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FD
07-16-2011, 10:39 AM
From the WSJ:

U.S. inflation fell in June as gasoline prices retreated from early summer highs, but rising costs for a host of items including clothes and rent are keeping pressure on households and could complicate any efforts by policy makers to boost the economy.

Consumer prices fell a seasonally adjusted 0.2% in June from a month earlier, the first drop in a year and a reversal of the 0.2% increase the prior month, the government said Friday.

A measure of underlying or "core" inflation—watched closely by economists and the Federal Reserve because it strips out volatile energy and food prices—climbed by a monthly 0.3% in June, the same as the month earlier.

Behind the dip were falling prices for gasoline and other fuels: The energy index declined 4.4% in June, the biggest drop since December 2008.

The gasoline index tumbled 6.8%. Food prices rose 0.2% in June, the smallest rise so far this year.
http://online.wsj.com/article/SB10001424052702304521304576447641965268196.html?mod=WSJ_business_EconomyNewsBucket

FD
07-16-2011, 10:41 AM
Of course what really matters is core inflation, which strips out the most volatile elements of the price index, namely food and gas. We are not actually experiencing deflation right now, as the headline number would indicate. I'm posting this to remind the inflation hawks around here why core inflation is a superior measure, especially in times like these when volatile gas prices whip the headline number up and down drastically.

petegz28
07-16-2011, 10:44 AM
Of course what really matters is core inflation, which strips out the most volatile elements of the price index, namely food and gas. We are not actually experiencing deflation right now, as the headline number would indicate. I'm posting this to remind the inflation hawks around here why core inflation is a superior measure, especially in times like these when volatile gas prices whip the headline number up and down drastically.

Yes, becasue food and energy is something that isn't used by most people.

BTW I noticed gas was heading back up again.

FD
07-16-2011, 10:48 AM
Yes, becasue food and energy is something that isn't used by most people.

BTW I noticed gas was heading back up again.

Its used, but because they're so volatile they can give a misleading view of actual, long-term inflation.

Do you really think we are experiencing deflation right now? Because thats what your preferred measure says.

petegz28
07-16-2011, 10:56 AM
Its used, but because they're so volatile they can give a misleading view of actual, long-term inflation.

Do you really think we are experiencing deflation right now? Because thats what your preferred measure says.

No and I have never said we were. I am saying extended periods of inflation of food and energy will lead to core inflation in the long run. It has too. Not to mention the price of commoditites in general.


Do we not use commodities to manufacture goods? Is oil only for running your car and heating your home? Is copper just to make pennies? The transportaton industry can only sustain higher fuel costs for so long before they have to raise their costs to their customers. And on down it trickles.

This hasn't been a blip spike in commodity prices. This has not been "transitory" as the Ben Bernank claims.

If things don't change we could very well see deflation.

BucEyedPea
07-16-2011, 11:18 AM
Of course what really matters is core inflation, which strips out the most volatile elements of the price index, namely food and gas. We are not actually experiencing deflation right now, as the headline number would indicate. I'm posting this to remind the inflation hawks around here why core inflation is a superior measure, especially in times like these when volatile gas prices whip the headline number up and down drastically.

Pure BS, since focusing on core inflation is a way to not confront that the cost of living is spiralling up while the politicos get off the hook for bad results that they can camoflage. Of course, not all prices rise at the same rate at the same time. This type of report satisfies Kool-Aid drinkers.

BucEyedPea
07-16-2011, 11:26 AM
Don't Believe Those Inflation Numbers (http://mises.org/daily/2302)

The CPI is a government statistic, and since the government's expansionary monetary policy creates the inflation, officials have an incentive to underestimate these numbers. Underreporting inflation helps government officials in at least three ways.


First of all, it provides more favorable economic news. Elected officials want to report and take credit for any positive economic announcements.

Second, if the government reports a rate of inflation that is lower than the actual inflation rate, this will increases tax revenues through bracket creep. If the actual inflation rate is 10%, but the measured rate of inflation is 4%, some taxpayers will be pushed into higher tax brackets even though their real income has not increased.

And third, a lower reported inflation statistic reduces government spending by limiting the spending increases that are tied to inflation. The state can take credit for cost of living adjustments that are allegedly keeping up with inflation although in real terms the payments are falling.

My point is that given the incentives facing government officials, we should be reluctant to put any credence in government statistics.

In addition to underreporting inflation, the feds also want to conceal the cause of inflation. Federal Reserve policies pump up the money supply creating the inflation. In the last decade, M3 has increased 120% and this monetary stimulus is reflected in the official inflation statistics. Fed officials are quick to blame the inflation on supply disruptions or the higher demand for goods. Think about this. The Fed is essentially blaming inflation on rising prices. Inflation is the rise in prices. This is like the thief blaming his victim's loss of money on the victim's thinner wallet. The Fed points to the rising prices then claims that they must fight inflation. They position themselves as inflation hawks, although they are the cause of the problem.

Consumers are often suspicious of economic statistics, and rightly so, since they see the rising prices daily. Ludwig von Mises, in explaining the fallacies of price indices, noted that in "practical life nobody lets himself be fooled by index numbers." In order to convince the public that their statistics are accurate, government officials report the CPI to one or two decimal places. In spite of the imprecision of economic statistics, the Bureau of Labor Statistics is considering taking this a step further by reporting the CPI to three decimal places. [ Lolz!]

mnchiefsguy
07-16-2011, 01:33 PM
Yes, becasue food and energy is something that isn't used by most people.

BTW I noticed gas was heading back up again.

Went up .15 cents overnight. Food and energy make up a significant portion of people's budgets, so wouldn't make sense to include them in a calculation of inflation?

Quickie
07-17-2011, 11:57 AM
prop·a·gan·da   /ˌprɒpəˈgændə/ Show Spelled
[prop-uh-gan-duh] Show IPA

–noun
1. information, ideas, or rumors deliberately spread widely to help or harm a person, group, movement, institution, nation, etc.
2. the deliberate spreading of such information, rumors, etc.
3. the particular doctrines or principles propagated by an organization or movement.