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Inflation on the rise? Market says not so much

Arbo said:
Yes, selective data sets. Looking at the big picture might upset your beliefs.
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Looking at the facts seems to upset your beliefs. :shrug:
 
Arbo said:
He's never about reality.
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And you're saying this as you poo poo the DXY Dollar Index, which is THE definitive index establishing the relative value of the dollar? :lamo
 
AdamT said:
And you're saying this as you poo poo the DXY Dollar Index, which is THE definitive index establishing the relative value of the dollar? :lamo
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Then why is a base corvette 10 grand more today, than it was 10 years ago?
 
KevinKohler said:
Inflation?

A brand new base model corvette in 2002, exactly ten years ago, would set you back some 41K.
A brand new base model corvette in 2012, ten years later, will set you back some 50K.

That's about 10 grand, in ten years.

To put that another way, it's about a dollar a day.

When you look at inflation, you have to look at REAL WORLD dollar amounts. That's all that matters.
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The 2012 Corvette is a much better car than the 2002 Corvette. It's not a very good gauge.
 
KevinKohler said:
Then why is a base corvette 10 grand more today, than it was 10 years ago?
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Because it's a much better car. And on top of that, even with stated inflation 40,000 in 2002 would be equivalent to 48,186 in 2010 (not 2012). The Inflation Calculator

Do you know what compound interest is?
 
AdamT said:
The 2012 Corvette is a much better car than the 2002 Corvette. It's not a very good gauge.
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You have to work in comparisons. I mean, the 1984 corvette is a much better car than a 1982 corvette, even though the price is not that much different. You have to compare to other cars, how good it is for the times.

In other words, in 2002, a base corvette was comparable, in performance, to a Porsche Carrerra. Z06 to a 911. The same holds true today. By your rationale, a 1960s vette should have cost next to nothing, because of how great a new vette is. Yet, a high end, top of the live model cost 1/4 of the average house cost, for the time period. Because it was, for the day, a world beating supercar. Not too much out there that could hang with an L88 vette. But it only cost, what, 4-6 grand, or something like that? By your logic, it must have been a crap car....not the barely road legal, race ready, super car that could out do even most new sports cars of today, right?
 
AdamT said:
Because it's a much better car. And on top of that, even with stated inflation 40,000 in 2002 would be equivalent to 48,186 in 2010 (not 2012). The Inflation Calculator

Do you know what compound interest is?
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Which makes my means of calculating inflation pretty freaking accurate, wouldn't you agree?
 
KevinKohler said:
You have to work in comparisons. I mean, the 1984 corvette is a much better car than a 1982 corvette, even though the price is not that much different. You have to compare to other cars, how good it is for the times.

In other words, in 2002, a base corvette was comparable, in performance, to a Porsche Carrerra. Z06 to a 911. The same holds true today. By your rationale, a 1960s vette should have cost next to nothing, because of how great a new vette is. Yet, a high end, top of the live model cost 1/4 of the average house cost, for the time period. Because it was, for the day, a world beating supercar. Not too much out there that could hang with an L88 vette. But it only cost, what, 4-6 grand, or something like that? By your logic, it must have been a crap car....not the barely road legal, race ready, super car that could out do even most new sports cars of today, right?
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I think that the Corvette is a higher end car today than it was in 2002, relative to other sports cars. But in any case, as I mentioned, a $10k price increase does not support the argument that inflation has been understated. A $10k increase is right in line with what you expect based on published inflation numbers.
 
RabidAlpaca said:
I disagree. It directly benefits the rich, and directly disadvantages the poor. The rich own hard assets, which appreciate in value with inflation. When helicopter Ben hands out cash at one of his giveaways, it's always to the hands of the mega rich.

There's something inherently wrong with a system where the government puts a gun to my head to take a portion of my money, so that they may loan to banks at a .1% rate, so that banks may loan to me at a 3% rate.
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The rich do own hard assets, but they also tend to have much more in cash more near cash type investments than the poor do. The poor don't have any money to deflate, thats why they are poor.

Wages tend to increase at about the same rate that inflation does. During high inflationary times, like the early '80's, wages increase much faster than during low inflationary times, like today.

The only two groups of people who are significantly harmed by inflation are people and businesses that lend their own money, or fail to invest their money into hard assets . Thats part of the rationel of targeting a three percent inflation rate. It tends to motivate people into either spending their money now, creating demand, or investing their money productively, creating capital for production expansion. Put the two together, increasing demand and increasing business investment - and ya got a forumula for a good economy.
 
KevinKohler said:
Which makes my means of calculating inflation pretty freaking accurate, wouldn't you agree?
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Well, it worked out pretty well in this case, but I think you were trying to argue that inflation is really worse than we've been led to believe, and your argument fails by your own calculation.
 
Voltaire X said:
3% inflation is terrible

2% inflation (what we've been hovering around the last few years) cuts the purchasing power of the dollar in half every 30 years.. So $100 now would buy what you could currently buy with $50 in 2042. That's pretty rough.
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Not if you invest your money wisely.
 
AdamT said:
Well, it worked out pretty well in this case, but I think you were trying to argue that inflation is really worse than we've been led to believe, and your argument fails by your own calculation.
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Eh, no fail. I don't believe inflation is worse than anyone is led to believe. I think people (like yourself) are trying to convince me that a relative 10K value drop in purchasing power of the USD is not such a bad thing, over a period of ten years.

I politely disagree. i think that ANY reduction in the purchasing power of the dollars that I earn and then SAVE is a bad thing. It's a tax on the money I keep in the bank, money that is SUPPOSED to be safe. And like ALL taxes, it's designed to incentivise certain behaviors...in this case, spending. Can't lose money to inflation if I don't hang on to it for long periods, can I?

Which is the problem with this freaking country. No one thinks about tomorrow, and no one understands the difference between SAVING and GAMBLING.
 
Kandahar said:
Are you aware of how Paul Volcker finally broke the back of inflation? It was by raising interest rates, which led to an intentional-but-necessary recession from 1980-1982. Just because unemployment and inflation are sometimes both high or both low doesn't mean that they aren't inversely related; the late 70s is a perfect example of dialing up unemployment in order to dial down inflation. In our present situation, we have the opportunity to dial up inflation in order to dial down unemployment. Hopefully the Fed makes good on their promise to do so.
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That is correct, of course it was a huge mistake to do so. Our inflation was being mostly caused by a force external to the American economy - OPEC and an artificially manufactured oil shortage that drove up the price of oil five fold:

HistoricalInflationAdustedOilPricesChart.JPG


That would be like oil going from $92 a barrel now, to $500 a barrel in less than two years. It would be quite inflationary - on everything.

We should never sacrifice our productivity or jobs to control externally produced inflation. It was stupid then, and it would be stupid today.
 
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KevinKohler said:
Eh, no fail. I don't believe inflation is worse than anyone is led to believe. I think people (like yourself) are trying to convince me that a relative 10K value drop in purchasing power of the USD is not such a bad thing, over a period of ten years.

I politely disagree. i think that ANY reduction in the purchasing power of the dollars that I earn and then SAVE is a bad thing. It's a tax on the money I keep in the bank, money that is SUPPOSED to be safe. And like ALL taxes, it's designed to incentivise certain behaviors...in this case, spending. Can't lose money to inflation if I don't hang on to it for long periods, can I?

Which is the problem with this freaking country. No one thinks about tomorrow, and no one understands the difference between SAVING and GAMBLING.
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Mild inflation is certainly better than deflation, and because it's unlrealistic to expect 0% inflation, mild inflation is generally what we target. As a rule salaries tend to track inflation as long as it isn't unusually high.

If you were really thinking about the future you would invest your money and not stick it in a bank earning essentially zero interest.
 
Voltaire X said:
Median wage levels are at the same level they were in the mid 1990s. Inflation hasn't stopped since then. The middle and lower classes are getting screwed over. Wages for most people aren't rising with the cost of living.
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Median wage levels have risen at nearly the same rate as inflation. Most likely the figures that you are citing were already adjusted for inflation. Do you have a link to your source?

It is accurate though that the median per family income has dropped during the past 5 years. Thats not really a reflection of declining wages as much as it is of unemployment and the reduction in the number of two income earner families.

But I do agree that the middle and lower classes are getting screwed, because while their incomes have stagnated, the incomes of the top 1% have skyrocket. I recently read that if all increases in per capita GDP would have been distributed equally across all income levels, that the median income today would be something like $80k.
 
hikari said:
Yes, they are getting screwed but it has a lot less to do with inflation than it does globalization. The ruling class has an easier time exploiting the American working class by exposing them more directly to competition from the third world, this has allowed wages to remain stagnant after all why pay people in Michigan a dime more if you could save money by sending that job elsewhere.

If we go down a path of Keynesian economics again, which I think we will, we will probably live with a moderate amount of inflation, and the ruling class wanting to maximize profit will make no moves to do things like peg minimum wage to inflation (which is a very good idea imo) so it will continue that wages will sink till congress needs a boost.

The thing that has changed really is that NAFTA and all the other pro globalization legislation were touted as things good for us, they were not.
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I agree that outsourcing jobs is one of the reasons that middle and lower incomes have not kept pace with the top few percent of income earners, and I agree that we will likey go down the Keynsian path before our economy improves, but I don't expect Keynsian economic policy will cause much inflation over the feds target rate. During times of high unemployment and low production utilization, inflation can only happen if there is an external factor like the oil crises of the '70's and early '80's.

Even if the gov started sending out $1000 checks to every American, we likely wouldn't see much inflation because our businesses have the un-utilized capacity to produce more products. It would take some absurd amount of Keynsian stimulous to produce inflation over the feds target rate.
 
KevinKohler said:
And simply keeping my money in the bank is unwise?


Do you realize how that sounds?
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Not only is it unwise, it's just plain STUPID when banks are paying you an interest rate less than the inflation rate (which is what always happens in any economy).

Yes, I realize how it sounds. Putting money into a savings account is not investing, it's saving.

When one saves, one loses a little bit of his savings every day that passes. It's always been like that. When cavemen tried to save meat, the maggets ate a little of it, and eventually it became uneatable. When farmers tried to save grain, the rats consumed a little every day. When cavemen tried to save water, it evaporated. The only type of savings that has been relatively free from loss was when we saved gold and silver and copper - and even then, if you try to hide it long enough, someone is eventually going to find it and steal it. But if you want to try your luck against the maggots, rats, and thieves, you are perfectly welcome to convert your cash into meat, grain, or gold.
 
AdamT said:
Mild inflation is certainly better than deflation, and because it's unlrealistic to expect 0% inflation, mild inflation is generally what we target. As a rule salaries tend to track inflation as long as it isn't unusually high.

If you were really thinking about the future you would invest your money and not stick it in a bank earning essentially zero interest.
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Make sure you deliver that message to my parents, who lost the bulk of their savings in 401Ks when the stock market crashed. Right before they were due to retire.
 
imagep said:
Not only is it unwise, it's just plain STUPID when banks are paying you an interest rate less than the inflation rate (which is what always happens in any economy).

Yes, I realize how it sounds. Putting money into a savings account is not investing, it's saving.

When one saves, one loses a little bit of his savings every day that passes. It's always been like that. When cavemen tried to save meat, the maggets ate a little of it, and eventually it became uneatable. When farmers tried to save grain, the rats consumed a little every day. When cavemen tried to save water, it evaporated. The only type of savings that has been relatively free from loss was when we saved gold and silver and copper - and even then, if you try to hide it long enough, someone is eventually going to find it and steal it. But if you want to try your luck against the maggots, rats, and thieves, you are perfectly welcome to convert your cash into meat, grain, or gold.
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See, I think treating a slot machine like BANK is stupid.
 
Voltaire X said:
*sigh* I have to respond to this argument every few days now.

Free trade is a good thing for everyone in the long run. It increases our standard of living. Outsourcing jobs is actually good for our economy. It allows us to focus our resources on producing goods that we have a comparative advantage in compared to other countries. We'd have a much lower standard of living if we manufactured everything here in the US as opposed to importing most basic goods like we currently do.
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Thats a logical argument, and not without merit, but outsourcing doesn't result in an increased standard of living when the trade is not recipricated in an equal amount.

Our gov debt to China isn't because we spend to much or tax too little, it's because China chooses to purchase our debt in the free market because they have excess dollars and dollars are not legal tender in China. They acquire those excess dollars because they don't choose to purchase as much from America as Americans purchase from them. the Chineese have to do something with those dollars, so they purchase US debt with them. It's one of the free market's mechanism for repatriating them.

When foreign trade causes unemployment at home, it's not a good thing, unless the unemployment is voluntary and unless we have a method of income distribution other than work.
 
KevinKohler said:
Make sure you deliver that message to my parents, who lost the bulk of their savings in 401Ks when the stock market crashed. Right before they were due to retire.
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Surely they didn't cash out in such a bad market did they? The market is nearly where it was prior to the collapse, so if they stayed in the market, by now they should have nearly recovered their losses. One thing is that you have to remember that most likley, much of their 401k balance was probably due not to the money that they saved, but due to the increases that they were rewarded with due to investing their money in the stock market in the first place. It does have it's ups and downs, smart people buy when it is down and sell when it is up.
 
KevinKohler said:
See, I think treating a slot machine like BANK is stupid.
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Well I understand that. I'm not that convienced either that the ponzi scheme that we call the stock market is the smartest way to invest ones savings either. I have a very small IRA account that is in stocks, but thats all.

Most of my savings is invested in my business. the commercial property that I operate my business out of (I also have a little rental income attached to that), my manufacturing equipment and inventory, etc. If one doesn't have the stomach to invest in the stock market, then maybe investing in commercial real estate (please buy after prices have declined, not after they have reached record levels), or rental houses, or in your own business is in order.

Now if you can't tollerate risk at all, then maybe the bank is your best place to put your savings, you just have to accept the fact that in exchange for relative saftey, you will pay the price of inflation. Oh, and you do realize that when you put money in a bank account, your are effectively loaning it to the bank don't you? thats why they pay you interest on your savings account. don't you have some sort of religious thing against loaning money?
 
imagep said:
Surely they didn't cash out in such a bad market did they? The market is nearly where it was prior to the collapse, so if they stayed in the market, by now they should have nearly recovered their losses. One thing is that you have to remember that most likley, much of their 401k balance was probably due not to the money that they saved, but due to the increases that they were rewarded with due to investing their money in the stock market in the first place. It does have it's ups and downs, smart people buy when it is down and sell when it is up.
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Never heard of forced retirement? Once you hit "the age" a company to do with you as they please. And try getting a job at 65.

So, yeah...they had to cash out. it was cash out, or foreclose. My dad finally found another job. Bagging groceries. He was an accomplished machinist for over 30 years. So you don't get to talk to me about the merits of "investing". Sorry. It is, always has been, and always will be...a slot machine.
 
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