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View Full Version : Economics Fed holds rates on inflation concerns


petegz28
06-22-2011, 01:33 PM
http://www.ft.com/cms/s/0/9f913490-9cea-11e0-8678-00144feabdc0.html#axzz1Q2DoplGM


Highlights:

1. The economy is growing slower than expected

2. Inflation is now a concern

3. Fed raised its forecast for inflation from 1.5 to 1.8



Basically what I and a few others have been saying now for a while. Inflation is on the rise. The cheap $ is causing us pain.

FD
06-22-2011, 01:38 PM
Basically why I and a few others have been saying for a while. Inflation is still below target, and expected to remain that way for the foreseeable future, the greater concern now is the slow recovery, and so rates will remain rock bottom for "an extended period"

petegz28
06-22-2011, 01:54 PM
Basically why I and a few others have been saying for a while. Inflation is still below target, and expected to remain that way for the foreseeable future, the greater concern now is the slow recovery, and so rates will remain rock bottom for "an extended period"

Actually I don't believe so. The article even states that core prices, excluding food and energy, are up an annualised rate of 2.5% in three months to May.

They raised their target to 1.8%. 2.5 is > that 1.8.

Also they are depending on commodities and energy prices to "dissipate" to bring inflation in line. What exactly is going to cause those to come down?

KC native
06-22-2011, 02:20 PM
Actually I don't believe so. The article even states that core prices, excluding food and energy, are up an annualised rate of 2.5% in three months to May.

They raised their target to 1.8%. 2.5 is > that 1.8.

Also they are depending on commodities and energy prices to "dissipate" to bring inflation in line. What exactly is going to cause those to come down?

The Fed isn't going to move until CPI goes north of 4% (annualized). They are still trying to fight off any deflationary pressures.

FD
06-22-2011, 02:22 PM
Actually I don't believe so. The article even states that core prices, excluding food and energy, are up an annualised rate of 2.5% in three months to May.

They raised their target to 1.8%. 2.5 is > that 1.8.

Also they are depending on commodities and energy prices to "dissipate" to bring inflation in line. What exactly is going to cause those to come down?

You've misread your article, they raised their FORECAST to 1.8%, not their target. The Fed's informal inflation target remains 2 to 2.5%. Core inflation in the year to May was 1.5%, which is below that, as is their 1.8% forecast.

Also, commodity prices don't need to "come down" to lower inflation, all they need to do is not grow as fast as they did last winter. Not only are they not growing that fast, commodity prices have fallen somewhat in the past few months.

BucEyedPea
06-22-2011, 03:05 PM
Basically why I and a few others have been saying for a while. Inflation is still below target, and expected to remain that way for the foreseeable future, ...

This is total bullshit except for the part on rates. Are you really this gullible? Food rose 17% sometime in the last year. I thought it was just the first 6 months even. Of course they removed this in the calculations along with energy. I remember you cited the bogus "core inflation" before.

BucEyedPea
06-22-2011, 03:24 PM
Inflation is not that hard to track. Just write down what you paid for something or save receipts from month to month. I have them as well as old checkbooks from ten years ago. Then go to the store next month and do the same.

Bonner asks, how do you figure less inside a cereal box? I'd add on a restaurant plate, or the amount of ink in a pen? I noticed that I am running out faster than before, particularly on the pens and in restaurants despite a lack of price increase on some of these things my servings are smaller, especially the proteins like meat and fish. The stats on inflation are usually approximations anyway.


By Bill Bonner from The Daily Reckoning
....

The Labor Department shows consumer price inflation at barely over 2%.
However, John Williamsí ShadowStats puts the figure close to 8%. [If you really want a truer comparison than the liars at the Fed.]

MIT University now has a project to track prices by monitoring them on the worldwide web.
This is a huge volume of price information, the Billion Prices Project is probably the most reliable measure of consumer price inflation developed so far.

Over the last 12 months, prices have gone up 3.2%, say professors Alberto Cavallo and Roberto Rigobon, who developed the index.

But get this, the rate of consumer price inflation is speeding up. Annualize the data from the last 3 months and you get 7.4%.

By the most recent calculation by the Billion Prices Project, US government bond yields measure only half the rate of consumer price inflation. How could that be? Why would investors buy a bond yielding only half the inflation rate? Are they idiots?

Maybe they are betting that the latest inflation numbers are a fluke. Ben Bernanke said so himself.

More : http://dailyreckoning.com/consumer-price-inflation-on-a-diet-of-gold-and-wheaties/

BucEyedPea
06-22-2011, 03:26 PM
And the reason the economy is growing more slowly is because people already have too much debt from the cheap credit frenzy by Fed during the Bush era. People can't take on more so priming the pumps has not worked.

petegz28
06-22-2011, 05:05 PM
And the reason the economy is growing more slowly is because people already have too much debt from the cheap credit frenzy by Fed during the Bush era. People can't take on more so priming the pumps has not worked.

The reason the economy is growing slowly is because a shitload of people are out of jobs, a bunch more are afraid of losing their jobs and none of them are spending because of their lack of security. Top that with higher and higher gas and food prices and suddenly you have less consumer spending.

Low interest rates are typically a good thing. Excessively low interest rates for an extended period of time are damaging as we are seeing now but many remain in denial. Our $ is eroding daily simply because interest rates are not ourpacing inflation so no one can grow their money without taking on extra risk.

Again an analogy I use to describe interest rates and our economy is liek taking asprin for a headache. You can take two a day for a day or two but if the headache doesn't go away and you just keep popping asprins your are making things worse not better.

The root cause of it all comes down to 4 simple letters, J O B S.

And in a time where jobs are sparse the Fed Gov continues to shove down regulation after regulation or entitlement after entitlement making it more and more expensive to create jobs.

An effective interest rate of 0 is a sign of a bad economy and low interest rates alone are not going to fix it. In fact it is becoming more and more harmful.

Calcountry
06-22-2011, 05:06 PM
Basically why I and a few others have been saying for a while. Inflation is still below target, and expected to remain that way for the foreseeable future, the greater concern now is the slow recovery, and so rates will remain rock bottom for "an extended period"Anecdotal Ann says I have to deal with a 10% cost of goods sold increase on my dog food starting July 1st.

Calcountry
06-22-2011, 05:07 PM
And the reason the economy is growing more slowly is because people already have too much debt from the cheap credit frenzy by Fed during the Bush era. People can't take on more so priming the pumps has not worked.The banks aren't lending unless you don't need the loan and aren't asking, then they are soliciting you to go into debt.

That will work.

Calcountry
06-22-2011, 05:08 PM
The Fed isn't going to move until CPI goes north of 4% (annualized). They are still trying to fight off any deflationary pressures.Barack Obama IS a deflationary pressure.

Obamacare IS a deflationary pressure.

Cap and bullshit, IS a deflationary pressure.

The only way this shit goes away is when Obama is fired.

Calcountry
06-22-2011, 05:12 PM
Inflation is not that hard to track. Just write down what you paid for something or save receipts from month to month. I have them as well as old checkbooks from ten years ago. Then go to the store next month and do the same.

Bonner asks, how do you figure less inside a cereal box? I'd add on a restaurant plate, or the amount of ink in a pen? I noticed that I am running out faster than before, particularly on the pens and in restaurants despite a lack of price increase on some of these things my servings are smaller, especially the proteins like meat and fish. The stats on inflation are usually approximations anyway.Or, you could go to costco and track a few key items like coffee, Tuna, toilette paper, and dog food and corn flakes. Yeah, the shit is off the charts. Best investment advice is to go long on real things like lumber, cement, bullets, rice, beans. Anything that is a readily usable commodity that won't readily shrink due to its age.

It won't ever be as cheap as it is now, again. Ever.

You don't just dump trillions into the money supply and it not have an affect. Just wait until everyone who still has money gets it and starts spending the shit as fast as they can because they know it will be worth less every day they hold onto it.

Calcountry
06-22-2011, 05:14 PM
Basically why I and a few others have been saying for a while. Inflation is still below target, and expected to remain that way for the foreseeable future, the greater concern now is the slow recovery, and so rates will remain rock bottom for "an extended period"You like bendover Big ben? Don't you?

EXTENDED period of time. That's a nice line. He has been using it since 2008.

All we need now is some protectionist tariff against China to put this thing into a full blown meltdown like the 30's.

petegz28
06-22-2011, 05:21 PM
The Fed isn't going to move until CPI goes north of 4% (annualized). They are still trying to fight off any deflationary pressures.

What deflationary pressures? I've been hearing this deflation talk for the last couple years yet the price of everything except housing keeps going up.

petegz28
06-22-2011, 05:23 PM
You like bendover Big ben? Don't you?

EXTENDED period of time. That's a nice line. He has been using it since 2008.

All we need now is some protectionist tariff against China to put this thing into a full blown meltdown like the 30's.

The Ben Bernank is an expert of the Great Depression and the Japanese crisis. We are to trust him. Nevermind he is doing the same fucking thing that Japan did.

The Ben Bernank has been wrong at every turn. The guy is a total academic who seems to be void of any real world economics.

petegz28
06-22-2011, 05:26 PM
<iframe width="425" height="349" src="http://www.youtube.com/embed/9QpD64GUoXw" frameborder="0" allowfullscreen></iframe>

petegz28
06-22-2011, 05:31 PM
<iframe width="425" height="349" src="http://www.youtube.com/embed/gldETRlhiXk" frameborder="0" allowfullscreen></iframe>

petegz28
06-22-2011, 05:37 PM
<iframe width="425" height="349" src="http://www.youtube.com/embed/tie6YqA1930" frameborder="0" allowfullscreen></iframe>

BucEyedPea
06-22-2011, 08:28 PM
The reason the economy is growing slowly is because a shitload of people are out of jobs, a bunch more are afraid of losing their jobs and none of them are spending because of their lack of security. Top that with higher and higher gas and food prices and suddenly you have less consumer spending.
An economy that has slowed down puts people out of jobs. People out of jobs doesn't start the slowdown necessarily but it does add to it.

Low interest rates are typically a good thing. Excessively low interest rates for an extended period of time are damaging as we are seeing now but many remain in denial. Our $ is eroding daily simply because interest rates are not ourpacing inflation so no one can grow their money without taking on extra risk.
What is low and what is high? They were too low from 2001 to 2008. The point is easy and cheap credit does the same thing as flooding the money supply.

Again an analogy I use to describe interest rates and our economy is liek taking asprin for a headache. You can take two a day for a day or two but if the headache doesn't go away and you just keep popping asprins your are making things worse not better.
I agree.

My point, however, was that priming the pumps will not stimulate an economy already carrying too much debt. Many have been paying it off instead of spending. Also, there is just too much inventory in the housing market....so no amount of stimulus will help that.

The root cause of it all comes down to 4 simple letters, J O B S.
No! The root cause is Federal Reserve policy because that came first leading to jobs being lost.
Now if you also want to stop govt spending or curtail it, including stopping Obama, you have to stop the Federal Reserve.

And in a time where jobs are sparse the Fed Gov continues to shove down regulation after regulation or entitlement after entitlement making it more and more expensive to create jobs.
Well, this too. But too much money is what they Fed Reserve is creating which is not helping and weakens the dollar making imports more expensive and of course that includes oil.

An effective interest rate of 0 is a sign of a bad economy and low interest rates alone are not going to fix it. In fact it is becoming more and more harmful.
I agree. 0% interest was offered consistently for credit card debt though from 2000- 2008.
That was part of the stimulus the Fed Res engaged in to get us out of the recession Bush inherited from Clinton.