I see a lot of talk about hyper-inflation here

especially on the gold related threads. perhaps i don't understand, but it looks to me as if inflation is relatively normal, not high at all. so i wonder if any of you people talking about needing wheel-barrows to buy bread and Weimar Germany 1923 could back up your pessimism.

looking at stats for inflation right now we are at about 3.5% - compare this to over 6% in 1990 and over 14% (!) in the early 80's

http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx?dsInflation_currentPage=0

are shopping. how much more are you paying for gas, home heating/cooling, etc. yeah, i know the fed doesn't count these things as "real" inflation. it's a load of crap. MY inflation rate is MUCH higher than 3.5%. but if you can swallow how the gov. calculates inflation, CPI or whatever, than you should feel pretty good with the 3.5%.

better.

Walter J. Williams (http://www.gillespieresearch.com/cgi-bin/bgn) wrote an analysis of why the economy feels worse than DC says it is (sorry, no link it is subscription for industry professionals). Long article but the upshot is that the real inflation rate is about 9% and the real unemployment rate is 12% - 15%. By removing the baseline (fixed basket of goods) from the CPI they have ensured there will never be an official COLA above 3% ever again, guess why. Those that are receiving SS are currently getting about 30% of what they are due because of this finagling.

You should realize that the numbers they report are for no other reason than to keep you in your comfort zone and to make you feel better.

Inflation is much higher than the cooked CPI numbers.

Most Gov't economic data relaeased these days borderlines on the absurd.

Guess we know where all the Aurther Anderson accountants ended up.

This isn't always counted in the gov't inflation stats, but affects many of us everyday. When the GOP talks about low inflation - they mean low wage inflation - wages are hardly going up & that is what they are all about. That is wage inflation for the average worker not the exec - that they don't care about.

the consumer price index. perhaps Warpy is correct, in his post below, that what is actually being measured in that index is constantly shifted to make things look rosier, but i don't know and he didn't provide any references for that statement.

i'm pretty sure it's not low pay wages being measured but rather commodities people buy.

First, the government is fudging those CPI numbers by changing the items in the market basket (which had been standard items and a good indication of inflation until Greenspan got in) to hide inflation. When a foodstuff like milk is at double digit inflation, they subsitute something else which is not. When meat is inflating, they substitute hamburger for roasts. The market basket has become an indicator of declining standard of living, not inflation.

Second, the overall inflation rate has been kept artificially low by offshoring, outsourcing, union busting, and an artificially low wage in this country.

If you want to see what the true domestic inflation rate is, look at healthcare and housing, the two industries that are still located here with American workers.

The best estimate we have of a standard market basket inflation is between 9.5% and 11.5%.

You may think inflation is low if you buy the lies and somebody else is doing all the routine shopping.

where do you get your figures for market basket inflation? What do you mean by "look at healthcare and housing"? Look where?

I see mostly unsubstantiated opinion and what I'm asking about is some facts beyond "look at the grocery store" in order to understand.

Ask any one who buys groceries. Canned vegetables used to be, not so long ago 40 cents, now are 76. I could go on and on. Check just about anything ordinary folks buy at the grocery store and compare a year ago to now. I don't care which chain you pick.

what i remember them costing last year and the year before. beans too.

not that you're wrong, i'm just looking for statistical facts apart from peoples memory of shopping trips. is this an issue? there seems to be a lot of emotion around this.

a year ago, two years ago? A couple of years ago, I noticed packages were being reduced in either size or weight and sold for the same price they used to be. This is not a new practice, by the way.

About 5 years ago I still could find a can of cherries in water for no more than $1.59. A couple of weeks ago, if memory serves me correctly, they were more like $2.00 for the can. I don't know about hyperinflation, but we definitely have inflation. Another day, another lie. That's normal in Bush world.

when i was in college in the late 70's i could buy a week's worth of groceries for $15. of course i was living mostly on fried onions, potatoes and peppers ;-)

i was asking about claims of unusually high inflation.

ps on edit: normal can size.

I can remember when a great big hersheys candy bar (huge by today's standards) cost a whole 5 cents. I won't say how long ago that was... :)

But along the same line, Suave shampoo was 99 cents for, I believe, an 18 ounce bottle. Its now 15 ounces. A 2 liter bottle of Dr. Pepper used to go on sale for 99 cents if you watched. It was on sale at $1.29 this week. Brand name cake mixes could be found on sale at 99 cents. I haven't seen anything close to that price lately. I don't remember the price, but those bags of lettuce mix have gone up a lot too. And meat? We don't even want to go there.

about investing in gold, it's gold bugs pumping up the idea of investing in gold.

that and the perpetual doom a lot of DUers seem to love ;-)

advisor for 17 yrs. and know the gold bug's tricks.

inflationary pace by quite a lot. It's gone down about a hundred an ounce in the last two weeks, so people who got in late got burned, as usual.

Meanwhile, the US stock markets are the only ones worldwide in positive territory, most markets have lost double digit percentages since the first of the year.

So we have inflation plus general deflation in stocks. Only the lavish tax cuts to the rich have propped up our own markets, or they'd be in decline, too.

whee!

is printed by the treasury, and people's wages go up more or less in lock-step with prices. Prices of various things are higher now than last year or last decade, gas being just one of them. Ask yourself if your salary has kept up? I rather doubt it. Certainly minimum wage buys less than it did back when I was first working for minimum wage when it was $1.25 per hour. I could actually afford to move out into my own (shabby and very small) apartment, and later with a roommate, on minimum wage.

In the late 1960s and throughout the 70s we had real inflation where wages and prices went up together. What a lot of people have totally forgotten is President Nixon's wage and price controls, imposed in August of 1971, which led to very high inflation rates of the late 70's. Indeed, Carter is unfairly blamed for that high inflation, when it was Nixon's foolish economic policies which produced it.

Any way you look at it, we're not in an inflationary period right now.

the same time started the inflation thing going.

source of the inflation, although there was a 10% "surcharge" for a while in 1967, just can't remember how long it lasted. And it wasn't enough to fund the war. But it was Nixon that made things a whole lot worse with his wage and price controls. Unfortunately, it's almost entirely forgotten these days.

It initially stopped inflation, but a lot of people were caught in the crunch of not getting a raise they'd been expecting, and had been in the works. All of a sudden they didn't have income they'd been counting on, and not all price rises were suppressed at the time. It's also why there was an enormous money crunch in the mid-70s, when mortgage money was nearly unobtainable.

probably the authoritahs always fudged etc, but the bush guys; starting in the years before the 2k election, the harassment of clinton etc-needless to say, the busheviks are totally committed to geeb (brother of john ellis bush, or 'jeb') and if they lie casually about literally everything their peebrains get ahold of, then they must be doing frightful things to the economy....the gopigs said they wanted to reduce 'government' until it could be safely ignored, and they had a plan to do this....at least part of their plan is to artificially maintain appearances until 'geeb' is safely retired and the gopigs themself are safe from repercussions of their looting the economy etc....the fact is, greenspan and tom ridge and asscrack john and ari fliesher/sam donaldson/tom brocawcaw/dan rawther/scott meclennan/john snow and a host of others who have quit the public eye though it can trulty be said that 'the president needs them' and these really are exciting times to be big shots, you would think: well the pigs are running and hiding because the trouble isn't going to show up in 'hyperinflation' it will show up in a total collapse of the dollar and martial law/civil war etc

Gasoline +200%
Electricity +100%
Food up +50%
Rent up +30%
Telecom +30%

Most dramatic rises have been this year. My personal budget shows +22% across the board in just the last 12 months.

I was living better working at a car wash in 1981.

I see a lot of talk about hyper-inflation here especially on the gold related threads. perhaps i don't understand, but it looks to me as if inflation is relatively normal, not high at all. so i wonder if any of you people talking about needing wheel-barrows to buy bread and Weimar Germany 1923 could back up your pessimism.

I agree that we are obviously not experiencing anything close to hyper-inflation. However, I have read charges that the government has changed the way that it measures inflation and that the true rate is higher than the reported rate. The following graph allegedly shows what the inflation rate would be using the pre-Clinton method for measuring it:



The graph and an accompanying article can be found at http://www.gillespieresearch.com/cgi-bin/bgn/ . In addition, the following graph from http://home.att.net/~rdavis2/cpi_m2.html gives a longer-term view of inflation:



As can be seen, a rapid growth in the money supply has tended to precede high inflation. In theory, I believe that the money supply can grow as fast as productivity without causing inflation. A faster growing money-supply, however, will tend to promote inflation. In any case, I noticed an additional event that seems to lead inflation. That event is war. If you look at the preceding graph and the corresponding table at http://home.att.net/~rdavis2/cpi_m2.html , you'll notice that five major spikes in the 10-year trailing inflation occurred in 1814, 1864, 1920, 1951, and 1982. These years are near or shortly following the end of the War of 1812 (1814), Civil War (1865), World War I (1918), World War II (1945), and the Vietnam War (1973). This is not surprising as wars often lead to large increases in spending which lead to growth in the money supply. The Iraqi War and the corresponding "War on Terror" could likewise do much to promote inflation. This is made even more likely by the fact that, for the first time in American history, we have cut taxes during a war.

is comparing apples to oranges. The way government measures inflation changed significantly in 1998.

This article claims that CPI understates inflation by 2.7% (that puts you into your estimates from the early 90s).
From the article:

Inflation, as reported by the Consumer Price Index (CPI) is understated by roughly 2.7% per year. This is due to recent redefinitions of the series as well as to flawed methodologies, particularly adjustments to price measures for quality changes. The concentration of this installment on the quality of government economic reports will be first on CPI series redefinition and the damages done to those dependent on accurate cost-of-living estimates, and on pending further redefinition and economic damage.

...

Up until the Boskin/Greenspan agendum surfaced, the CPI was measured using the costs of a fixed basket of goods, a fairly simple and straightforward concept. The identical basket of goods would be priced at prevailing market costs for each period, and the period-to-period change in the cost of that market basket represented the rate of inflation in terms of maintaining a constant standard of living.

The Boskin/Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival. The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that.

Another article gives some more detail on the computation of the CPI. For instance, the cost of buying a house (which has been skyrocketing) is not included in CPI, but the cost of rent (which has been dropping) is included:

The “shelter” weighting of the CPI represents 32 percent of the total index. The BLS does not track the cost of buying a home. Instead, it tracks the cost of renting a primary residence. The average price of new and used homes has risen dramatically. However, the cost of renting has lagged because of strong demand for home ownership. Home ownership has risen to 70 percent, which is the highest level ever. Some economists think that the use of rents has artificially understated inflation. If the economy slows and homeowners can no longer afford their homes, then rents should increase because of shifting demand. The heavy weighting of “shelter” in the CPI could increase the inflation index if rents rapidly rise.

"The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that." - well put and funny, but for the fact that it's very sad.

I've come to the conclusion that the predictions of dire inflation are mostly being driven by 'gold bugs' or people who are confusing a decline in standard of living with inflation.

Many things have changed;

The world dislikes America
Record increased debt
Record increased deficit
Tax reductionS during war
Corrupted government not being held accountable
Weak dollar, maybe should be in steeper decline
Fed hiding money supply for the first time (hidden to forestall inflation)
Overnight rate going up to forestall inflation
Jobs leaving even faster and including white collar
Wages declining even faster

<edit to add>
Home foreclosures up
Housing sales and speculating dropping in hot markets
Rent is higher due to very high home prices causing higher demand


ad infinitum
What am I leaving out? Where am I off base (I could well be).

Do you think we can continue to spend money we don't have w/o consequence? Do you think we can continue to borrow money and pay it back with deflated dollars? How long do you think our lenders will put up with that? Three weeks ago we had a near collapse of the dollar. The IMF met in an emergency weekend session in an attempt to shore up our currency. Why?

And why are you baiting the board?

trouble. I'm buying gold. Please cite what you're talking about.
I hear the term 'goldbug' used as a pejorative. But given the recent economic house of cards, it does not really apply acurately.

sorry

DOH!

He may just be falling prey to his desire to believe what he wants to believe, no matter what is presented to him, no matter how reasonably or logically.

I get that a lot these days from people, to the point i refuse to discuss economics in most circles. It's not that a lot of people don't get it, they can't allow themselves to. They want so desperately to believe what they believe, they will believe it no matter what.

What they fail to realize is, no matter how far you keep your head in sand or stay in denial, it will not insulate you from the consequences that reality brings to bear.

People simply do not want to believe that things in this country are as economically precarious as they are. because if the shit hits the fan, many of them know they are not prepared to make it through comfortably without great consequence.

It is much easier to live in denial than live with reality.

Granted, the consequences, especially the more dire ones may never come to pass. This country has been EXTREMELY lucky to avoid them. Those in denial have pretty much been able to get away with it.

But one of these days that horse may drop dead on the track.

It is better to be prepared, not scared.

it is (literally in this case) too terrifying for most people to think about. The piper is coming up the walk and he's looking for a payday.

It used to exasperate me to no end the way people lie to themselves. now I realize why they do it. They can't handle thinking about the consequences. It's too much.

There are some days I really can't blame them. It's much too late for many to position themselves favorably, for the simple reason of debt alone.

Needless to say, when you have gone from the world's largest creditor to the worlds largest debtor, it is a good bet that most of your citizens aren't going to be able to position themselves favorably.

... it's not so much that inflation is "out of control" right this minute. Oh, it's roughly double the official CPI numbers, but most people pay no attention to those numbers anyway. Fact is, MOST Americans are economically illiterate.

The inflation everyone is talking about hasn't happened yet. It's merely the inevitable consequence of printing 3 trillion dollars in the last 5 years.

You can print (add to the money supply) a certain amount of money each year and get away with it. But this administration has left all restraint behind. Why? Well to be honest, THEY HAD NO CHOICE. The economy would be in a severe depression right now if they hadn't pumped all that cash into the economy and make real estate the target of choice, complete with insane rates, insane loan structures and insane buyer qualification relaxation.

So, really, this economy is dead man walking as far as I'm concerned, the actions of the Fed have forestalled the reckoning but at the same time they have insured that when it comes it will be much worse than it would have been.

When will the bill become due and payable? Could be any time. Could be next month or ten years, but it won't be forever, of that I'm certain :)

the end is nigh.

okay. now i'm baiting (and i'm not a 'he' btw).

I'm the first to admit my ignorance about economics. I went to art collage, all i know is color theory. The intent of my OP was to get info to sort out real info from anecdotal evidence regarding inflation. In spite of what you're saying there are plenty of economists that think gold and commodities are oversold because, for one thing, inflation isn't that high. I really don't know if they're full of it or not. Or who is right or wrong. Like I said, I'm *really* ignorant about economics. There's some solid posts in this thread explaining *how* the numbers have been fudged. I learned a lot from those posts. There are also some emotional, reactive posts from people who seem angry at the mere suggestion that maybe it's not the apocalypse.

ps - I think the person who accused me of 'baiting the board' (as if s/he could speak for everyone) is one of the people that believes gold will triple in 5 years. Seems any discussion that doesn't support what s/he wants to believe is 'baiting'.

by 'gold bugs' or people who are confusing a decline in standard of living with inflation." indicates that you do not understand what you've read. A decline in the standard of living is one of the surest indicators of inflating prices and declining wages. The predictions of dire inflation are being pronounced by virtually every economist and investor on the planet and they're scared shitless and desperately trying to get out of US dollars before it falls apart.

Did you know that the dollar has lost 40% of its value in the last five years in the "booming economy"? IOW, your $100K invested "safely" in the stock markets has "gained", lets be generous and say 25%, means you've given ~20% of your money to the finance industry. No wonder they keep telling you how great it is, they just leave out who it's great for.

But isn't there a shit load of new money pumped into the economy by der bushler raising the debt cap to double of what it use to be? And correct me if I am mistaken, but don't you get inflation if there is more money representing the same and/or less goods and services output?

Helicopter Ben talks tough on inflation, but the reality of it is, The Fed is going to keep printing until monopoly money is more valuable than our currency.

One of the opinions that has been going around about the ceasing of reporting of M3, is that The Fed does not want the public or the world at large to know for that matter about the massive liquidity they are about to dump on things.

One theory is that the PTB KNOW the shit is about to hit the fan as far as Real Estate goes, and one way to deal with it is to create another Stock Market Bubble to offset that.

In essence, no matter what the problem, they think they can print their way out of it.

There is no way to know for sure, but the current path we are on is not sustainable.

Something has to give sooner or later.

And it's unfortunately going to land on the heads of 95% of us.

The other 5% will be just fine.

Buying up our misery for pennies on the dollar.

about three months ago detailing the methods used by the government to measure the economy. Unfortunately you have to register and pay to get the article today. Here is a link http://www.gillespieresearch.com/cgi-bin/bgn/

John Williams started collecting and analyzing the government economic numbers because he found that the government numbers were not accurately predicting certain economic trends as they had in the past. He now provides this analysis to businesses and people who want to be able to make intelligent decisions about investments.

One of his comments was that if the government calculated inflation today, as it was calculated during the depression and how the average American thinks of inflation, then you would have to give people on Social Security a 75% increase. He carefully laid out how the government consistently massages the CPI and inflation numbers to fool us into thinking we are in a "good" economy. If people think inflation and unemployment are down then they are more likely to vote in favor of the current administration.

Now some of the people promoting gold are doing it to push another bubble but there really is inflation. The government keeps printing more and more money and now has stopped publishing the M3. It is like adding water to a bottle of whiskey, eventually their will be more water than whiskey.

In the long run
inflation = money supply growth - economic growth
In the short run inflation (prices) don't react immediately to changes in the money supply. Think of it this way a shop keeper doesn't raise prices because of news of what the FED does. He does so when that new money makes it to his town and causes prices and wages to go up. If the FED gave me a baziolion dollars but never spent it, inflation wouldn't be affected.

Now let's talk about hyper inflation. Hyper inflation (let's say 100%/year) almost always requires a matching growth rate in the money supply which is only possible with "fiat currency"/nominal currency where the government can print whatever it wants. Generally the problem comes when confidence is lost in the nation's finances.

Here are some kinds of US money (not very exact):
cash(M0=monetary base) = only 739B$
Demand Deposits(MZM) = 6.968T$
National Debt = 8.3T$

So for a quick reference the almost worst case scenario nobody loans the US any more money and so she has to pay off all the debt with cash as the bonds come due. The in the end there
cash 739B$ -> 9T$
Demand Deposits 7T$ -> 85T$
Debt 8.3T$ -> 0
Since the money supply grew by factor ~12, we'd expect prices to do the same. Actually they'll probably do more than this because as the currency starts to inflate nobody will want to hang on to it long - increased velocity. Note that the guy that bought long term bonds looses 90%+ of his money since by the time they come due the currency they pay out will have lost its value.

About 2/3 of the US debt is comes due in 3 years. The intention of coarse is to refinance it. The interest paid on that debt is determined by the market in bond auctions. Generally:
rate = world real interest rate + expected inflation + risk premium
There is a general cyclical logic here though: rate the debt grows depends on inflation, but a large debt threatens inflation. So when some external risk comes along like a war it can set off a chain reaction.

The worst case scenario is when you've got an endangered government having to borrow more money while its currency is hyper-inflating. For example the US has a revolution. There's a 50% chance the rebels will win. If they do they default on what they consider an odious debt. To put down the insurgency the US is borrowing tons of money. Inflation is at 200%. An investor is going to demand double his money back to offset the risk of a rebel victory and he's going to demand the inflation be offset, so something like 505% nominal return on investment for one year. Borrowing money like that will cause the inflation to accelerate more an more.

Now I don't think we're there yet. Here are a few things that could help set it off:
* Other world banks selling off their US debt.
* A high level of debt from other sectors like consumer and corporate debt.
* High Expenses that must be paid like expensive wars and social programs like SS.
* Other economic shocks which might make the US look overextended like energy shocks
* A trade dispute in to today's globalized economy.
* A sudden rise in global interest rates.