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Where Is the Inflation?
16 January 201 ^ | Mark Thornton

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 ...


TOPICS: Business/Economy
KEYWORDS: austrian; economics; inflation
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How the poor would get richer and the rich get poorer.
1 posted on 01/16/2013 10:48:19 AM PST by arthurus
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To: arthurus

Because REAL unemployment is closer to 16%, so many people are struggling, there isn’t much demand to put pressure on prices.


2 posted on 01/16/2013 10:52:27 AM PST by Trapped Behind Enemy Lines
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To: Trapped Behind Enemy Lines

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?


3 posted on 01/16/2013 10:54:50 AM PST by MeneMeneTekelUpharsin (Freedom is the freedom to discipline yourself so others don't have to do it for you.)
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To: arthurus

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.


4 posted on 01/16/2013 10:54:56 AM PST by wolfman23601
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To: arthurus

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.


5 posted on 01/16/2013 10:56:36 AM PST by Moonman62 (The US has become a government with a country, rather than a country with a government.)
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To: arthurus

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.


6 posted on 01/16/2013 10:59:16 AM PST by Uncle Miltie (The shooter in CT was a Satanist. Curtail Satanists' First Amendment Rights for the Children!)
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To: arthurus
However, only Austrians can explain the current dilemma:

They should not say Austrian, but Austrian economists. Austrian economists have a Libertarian/Anarchist political agenda.

7 posted on 01/16/2013 10:59:40 AM PST by Moonman62 (The US has become a government with a country, rather than a country with a government.)
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To: arthurus

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.


8 posted on 01/16/2013 11:04:38 AM PST by WinMod70
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To: arthurus

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.


9 posted on 01/16/2013 11:04:49 AM PST by factoryrat (We are the producers, the creators. Grow it, mine it, build it.)
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To: arthurus

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.


10 posted on 01/16/2013 11:05:45 AM PST by CodeToad (Liberals are bloodsucking ticks. We need to light the matchstick to burn them off.)
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To: Trapped Behind Enemy Lines

Next time you go to the grocery store, look at the packages. You’re paying the same price for less stuff.


11 posted on 01/16/2013 11:06:11 AM PST by tbpiper
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To: Uncle Miltie
0bamanomics is killing us, but keeping inflation under control by disallowing growth.

But growth in Q by the equation M*V = P*Q would lower inflation.

12 posted on 01/16/2013 11:06:19 AM PST by Moonman62 (The US has become a government with a country, rather than a country with a government.)
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To: Moonman62

They have no “agenda.” They astutely describe what happens in the real world.


13 posted on 01/16/2013 11:08:31 AM PST by arthurus (Read Hazlitt's Economics In One Lesson ONLINE www.fee.org/library/books/economics-in-one-lesson)
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To: arthurus

If you buy food, fuel, education and insurance inflation is huge.


14 posted on 01/16/2013 11:08:47 AM PST by central_va ( I won't be reconstructed and I do not give a damn.)
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To: Moonman62
They should not say Austrian, but Austrian economists. Austrian economists have a Libertarian/Anarchist political agenda.

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)

15 posted on 01/16/2013 11:08:54 AM PST by KarlInOhio (Choose one: the yellow and black flag of the Tea Party or the white flag of the Republican Party.)
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To: wolfman23601
Question: "Where Is the Inflation?"

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.

16 posted on 01/16/2013 11:09:03 AM PST by AEMILIUS PAULUS (It is a shame that when these people give a riot)
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To: tbpiper

I just bought a jug of Clorox - 3 quarts, not a gallon anymore.


17 posted on 01/16/2013 11:10:52 AM PST by WinMod70
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To: arthurus

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.


18 posted on 01/16/2013 11:12:05 AM PST by DannyTN
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To: Uncle Miltie

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”.


19 posted on 01/16/2013 11:12:19 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: factoryrat
The one thing that should be tracked for inflation (ie: food, staples, fuel) is not included in the inflation index.

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.

20 posted on 01/16/2013 11:15:55 AM PST by KarlInOhio (Choose one: the yellow and black flag of the Tea Party or the white flag of the Republican Party.)
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To: Moonman62

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.)


21 posted on 01/16/2013 11:16:01 AM PST by Uncle Miltie (The shooter in CT was a Satanist. Curtail Satanists' First Amendment Rights for the Children!)
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To: arthurus

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.


22 posted on 01/16/2013 11:17:45 AM PST by pallis
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To: arthurus

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.


23 posted on 01/16/2013 11:18:07 AM PST by proxy_user
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To: tbpiper
Next time you go to the grocery store, look at the packages. You’re paying the same price for less stuff.

Old news. From a Mad Magazine in the 1960s:


24 posted on 01/16/2013 11:19:06 AM PST by KarlInOhio (Choose one: the yellow and black flag of the Tea Party or the white flag of the Republican Party.)
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To: arthurus

I’m seeing REAL inflation at the grocery store. Prices are substantially up.


25 posted on 01/16/2013 11:22:27 AM PST by Little Ray (Waiting for the return of the Gods of the Copybook Headings.)
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To: pallis

Figures lie and liars figure...


26 posted on 01/16/2013 11:22:53 AM PST by jurroppi1
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To: arthurus

>>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.

Example:

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.


27 posted on 01/16/2013 11:23:44 AM PST by Iron Munro (I Miss America, don't you?)
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To: arthurus

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.


28 posted on 01/16/2013 11:27:26 AM PST by wattsgnu
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To: Iron Munro
I've heard it described as inflation of the essentials and deflation of the luxuries. Second houses have gotten a lot cheaper while the beans are getting more expensive. However far more people are worried about the bean prices in the current economy and the Bureau of Labor Statistics probably haven't adjusted their inflation calculations (or dare not adjust them for fear of what statistical honesty would release) to reflect current purchasing priorities.
29 posted on 01/16/2013 11:27:27 AM PST by KarlInOhio (Choose one: the yellow and black flag of the Tea Party or the white flag of the Republican Party.)
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To: MeneMeneTekelUpharsin
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?

You can thank the EPA for that.

30 posted on 01/16/2013 11:33:38 AM PST by E. Pluribus Unum (TYRANNY: When the people fear the politicians. LIBERTY: When the politicians fear the people.)
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To: arthurus

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?


31 posted on 01/16/2013 11:39:18 AM PST by Iron Munro (I Miss America, don't you?)
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To: MeneMeneTekelUpharsin

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.


32 posted on 01/16/2013 11:39:35 AM PST by naturalborn
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To: E. Pluribus Unum
You can thank the EPA for that.

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.

33 posted on 01/16/2013 11:41:05 AM PST by KarlInOhio (Choose one: the yellow and black flag of the Tea Party or the white flag of the Republican Party.)
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To: arthurus

Everything I’m buying has gone up in price considerably.

So other than rising prices, I see no inflation.


34 posted on 01/16/2013 11:45:17 AM PST by SampleMan (Feral Humans are the refuse of socialism.)
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To: arthurus

The price of guns and ammo seems to be going up.


35 posted on 01/16/2013 11:47:40 AM PST by Paladin2
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To: naturalborn

The largest US supplier (Blitz) was put out of business by the tort lawyers.


36 posted on 01/16/2013 11:49:55 AM PST by Paladin2
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To: Iron Munro

Are you trying to say the OP doesn’t know beans? ;)


37 posted on 01/16/2013 11:54:02 AM PST by Trod Upon (Civilian disarmament is the precursor to democide.)
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To: MeneMeneTekelUpharsin
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?M

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.

See:

"Blitz USA manufacturing plant in Miami to close in July"

"A Factory’s Closing Focuses Attention on Tort Reform"

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.


38 posted on 01/16/2013 11:57:45 AM PST by Iron Munro (I Miss America, don't you?)
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To: Uncle Miltie

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.”


39 posted on 01/16/2013 11:59:47 AM PST by Wyatt's Torch (I can explain it to you. I can't understand it for you.)
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To: KarlInOhio

What the EPA regulation was REALLY about was putting the old can manufacturer out of business and replacing them with a friend of Soros.’


40 posted on 01/16/2013 12:01:02 PM PST by E. Pluribus Unum (TYRANNY: When the people fear the politicians. LIBERTY: When the politicians fear the people.)
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To: arthurus

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.


41 posted on 01/16/2013 12:01:17 PM PST by Paraclete
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To: factoryrat

You should really read the article first.


42 posted on 01/16/2013 12:01:26 PM PST by Wyatt's Torch (I can explain it to you. I can't understand it for you.)
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To: wattsgnu
For the last few years there has been no COLA added to Social Security checks.

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.

43 posted on 01/16/2013 12:21:09 PM PST by Syncro ("So?" - -Andrew Breitbart --The King of All Media RIP Feb 1, 1969 – Mar 1, 2012)
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To: Uncle Miltie
"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."

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...

44 posted on 01/16/2013 12:22:27 PM PST by uncommonsense (Conservatives believe what they see; Liberals see what they believe.)
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To: arthurus

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.


45 posted on 01/16/2013 12:47:42 PM PST by Age of Reason
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To: arthurus

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.


46 posted on 01/16/2013 12:55:23 PM PST by Vinnie (A)
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To: central_va

“If you buy food, fuel, education and insurance inflation is huge.”

you forgot about guns and ammo.


47 posted on 01/16/2013 1:18:21 PM PST by fatrat (extremely extreme right-wing radicalized veteran)
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To: arthurus
why hasn't the massive money printing by the central banks of the world resulted in higher prices.

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.

48 posted on 01/16/2013 1:45:02 PM PST by mjp ((pro-{God, reality, reason, egoism, individualism, natural rights, limited government, capitalism}))
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To: arthurus

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.


49 posted on 01/16/2013 1:54:57 PM PST by Will88
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To: Will88

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).


50 posted on 01/16/2013 2:03:27 PM PST by DeFault User
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