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Guest Post: The Shape Of 40 Years Of Inflation

Tyler Durden's picture


Submitted by John Aziz of Azizonomics

The Shape Of 40 Years Of Inflation

I have written before that there is no single rate of inflation, and that different individuals experience their own rate dependent on their own individual spending preferences. This — among other reasons — is why I find the notion of single uniform rate of inflation — as central banks attempt to influence via their price stability mandates — problematic.

While many claim that inflation is at historic lows, those who spend a large share of their income on necessities might disagree. Inflation for those who spend a large proportion of their income on things like medical services, food, transport, clothing and energy never really went away. And that was also true during the mid 2000s — while headline inflation levels remained low, these numbers masked significant increases in necessities; certainly never to the extent of the 1970s, but not as slight as the CPI rate — pushed downward by deflation in things like consumer electronics imports from Asia — suggested.

This biflationary (or polyflationary?) reality is totally ignored by a single CPI figure. To get a true comprehension of the shape of prices, we must look at a much broader set of data:

Yet the low level of headline inflation has given central banks carte blanche to engage in quantitative easing, and various ultra-loose monetary policies like zero-interest rates — programs that tend to benefit the rich far more than anyone else. Certainly, lots of goods and services — especially things like foreign-made consumer goods and repossessed real estate — are deflating in price. But you can’t eat an iPad or a $1 burnt-out house in Detroit. Any serious discussion of monetary policy must not only consider the effects on creditors and debtors, but also the effects on those who spend a larger-than-average proportion of their income on necessities.

Another issue is that CPI leaves out both house prices as well as equity prices.

Below is CPI contrasted against equities and housing:

It is clear from this record that a central bank focused upon a price index that fails to include important factors like stock prices and house prices can easily let a housing or stocks bubble get out of hand. CPI can — as happened in both the 1990s as well as the early 2000s — remain low, while huge gains are accrued in housing and stocks. Meanwhile, central bankers can use low CPI rates as an excuse to keep interest rates low — keeping the easy money flowing into stocks and housing, and accruing even larger gains. However, because such markets are driven by leverage instead of underlying productivity, eventually the ability to accrue new debt is wiped out by debt costs,  hope turns to panic, and the bubble bursts.

Both of the above examples indicate that the contemporary headline price index measures of inflation are deeply inadequate. Attempts to measure the rate of inflation that ignore data like house or stock prices will lead to flawed conclusions (rendering any such notions of “price stability” as meaningless), which has tended to lead to failed policy decisions such as those which led to the bust of 2008.


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Sat, 09/01/2012 - 13:19 | 2755134 JeremyWS
JeremyWS's picture

Got to love FRED.

Sat, 09/01/2012 - 14:32 | 2755209 Ahmeexnal
Ahmeexnal's picture

Keep stacking them coins. Here's another one for your consideration. 1 swedish krona coins with the portrait of the "whore" king:


An artist has come clean and admitted to being behind the fake one krona coins which defame Sweden’s King Carl XVI Gustaf, claiming that it was all part of an art project.

"Yes, it is me behind the coins. I have done it myself and have sought expert help when I have needed it," the artist told the Svenska Dagbladet (SvD) daily.

The mystery of the unorthodox coins began to gather pace after they began to surface in the money system during the summer.

Instead of the usual “Carl XVI Gustaf Sveriges Konung” ('Carl XVI Gustaf Sweden’s King'), the text written around the image of the King's head on each coin read “Vår horkarl till Kung”, which translates roughly into English as “Our whorer of a King”.

The coin,s royal insult is an apparent reference to the King's rumoured infidelities detailed in a tell-all biography of the king published in late 2010.

The book, entitled “Carl XVI Gustaf - Den motvillige monarken” (‘Carl XVI Gustaf - The reluctant monarch’), included a rare and detailed look into the King’s private life, including details of love affairs, wild parties with Swedish models, and connections to the underworld.

You can bet these krona coins will be worth a lot more than the "real" ones. Too bad the artist didn't mint some special edition Ogolfer coins.

By the way, any swedish ZH members around who could tell us how do you say "BUNGA BUNGA" in svenska?

Sat, 09/01/2012 - 14:50 | 2755261 laozi
laozi's picture

His Majesty's parties were not real bunga bunga, but very close. They had pretty "coffe girls" instead (kaffeflickor).

Sun, 09/02/2012 - 02:46 | 2755917 AAPL_Short
AAPL_Short's picture

Knulla knulla

Sun, 09/02/2012 - 07:17 | 2755980 Ghordius
Ghordius's picture

LOL - Ahmeexal, you write like a closet royalist. you are utterly fascinated by royal scandal, eh?

Royals are mesmerizing because they can be the focus of many projections, including the famous one of the "First Family of the Nation", a platonic ideal that leads and so protects and appeases the mind by appearing perfect. The "Approval of the gods Effect".

When the Romans got rid of the King, they found out that the population was restless and felt unsure. And so the pontifices created the institution of the Rex Sacrorum, someone that would lead a pious married life and continue the religious services that belonged to the King's duties, so that the gods from above would not notice a lack of respect and so the "Peace with the gods" would be kept.

But Royals themselves? Note one thing: their views - shaped by their position in society - are utterly different from the "sheep" that adore them.

So don't even try to apply your "sheepish" morals to them. You can't shame them with that. And trying does not change anything, their supporters sense that. Though you could try to find out what their morals look like, and use those. If you really wanted, that is.

To generalize: if a "shaming" movement rises from one group where it's applicable and tries to be applied to another group where it's not applicable, it will fail in every aspect except one: making a "them" and "us" statement.

You say "Bunga Bunga! I'm shocked!". I hear "Baaaah! Baaaaah! Baaaah!".

Sun, 09/02/2012 - 07:23 | 2756004 CTG_Sweden
CTG_Sweden's picture





“Keep stacking them coins. Here's another one for your consideration. 1 swedish krona coins with the portrait of the "whore" king:

An artist has come clean and admitted to being behind the fake one krona coins which defame Sweden’s King Carl XVI Gustaf, claiming that it was all part of an art project.

  • Fake krona coin mocks 'whorer' Swedish king (14 Jun 12)
  • "Yes, it is me behind the coins. I have done it myself and have sought expert help when I have needed it," the artist told the Svenska Dagbladet (SvD) daily.

    The mystery of the unorthodox coins began to gather pace after they began to surface in the money system during the summer.

    Instead of the usual “Carl XVI Gustaf Sveriges Konung” ('Carl XVI Gustaf Sweden’s King'), the text written around the image of the King's head on each coin read “Vår horkarl till Kung”, which translates roughly into English as “Our whorer of a King”.

    The coin,s royal insult is an apparent reference to the King's rumoured infidelities detailed in a tell-all biography of the king published in late 2010.

    The book, entitled “Carl XVI Gustaf - Den motvillige monarken” (‘Carl XVI Gustaf - The reluctant monarch’), included a rare and detailed look into the King’s private life, including details of love affairs, wild parties with Swedish models, and connections to the underworld.

    You can bet these krona coins will be worth a lot more than the "real" ones. Too bad the artist didn't mint some special edition Ogolfer coins.

    By the way, any swedish ZH members around who could tell us how do you say "BUNGA BUNGA" in svenska?”

    My comments:


    It seems as if you are indicating that the Swedish krona will depreciate due to excessive money printing.


    The Swedish central bank Riksbanken does not print money in order to cover the government´s budget deficits. But perhaps the Swedish central bank should consider to print money anyway if the Swedish will continue to appreciate. Perhaps they should have begun to print money in June. I reckon that the Swedish krona perhaps has appreciated too much by now. But it probably takes a new charter for the Swedish central bank to allow such measures. And I doubt that politicians who actually want Sweden to become a member of the Eurozone would like to change the charter in order to avoid problems due to too much appreciation of the Swedish krona. They are probably reluctant to let the Swedish economy benefit from all possible advantages of a floating currency since they want Sweden to eventually become a part of the Eurozone.


    The translation of the term “bunga bunga party” into Swedish should probably be something like “sex-orgie” (sex orgy) although I don´t know whether the Italian PM who has become associated with the term “bunga bunga” actually had sex with the young women that were “entertaining” him.


    The term “bunga bunga party” and politicians and Sweden inevitably brings a hushed up scandal from the 1970s to mind.


    In the 1970s, it seems as if some Swedish politicians had their own version of a “bunga bunga party”. According to the Swedish author Deanne Rauscher, parts of the Swedish government and some politicians from the opposition were “entertained” by some strippers and a “live show” with two females during some negotiations that took place on the Lucia Day celebrations in 1974 (see her book “Makten, Männen, Mörkläggningen”). My impression is that the Swedish Employers´ Confederation (SAF), or at least their top lobbyist, had paid for these strippers and also some hookers in order to have a hold on some politicians. In those days, the ruling Social Democratic Party was considering to confiscate most of big business by some additional taxes that would transfer ownership to some kind of funds controlled by the trade unions. These funds were called “Meidner funds” and had been proposed by the economist Rudolf Meidner. The elections in 1973 had resulted in 175 seats in the parliament for the ruling Social Democratic Party and the communists and 175 seats for the liberal and conservative opposition parties. My impression is that a SAF top lobbyist paid for some really expensive hookers that were offered to some politicians in the liberal Centre-Agrarian party which during the 1950s had formed a coalition government with the social democrats. I suspect that the Swedish Employers´ Confederation feared that Centre-Agrarian would sell out big business in return for showing favours towards the farmers. So therefore they offered hookers to some politicians, primarily politicians belonging to the Centre-Agrarian party, in order to have a hold on them. That´s my theory. According to Rauscher, the politicians generally paid for the hookers themselves. But I doubt that, with the exception of the minister of justice, Mr. Lennart Geijer, who probably was more able to pay for expensive hookers. He had inherited money he could spend on that. I think that the wives of most other politicians would have noticed if they had paid for the hookers themselves (but perhaps they had been granted heavy discounts by the “madam”, Ms. Doris Hopp?).


    As regards the Swedish king, I suspect that the rumours about prostitutes are exaggerated. If some prostitute would have shown up with a child that looked like the king, and if a blood group analysis would have indicated that the king probably was the father of the child, that would probably have endangered the throne for him. Remember that you could make some kind of paternity tests using blood groups before the DNA tests were introduced. But it seems as if his buddies had brought strippers to some parties which the king attended. A former bodyguard has also stated that the king attended a party in connection to a formula 1 Grand Prix at the Anderstorp raceway in the 1970s were two strippers appeared. (I know that this didn´t happen in connection to the last Grand Prix in 1978. I was there and saw the “parade” on the track in which he was riding in a 1950s Mercedes-Benz 220 Landaulette or Cabriocoach with the queen beside him. After the race, he left Anderstorp immediately. We were passed by this Mercedes 220 north of Jönköping shortly after the race. I said to my father “look, the king´s car!”.) The king has also admitted that he visited Moulin Rouge, or something similar, in Paris when he was young, probably in the 1960s.

    Sun, 09/02/2012 - 07:38 | 2756017 Ghordius
    Ghordius's picture

    +1 - Great characterisation of how the 70's and the politics behind the "Meidner schemes" worked. Love them or hate them, Scandinavian Lefties do their homework. I agree with you that a "honeytrap" scenario is likely.

    I think the rumour of a planned entry of the Swedish Krona into the eurosystem are greatly exxagerated. There is no need for it, nowhere.

    Up to now it was only the Swiss and Danish currencies that felt the need of a floor/peg. But yes, if the Yuan-Dollar fight goes on - which then leads to the EUR joining in devaluation, then a Swedish Krona floor to the EUR is likely. Perhaps next year already.

    Sun, 09/02/2012 - 11:15 | 2756221 CTG_Sweden
    CTG_Sweden's picture



    "+1 - Great characterisation of how the 70's and the politics behind the "Meidner schemes" worked. Love them or hate them, Scandinavian Lefties do their homework. I agree with you that a "honeytrap" scenario is likely."

    My comments:

    You don´t think that the Swedish Employers´ Confederation (SAF) did their homework better than the Social Democrats? Or do you think that the Social Democrats paid for the hookers that were offered to politicians belonging to the Centre-Agrarian Party?



    "I think the rumour of a planned entry of the Swedish Krona into the eurosystem are greatly exxagerated. There is no need for it, nowhere."

    My comments:

    Do you mean that there is no need for Sweden to join the euro or do you mean that the Establishment thinks that there is no need for unnecessary economic problems in order to make the electorate more inclined to support the idea to replace the Swedish krona with the euro?



    "Up to now it was only the Swiss and Danish currencies that felt the need of a floor/peg. But yes, if the Yuan-Dollar fight goes on - which then leads to the EUR joining in devaluation, then a Swedish Krona floor to the EUR is likely. Perhaps next year already."

    My comments:

    I´m not so sure that a fixed floor is a great idea. It should be possible to work out other criteria for how much money the central bank should print. Furthermore, it seems if pegs and floors sometimes attract speculators which in turn can cause problems.

    Sun, 09/02/2012 - 12:10 | 2756271 Ghordius
    Ghordius's picture

    Peace, I don't know enough about Swedish politics to make qualified comments - it was more a general comment to how social democratic parties across europe work, "tick", if you want. I would never vote Socialist, but you find me agreeing on cooperation with them in certain fields. I would prefer a good socialist party to an utterly corrupted party nearer to me. And this view annoys some, here, but hey, it might just open up their eyes to others. Intentions are debatable and differ, corruption is always the enemy.

    no. the EUR was the proposed solution to a commercial and industrial need. and then there is the context of trade and currency wars. they happen.

    Currently there is no immediate need for the Krona because it has a big sister, the EUR to hang-on-if-necessary. this "big sister" status is given by how much trade flows between the two (the more, the stronger). and by size (the bigger, the better).

    Side remark: I always find interesting that all the proponent of the breaking of the EUR always bring the merit of competitive devaluation as the key reason.

    But the EUR is big enough for this kind of stability, as the Danish and the Swiss are demonstrating. So why join or even propose to join? No need from neither side.

    Technically, a floor is the only way to ensure you reverse this policy easily. It's pegs that are easy to break. Or floors to small currencies. Of course, as you point out, this creates the problem of "how much/how long"? But hey, the Chinese are telling us that in 2016 they want to stop loving the dollar so much - and I fear the day they start to transfer this love to the EUR.

    Sat, 09/01/2012 - 14:21 | 2755227 Aziz
    Aziz's picture

    End the Fed, keep the FRED ;)

    Sat, 09/01/2012 - 15:20 | 2755288 Hype Alert
    Hype Alert's picture

    There is more to consider with house and equity prices. They are not consumables like food, auto, clothing, etc. or even rent. You don't buy a house every day, week, month or year and if you do trade up, you're usually exchanging one for another and you've realized a gain in the old house. Usually, though not lately. That's not to say house prices or equity prices shouldn't be looked at for bubbles. That I totally agree should happen.


    Great catch on the charts.

    Sat, 09/01/2012 - 15:31 | 2755298 VisualCSharp
    VisualCSharp's picture

    Housing is not consumable? I beg to differ. You see what happens to a house when the owner doesn't maintain it--spend money to maintain it. It goes to shit just like everything else in the universe. Entropy, my friend.

    Sat, 09/01/2012 - 15:44 | 2755307 Hype Alert
    Hype Alert's picture

    It's an asset, not a consumable.  If some DA wants to buy one and then light it up, it doesn't mean it's not an asset.  It means they are a dumb ass.

    Sun, 09/02/2012 - 07:01 | 2755987 Ghordius
    Ghordius's picture

    If you buy an estate that has a track record of production for centuries, together with living space of the same age and in conditions that look good for a few centuries more because most walls are made with boulders heavier than you, then you are perhaps buying an asset.

    If you buy a cardboard/light wood shelter made to last one lifetime only in an alluvional area noted for it's disasters, then you are perhaps buying a consumable, IMHO.

    Though most housing is in between those extremes, isn't it? And in today's financialization's twilight years an asset is anyway "whatever a bank will accept as collateral".

    Sun, 09/02/2012 - 10:58 | 2756205 juslen
    juslen's picture

    Houses are like cars, they are a depreciating asset like a car. Instead of rusting and needed new parts, homes need new paint, new shingles, and they must be kept from of bugs, rodents and plant life. You have to clean the gutters out, make sure their are no holes in the roof or foundation and you have to make sure the pipes don't leak or freeze. Only when a bubble is being inflation through monetary expansion can one even hope to get their money back if they sell. Well.. not true, some houses that are built in certain areas appreciate in value because the land they sit upon and the land surrounding it has become more in demand with the expansion of cities and so forth. Homes will always have value, but rarely are they ever investments especially if you get stuck underwater on your mortgage or you wife leaves you to pay it on your own. Or if you lose your job and are forced to sell or walk away because you have to find a job elsewhere.

    Sun, 09/02/2012 - 08:25 | 2756057 Umh
    Umh's picture

    Thinking of houses as nondepreciating assets is a large part of why we had a housing bubble. Houses depreciate, just slower than cars and mobile homes so peoples senses are fooled.

    Sat, 09/01/2012 - 13:22 | 2755138 Badabing
    Badabing's picture

    tye dye from 40 years ago

    Sat, 09/01/2012 - 13:27 | 2755144 mrdenis
    mrdenis's picture

    holy shit ,my doctor posted my EKG ! 

    Sat, 09/01/2012 - 13:27 | 2755145 chubbar
    chubbar's picture

    If "they" were trying to measure the price inflation they would literally compare apples to apples instead of the various trick fuck measures they installed after the Boskin Commission (hedonic, substitution, et al) which have acted to suppress official price inflation so that they didn't have to pay COLAs to retirees, etc.

    Sat, 09/01/2012 - 13:45 | 2755168 akak
    akak's picture

    I actually sat down and wrote a scathing email, which I sent to each of the chairmen of the BLS, after a laughable and insulting, widely-quoted newspaper article was printed back in 2007 in which it was claimed that "inflation" was below 2% in the previous year, and that overall prices (the CPI) had only risen an accumulated 17% since 2000, seven years prior.  Several of them responded, and two actually had the nerve to claim that the CPI figures calculated by the BLS probably actually OVERstated the true rate of inflation!  It was then that I could literally feel myself in the presence of evil, much as in my email exchanges with Jon Nadler.

    Sat, 09/01/2012 - 14:16 | 2755219 css1971
    css1971's picture

    Recommend you keep your receipts then when doing taxes, work out your personal inflation rate.


    Sat, 09/01/2012 - 15:07 | 2755280 Winston of Oceania
    Winston of Oceania's picture

     email exchanges with Jon Nadler

    Do they make some sort of condom for that?

    Sat, 09/01/2012 - 17:36 | 2755457 akak
    akak's picture

    Yes, but it is made of gold and silver.

    That is why Jon Nadler is a truth virgin.

    Sat, 09/01/2012 - 13:34 | 2755155 css1971
    css1971's picture

    You do of course realise this is entirely deliberate. Engineered.

    It wouldn't work if they measured real inflation.

    Sat, 09/01/2012 - 14:30 | 2755237 Backspin
    Backspin's picture

    Exactly.  And that, my friend, is one of the keys to understanding the true nature of this entire mess we're in.  Took me a while to figure it out, and a while longer to accept it, but that's the way it is.

    Sat, 09/01/2012 - 15:56 | 2755317 CPL
    CPL's picture

    They would all be arrested for racketeering and ponzi scheme development the same moment anyone offered the truth.



    Sat, 09/01/2012 - 13:39 | 2755158 Tortuga
    Tortuga's picture

    I don't need to look at any broader data than the thinness of my billfold. Anybody with half a brain knows that government data has been skewed for decades and that a cut in government spending is only a reduction in spending growth. We are in for some hard times when the black swan lands. My marker is the bulk pinto bean bucket in Kroger, 3#'s for a dollar less than a year ago, now, $1.19 #. Whew. Spam scrambled eggs are soooo, filling.

    Sat, 09/01/2012 - 14:12 | 2755216 Beam Me Up Scotty
    Beam Me Up Scotty's picture

    Look on the bright wide. You can buy twice as many Face Book shares as you could a couple months ago.

    Sat, 09/01/2012 - 14:31 | 2755239 JR
    JR's picture

    Or look at it this way: if you jumped into Facebook’s May IPO when MS drove the stock to $38 with your 401(k) money, you’ve lost more than half your money.


    Sat, 09/01/2012 - 15:11 | 2755282 bank guy in Brussels
    bank guy in Brussels's picture

    Where inflation may be even worse, is in the emerging market countries, such as in South-East Asia, the places which are considered 'good investments' by the international hot-money crowd ... I am hearing awful stories about much worse inflation, from residents in those countries who are visiting here

    It seems our big Western money-printing is hitting those countries quicker and harder, that we are exporting inflation furiously to those nations where so many millions of people spend half their income on food

    There is real evil in this world, and the people who commit these monetary and financial crimes against the world's poor families, should suffer deeply in the next life if not in this one

    Sat, 09/01/2012 - 13:43 | 2755169 Darth..Putter
    Darth..Putter's picture

    So any price gains in housing can be a bubble.  A stable price in housing can be a bubble.  Even a mild negative price trend can be a bubble until the distorting supports fail.


    Malinvestment indeed. 

    Sat, 09/01/2012 - 13:45 | 2755172 e-man
    e-man's picture

    Well at least the price of ceramic unicorns appears to remain stable.  Great job, Bernanke, price stability accomplished.

    Sat, 09/01/2012 - 16:13 | 2755338 CPL
    CPL's picture

    WIcker Peau Pourri Baskers with fake fruit at the dollar store holding steady at it's last trade price for 20 years of $1 dollar.


    Cost averaging over a lifetime of the Wicker Peau Pourri Baskets with fake fruit is $1 dollar.


    Now here is what I've always wondered about any of the wicker anything in a dollar store.  Someone..somewhere...made that basket for less than a buck. 

    It would take me weeks to make something like it, infinite uses, nearly a standard for all of humanity of the history of mankind for storage. 

    I would make more money finding loose change at a park than making wicker peau pourri baskets with fake fruit.  And we all know in in our hearts in this business chain of events that there was a cost assessment on the fake fruit because it was a closely measured cost against the labour to make the wicker basket.


    ...and it still cost under a buck, and must make a substanial profit because they are everywhere. 


    I'm not kidding, go to Mexico, Peru...anywhere...chinese junk shops are like a cancer next to the investor group california strip mall designs. Which I might add, usually have a dollar store, subway, chinese food joint, 24/7 store, grocery store and one casual slot to make it "different" and a hair dresser.


    Sat, 09/01/2012 - 13:46 | 2755174 DeFeralCat
    DeFeralCat's picture

    Yet, we still have Dollar Stores. We have pizza at a dollar a slice. And most fast food has a dollar menu. If we have a dollar consuming mentaility and our spending is 70% of the economy, demand will exponetially implode as prices rise. People will substitute down and then substitute out. Bernake is at the crossroads as even his hinting of measures causes prices to rise in the face of declining demand. The wealth effect on the stock market does not trickle down to someone having to pay $4.50 a gallon for gas. I think people are finally beginning to see the endgame in the easing approach as it has little positive impact and is actually now negative to demand.

    Sat, 09/01/2012 - 13:48 | 2755176 e-man
    e-man's picture

    We will still have dollar stores and dollar pizza.  Twelve ounces is the new pound, check your groceries.

    Sat, 09/01/2012 - 13:54 | 2755190 DeFeralCat
    DeFeralCat's picture

    Thus, unless I buy an extra can demand further accelerates downward.

    Sat, 09/01/2012 - 14:05 | 2755205 e-man
    e-man's picture

    Interesting.  Price still reflects value.  So as the unit of currency is devalued, price moves toward infinity and unit sizing should drop accordingly, should unit demand remain the same.

    I think we're already seeing this in Asia where items are now being sold in single use packaging.

    Much like nanosecond trading on the market, I guess nano-sized pizza slices are coming our way.

    Sat, 09/01/2012 - 14:22 | 2755228 DeFeralCat
    DeFeralCat's picture

    Or they are trying to maintain stable demand by keeping the price stable and protecting their margin and thus their profit by smaller sizes. The point is that this is unmaintable if input prices are rising. I can only make a product so small. I think the drop in demand is far more dangerous as trying to raise the price will only get me to substitute less or away. I think we will see this more clearly in Q3 reports (except for Apple).

    Sat, 09/01/2012 - 20:19 | 2755613 scatterbrains
    scatterbrains's picture

    Well they can just increase the ratio of plastic to rice or chalk to flour without too much side effect.

    Sat, 09/01/2012 - 15:13 | 2755229 Z Beeblebrox
    Z Beeblebrox's picture

    "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"

    See, it all goes together. I wonder which Fed branch hosts the Ministry of Standards Fixing.

    Sat, 09/01/2012 - 15:27 | 2755294 ebworthen
    ebworthen's picture

    48 ounces is the new half-gallon (64 ounces).

    I'm waiting for a dozen eggs to be 10 or 8.

    Sat, 09/01/2012 - 19:07 | 2755538 e-man
    e-man's picture

    If a baker's dozen is 13, I believe we will be calling 10 or 8 eggs "a banker's dozen" in the near future!

    Sat, 09/01/2012 - 15:24 | 2755289 californiagirl
    californiagirl's picture

    Dollar pizza and dollar fast "food" is not food fit for consumption by humans or animals. It is a toxic brew of chemicals and unnaturally, genetically modified crap (who besides a Eugenisist and Big Pharma salesmen ever thought that crossing a virus or bacteria with a food was a good idea) cooked up in a Petri dish that is approved by the FDA (where the fox runs the henhouse) and is sold to the sheeple, who have been made into Keynsian welfare slaves so they cannot afford anything else (because governments require/spend over half of GDP in the U.S.), so that chemical companies and Big Pharma can profit and the environment and people become sicker and sicker, continually increasing healthcare's share of the GDP pie.

    Sat, 09/01/2012 - 21:49 | 2755713 Vuke
    Vuke's picture

    Calgirl, anybody who believes that's real cheese on the pizza, or that the crust is unadulterated wheat, is a candidate for the pharmaceutical industry and its creative "fixes".

    The fraud of these groups far exceeds anything ever attempted throughout history. 

    Sat, 09/01/2012 - 13:47 | 2755175 ParkAveFlasher
    ParkAveFlasher's picture

    40 years ago my father was on his third house as a father and sole provider to three kids and his wife, on the salary of a truck diver, living on a third acre within spitting distane of NYC.

    Today, his three children are struggling to raise smaller families on smaller lots although they are holders of multiple college degrees and both husbands and wives have high NOMINAL INCOMES via professional careers, and pushed back from the city.  

    Go figure.

    Sat, 09/01/2012 - 15:25 | 2755290 dwdollar
    dwdollar's picture

    That same story echoes throughout the nation. If the '70s were so bad, why is this story so prevalent?

    Sat, 09/01/2012 - 13:50 | 2755182 topspinslicer
    topspinslicer's picture

    the shape of inflation is your wife having to join the labor force to either make ends meet or to obtain some few luxuries

    Sat, 09/01/2012 - 13:55 | 2755191 ebworthen
    ebworthen's picture

    Great charts.

    No coincidence that unhinging the dollar from gold in 1972 led to ten years of the worst inflation ever.

    After that money was made by blowing bubbles:  S & L bubble, technology bubble, housing bubble, national debt bubble, equities bubble, education bubble (student loan bubble/grads without jobs bubble).

    Massive wealth transfer schemes to enrich banks and get politicians elected while bleeding the middle class.


    Sat, 09/01/2012 - 13:59 | 2755196 Pairadimes
    Pairadimes's picture

    So what? My dollar is worth 4 cents. The Fed took the other 96.

    Sat, 09/01/2012 - 14:01 | 2755198 El
    El's picture

    I downloaded the FRED app the other day and gleefully started playing around with their charts. I was astonished to see that according to the St. Louis Fed, we are in great shape! What a waste of time that app was. :(

    Tue, 09/04/2012 - 09:25 | 2759920 madcows
    madcows's picture

    Bullard was on Bloomberg last week.  Said they were doing a great job of containing inflation.  Lies, damned lies, and Government Statistics

    Sat, 09/01/2012 - 14:01 | 2755199 css1971
    css1971's picture

    The main point about inflation is it is compounding.

    The charts as presented don't effectively demonstrate this, so the real inflation has a much larger effect than CPI when taken over several years.


    2% CPI vs 6% real:  After 5 years, 6% inflation would be 34% more expensive while CPI would only be 10% more expensive.

    My experience is real inflation is close to double digits and wiping my arse with an iPad doesn't do the job.

    Sat, 09/01/2012 - 14:09 | 2755212 GreatUncle
    GreatUncle's picture

    Nope, don't think so and no disrespect to the article neither "they never ignored it at all".

    Oh this is looking bad, so each manipulation, remove the prices of houses, keep the low cost imports in etc. etc. all makes it look good so they can carry on as they want.

    It was never ignored, manipulated more like to make it look good on paper and they know full well the reality but then they proffered their own scrap of paper of manipulated statistics to say ...

    And as the honourable banker speaks ...

    "Oh but its like the numbers indicate, really it is".

    With a capital B for bullshit they knew exactly what they were doing all planned and contrived.

    Sat, 09/01/2012 - 14:16 | 2755220 Laretes
    Laretes's picture

    A bit sad to see that inflation (increase in the monetary base) is mixed with an increase in prices, even in ZH articles...

    Sun, 09/02/2012 - 06:31 | 2755969 cranky-old-geezer
    cranky-old-geezer's picture



    Yes, it seems most people use "inflation" and "deflation" to describe price changes, not understanding they have to do with money supply, not prices.

    If a stock price rises people don't say the stock is  inflated.  They just say the price rose.

    If a stock price falls people don't say the stock is deflated.  They just say the price fell.

    Then the author talks about "biflation" and "polyflation", proving he's a dumbass.  

    There's no such thing as "biflation" and "polyflation".

    Sun, 09/02/2012 - 08:56 | 2756073 Pseudolus
    Pseudolus's picture

    "Between thought and expression, there lasts a lifetime...."(Lou Reed)

    Yes, we are "Perverted by Language" (Mark E. Smith, the Fall, ). Its why .gov has its language planners. Its why education & media follows Gorgias not Socrates. Educational didakts, not pedagogues (etymology anyone?). Media sophists, not investigative journalists. Paradoxologia not praxeology.

    Shoddy thinking -> shoddy expression -> shoddy comprehension ---> 

    shoddy thinking -> a value fog (nous mangeons la fievre avec nos legumes aqueux) -> dysfunctional behaviours -> servile life

    Orwell wrote the playbook (Karl Kraus too in die Fackel).

    You are right about inflation. The stock examples you give also relate to the wealth effect. The neighbours house sold for 5% less than another neighbours a year my house worth 5% less? Maybe he was in difficulties, or it was a quick sale to flip, upsize or move for work....there is no such thing as price until its agreed - until then its offer and counter. Our system is too much predicated on a financialised confidence/sentiment model: fragile confidence and pliable sentiment. But then, what to expect when gov debt mountains constitute quality capital holdings

    Sat, 09/01/2012 - 14:29 | 2755235 I am Jobe
    I am Jobe's picture

    All Amerikans wants to know is whay jersey Shore is not shown while Soccer Moms are too buys fcuking coaches and thinking how to rig the system by driving Mini SUV's and feel great about the underwear they are wearing and when the next fuck is. Nothing new in the Amerikan Life day to day living, Inbreed, cheat, and add bumper stickers showing u fcuking support the troops and get ready for Boy Fucking Scouts or Girl Fucking scouts and be broke and nothing to show for and guess what the kids will foloow your footstpes. Dip shits

    Sat, 09/01/2012 - 14:39 | 2755248 Jam Akin
    Jam Akin's picture

    This country of which you speak needs a leader whose time has come:  Corzine for President!

    Sat, 09/01/2012 - 14:56 | 2755270 LMAOLORI
    LMAOLORI's picture



    Please we already have one his name is obama

    CONVICTED: Bush 1300+, Clinton 1000+, Obama 0.0 (+/-)

    Sat, 09/01/2012 - 14:41 | 2755249 Monk
    Monk's picture

    The crisis was caused by financial speculation on part of Wall Street, with citizens and government playing similar games.


    Sat, 09/01/2012 - 14:41 | 2755250 Shizzmoney
    Shizzmoney's picture

    Watching the Yankees game last night, they showed an infographic of what was happening in the world when the last time their opponent, the Baltimore Orioles, were good (1997).

    Milk was $3.12, and Gas cost $1.32 (!!!) at the pump.  I spit out my beer. 

    Inflation has jumped more in the last 20 years than it did from 1913-1970 (and that was pretty big as well)! 

    Sat, 09/01/2012 - 14:47 | 2755257 vertexa
    vertexa's picture

    the Federal Reserve says inflation is 2%

    should I believe my lying eyes?

    Global Food Prices Jumped 10% in July, Raising Fears of Food Insecurity for the Planet’s Poorest

    Sat, 09/01/2012 - 14:59 | 2755274 LMAOLORI
    LMAOLORI's picture



    Should have thrown this one in there too

    Barclays makes £500m betting on food crisis

    Sat, 09/01/2012 - 15:11 | 2755283 DavidC
    DavidC's picture

    And don't forget, ANY positive inflation figure is quasi exponential, being based on the previous year's figure plus the percentage increase.


    Sat, 09/01/2012 - 15:26 | 2755291 pismo10
    pismo10's picture

    Very good article. This explains in a nutshell exactly what has been happening in America for several bubbles now.

    Sat, 09/01/2012 - 15:27 | 2755292 Bam_Man
    Bam_Man's picture

    CPI no longer even attempts to measure "inflation" after the Boskin Commission changes.

    It attempts to measure "cost of living" - and even does that poorly, generally with a downward bias.

    Sat, 09/01/2012 - 20:28 | 2755627 scatterbrains
    scatterbrains's picture

    try substituting hamburger for Alpo and you'll see it's true. Cost of living can run flat to down weekly basis depending on the amount of substitution you want to do.

    Sat, 09/01/2012 - 15:26 | 2755293 Dr. Engali
    Dr. Engali's picture

    I'd like to know exactly what price stability means as far as the feds mandate. Are they supposed keep inflation stable I don't see that happening. Financial markets stable I don't see that happening. wages of labor stable I don't see that happening. The economy stable I don't see that happening. As far as I'm concerned the Fed is a failure, And needs to be abolished.

    Sat, 09/01/2012 - 20:27 | 2755595 ATG
    ATG's picture

    BLS samples an Owner's rent equivalent housing cost guestimate that is highly subjective and does not count furnishings, garages, government subsidies, parking, repairs or utilities:

    Saw how they sampled the same unsold suit price tag on the rack for years to calculate CPI.

    Now that Fed FRED has taken over Consumer Finance under Dodd & Frank, is it too much to hope their housing price index that nailed the March 2007 top in housing will see the MSM light of day?:

    Here's the new and improved 2012 BLS CPI comparison to 1980:

    2% CPI current methodology vs 9% 1980 CPI methodology:

    Overall inflation up +115% since 1986.


    Education inflation up +498%:

    Anything bureaucrats touch gets more expensive and less productive.

    Profit schools were signing up brain-damaged vets with GI Bills in their barracks:

    Government student loans worse than subpprime mortgages:

    ESI hit 121.98 after five years of 200% ROEs:

    Recently 30.37.

    So when are the Harvard Princeton Stanford and Yale IPOs?...

    Sun, 09/02/2012 - 06:03 | 2755961 daxtonbrown
    daxtonbrown's picture

    Biflationary Depression: Protecting Assets From Inflation And Deflation In A Keynesian Collapse

    Sun, 09/02/2012 - 07:49 | 2756027 Ghordius
    Ghordius's picture

    Good article. My take to "This biflationary (or polyflationary?)"

    That's the point, the term inflation is properly applied to increases in the quantity (or decreases in the quality) of the money supply.

    Which then lead to price increases.

    Those increases can't be everywhere. It's complex. I don't buy the same basket of necessities as ten years ago, and those necessities are not the same anymore and are produced differently anyway.

    The only way to gauge differences in price increases as affecting the general public is:

    - either by kneeling down into a lot of details, as this article hints so well

    - or by "constructing" a family-size basket of modern necessities and price it. But it won't be your grandfather's basket.

    Sun, 09/02/2012 - 10:02 | 2756143 TrulyStupid
    TrulyStupid's picture

    The Austrian definition of inflation/deflation differs from this author's:

    "inflation is always and everywhere a monetary phenomena"  - Milton Freidman

    "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 a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”  - Von Mises

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