Monday, December 13, 2010

The Vigilantes Strike: Taxpayers's Children Hardest Hit

Some will say that these are 'short-term' moves in the 10-year and 5-year rates.


Oh, by the way: when copper and petroleum are up, do we call it "inflation"? Or just ignore it, like the price of food, and assign it to the "doesn't count/I can't HEAR you" category? is clear from the M2 statistics that the Federal Reserve has been creating money. Since the crisis began in September 2008, the M2 money supply has risen from $7.9 trillion to $8.8 trillion, an increase of $873 billion. This means that the central bank has been creating money at an annual rate of 5.1 percent, which is significantly in excess of the 0.8 percent economic growth that has been reported in terms of nominal GDP over the same period. The difference, 4.3 percent, is what is considered to be inflation by most mainstream economists. --Vox

What inflation?

Here's Ben Bernanke, using Bart Simpson's voice: "I didn't do it. Nobody saw me do it. You can't prove anything!!"

Why not Bart Simpson for FRB Chair?

HT: Ticker


J. Strupp said...

1. No one ignores commodity prices. They're volatile from day to day, week to week so they're bad indicators of inflation inertia.

2. Commodites like copper and oil are highly speculative. They trade wildly based off negative AND positive data, not just M2 levels. The recent upward trend is more the result of better economic data. Gas prices are more sensitive to supply/demand dynamics than market speculation which is probably why we're paying the same for a gallon of gas then we did back in May of this year even though oil is up. Naturally, I'm waiting for someone to tell me that I don't know what I'm talking about because gas prices are getting expensive.

2. Food prices, on average, aren't experiencing substantial inflation. We've been over this and economists have produced the data to prove it over and over and over. You are ignoring the data and then telling your readers that economists are ignoring the data.

J. Strupp said...

3. oops.

Dad29 said...

Umnnnhhh....."Hedonic" food prices don't cut it, Struppster.

I suggest you ask ANY groceryshopper of your acquaintance about food prices. Either: 1) portions are smaller OR 2) prices are larger.

Not by a ton, but they're up, and f*&^ Greenspan's stupid hedonics.

Copper, yes, generally follows industrial activity, so it is a GOOD thing that it's up. But pricing of finished products is not so easy to move upward; there may (will) be a squeeze on profits.

As to gasoline, the concern on my part is not so much the world-price of petroleum, but the short/medium-term effects of the Regime's cutoff of exploration both on and off US shores.

And by the way, the increase price of petroleum WILL work its way through the system. You've read the $4.00-by-Christmas predictions, yes?

J. Strupp said...

"I suggest you ask ANY groceryshopper of your acquaintance about food prices. Either: 1) portions are smaller OR 2) prices are larger."

I've made it clear that I don't buy anecdotal evidence. Consumers will almost always key on price increases while ignoring price stability and/or decreases.

And yes, food prices are up slightly relative to prices following the financial crisis. Of course, looking at a longer time series would show that food inflation is no where near where they were prior to 2008. Hardly a case against QE2.

"But pricing of finished products is not so easy to move upward;"

Exactly! That's my point Dadster. Finished goods price movement is a MUCH better indicator of inflation/deflation because they ARE difficult to move up or down. They give a MUCH better indication of price inertia. Wages too. Currently, both are near zero.