If There’s No Inflation, Why Are Prices Up So Much?

Many of the costs faced by typical American households are rising faster than the official inflation statistics indicate.

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Last week, I ran out of ink for my printer and ordered some more online. My computer automatically pulled up the previous order, and I was shocked to see that the price of the ink cartridges I was buying had gone up 25%. To my mind, ink always seems overpriced. Manufacturers sell printers cheaply because they know that they can make lots of money on the ink. For the same reason, John D. Rockefeller’s Standard Oil is said to have sold millions of cheap kerosene lamps in order to make big profits selling kerosene. But since ink cartridges were already priced way above cost and official statistics show little general inflation, why had ink gone up 25% in less than a year?

Price hikes for a particular item here or there don’t qualify as inflation. If one thing gets more expensive but something else gets cheaper, that’s what economists call a relative price change. Inflation is a simultaneous increase in prices across the board. Some measures of inflation, such as the GDP Deflator, track price changes that affect businesses as well as those that affect consumers. But the Consumer Price Index is supposed to focus on inflation at the consumer level. And the CPI has recorded minimal increases over the past four years. Since the recession ended, the 12-month change in consumer prices has averaged 2% and has never been as high as 4%.

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There are lots of other ways to gauge inflation, however, that give very different signals. Gold was $930 an ounce when the recession ended, and today it’s $1,583. So if you believe in the gold standard, prices have increased 70% in four years – or an annualized rate of 14.2%. Of course, many economists dismiss the gold price as an archaic indicator. So it may be more meaningful to look at price increases over a broad range of commodities. The Reuters CRB Commodity Index, which tracks the prices of coffee, cocoa, copper, and cotton, as well as energy, is up 38% over four years, or 8.6% at a compound annual rate.

It may well be that these increases in the cost of raw materials aren’t translating into broader inflation because the economy is so weak. For sustained inflation to get going, workers have to be able to demand higher pay to make up for increases in their cost of living. And today, whatever inflation is caused by the rising cost of raw materials is being offset by below-normal increases in wages. Indeed, that’s one of the factors causing the decline in real after-tax household income that I wrote about last week.

That may result in price stability for the overall economy, but it isn’t great news for middle-class American families. It’s true that some important costs have remained moderate. Food prices may fluctuate from season to season, but overall they have risen at only a 2% compound rate since 2009. And in the current real estate market, housing costs haven’t gone up much either. Nonetheless, many of the everyday costs that Americans face have risen a lot.

The price of gasoline has gone up from $2.60 a gallon when the recession ended to $3.68 today. That’s a 41% increase in four years, or an annualized rate of 9%. Taxes have gone up almost as much. Federal, State and Local income taxes and social charges (Social Security payroll taxes, for instance) have risen 35% over four years, an annualized rate of 7.8%.

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Perhaps the most telling indicator – albeit a slightly facetious one – is the Big Mac index, popularized by the Economist magazine. McDonalds hamburgers are available in many countries and their prices reflect the cost of food, fuel, commercial real estate, and basic labor. The price of a Big Mac, therefore, can be used to compare the economies of different countries – or serve as a bellwether of inflation in a single country. Since the recession ended, the cost of a Big Mac in the U.S. has risen from an average of $3.57 to $4.37, or 5.2% a year.

So why haven’t these more rapid increases shown up in the Consumer Price Index? One reason is that the index itself has been modified in a variety of ways over the past 35 years. Fluctuations in home prices have been smoothed out, for example. And the index has been adjusted periodically to reflect changes in what people buy, particularly if they shift from more expensive items to cheaper ones. Such revisions to the CPI have tended to reduce the official inflation rate, on balance. Various estimates of what the annual rate would have been over the past four years if earlier methods of calculation had been continued come up with numbers in the 5%-to-10% range.

Several conclusions can be drawn from all this. First, there is no absolute and objective gauge of inflation. Any particular measure is simply one way of making the calculation, based on a host of assumptions. Second, a number of the costs that middle-class households face are going up considerably faster than the CPI. Printer-ink cartridges may be a particularly obnoxious example, but they’re not the only case where prices are rising more than official statistics indicate. At the moment, these trends aren’t highly visible because the economy is so sluggish. But as the recovery continues, there’s every reason to think that they will become more widespread.

126 comments
ow7065
ow7065

They are lying.


Printing money at the fed so the government can spend money causes oil to go up (because oil is traded in dollars) and then that drives up food and other stuff.


So we, the idiots, pay for them to borrow money which they give to the banks for free who loan it to us at 10%.


Food and gas have doubled or more over the past 20 years alone.


Now if they continue, they will print/spend us into third world in another 30 years.

NEWS2VIEW
NEWS2VIEW

The article says food prices may fluctuate from season to season, but overall they have risen at only a 2% compound rate since 2009.

Wrong.

During the Great Recession food manufacturers attempted to keep grocery prices steady by reducing the volume of cereal, peanut butter and the like so that they could continue offering the same price on items while concealing the fact that the volume had shrunk. Packages were designed to look the same on the shelf but hold less. Meanwhile, there were riots in Algeria over sugar prices, riots in Mexico over tortillas and a rice shortage that forced no less than the likes of Costco to ration. How short our memories! 

Even after the Great Recession is said to have ended a December 2009 article on sticker shock at the grocery store suggests that even the US Agriculture Department anticipated overall food prices to increase as much as 4 percent by the end of 2010. Other economists anticipated a hike of as much as five percent. A five percent increase would mean coming up with roughly a thousand dollars more per year for groceries, the article went on to state. In fact, consumers are said to have already sustained a 45 percent hike for groceries over those costs in 2007!

Source: "Sticker Shock at the Supermarket - Food Prices Poised to Rise" on the Daily Finance website.

What harms the middle class in the US inspires unrest and instability elsewhere in the world. We are often told various protests and uprisings are in support of greater political freedom but more basic motivators such as the cost of food are precipitating factors. According to a senior economist from the Food and Agriculture Organization quoted by NPR in 2011, global food prices, which, among other commodities, are heavily influenced by US monetary policy given our status as world reserve currency, increased on the order of 50-60 percent year-to-year!

Source: "Skyrocketing Prices Point to Looming Global Food Crisis", NPR website.

In conclusion, this TIME article is at best poorly researched and at worst woefully misleading. Few of the statistics cited in this piece are attributed to a source. That ought to be a reader's first clue.

Eva_fate
Eva_fate

You keep saying the recession ended. 

NickLivingstone
NickLivingstone

couldn't the rise in prices be a basic shortage? If aggregate demand fell during the "great recession of '08" and supply has lagged in rising to meet increased demand in the years since (which could be explained by negative pressure on supply due to the financial markets, which place a high emphasis on EPS, profit margins relative to revenue, and other factors), then couldn't this increase in prices just be a lag on a supply increase that would create a shortage?

fredlb
fredlb

Post people I know believe that the inflation rate for groceries is in double digits and has been for several years.  That is, they believe the government's figures are just lies.

Dellhar
Dellhar

Not only has the inflation rate risen, but retailers are masking it by selling products with less volume.  We now have the the 4 lb. bag of sugar (once 5 lbs.), the 13.5 ounce can of corn (once 16 ounces), 14  ounces of prepackaged sausage (once 16 ounces), etc., etc. 

The Stop N Shop retail chain has cornered the market on this.  Not only is the volume of products smaller but the prices have increased.

Insurance rates have increased, so has rent.  For any official to make a statement that inflation has held steady or the rate is low is nothing more than irresponsible propaganda.


RedHeadedRob
RedHeadedRob

When you lose your job because of Obamacare (which I did, twice) and are forced to take a drastic pay cut to stay employed (which I did, twice) to where you are making almost half what you were a few years ago, what does that say about inflation?  Does that stat even really matter?  Let's compare quality of life shall we?  The quality is WAY DOWN folks.  We are living as surfs here to serve Obama and his ilk who take million dollar vacations on the back of the working class while buying votes from the unemployable and blockading the national parks we pay for.  It's Sherwood forest all over again.  Where is Robin Hood when you need him?

JohnSalv
JohnSalv

Real inflation, experienced by citizens, is definitely higher than the data the U.S. government publishes. Official U.S. inflation is below 2%. However, alternative methods of calculation - as well as some surveys - puts inflation between 4-10%.

The U.S. is not the only country that experiences price inflation though. In most countries the costs of goods and services are increasing and real wage growth is not keeping up pace – leading to a loss of purchasing power and wealth.

The reason behind the increase in inflation is primarily the stimulus packages that most governments launched in the wake of the credit crunch in 2008. The U.S. is probably the best example, but many other countries have followed suit. In fact, in 2009 all G-20 countries were on some sort of stimulus plan.

Today, Japan also stands out with a $1.4 trillion 2-year stimulus package in an effort to double the monetary base. The ECB in Europe, China, South Korea and a host of other countries are on similar programs.

Even though inflation clearly is higher than what the government says one can make some interesting observations when looking at how much the monetary base has grown and how much money we actually see in circulation. Doing so will reveal that we have yet to see significantly higher inflation numbers – maybe even hyper-inflation.

read the full article here: https://www.saveguards.com/en/news/why-isnt-inflation-higher/



Read more: http://business.time.com/2012/09/05/why-isnt-there-more-inflation/#ixzz2ZDI242D3

JeffreyMillinger
JeffreyMillinger

This scam by the US government and its backing of the criminal Federal Reserve system must be CALLED OUT.  They are inserting oblong objects into our collective rectum and claiming it's not "rape" it's just "probing".  Enough already.  Inflation is much much higher than the 1% Ben Bernanke and his lying minions claim it is... 

.....they are expanding the money supply and adding to the national debt, which is already insurmountable, and feeding the money into assets like US equities which they will later cash out at the top and walk away from FILTHY RICH (richer than they are now if that's even imaginable).  They will leave the rest of us burdened with rising costs of living as bond yields soar ... stop them NOW.... write to the POTUS and demand that they act more responsibly and END THE CRIMINAL FED.  

HerbSmith
HerbSmith

Sivy, You're a dope.  Lot's of prices are way down - e.g., flat screen TVs.  If you buy a name brand printer cartridge, well, of course you'll pay thru the nose for it.  Hey dummy, Don't buy the name brand cartridge!!  Your understanding and explanation of the BLS CPI is pathetic!  The whole article is a sophomoric waste of time.  If you can't do better than this, leave economics alone and instead cover celebrity news.

jeff773747
jeff773747

That is the big crock of BS that there is no inflation.  I bought a NEW 2000 Camaro Z28 for $25,000.  The same car today - 2013 - is priced at $45,000.   Any other questions about inflation?

TenaciousJim
TenaciousJim

Horse meat hamburgers are still cheap so there is no inflation. You can but a 20 year old car for less so there is no inflation.

Meanwhile education costs, medical costs, retail prices of utilities such as electric and water plus local property taxes are going through the roof BUT there is no inflation.

zerses
zerses

Milk and bread... want to see your inflation in real terms?  Those two items are the gauge of most American's food budget.


Other items going up fast like gas, electricity, water/sewer and HEALTH CARE (!) are all "signs" that inflation is taking hold - so um, America, we have inflation.

ywatkins1951
ywatkins1951

Anyone who has ever dealt with the people who collect the information for the consumer price index knows that the methods of collecting information verge on the ridiculous.  They tell you that you have to report everything you spend for two weeks.  From the coffee at Starbucks to a new car.  They don't check to see if you are accurate, they just take your word for it.  And if you decline to participate (which you are legally permitted to do) they appear at your door at all times of day trying to convince you to provide information which they never check on.  I cannot think of a worse way to collect accurate data.

hamiltonchem
hamiltonchem

Over the last decade, the largest cost increase for my household every year has been health care, including both insurance and out-of-pocket costs.  I do not see much discussion of this, but it has done at lot more damage to my bank account than gasoline or hamburgers. 

PatrickT
PatrickT

The problem is in defining one's terms.   What are you trying to measure?  Are you trying to tell whether it's raining, and how hard, or are you trying to measure how wet someone with an umbrella will get?    What do you mean by inflation?   If inflation is the measure of the effect of monetary growth on the price of everything, for purposes of determining, say, the "real" part of "real GDP" (meaning, if there is no actual GDP growth, we should stop the Keynesian "hair of the dog that bit me" policies) - then yes, we have high single digit inflation, as shown on Williams' website.   If you're trying to measure the net effect on the consumer, after taking into account her ability to maneuver to offset the effect of a broad price-level increase, then the BLS measure is correct.   But these are two different questions.    You cannot use a statistic that answers the second question to answer the first.    And that is what you do when you quote "real GDP growth" by adjusting nominal GDP growth for CPI.   

StevenHales
StevenHales

This controversy over the CPI and its calculation was played out back in 2008.  The sparring partners were John Williams founder of shadowstats and the BLS economists Greenlees and McClelland the previous link to their paper had this devastating critique obliquely referencing Williams.  Williams suffered more than just a flesh wound. Sivy seems to have fallen for the same discredited line of thought that Williams still promotes. It is a modified conspiracy theory.  Here are Greenlees and McClelland deftly twisting the knife. 

To begin, it must be stated unequivocally that the BLS does not assume that consumers substitute hamburger for steak. Neither the CPI-U, nor the CPI-W used for wage and benefit indexation, allows for substitution between steak and hamburger, which are in different CPI item categories. Instead, the BLS uses a formula that implicitly assumes a degree of substitution among the close substitutes within an item-area component of the index. As an example, consumers are assumed to respond to price variations among the different items found within the category "apples in Chicago." Other examples are "ground beef in Chicago," "beefsteaks in Chicago," and "eggs in Boston"....

The quantitative impact of the CPI's use of the geometric mean formula also has been grossly overstated by some, with one estimate exceeding 3 percent per year. It is difficult to identify real-world circumstances under which geometric mean and Laspeyres indexes could differ by such a large amount. The two index formulas will give the same answer whenever the prices used in an index all change by the same percentage. The bigger the differences in price changes, the more the Laspeyres index will tend to exceed the geometric mean. For the growth rate of the Laspeyres index to exceed the growth rate of a geometric mean index by 3 percentage points, however, the differences in individual price changes have to be quite large.

To see this point, consider another very simplified example. Suppose that the CPI sample for ice cream and related products in Boston consisted only of an equal number of prices for ice cream and frozen yogurt and that, between one year and the next, all the prices of ice cream in Boston rose by 8.6 percent while all the frozen yogurt prices fell by 4.2 percent. In that case, the geometric mean estimate of overall annual price change would be 2.0 percent, only slightly less than the Laspeyres estimate of about 2.2%. In order to come up with a difference of 3 index points, one has to assume a much more dramatic divergence between ice cream and frozen yogurt prices than the one hypothesized. For example, if ice cream prices rose 30 percent in one year, while frozen yogurt prices fell by 20 percent, the overall geometric mean index would still rise by 2 percent, but the Laspeyres index would rise 5 percent, for a difference of 3 index points. However, such a large annual divergence would be quite uncommon within CPI basic indexes-- between ice cream and yogurt, between types of candy and gum, between types of noncarbonated juices, or between varieties of ground beef. Moreover, for a 3-percentage-point divergence to continue year after year, the divergence between the individual component prices would have to continue to widen. For example, if, by contrast, during the next year ice cream prices increased by the same amount as frozen yogurt prices, then the two index formulas would give the same inflation estimate for that year. Although such a divergence might plausibly occur in one component for 1 year, it is beyond belief that such sharply divergent price behavior would continue year after year across the whole range of CPI item-area components.

Finally, and most importantly, there is rigorous empirical evidence on the actual quantitative impact of the geometric mean formula, because the BLS has continued to calculate Laspeyres indexes for all CPI basic indexes on an experimental basis for comparison with the official index. These experimental indexes show that the geometric mean led to an overall decrease in CPI growth of about 0.28 percentage point per year over the period from December 1999 to December 2004, close to the original BLS prediction that the impact would be approximately 0.20 percentage point per year.

atworkforu
atworkforu

"So if you believe in the gold standard, prices have increased 70% in four years – or an annualized rate of 14.2%"

No, quite the opposite.  If you believe in the gold standard and you had 2 1/2 lbs of gold 4 years ago, you could have a BMW 328.  Now, because of **deflation** (prices going down) relative to gold, you can have the same BMW for only 1 1/2 lbs of gold.

StevenHales
StevenHales

"And the index has been adjusted periodically to reflect changes in what people buy, particularly if they shift from more expensive items to cheaper ones." This is fundamentally wrong.

http://www.bls.gov/cpi/cpiqa.htm#Question_3

From BLS:

When the cost of food rises, does the CPI assume that consumers switch to less desired foods, such as substituting hamburger for steak?

No. In January 1999, the BLS began using a geometric mean formula in the CPI that reflects the fact that consumers shift their purchases toward products that have fallen in relative price. Some critics charge that by reflecting consumer substitution the BLS is subtracting from the CPI a certain amount of inflation that consumers can "live with" by reducing their standard of living. This is incorrect: the CPI's objective is to calculate the change in the amount consumers need to spend to maintain a constant level of satisfaction.

Specifically, in constructing the "headline" CPI-U and CPI-W, the BLS is not assuming that consumers substitute hamburgers for steak. Substitution is only assumed to occur within basic CPI index categories, such as among types of ground beef in Chicago. Hamburger and steak are in different CPI item categories, so no substitution between them is built into the CPI-U or CPI-W.

Furthermore, the CPI doesn't implicitly assume that consumers always substitute toward the less desirable good. Within the beef steaks item category, for example, the assumption is that consumers on average would move up from flank steak to filet mignon if the price of flank steak rose by a greater amount (or fell by less) than filet mignon prices. If both types of beef steak rose in price by the same amount, the geometric mean would assume no substitution.

In using the geometric mean the BLS is following a recognized best practice for statistical agencies. The formula is widely used by statistical agencies around the world and is recommended by, for example, the International Monetary Fund and the Statistical Office of the European Communities.

BrandonGunnoe
BrandonGunnoe

QE=More Currency in Existence=Debased Value? 

UmadBrazi1
UmadBrazi1

I'm sorry for the non-constructive comment, but i'm gonna drop it anyway:


This is quite possibly the stupidest article I've ever read in my entire life.


"OMG ink price is higher, OMG BIGMACS cost more, OMG gas prices have increased."


Seriously the economic ignorance in the mainstream is mind-numbing.


It would take far too much time and effort to educate you on basic concepts, so I'll just leave this snarky comment and hope to give at least one other intelligent reader a chuckle.

sharonsj
sharonsj

I have been bitching about price inflation since 2008.  The financial crash led to an immediate jump in prices for everything (or a shrinking of packaging with the price staying the same).  The media has ignored price inflation for everything except gasoline.  Inflation is not 2% a year, it's more like 10% a year or more.  Just because the media ignores it doesn't mean the rest of America isn't aware of the truth.

And now they want to change the CPI to a chained CPI which will screw the elderly, poor and disabled.  When ExxonMobil and GE finally pay income taxes, and when they stop giving handouts to NASCAR and the Disney Corp., then maybe I'll agree to pay my "fair share" too.

Brynjo
Brynjo

If the "old" methodology of using home prices was utilized, BLS would have had to record the cumulative 30% drop (Case Shiller) national home prices since 2006. Talking about higher ink cartridge prices is easy for bloggers to write about, but I've yet to hear about a comprehensive inflation statistic, that at least tries to adjust for quality improvements (better technology) and quality degredations (smaller airline seats) as well as the BLS. Realistically, its not the ink cartridges or big macs that determine "cost of living" its the bigger broader themes, like falling Nat Gas prices, balanced against various rising prices.

CRWMD
CRWMD

Why?- Because the government removed food and energy prices from the official method used to calculate the inflation rate- a fact which you allude to but then dance around when you state that the using the "old method" the inflation rate would have been 10% the last few years. Why did the government do this? 1. To hide how bad things really are. 2. To hide the impact of Obama's massive and unprecedented expansion of US money supply-do a search on "Saint Louis Federal Reserve Money Supply Chart" 3. To avoid having to pay huge increases in Social Security and Federal pensions which are tied to the official inflation rate- in fact payments where actually cut do to the impact of falling housing prices-while the "personal inflation" experienced by retirees has shyrocketed because most of their expenditures are on the comodities (food, medications, energy) which are no longer being counted in the inflation rate.

If a private sector company did what the Federal Government is doing to mask what is really going on the responsibile parties would be facing jail time for accounting fraud.    To estimate the impact that inflation has on the buying power of your income use the rule of 70- divide 70 by the true inflation rate of about 10% and you get 7 which means that every 7 years your money loses roughly 50% of it's value!

mahoneyct
mahoneyct

I remember 1977-81, when we had inflation. It was highly visible. Today is very different.

TexasTruBlu
TexasTruBlu

You know, it would have been nice if the media had bothered to notice this say, before the election last summer....I commented frequently on various social media outlets that I was seeing a precipitous rise in basic groceries. Here's the nasty little secret the media continues to ignore. As a Globalist, Obama views ALL AMERICANS as "the rich." So he goes after the top tier to garner popular acclaim, but surreptitiously taxes all Americans through additional layers of insurance, zoning, EPA restrictions and limits on development pushing these industries to the Third World countries he so loves. They make the goods, sell it to us for whatever the market will bear and since there's no domestic competitions because of layers of cost heaped on domestic goods, the money goes out of the country. Think of it as a payday loan place that simply wires our taxes to Brazil or Cambodia. So outlets like this one should bear a great deal of the blame for failing to write real news stories, do real research and in short do their doggone jobs.

joeavillarreal
joeavillarreal

@r3port3r Corporate Taxes on the rise lead to higher prices everywhere, companies have to make up those tax burdens somewhere.

Historybuff
Historybuff

I am surprised.   Someone writing for Time is actually writing something that is not flattering & biased towards obama.   Will wonders never cease?

There is no question that "the cost of middle class living" had gone up dramatically.   It is s sign of bad government, democrat or Republican, that the reporting statistics have been 're-arranged' to avoid controversy.   EVERYBODY that is in the middle class KNOWS that costs have risen - and our government should be honest with us.   

AaronCohn
AaronCohn

A silver quarter bought a gallon of gas in 1964.

And it still does.

KevanHuston
KevanHuston

Do you even know what facetious means? There's nothing "facetious" about the Big Mac Index.

More worryingly, you don't even seem to know what inflation is. It is the rate of expansion (or contraction) of the supply of money. Price increases are a *consequence* of inflation, not inflation per se.

And somehow you managed to talk for 10 odd paragraphs about "inflation" without talking about financial asset prices.

NEWS2VIEW
NEWS2VIEW

I want to add: The US changed the method for computing inflation and unemployment stats, among other figures. The website Shadow Stats reveals how the numbers would look before the formulas were amended in the '80s and '90s (to conceal the damage of NAFTA/GATT, no doubt!). Meanwhile, Fed Chair Janet Yellen has proposed changing the unemployment tabulations. She acknowledges in a recent article that the current method is inadequate. The reality is that only 63 percent, just over half the working-age population in the Untied States, participates in the labor force. The 6 percent rate of unemployment, much like inflation, is misleading in that it is primarily achieved by disenfranchised workers dropping out of the labor force (or working part time when they actually want a full time job).

What is even more glossed over by mainstream media is the fact that the United States exports inflation to the rest of the world, thanks to the fact that the dollar is world reserve currency. Increasingly, nations are forming direct-trade agreements to bypass the dollar. When the dollar is finally unseated as world reserve currency the true state of inflation will be become disastrously apparent (to make the Great Depression look like a picnic in the park). 

That we Americans, on the whole, are affluent enough to blunt the impact of rising prices does not make it any less real. There are calculators on the internet that allow one to compute how little a dollar is worth compared to what it could buy in years past. Our spending power is not what it was or should be — not even that of our parents' and grandparents' generation — and what's hurting the dollar both here and abroad is loose monetary policy from the Fed. Efforts to pump up Wall Street have done little for Main Street — in fact, Fed monetary policy threatens to inflate another "too big to fail" Wall Street bubble at our expense! 

When protests arise elsewhere in the world, we are told the people want "freedom". And yet civil unrest — our potential to be dragged into wars abroad — bears a direct relationship to the financial desperation dollar devaluation/inflation has inflicted around the world. Even in the US, it is said, more than half of Americans now live paycheck to paycheck. Another report out last year suggests 80 percent of Americans will face a period of serious economic hardship (on the level of taking some form of assistance!). If that sounds bad, it gets worse elsewhere: In less affluent nations, spending 60-80 percent of one's income on food is not unheard of. Not only is it disingenuous to say there is little to no inflation, it is inaccurate by our own historical measures. 

NEWS2VIEW
NEWS2VIEW

@RedHeadedRob Haven't you heard? Good times are here again! All the people invested in Wall Street who lost during the financial crisis have regained their lost money and then some! 


At the core of all evils: Concentration of wealth. Concentration of political power. Concentration (collapse) of competition. 


I own a book published by the Council on Foreign Relations that I grabbed one holiday off of Amazon before it disappeared (prior to the Great Recession). It talks about removing barriers to regional currencies (and ultimately world currency). To pull off what would amount to a loss of autonomy and sovereignty not just in the United States but worldwide — and still call it "freedom" and "democracy" — the economy must be undermined as opposed to openly advocating for world federalism. (A long time ago, I wouldn't have believed it either, but before there was such a thing as "Twitter" I found a website for the World Federalism society, an organization founded over 100 years ago out of New York, that depicted a graph showing all the milestones in aim of world governance. Talk about hiding in plain sight. You just can't make this stuff up if you try!)


Be it incompetence, accident or corruption — or dare I say "conspiracy" —  allowing the current system to go to hell in a hand basket, economically speaking, will entice Americans and our counterparts abroad to go in search of a fix (natural human impulse, after all). In the coming years and decades, watch how "the solution" will be more of the same: an even more concerted push to concentrate political and economic power! 


All I can say is this: Resist. Resist by stepping up and involving yourself in political office and by "outing" the bad actors in both parties who seem to put global priorities in front of domestic jobs, deficit reduction, protecting our own trade interests, etc. Resist, foremost, by pushing political candidates and the media to recognize public support for campaign finance reform, pushing harder and harder for campaign finance to become THE topic of discussion during upcoming presidential elections. It's not just the SuperPacs and Citizen's United that pose a threat. 


Consider, finally, turning the system as we know it upside down: For starters, there ought to be a firewall between those seeking to advance public vs. private interests. Public servants who choose to run for office election after election shouldn't be able to "retire" into private-sector employment or consulting gigs in the very industries their legislative efforts benefited because it encourages politicians to enter office with personal advancement — rather than public interest objectives — in mind. Ditto for confirmed members of lobbying organizations. If they choose to advance a private-sector agenda and are being paid as a top consultant to that end, they should be barred from seeking public office in a capacity where they may be able to subvert the legislative agenda for the purpose of advancing their careers in the private sector at a later date. 


If we had a "choose your team" approach to politics, with the aim of shutting the revolving door between the public and private sector, we might be able to get past the current "pay to play" reality that enables both parties to ignore the will of the 99 percent.

NickLivingstone
NickLivingstone

@RedHeadedRob  you're blaming obamacare for negative pressure on the labor markets... you'd have to give a good reason for that. And how do you measure quality of life? Is that GDP per capita? Median household income? Mean household income? there are a number of ways to measure QOL, most of which rely on different factors. Are you making an argument for increased taxes as a means to redistribute income (just wondering, since you made the robin hood reference)? In addition to this, losing your job "because of obamacare" may not be directly because of obamacare, but because of irrational expectations of employers on how his bastardized form of nationalized health care would effect the economy. This would fall (assuming you're anti government intervention in the form of a new classical macroeconomic model, and assuming you're pro government intervention in the form of a new keynesian macroeconomic model) in the error term, which while assumed to average to zero, does not always equal zero for an individual firm. I guess what i'm trying to ask is what is your policy prescription to fix the very real problems that you're addressing?

RedHeadedRob
RedHeadedRob

@JeffreyMillinger Do you really think writing will do any good?  IMO it is far beyond that and unfortunately short of a very real revolution with real bullets nothing will change for the better.  Our nation is being judged.

CraigWallace
CraigWallace

@HerbSmith 

Yes Herb, I buy a new flat screen TV every time I need groceries or gas. I understand the price of Yachts is down also which really impacts all of us.

JeffreyMillinger
JeffreyMillinger

@HerbSmith Technology prices ALWAYS GO DOWN, that is a hallmark of technology itself and its ability to create obsolescence... Herb, it seems YOU are the one who is a dope

NEWS2VIEW
NEWS2VIEW

@TenaciousJim The tabulators of our statistical reality really do play games such as whether consumers can deflect price hikes by substituting pork for the cost of chicken (or perhaps where it is not verboten, horse meat for the cost of pork!). Equally ridiculous, it is said that poverty rates are calculated only on the basis of how much it would take to feed X-number of people in a family for a year — without provision for remaining clothed or housed. If the cost of living — notably housing — were included in Federal poverty-line calculations, a lot more people would land in the officially impoverished category. Just about every government stat is skewed. This allows politicians to remain gridlocked and ideologically entrenched because there is no "emergency".

NEWS2VIEW
NEWS2VIEW

@hamiltonchem Ditto. Fixed-expenses, such as healthcare, childcare and energy, also explain why retail earnings have suffered, too. The subject of discretionary spending gets even less play in American media than the inflation topic.

WilliamBrown1
WilliamBrown1

@mahoneyct No difference in the last four years and 1977-1981. You must not be in close contact with prices and purchases. If you keep your receipts for all purchases from year to year, you will see through the fog.

NEWS2VIEW
NEWS2VIEW

@joeavillarreal @r3port3r The tax argument is an old one but misleading in view of the facts (options) at the disposal of major corporations. GE, Google and scores of other corporations routinely sidestep billions in taxes, leaving the American taxpayer to argue bitterly over how little we can afford to return to ourselves in the form of social security and other social safety nets and entitlements. High taxes principally hurt individuals and small businesses. The multinational corporations can afford the lawyers and the lobbyists, both here and abroad, to obtain the tax loopholes they need and want. The cruise ship industry is a good example. Seemingly "American" cruise lines often incorporate in foreign island nations to avoid US safety regulations and sidestep US tax rates. 


Loopholes give Fortune 500 corporations an advantage over small businesses as well as the bottom 99 percent of American taxpayers. Warren Buffet is said to have noted that his effective tax rate is less than that of his secretary! Under the circumstances, it is unlikely that we will ever again see a major competitor arise from obscurity to compete with Apple, Microsoft, the major health insurance companies, the Wall Street banks, etc.  We like to romanticize how this or that industry started out of somebody's garage, but aside from the next big app from the Apple or Android store or the next big social media website — when Twitter and Facebook still struggle with how to be profitable! — we are unlikely to see fundamental growth in the economy. I foresee no new competitors to Walmart, Target, Kohls, JP Morgan-Chase, Blue Cross, etc.


Aside from the matter of inflation, monopolies can charge consumers anything they want for their goods and services because competition is limited. True competition — price competitiveness — will remain limited until we start enforcing antitrust laws. The development that has allowed Americans to ignore the antitrust matter for as long as we have is globalization — the presence of cheap imports from China as compensation for a loss in buying power. Only when Americans can no longer compensate for a loss of income relative to the cost of living by buying foreign-made electronics, clothing and appliances will we be faced to reconcile the fact that "too big to fail" has come to describe just about everything, everywhere. If we want to control the inflation problem, we must account for the competitiveness problem. The hackneyed complaint over corporate tax rates only touches the tip of the ice berg.

larsonm
larsonm

@joeavillarreal @r3port3r 

Actually, since there is no connection between cost and price for most products, increases in cost do not show up as price increases as prices are already set to maximize net revenue.  Also, since corporate taxes are not a cost of production, they don't get passed on even for those things where price is related to cost per the first sentence.

WilliamBrown1
WilliamBrown1

@Historybuff The incumbent governing group broadcasts across America they are for the middle class and the poor so they can get the votes. Blame the opposition for everything, including high prices and get re-elected, it happened. During the crash of 08 I refused to sell my stock while waiting on the results of the Presidential election. When the Democrats were elected, I kept my stock because they are the best friends an investor can have. Divert taxpayer money to the poor who spend 100% of their funds buying consumer goods and driving up porfits for stockholders. If they had cut spending, stocks would not have recovered. Mine recovered in 12 months and have added 30% since. But every day I ignore the political news of the Democrats being for the middle class and the poor. I feel like governing Democrats are true Republicans in disguise and are misleading the group Mr. Romney identified as the 47%. I, too, wish our govt was honest with all of us. Under this administration the middle class is suffering dearly but they love the words they hear.

HerbSmith
HerbSmith

@KevanHuston It's a free country so you entitled to have whatever definition of inflation your would like.  Which of the various definitions of money supply (gold?  M1?  M2? M1A?) would you like to measure inflation?  Don't ignore the question, because the choice makes a big difference.  Depending on the purpose, I prefer instead one of the BEA NIPA deflators.

DaveCarroll
DaveCarroll

@KevanHuston It's true that that's the actual definition of inflation but if it were actually true that governments could create real value out of thin air simply by printing money then inflation would be a good thing. So it's valuable to show how prices are going up in correlation with the expansion of the money supply to prove that it's bad.

felixhemsted1
felixhemsted1

@KevanHuston  the definition of inflation really depends on where you view it from. Whilst monetarists do measure inflation in terms of the money supply, this is of relatively little use on the high street, and therefore very little use for someone planning what wage rises they should give / want in the coming year, and therefore inflation in terms of the price level can be more useful in the general economy.

DaveCarroll
DaveCarroll

@larsonm @r3port3r No because if costs go up prices are just reset higher to 'maximize net revenue'. And since everyone's production costs go up prices go up accross the board.