Central Banks Stumped As Global Inflation Hits Lowest Level Since 2009 - Here's Why

Tyler Durden's picture

Authored by Mike Shedlock via MishTalk.com,

Yesterday, I commented on “transitory” factors holding down inflation.

Today, the Wall Street Journal reports Global Inflation Hits Lowest Level Since 2009.

The Organization for Economic Cooperation and Development said Thursday that consumer prices across the G-20—the countries that account for most of the world’s economic activity—were 2% higher than a year earlier. The last time inflation was lower was in October 2009, when it stood at 1.7%, as the world started to emerge from the sharp economic downturn that followed the global financial crisis.

 

The contrast between then and now highlights the mystery facing central bankers in developed economies as they attempt to raise inflation to their targets, which they have persistently undershot in recent years.

 

According to central bankers, inflation is generated by the gap between the demand for goods and services and the economy’s ability to supply them. As the economy grows and demand strengthens, that output gap should narrow and prices should rise.

 

Right now, the reverse appears to be happening. Across the G-20, economic growth firmed in the final three months of 2016 and stayed at that faster pace in the first three months of 2017.

 

Growth figures for the second quarter are incomplete, but those available for the U.S., the eurozone and China don’t point to a slowdown. Indeed, Capital Economics estimates that on an annualized basis, global economic growth picked up to 3.7% in the three months to June from 3.2% in the first quarter.

 

Central bankers in developed economies are puzzled by the sluggish pace of pay rises, given continuing declines in jobless rates. However, they believe that economic growth will ultimately eliminate the gap between what their economies can produce and what they are now producing, supporting wages and prices.

No Puzzle

Central banks are puzzled because they do not know what inflation is, or how to measure it.

For example, instead of using home prices in the CPI, they now use Owners’ Equivalent Rent.

In general, asset prices do not count. Bubbles in stocks and bonds do not count.

The massive global QE liquidity went someone, as money always does. The liquidity did not go where the central bankers wanted. It went into asset bubbles.

Mystery Solved

It’s no mystery why central bankers are mystified: Collectively, they are economically illiterate fools engaged in Keynesian and Monetarist group think.

On deck is another round of destructive asset price deflation, brought about by Central banks who cannot see the obvious.

 

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ipso_facto's picture

Poof!!! "Pay Me..."

 

TeamDepends's picture

Dear central banks, YOU'RE FIRED!!!

ejmoosa's picture

I rent a two bedroom apt for 1700 month.  Things get tight and I add a roommate.

In the Fed's eyes, my rent has fallen in half.

And that's how we get deflation...

MFL5591's picture

All intentional, all by deisgn.  

BandGap's picture

This was posted two days ago by another ZH warrior. Lengthy, but explains a lot in regards to this conversation.

https://www.youtube.com/watch?v=8YTyJzmiHGk

They (the Central Banks) never thought they would see the circumstances they are dealing with today. They simply do not know what to do. So they do dumb shit stuff.

Gods's picture

My food has price doubled in the last 10 years. My rent has doubled in the last 10 years. My insurance has almost doubled. My wages have remained the same since 2000.

847328_3527's picture

Frozen veggies have gone from 80 cents/16 oz to the present non-inflationary price of $1.57/10 oz.

Gubmint workers have been getting some releif with their 3-5% wage increase every year but the private sector not so much.

Obama and Democrats hate the American middle class.

hoist the bs flag's picture

eat more Ramen...It's still a dollar a pack.. hovering right at 2009 prices. It's hedonically adjusted. wink wink...

SoDamnMad's picture

About the most non-nutritional food going. Better eat at McDonalds than that shit. (Not saying very much)

eclectic syncretist's picture

"Central Banks Stumped As Global Inflation Hits Lowest Level Since 2009"

The Federal Reserve's mandate is to ensure price stability, meaning no inflation or deflation. Obviously, having enacted policies that have resulted in the dollar being devalued over 20-fold since its inception in 1913, the Federal Reserve has been a massive failure by their own benchmark, and should be shuttered based on this fact alone.

Of course, everyone knows that even from the beginning the true ulterior motive behind the Central Banks has always been to counterfiat money in order to selectively enrich a few at the cost of the many, with inflation simply happening as a direct result of all their counterfiat printing. 

The Fed is lying to us this time by telling us that there is no inflation, because they intend to raise interest rates and ramp up the counterfiat printing presses so that they can enrich themselves with more free money and interest payments from the rest of us. They will do this because even now the banksters feel they don't have enough already, and fail to recognize that all the wealth in the world could never fill their surfeit souls, which is the real problem. When they convince themselves they own the entire earth they'll lust for the moon, and then the stars, and the air, and no matter how much they control and strip of essential spirit and kill, they will die sad and unfullfilled. Such is the curse of the bankster.

Kayman's picture

From the article- "they (Central Banks) are clueless about how to measure (inflation)"

Nonsense.  They know exactly how to measure inflation, but they use this fraudulent adjusted statistical nonsense to perpetuate the theft from the middle class. All the time pretending they are clueless.

The Wizard's picture

I would guess food more than doubling over the last 10 years. Might it be the statistical analysis methodology is screwed up and the guys visiting the grocery stores haven't noticed the shrinkage of packaging. It is a joke. 

Hell, discouraged workers are not included in the unemployment statistics. How stupid is that stat?

Bay of Pigs's picture

Good thing items like healthcare premiums aren't going up either.

Come on Mish. We went over this terminology ten years ago at your site when having this discussion. They are lies, not real stats.

shizzledizzle's picture

Stop hammering PM's every day and you'll get your inflation.

ReturnOfDaMac's picture

And that Shizz is exactly why they do it. And they will continue to do it until and unless it all blows apart.  Btw, unfortunately it won't.  So get out there and buy stawks!

TheSilentMajority's picture

The real CPI has averaged between 7%-12% annualized for more than 20+ years.

The clueless peon sheep would amass with their pitchforks if the central bankers ever published the real inflation rate.

Grandad Grumps's picture

See link

OK, so why would Getty Images do such a bad job of pasting Zuckerberg's face over someone else's head? (maybe it is even Zuckerberh's head). What are they trying to tell us?

https://www.thesun.co.uk/tech/4170364/former-facebook-executive-says-soc...

Doom and Dust's picture

Bollocks. Central banks know exactly what they're doing. Their intention is just not what you think or they say it is.

Uncertain T's picture

Whenever the price of a commodity goes up, it gets removed from the index. Try that. 

 

http://www.businessinsider.com/if-people-knew-the-actual-inflation-rate-...

4johnny's picture

Except for gas, inflation is everywhere.  Where are these fuckers looking?

THORAX's picture

Audit the Fed! 

Reptil's picture

You mean: they're ACTING surprised
none of this is coincedental

AUD's picture

It's not because they don't know how to measure it, they just don't want to measure it

small axe's picture

No mystery. Velocity of money shows that the QE money stayed in the canyons of Wall Street. Lowest level on record:

https://fred.stlouisfed.org/series/M2V

Mission accomplished, Janet?

Criminal, pure and simple.

Albertarocks's picture

Exactly right.  There is no mystery, except to bankers who are pretending to be stumped.  They know damned well why there's no inflation... and it's exactly for the reason you point out.  The magic of fractional reserve banking has not been allowed to play out, and it won't as long as the bank pigs keep withholding all that play money for themselves for use in the stock markets.  Once they start lending it into the economy for the benefit of any business in the USA that want's to expand and start growing the country again... the usual inflation due to fractional reserve banking "is not happening".  Any banker who is truly "stumped" by this fact would be better suited to a job at Taco Bell... taking the garbage out.

Dilluminati's picture

Actually the banks rotated the deflation upon the consumer in bank returns for savings and retirees.  Been at it, hard at work at it now for oh about 9 years.  This is why additionally no wage growth, again ROTATED DEFLATION as a market cycle onto consumers, but.. remember this.. there gets to be a point where too many debts chase too few dollars, and irrespective of if that is retail sales or autos, the banks who own effectively everything can forestall that correction, but never avoid it.

So long animal spirits, go buy the dip.. but when you have to run for cover the next cycle, there isn't safe places to run as the large dollars buy those hiding spaces or so many initial dolllars force the sale.  I'll laugh when people are trying to buy safety in the 30 and receiving less than what you could have gotten in March of this year brokered CD Dis, non-callable, FDIC insured.  If the debt ceiling isn't risen.. that means not enough dollars to service debt.

Deflation = too many debts chasing too few dollars, the narrative and bias of the gold bug misses stating it in that succinct of a sentence, but if you sold at the height of the property bubble, and waited for too many debts to chase too few houses, you could have in 2008 reinvested that money and bought 2x as much house, 2x as many units.  Arguing if deflation eroded 40 to 50% of bubble price does not equal cannonical inflation.  The prices might have been inflated temporarily, but as debt proves time and time again it is the final arbitrator on value. 

Dilluminati's picture

Correct, it never circulated the real economy and we eventually troughed up or expressed cycle growth, this was that moment to get to a safe position

AntiMatter's picture

 

 Only Three Countries Left Without a ROTHSCHILD Central Bank!

The Attacks of September 11th were an inside job to invade Afghanistan and Iraq to then establish a Central Bank in those countries.

Case Closed: JFK Killed After Shutting Down Rothschild’s Federal Reserve

http://www.theeventchronicle.com/finanace/three-countries-left-without-r...

 

 

Ban KKiller's picture

Accounting gimmicks, works right up to the moment...

I'd say real inflation is six to nine percent...generally. Compared to savings rate of fifty basis points, yeah that makes sense.

Too-Big-to-Bail's picture

We're not taking any more of your debt -- we're already saturated. Before we could all consume more by adding debt, and once debt is saturated something has to give. Interest payments take up a higher share, so consumption on the things you want us to buy to give you your inflation is just not going to happen. Duh!

Dilluminati's picture

We are in a debt deflation, I flogged that horse here repeatedly and yes I'm right.  

https://keenomics.s3.amazonaws.com/debtdeflation_media/papers/keen_cce.PDF

However It is non-linear which is to say that factually M3, M2, M1 is more akin to math in harmonics.  Many people confuse a growth term and a cycle term.

The next downturn is going to be brutal.

While many can turn their noses up at 2.83% semi-annual growth for a period of 10 years, if you have an IRA and the gains are tax exempt, they could also be:

FDIC insured, which is to say if the bank breaks the buck, the instrument is additionally contract non-callable.  

Those are TWO DIFFERENT THINGS!

https://www.depositaccounts.com/blog/cd-rates-survey/

Currently 

https://personal.vanguard.com/us/funds/bonds/bonddesk

Discover is selling the 2.65% at 10 year

You will see the two in the above links.

Risks

Selling Before Maturity: If you need to sell a CD before its maturity date, the sale proceeds may be more or less than your initial investment.1

Call Features: Some CDs may include a provision that allows the issuing bank to "call" or redeem the CD prior to maturity at a given price.

FDIC Coverage Limits: CDs are insured up to the FDIC limit per depositor per institution. If the total amount you have in deposit obligations at a specific institution exceeds the insurance limit, your deposits may not be fully protected.

Credit Risk: Since CDs are a debt instrument, there is a risk that the issuing institution will default. FDIC insurance helps mitigate that risk.

In conclusion your IRA or self-directing 401K should investigate a brokered CD tax exempt if you have already accumulated wealth in your retirement account and north of 50 years of age, in effect TIMING the safe play of brokered CD through to retirement.

Ohhh congratulations, you retired, you lost 40% of your IRA like what happened in Japan in 1989.

I'll agree after tax what is 2.65% not freaking much, but now is those opportune times to sell high and lock in the gains with 10 years garunteed gains if your age makes this a valid scenario.

But debt deflation is both represented as a growth term and cycle term.  It oscillates said simply.

Next downturn is going to burn some baby boomers and.. and.. because it is deflation there will no bid on metals.. and crypto will vanish.

Best of luck folks 

 

 

 

Bay of Pigs's picture

Yes, you are correct about some points. Talking about real inflation rates isn't one of them.

Dilluminati's picture

People talked about housing inflation in 2008 it was a MARKET CYCLE of debt!  Dollars are a also a market and a cycle.  Just you wait until too many debts chase too few dollars, and we'll see if it's deflation?  Or Inflation?  The WTI is betting with me, so is professional market participants in metals.  Wishing doesn't make it so, just the facts.. I'm well placed/documented on my opinion, lets see how it plays out?  

 

LawsofPhysics's picture

LOL!!!  ....but, but, "debt is money"...

"Full Faith and Credit"

 

yes, there will be no bid on PAPER metals...

...real shit on the other hand...

 

JUMP YOU FUCKERS!

small axe's picture

Even by the official CPI inflation calculator from the BLS, inflation since 2000 is running at 45%...or, better said, the dollar has lost 45% of its value

$1

in 2000

has the same buying power as

$1.45

in 2017

https://www.bls.gov/data/inflation_calculator.htm

LawsofPhysics's picture

Correct, REAL INFLATION IS ALREADY OUT OF CONTROL!

 

The "masters of the universe" know this already.

lester1's picture

Globalization

 

Is 

 

Naturally

 

Deflationary!!

LawsofPhysics's picture

LMFAO!!!!

 

For whom?  People on Mars?

The cost of living at a decent standard has not gotten less expensive on earth you stupid fuck.

Full Court Lugenpresse's picture

Put Market Cap / GDP into the inflation calculations and maybe you'll learn something...

wholy1's picture

DUH: robots, minimum-wagers and "savers"/retirees at inflation-adjusted -2% return "consume" how much?

gregga777's picture

As of May 2017, the number of working age Americans “not in the labor force” has reached a total of 94.98 million. When you add that total to the number of Americans that are “officially” unemployed (6.86 million), you get a grand total of 101.84 million. That makes almost 102,000,000 million unemployed working age Americans or ~40% unemployed.

But, the Intellectual Yet Idiot classes ruling MORON criminals, the Goldman Sachs Feral Reserve System and the US Bureau of Lying Statistics say that everything is great and that unemployment is down to just 4.3%. Hey, it’s full employment people! Whoopee! Party on!

They also claim that most of people excluded from the 'official' unemployment figure are 'discouraged' workers who don't want to work. So, tell me, where are there tens of millions of always unfilled job openings in the United States?

http://www.zerohedge.com/news/2017-06-05/real-unemployment-number-102-mi...

Too-Big-to-Bail's picture

And secondly, The central banksters are not dumb -- they are playing dumb -- big f*cking difference!

idontcare's picture

No inflation?  Let's see. the last time the average person working a full time job could afford "the American Dream" of a home, a car, two kids, a dog, and a stay at home spouse was when?

CRM114's picture

Consumer inflation is 8.5%

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

The problem the Fed now has it that is has so completely removed its stats from reality that they are now caught by an inability to change them themselves. And if they do change the formulae, the real runaway consumer inflation will be revealed immediately.

The road has become a hill, and the can is being kicked up it now.

LawsofPhysics's picture

Bingo. 

"Full Faith and Credit"

Now, jump you fuckers!!!

khakuda's picture

EXACTLY RIGHT.  And so obvious, too.  It was obvious when they started out on this experiment.

Think about it.  If I see the government printing money and expect money will be worth less as a result (nflation), I will buy stocks to protect myself because they have typically been an inflation hedge.  Why?  Because I certainly can't buy a lifetime supply of turnips or gasoline or cars or cable tv or cell phone bills or heatlhcare upfront, can I.  Of course, the economists believe that I will rush out to buy stuff because I think the price is going up.  In their world, produce doesn't go bad and I have unlimited storage capacity in my home to buy ahead of need.  Well, I don't.  But, I can buy the stocks in the makers of those items if I think they will benefit from inflation and that will push up the prices of financial assets.

Financial market inflation has been runaway inflation.  Prices have oupaced underlying earnings for most of the past decade.  My sister just complained that a house she almost bought 6 months ago was purchased by someone else and is not on the market at twice the price.

Central bankers are incompetent hacks.

CRM114's picture

Actually, there a quite a few things you can buy a lot of, and a lot of them are very cheap right now because the rest of the public either can't afford them or don't realise the importance

Quality kitchenware - 25 year guarantee 11 pan set at only $205. Wusthof knife set (top quality, effectively lifetime), $400.

Quality work clothes and boots

Quality gardening tools - grow your own food.

etc.

Solar panels

Metal roofing

insulating foam.

All the above gets your bills down and thus further insulates you from inflation later (not to mention the tax increases that must come).

So, whilst the list you give is true, there is much that can be done.

 

Batman11's picture

1929, Japan 1989 and 2008 were all the same.

A debt saturated economy with a debt fuelled asset price bubble.

Richard Koo compares them and gives us some lessons we might lean.

He explained why austerity didn’t work in Greece to the IMF.

Ben Bernanke read his book and altered US policy, he leads those we follow.

https://www.youtube.com/watch?v=8YTyJzmiHGk

The West turned Japanese in 2008.

Central Bankers hopes for recovery need to adjust to Japanese timescales.

27 years and it’s still stagnating.

Batman11's picture

De-leveraging since 2008 has got the US into a similar position to that it was in before the Great Depression:

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png

There is a way to go yet.

The UK:

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.53.09.png

There is a way to go yet.

No one really knew what they were doing in the neo-liberal era and the whole thing was running on debt. Its economics didn’t look at private debt in the economy and so no one could see the problem as it was developing.

We all have to live with the consequences.

MrBoompi's picture

Even at 1.5% inflation, this is like a cancer that eats away at economic security for the 99.9%.  Most wage earners are getting further behind.  Retirees are even worse off.  It seems the Fed loves inflation, but not with wages.  On top of that, they purposely under-measure price inflation to get to the absurdly low 1.5-2.0%.  A stronger dollar purchases more and is better for consumers.  Cheaper prices, price deflation, is also better for consumers.  Higher relative wages are better for consumers.  So it follows logically the Fed is against anything that helps consumers.  As if we didn't already know that.