Posted on 05/16/2011 10:23:53 AM PDT by Graneros
New inflation figures were released by the government last week, and the news was not good. The headline inflation number was 3.2% in the 12 months that ended in April. That is more than a percent above the Federal Reserve’s “target” rate of 2% and the first time it has been more than 3% in over than 2 ½ years. Of course, the accounting gimmicks used by the Bureau of Labor Statistics (BLS) understate true inflation, so things look better than reality. Nonetheless, in the latest report from economist John Williams of Shadowstats.com, even the government’s own “official” numbers will likely show double digit inflation in the next three months or so. The reason is continued money printing in the form of another round of Quantitative Easing (QE) by the Fed to prop up the struggling economy. Williams said, “The underlying pace of official inflation is accelerating, and could move into double-digits in third-quarter 2011. Preceding or coincident with that likely will have been some move to QE3 by the Fed and intense—if not panicked—selling of the U.S. dollar and dollar-denominated assets. Such a circumstance could be a base from which a hyperinflation might begin to unfold with some rapidity.”
And get this, inflation is already in double digits, according to Williams, if it was calculated the way BLS did it more than 30 years ago. Williams said, “. . . based on reporting of 1980, the April 2011 annual inflation rate would have been about 10.7%.” But, the double digit inflation story is not the one the mainstream media likes to tell. Instead, it usually focuses on what the government calls “core” inflation that excludes food and energy. The “core” inflation rate is .2%. Who lives in a world where the core of existence is not food and energy?
(Excerpt) Read more at usawatchdog.com ...
Who will pay for those COLAs? Do the COLAs get paid from magical stimulus dollars? Perhaps it may be good for these groups in the short run but it will be another blow to the country’s fiscal outlook in the long run.
Oh well. Big deal. I tried to get people to want to cut the budget and was shown that they will not get rid of their goodies. I was on many threads today trying to show FREEPERS that we are in trouble and they all shrugged their shoulders and said “who cares”.
Actually we are net exporters in cotton, beans, wheat, corn so the significant force is not added competition but increased external demand for those products. Now it is true that the decline in the value of the dollar increases that demand but the dollar’s decline is more because of extraordinarily low interest rates here rather than the increased money supply. That might not remain true for long, however,
In periods of true inflation housing prices rapidly escalate. Look at the 70s for an example.
Gallows comes to mind.
I wonder what construction material can be used to build these structures, such as to be considered Green.
Green Gallows, they will be popular and soon, ready for service in a neighborhood near you.
“The main cause of inflation right now is still the ‘do Nothing’ ‘Restrict Supply’ approach to energy. Monetary policy is not driving inflation, this is oil based.”
That’s not true. Expanding supply would lower prices, obviously. But they’ve been resticting domestic exploration forever. Supply is more of a longterm problem, and can’t explain what’s been happening recently.
I agree 100%. There is another significant leg down in prices ahead. The current price drop is with historically low interest rates. When "real" interest rates arrive, look out.
On excluding nergy being disingenuous, would have to agree - it was $72 to fill up the minivan yesterday. It must perceived by Barry & Co. as some sort of optional luxury item...
Not our glorious Parasitic class
Just wait to when after they spend our money on food there's no money left over to pay for their HBO on their 56" High Def TVs or no money to pay for their fancy rims and sub-woofers for their Cadillac Escalades.
I wouldn't want to be in one of our major cities when that day comes.
“Devaluation of a currency is not a cause of inflation it is a RESULT of inflation”
No, devaluation of currency is inflation, purely and simply. Look it up.
Housing price deflation might have been worse but the banks are still not marketing mortgages like they were before 08. The monetary expansion has not been put into housing. That mainly went to aiding the public sector unions as Rush is constantly harping on - the Democrat money laundering machine.
>>Devaluation of a currency is not a cause of inflation it is a RESULT of inflation. <<
Actually, devaluation of a currency due to the increase in volume of money is the dictionary definition of inflation. The rest is a reflection of the money being reduced in value. I learned this while arguing the subject with some more knowledgeable freepers than myself.
http://dictionary.reference.com/browse/inflation
But we’re arguing fringe issues, really.
>>Food, and clothing have not gone up by 20%.<<
You are correct. And I didn’t say they have. I said they WILL. And worse...
If you are not big into gold and/or silver, you could be in for a world of pain. Heck, you probably will be anyway. Me too.
“the dollar’s decline is more because of extraordinarily low interest rates here rather than the increased money supply”
Say what? What do you think lowering the rate of interest does, besides increase the money (or, more precisely, credit) supply?
“If,” he said tersely, “we could for a moment move on to the subject of fiscal policy ...”
“Fiscal policy!” whooped Ford Prefect, “Fiscal policy!”
The Management Consultant gave him a look that only a lungfish could have copied.
“Fiscal policy ...” he repeated, “that is what I said.”
“How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn’t grow on trees you know.”
“If you would allow me to continue ...”
Ford nodded dejectedly.
“Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.”
Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed.
“But we have also,” continued the Management Consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut.”
Murmurs of alarm came from the crowd. The Management Consultant waved them down.
“So in order to obviate this problem,” he continued, “and effectively revaluate the leaf, we are about to embark on a massive defoliation campaign, and ... er, burn down all the forests. I think you’ll all agree that’s a sensible move under the circumstances.”
The crowd seemed a little uncertain about this for a second or two until someone pointed out how much this would increase the value of the leaves in their pockets whereupon they let out whoops of delight and gave the Management Consultant a standing ovation. The accountants amongst them looked forward to a profitable Autumn.
- Douglas Adams, The Restaurant at the End of the Universe
There is no need for me to educate myself about what “devaluation” or “inflation” are I am quite familiar with them.
When one speaks of “devaluation” generally it is with reference to exchange rates and it the RESULT of inflation. It is an EFFECT of inflation it does NOT cause inflation.
Inflation is an increase in the GENERAL price level and cannot occur without increases in the money supply greater than the increase in productivity.
Notice that inflation is not the rise in prices. Inflation is the increase in the money supply. Triple digit inflation has already occurred. And notice again the statement of truth in the dictionary:
Inflation always produces a rise in the price level.
Thank you. That is EXACTLY what I was referring to. Just saw the entire television series last Thursday and Friday. :)
>>QE2 ends 6/30/11
So I guess that’s doomsday<<
Nope. It’s May 21st. ;)
Keynes showed in the 30s that it is not always possible to increase the volume of loans merely through decreased interest rates. This is the “liquidity trap” wherein the extra money is not lent out because no one has the confidence to undertake loans.
But almost instantaneously the exchange rates will be impacted by the lowered interest rates. Since we have floating exchange rates now there is no true “devaluation” any more as was the case with fixed exchange rates based on a commodity standard (gold).
Also relevant in examining price changes is the Velocity of Circulation or the number of times a dollar is exchanged during a year. If V is extraordinarily low an increase in the money supply will not be reflected in price increases for a long time. If it is high then even small increases in M will produce a big impact on prices.
We have inflation in food and energy.
The fact that you don’t see inflation in housing is because housing is still coming down from its bubble. Housing is still vastly overpriced and vastly overstocked - and the Fed are still keeping house prices pumped up with taxpayer money.
Good to know that the buying power of the dollar is the same as it was fifty years ago.
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