Posted on 07/06/2020 2:44:19 PM PDT by John W
The prices of cell phones, laptops, High definition TVs, tablets etc are vastly lower than they used to be.
I remember when I bought my desktop for over $3000. Today you can get a laptop (which should be pricier than a desktop) for as low as $300.
Stock market indices have nothing to do with inflation.
Microsoft and Apple are not at a market cap of a massive $1.6 Trillion each because of rumors. They are priced very high because they delivered excellent Q1 results and are expected to deliver great Q2 earnings as well.
Let me know when you are actually ready to post something that actually makes any sense will ya?
People with 401ks get richer.
Suggest you move to whatever country has a market that meets your approval.
“It will be fun to see where the Fed will be investing next.”
What is it you think they are buying other than bonds?
“and awash in debt which will never and can never be repaid.”
Why is paying off the debt necessary? The only time that the national debt was ever paid off was during Andrew Jackson’s presidency, about 190 years ago.
The answer to your question is that the world has a dollar shortage.
In recent years countries besides the United States have issued huge amounts of debt denominated in dollars.
That’s because international investors trust the U.S. dollar, and they don’t trust the currencies of a lot of other countries. The amount of that outstanding debt is around 60 trillion dollars.
These countries need dollars to service the interest on their debt. This has created a global shortage of dollars estimated to be about 13 Trillion as of March 2020.
So while the Fed has increased the money supply by a few trillion dollars it’s being absorbed by international demand. That’s why you aren’t seeing a ‘70s style inflation.
https://tsi-blog.com/2015/07/beware-of-bogus-inflation-indices/
“Another alternative CPI is called the Chapwood Index. The components of this index were selected based on a survey of what Ed Butowsky’s friends and associates spend their money on (Ed Butowsky is the index’s creator).
“The prices of the 500 most commonly purchased items were then added together to generate the index. Not surprisingly, considering the methodology, the result is not a realistic measure of the change in the dollar’s PP or the cost of living.
“As evidence I point out that if the roughly 10%/year average increase in the general price level estimated by the Chapwood Index during 2011-2014 is correct, then the US economy’s real GDP must have been about 25% smaller at the end of 2014 than it was at the end of 2010*. In other words, if the Chapwood Index is an accurate reflection of PP loss then the US economy now produces about 25% less goods/services than it did four years ago. This is not remotely close to the truth.”
As for the economy, it's going to have spectacular growth between now and November . And the record new job creation figures will continue right up to the elections in November.
Everything is looking great for a very nice Trump win come November.
Do you think the the government buying bonds is a good thing? And when that stops working, do you think they will stop there?
But the market is up. So that’s good, right?
So prices DOUBLED in 6 years at your hardware store?
Find someplace else to shop.
“Do you think the the government buying bonds is a good thing? “
The government doesn’t buy bonds. It sells them. It does this every single week at the Treasury auction.
I don’t disagree. CPI is at least a standard benchmark to work off of and it’s built from the widest collection base of any inflation calculator.
Businesses and investors need a reference point and that’s all that the CPI offers. If you think it’s underestimating inflation then buy some hedges.
30 yr Treasuries are currently yielding 1.45%. Bond vigilantes aren’t in the habit of buying bonds with negative yields; meaning that inflation is lower than that.
Inflation plus Real Yield = Nominal yield of 1.45%
In 1981 inflation was still raging. Nominal yield on 30 yr Treasuries was 12%
You realize the Fed is buying corporate bonds every week, right?
I guess my error is saying government. In that context, you are correct. I meant “Fed”, not government. My mistake.
“You realize the Fed is buying corporate bonds every week, right?”
They are this year. Normally they only buy Treasuries.
They aren’t buying individual corporates, they are purchasing through established bond funds.
The purchase of corporates is being driven by the Covid shutdown. There is a danger of default on corporates because the companies may not have the income to cover their interest payments.
Holding defaulting paper won’t hurt the Fed. If that paper is held by commercial banks and financial firms there is a risk of serious deflation. This is the same battle that Bernanke and the 2008 Fed were confronted with when the mortgage bubble collapsed.
Last week they started buying individual bonds, not just the eft.
No matter how you slice it, it’s public money picking winners and losers.
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