well Tanta,they will have to outbid the credit card companies...

Hedge fund fat cats ride to the rescue of beleaguered mortgagors. I might throw up.

Maybe they are trying to win NEXT year's Nobel Prize? Do they know a film maker?

Inflation is a process, not an event. Something can get expensive because your dollars are worth less, but it can also get expensive because the free market is trying to tell you to consume less.

Figuring out which in any particular case is non-trivial, but there is nobody better qualified to do so than our central bankers. If their actions seem irrational to you, it is probably because they possess decades of study and experience and you don't.

I find it amusing to see random bloggers with zero training in economics making light of the Fed's inflation metrics. I do not have much economic training myself, but at least I know what I do not know.

Anecdote: I am considering replacing my 1997 Honda Civic. As far as I can tell, I can get more car for less money than I could 10 years ago. Anecdote 2: Tried pricing computers lately?

Final thought: The 30-year bond currently yields 4.91%. If the dollar is so obviously heading into the dumpster, who the heck is making 30-year loans at under 5% interest?

Destination Moon

YouTube
- Dinah Washington - Destination Moon

random bloggers with zero training in economics making light of the Fed's inflation metrics

This would be more caustic if there weren't economists with decades of experience on both sides of the argument.

If the dollar is so obviously heading into the dumpster, who the heck is making 30-year loans at under 5% interest?

This is a conundrum analogous to my question of the last couple years: Who would loan money to someone with no proof of income?

"Controlled by? Maybe, but more vulnerable to being utilized by,..."

sdtfs,

Control via manipulation. That is what the whole American econo-political system has been turned into -- controlling the population via manipulation, e.g., the American People own, or control, the govt. because they have a vote. The vote is only slightly more valuable than toilet paper. Not to me, though.

Jas

(Yeah, sorry for taking the thread off-topic. I'll stop if the mods say stop.)

BR --

A one-time increase in energy prices, even over 5-7 years, is not inflation. That's what I meant by "inflation is a process, not an event". Any price rise due to supply and demand is just the free market working and does not demand a monetary policy response.

The focus on "core" inflation is not only about volatility; it is also about ignoring price changes that reflect actual supply and demand. Inflation is the continuous (not one-time) process of growth in the GENERAL price level. I am sure the Fed has more ideas than we do on how to measure that, predict it, and regulate it.

And they are far more likely to be right than any pundit you find on television, never mind the Internet.

Sorry for the OT but this is the last post for now-

the American People own, or control, the govt. because they have a vote.

Yes, and we are reaping the benefits of our choices. We are all responsible.

based on all of Sebastians comments on an earlier thread i think i have to propose the theory that "Sebastian" is a frontname for a bunch of hedge fund guys who monitor this "bear board" and try to influence our thinking. several months ago i felt a poster by the name of Shortbuster was a hedgie based on a series of his posts. i challenged him to come out and refute that idea but he never responded and has not shown his handle on this board since. no big worries though since they have every right to come here but i would suggest viewing his comments with this theory in mind.

sorry Tanta but i had to take a shot at Sebastian.

in regards to Paulson; i'm glad to see that hedge fund guys can turn on each other. this must piss the heck out of his peers and the IB's. in fact i wonder how he gets funding if any from the IB's. if they do get the bill thru my shorts will go thru the roof.

Apparently it's just "random comment" day today. As it's Friday afternoon, I give up. Tanta

I wonder why Hamsters don't like each other...a quiet afternoon.

based on all of Sebastians comments on an earlier
thread i think i have to propose the theory that >"Sebastian" is a frontname for a bunch of hedge
fund guys who monitor this "bear board" and try
to influence our thinking.

Why do all bearish arguments have to lead to conspiracies? Central bankers are manipulating gold prices, goldman sachs is buying stocks with money from treasury, japanese central bank is supporting dollar, Martians are talking to George Bush about punishing the bears, have I heard it all? Why can't you acknowledge that it is just supply and demand or other natural forces in action?

S.

(fake)

Now how about them bloggin' economists?!

(There are a few who wear shoes in the temple, to be fair...)

I agree the Fed knows more about inflation and the cause. That's what took so long for most of us to catch on.

i would like to point that it looks like RKH has rolled over, XLF is rolling over, and small bank stocks, HB's and lenders are getting hit again. remember the financials lead...

One last time... If prices are rising because of constrained supply or rising demand, that is NOT inflation.

Maybe energy and commodity prices are rising because the Fed is printing dollars. Then again, maybe it's because 3/4 of the planetary economy is coming on-line for the first time ever. If the Fed treats the latter like the former, it will be truly disastrous.

Maybe wheat is expensive because the dollar is weak. Then again, maybe it's because half of the world's wheat acreage suffered a drought this season, plus U.S. farmers planted too much corn thanks to idiotic ethanol subsidies.

I freely admit I do not know. I also recognize that neither do any of you.

Finding someone who "got it right" on macro issues over the past two years proves nothing. Finding someone who got it right for 10-20 years would be very interesting, but I know of no such person.

So I am content to admit I have no idea, and to do my best to watch the data as it arrives.

Tanta,

Great Label "Chutzpa". None of your humor goes unnoticed.

As for Nemo, I was gonna agree with him, but then realized he just a random blogger.

Good point, jm. If you let enough rats into a maze, one will find its way to the exit without even making a wrong turn.

I still think someone with a good long-term track record of macroeconomic predictions would at least be worth a peek. But that would be no guarantee, and anyway, I still am not aware of any such person.

Nemo:
a sucker who believes what FED put out there (they may even think different privately)..
a born-again greenspan has already confessed..all econometric models - what FED swears by - are useless tools, used by the economists to feel good about themselves by using tons of math..

JR, go back and read Tanta's several outstanding posts on the topic over the last few weeks. Perhaps then you'll understand.

Nemo: I find it amusing to see random bloggers with zero training in economics making light of the Fed's inflation metrics.

I find it amusing to find any blogger with faith in the federal government.

It doesn't require anything more than critical thinking skills to make fun of inflation metrics. For example, let's make fun of the birth of OER in 1983. From the BLS:

The asset price method treats the purchase of an asset, such as a house, as it does the purchase of any consumer good. Because the asset price method can lead to inappropriate results for goods that are purchased largely for investment reasons, the CPI implemented the rental equivalence approach to measuring price change for owner-occupied housing.

Good thing CPI only includes things that can't be influenced by speculators... er.. investors.

See how easy that was? Next time I can dress it up in some linear equations if that is more palatable to your Massachusetts Institute of Technology sensibilities. An easy enjoyable, read is Money Mischief by Friedman. Maybe you would prefer to hear it from a Nobel Prize winning Economist?

Money is much too serious a matter to be left to the central bankers. --Milton Friedman

I'd also like inverse hedonic adjustments for my food since it now comes with lesser nutrition, more chemicals, and lesser regulation. Maybe you consider cow growth hormones a positive characteristic? Yum! Tastes like melamine!

I freely admit I do not know. I also recognize that neither do any of you.

Have they stopped teaching logic at "M.I.T."?

Nemo said: "...The focus on "core" inflation is not only about volatility; it is also about ignoring price changes that reflect actual supply and demand. Inflation is the continuous (not one-time) process of growth in the GENERAL price level. I am sure the Fed has more ideas than we do on how to measure that, predict it, and regulate it.

And they are far more likely to be right than any pundit you find on television, never mind the Internet."

For anyone who knows their way around a spreadsheet there's an illuminating exercise you can do to get a better picture of what inflation looks like. It might take a couple of hours of work, but you'll wind-up being able to speak far more knowledgeably about inflation in the future.

Get several years' data on the top dozen or so inputs into CPI-U (Owner's Equivalent Rent, motor fuel, recreation, household goods, electricity, food, etc.). Calculate the year-over-year changes (so you can see the growth) for each input, then chart them all on the same chart so you can make a clear visual comparison.

What you'll see is that almost none of the inputs move together, which is a "normal" state of low, tame inflation. Some inputs are moving up, some down, some sideways. You'll notice a couple that are highly volatile, but most are relatively quiet. The "sum" of those inputs is inflation (which is currently very low).

It's not until there are multiple inputs rising strongly and simultaneously that inflation becomes a real problem (one of the points Nemo was making), and you can see that from the chart. Motor fuel price growth spiked surrounding the Katrina disaster, but came back down. Housing price growth spiked during the "bubble", but also came back down.

So now, the next time someone tells you that we're going to have runaway inflation because oil is at $80+/barrel or because health-care costs are going ballistic, you can simply nod sagely, secure in the knowledge that he doesn't have a clue.

Sebastia