Skip to comments.Where Is the Inflation?
Posted on 01/16/2013 10:48:17 AM PST by arthurus
The basic notion that more money, i.e., inflation, causes higher prices, i.e., price inflation, is not a uniquely Austrian view. It is a very old and commonly held view by professional economists and is presented in nearly every textbook that I have examined.
This common view is often labeled the quantity theory of money. Only economists with a Mercantilist or Keynesian ideology even challenge this view. However, only Austrians can explain the current dilemma: why hasn't the massive money printing by the central banks of the world resulted in higher prices.
(Excerpt) Read more at rightsidenews.com ...
Because REAL unemployment is closer to 16%, so many people are struggling, there isn’t much demand to put pressure on prices.
That is correct. Real statistics on the economies are NOT being published. Real employment in the U.S. without a specialized education is abysmal. A 5-gallon gas can at Wal-Mart priced out at $16 dollars yesterday. That’s a bit high for a piece of plastic, don’t you think?
If you haven’t seen the inflation, you obviously haven’t been out. Food, gas, new automobiles, toys, and services have all pretty much doubled in 10 years.
The Fed is gobbling up government debt with Monopoly money. This is the same thing they did after WWII in the 1950’s and early 1960’s. Eventually the scheme collapsed and we got the inflation in the 1970’s.
If I recall my econ correctly (30 year old memory here...)
M*V = P*Q
M = Money Supply
V = Velocity of Money (Re-use of the same dollar by many people through the banking system)
P = Price Level (An increasing one is “Inflation”)
Q = Quantity of Goods
So, it is entirely possible that the printing of money (+M) is completely offset by the reduction in the velocity of money(V-) because banks won’t lend.
That’s my theory. If banks actually started to lend at historic rates, inflation would ramp to unheard of levels.
But what bank is going to be willing to lend for a house? What person can qualify for a loan to buy a house? What business is willing to take risks so that they ask a bank for a loan? So, money stays on the sidelines, waiting for a better economic policy environment.
0bamanomics is killing us, but keeping inflation under control by disallowing growth.
They should not say Austrian, but Austrian economists. Austrian economists have a Libertarian/Anarchist political agenda.
Where isn’t it? I just paid close to $9 for two halogen bulbs to replace the two that burned out on a work light I paid less than $20 for a year ago. Go buy a can of WD-40. The only I haven’t really noticed much of increase in is a case of beer; necessities being what they are.
This clown hasn’t been to the grocery store or gas station lately. Pay more, get less. Look at the unit volume you get for what you pay for. Everything costs more now per pound/ounce/gallon. The one thing that should be tracked for inflation (ie: food, staples, fuel) is not included in the inflation index. You can’t eat durable goods, so why do they use those as an index for inflation? Because they need to hide the fact that OUR dollars can buy only so much food, at the expense of buying cheap junk from china, which you cannot eat without dying.
We are still regressing the economy so deflation continues until bottom. Then, hyperinflation. Manufacturers are selling off warehouse stocks and manufacturing to try to stay in business. Some manufacturers still producing necessary goods but finding pressure on prices. People are simply comparative shopping to the max and stocking up on deals.
Next time you go to the grocery store, look at the packages. You’re paying the same price for less stuff.
But growth in Q by the equation M*V = P*Q would lower inflation.
They have no “agenda.” They astutely describe what happens in the real world.
If you buy food, fuel, education and insurance inflation is huge.
That was specified in the first sentence of the original article, but the excerpt here jumped past the intro and into the meat of the article (which is usually helpful - far too many FR excerpts show the intro but not the main point)
Response: Three New York steaks at a Los Angeles County COSTCO were priced at $51.00.
The reported CPI averaged 218.056 in December 2010 and averaged 224.939 2012.
I just bought a jug of Clorox - 3 quarts, not a gallon anymore.
You don’t have to be an Austrian to realize that the printing was offset by a massive credit squeeze.
The reduction in credit reduced the money supply. The printing increased it. They offset.
Indeed, money has to MOVE in order for there to be across the board inflation.
However, food prices are going up, package sizes getting smaller, etc.
Time to “grow your own”.
Both "core" (excluding fuel and food) and total CPI figures are published every month. Now which one the press chooses to report depends on their ideology, but the BLS isn't hiding food and fuel.
Now whether their CPI calculations reflect reality is certainly open to to doubt and discussion.
Agreed, but there is no growth. And the growth would have to be independent of the other 3 variables.
For example, if M and V were fixed, but Q grew, then P would have to decline in order for the equation to work.
Prices can decline when lots more stuff is produced and money supply and velocity are static. That would be a “same number of dollars chasing more goods” scenario. Prices for the same goods would drop.
(P.S. - I know this is about the second layer of Macro Economics. There are further refinements beyond this explanation.)
Bought groceries lately, or paid healthcare premiums? Dollars buy less everyday, but inflation doesn’t exist. It’s a strange world we live in, the way we figure things.
It’s in China.
We print money, and use it to pay China for goods. In order to maintain a fixed exchange rate, the Chinese government has to print Chinese money. This causes prices to soar in China.
Eventually, of course, they’ll have to charge us more for their goods.
Old news. From a Mad Magazine in the 1960s:
I’m seeing REAL inflation at the grocery store. Prices are substantially up.
Figures lie and liars figure...
>>Where Is the Inflation?<<
To state the obvious - It’s at every supermarket, food warehouse and retail store in America.
Every week prices on foods go up and up again.
Last spring a 50 lb. bag of pinto beans at the local wholesale food warehouse was $18.
Yesterday the same bag of pinto beans were $37.
A 50 lb. bag of red beans has now risen to $49.
I’ve seen it in freerepublic before that the method of calculating inflation has changed over the years. According to John Williams of shadowstats.com, if inflation was measured the same way that it was back in 1990, the inflation rate would be about 5 percent right now. If inflation was measured the same way that it was back in 1980, the inflation rate would be about 9 percent right now. But instead, we are expected to believe that the inflation rate is hovering around 2 percent.
I guess this was done to prevent the sheeple from knowing how bad things really are.
You can thank the EPA for that.
Economic theory goes out the door when the federal government tries to control natural law.
Just google “Stagflation”.
FWIW, the classic symptoms of Stagflation are almost exactly what we now have.
It is just that the media refuses to attach such a critical lable to Obamanomics.
When you have classic Stagflation you have:
1 - High Inflation
2 - The economic growth rate is slow
3 - Unemployment remains high
Sure sounds familiar, doesn’t it?
i think gas cans are expensive because they have to be manufactured with the special “spill proof system” on the nozzle instead of just a regular spout.
I've bought a couple of those new, impossible-to-use gas cans. I just remove the whole nozzle assembly and use a funnel when I have to refuel my snowblower. So much for helping the environment.
I still have the old cans for my mower and emergency storage, but I had to buy a new one for the two stroke gas/oil mixture.
Everything I’m buying has gone up in price considerably.
So other than rising prices, I see no inflation.
The price of guns and ammo seems to be going up.
The largest US supplier (Blitz) was put out of business by the tort lawyers.
Are you trying to say the OP doesn’t know beans? ;)
Blitz, once the biggest cas container nmanufacturer in the USA, has gone out of business because of the EPA regulations that make it impossible to profitably manufacture compliant gas cans at a reasonable price.
The Oklahoma factory has closed putting 117 people out of work.
If you can find any old stock Blitz water cans they are basically the same can as their gas cans except for the color and are (were) about 1/3 the price.
From the article: “It would seem that the inflationary and Keynesian policies followed by the US, Europe, China, and Japan have resulted in an economic and financial environment where bankers are afraid to lend, entrepreneurs are afraid to invest, and where everyone is afraid of the currencies with which they are forced to endure.”
What the EPA regulation was REALLY about was putting the old can manufacturer out of business and replacing them with a friend of Soros.’
The answer is pretty simple. The inflation is the fact we’re already paying several times the real value of stuff even though it’s worth much less. The FED is trying to let the air out without a total collapse of asset prices. The underlying price structure has already collapsed — many just don’t know it . . . or don’t want to accept it.
The hard part to manage is who suffers as we assimilate the deflation. So far it’s been savers who have carried the brunt.
We’re between a rock and hard place. If interest goes up, the government goes broke faster. If it stays down, pensions and longer term instruments will collapse.
You should really read the article first.
That is one of the main reasons we don't see the inflation.
They have decided that food and gas prices won't be added in to the cost of living inflation index.
This year I think there was a small increase.
Ding, ding, ding... winner
Banks and private companies are sitting on piles of cash, and the velocity of gov spending is process constrained (> 1.0).
Also, the corrupt gov institutions change metrics to keep their gravy train chugging along. Employment, inflation, debt/unfunded obligations, student test scores - you name it...
The money printing has been going straight into the pockets of the rich. So what the rich buy with their money is where the inflation is: investments, stocks, real estate, gold.
Meanwhile for the rest of us, the cost of goods and services produced domestically has gone through the roof over the last few decades: medical services and medical insurance, housing, and anything else that cannot be outsourced to china or india to keep the cost down.
Last Saturday I went to buy a loaf of multi-grain bread I like.
The price was $4.19. Less than a year ago it was #3.29.
Just one I can think of offhand.
“If you buy food, fuel, education and insurance inflation is huge.”
you forgot about guns and ammo.
According to the formula, mv=d, an increase in the money supply leads to an increase in demand. According to the formula, p=d/s, an increase in demand leads to an increase in prices. But when the economy is in a severe recession or a depression, there is a natural tendency for prices and wages to fall. The current low increase in prices of the current recession is the product of these two offsetting pressures.
For years, 6 oz. cans of tuna were $.65 - .79. Now 5 oz. cans cost around $.80 to $1.00.
15 oz. cans of Salmon around $1.30 for years, now around $2.89.
Quarts of mayonnaise have risen from around $1.98 to $3.50 for a common brand, and about the same for less and more expensive brands.
Egss have increased greatly also, along with most all grocery store items.
These increases over the past three or four years.
You’re shopping in the wrong place. Try Aldi’s. Tuna is still $.69, mayo $1.95, milk<$3 per gallon, and eggs fluctuate with the season but generally cheaper than anywhere else. You buy from the cardboard cases and bag your own. It’s owned by Trader Joe’s and carries some of the same stuff but still no 2 buck Chuck (3 buck Chuck now).