional.  At any rate, I'm sur they will use their ill gotten gains to capitalize the F out of the crash they create

idontcare's picture

Anyone who says that there is not any inflation in the system is a government lackey or one of their "familiars" (in the demonic sense).  The minute Nixon took us off the gold standard (effectively devaluing the currency), we've had almost 50 years of hyper-inflation (since when should  single family home well under 2000 sq ft in a metro area cost $1million+/- when wages have barely doubled in that time?   BTW, has anyone looked at the prices for real SUVs (Escalades, Suburbans, etc.... not asian soccer mom mini-SUVs) lately?   .... and then there's the cost of healthcare and health insurance......

ArthurDaley-OldieTimeTrader's picture

In 2008 when the system went tits up the Elites weren't ready. So Yellen & co put it all on hold. Since then the Elites have been preparing. JPMorgan's vault now contains 550 million ounces of silver. So if you're not ready yet, you'll never be ready.. Get stacking the Elites have.. So when it goes this time it will be a life changing proposition..

JailBanksters's picture

So why is better that you need more dollars tomorrow than what need today to buy the same thing ?

Or to put it another way, why is better the dollar be devalued more in the future ?

CRM114's picture

The official inflation figures were fixed a long time back to exclude the true essentials, thus hiding the real inflation figures that most people were and are experiencing.

http://www.shadowstats.com/alternate_data/inflation-charts

Now, as disposable income is reducing, a greater proportion of people's money is spent on those essentials, and less is available for purchases which are recorded for official figures, and so prices drop on those purchases (or, to be more accurate, increase at a lower rate, which will eventually reach zero and below).

Thus, official inflation appears to drop, whilst in fact real inflation is unmeasured and unchecked.

If the Fed continues its current policies, chasing an unattainable official inflation target, it will in fact make the situation even worse.

This is the inevitable death spiral that befalls all models which use bad data.

What Governments (not just the US) gain by lying is a short amount of time to fix the problem before everybody notices. What they in fact did was just continue with the same policies which caused the problem in the first place. It's pathetic - their stock-in-trade is lying and they don't even know how to do that properly.

Climate Change: bad (i.e. fixed) data

Immigration: bad data

Employment: bad data

We're Doomed!, Doomed I tell ya!

roadhazard's picture

I don't believe I can afford any more inflation. The price of gas is my only perk.

OverTheHedge's picture

Looks like the wrong week to be a BMW importer: fuel may be cheap, but all Germany's export driven economy will be slowing down as their customers look elsewhere. The best way for Trump to MAGA is to devalue, but everyone else will devalue more, except no one has any money to buy stuff to make prices inflate.

Damn! This economics thing is tricky!

totenkopf88's picture

No inflation, huh? Just in home prices, rent, utilities, automobiles, health care, food, college education, etc- other than those things- not too much.The only thing that cunt,  Yellen, isn't getting inflation in is wages which have been flat for 40 years.

U4 eee aaa's picture

The only inflation the Fed cares about is in the labor market. They have been show to be at financial war with laborers in the name of the bankers since they were created

silverer's picture

Interestingly, it was shown that if you bought a house 100 years ago, and sold it today, on an average, you'd have virtually no profit. It's all inflation. So they get to steal from you again on your "gains". Many come out at a loss after paying fees, transfer taxes, realtor commissions, filing charges, inspection, repairs mandated by the government, loan fees, insurance, and on and on. Plus, you never really own the house. Stop paying property taxes to find out who really owns your house.

I Write Code's picture

Well it depends, in the crazy expensive areas in California maybe not so much, they have inflated way beyond inflation.

As for the rest, if housing prices have only kept up with inflation wages have not even, once you peel the top 1% off current numbers.