Readers may have noticed that I don’t make the kinds of sweeping predictions about the housing market that I used to.
There are two reasons for this.
The first is that housing prices are no longer at an extreme. This can be seen in a semi-recent update to my price-to-income and price-to-rent charts, which show local home valuations returning from orbit and heading back to earth over the past several years. It’s pretty easy, when homes are stunningly overpriced, to forecast that they will eventually reach something quite a bit closer to their fundamentally justifiable values. But once the valuations go from “extreme” to “somewhat reasonable,” you just don’t have that same analytical wind at your back.
The second reason for the dearth of forecasts is more specific to this particular time, place, and subject matter.
“Clearly, that adjustment is
“Clearly, that adjustment is not being allowed to take place. And when it finally does, will it come in the form of lower nominal home prices or higher nominal incomes and rents?”
Higher nominal incomes and rent??? Really!?! I think I know where I’d place my bets.
“One is forced to practice a
“One is forced to practice a sort of real estate Kremlinology in an attempt to figure out how fiscal and monetary policy will affect, or cease to affect, the market.”
LOL. Love the use of the word Kremlinology. Pretty much says a mouthful there.
“The government will move heaven and earth to prop up housing prices, at least for as long as our creditors are willing to foot the bill.”
The way I see it, the taxpayers are footing the bill and that can go on in perpetuity as long as people just go along w/it. And since a majority of the population wants to save housing, they will sell the future of their children for it. (continue to be happy about not having any)
JP, if the taxpayers were
JP, if the taxpayers were footing the bill via taxes, then we wouldn’t have to be borrowing so much money from overseas, or creating so much new money out of nothing.
US taxpayers are certainly paying some of it, but not all, and those other parties could pull the plug even if the Americans wanted to keep it all going.
Rich
Yes, Rich. I sometimes don’t
Yes, Rich. I sometimes don’t consider the money from overseas. Are you referring to China? They would have to find another country w/a voracious appetite for their crap. Who could replace us? Without us, they would have warehouses full of junk they couldn’t get rid of. It’s all so precariously balanced.
I don’t really agree with
I don’t really agree with that viewpoint… my opinion is that their productive capacity can, and eventually will (emphasis eventually), be repurposed to serve the needs of their own consumers or to make products for importers that actually stand a chance of paying them back in real terms.
As far as the topic at hand goes, though, it doesn’t matter… this uncertainty actually feeds into my point that the govt will be able to distort the housing market for an unpredictable length of time.
Rich
Rich Toscano wrote:JP, if the
[quote=Rich Toscano]JP, if the taxpayers were footing the bill via taxes, then we wouldn’t have to be borrowing so much money from overseas, or creating so much new money out of nothing.
US taxpayers are certainly paying some of it, but not all, and those other parties could pull the plug even if the Americans wanted to keep it all going.
Rich[/quote]
So riddle me this:
If there is no real play between RMB and the greenback, then aren’t they effectively just buying their own securities?
I mean there is a different government but there appears to be no downside risk to buying US debt at a nominal cash level. The nominal yield on US securities won’t change even if denominated Yuan.
Dan – Sorry, I don’t
Dan – Sorry, I don’t understand the question…
Rich
Rich Toscano wrote:Dan –
[quote=Rich Toscano]Dan – Sorry, I don’t understand the question…
Rich[/quote]
Okay.
It is a given that much of US funding comes from Chinese purchases of US securities.
It is also a given that renminbi does not have a market-based relationship to the greenback.
To me this suggests that the yuan is (or at least could be seen as) effectively a 14-cent unit and not a discrete currency.
This further suggests to me that it is in the interests of the holders of the afore-mentioned securities to maintain this relationship (lest their huge quantities of dollar-denominated wealth suffer catastrophic drops in (in local nominal) value).
Considering that the entire focus of the last 20 years of Chinese policy has been an accumulation of capital (or at least had that as the common thread), I consider it unlikely that dumping that much capital would really be in the offing.
Now if the jobs picture improves, we might see spending such that there is actual inflation (other than that targeted in housing). If that happens, we might see diminished demand for US securities and then perhaps a funding problem.
So all we need is a full recovery to have a catastrophe.
Wait.
My head hurts.
The only flaw is that the US
The only flaw is that the US debt is not static but approaching a parabolic trajectory with no foreseeable effort to curb it.
SD Realtor wrote:The only
[quote=SD Realtor]The only flaw is that the US debt is not static but approaching a parabolic trajectory with no foreseeable effort to curb it.[/quote]
Dr. Boom’s First Law of Economics Charts:
If your chart looks like a hockey stick, you will soon be pucked.
btw: Thanks for the great commentary, Rich.
urbanrealtor wrote:
It is
[quote=urbanrealtor]
It is also a given that renminbi does not have a market-based relationship to the greenback.
To me this suggests that the yuan is (or at least could be seen as) effectively a 14-cent unit and not a discrete currency.
[/quote]
It is for as long as they hold the peg, but I don’t assume that that will go on forever. I don’t buy the argument that they will throw good money after bad forever just to prop up the value of their existing dollars. Though they certainly could for a while. But it’s certainly not a long-term sustainable situation.
My guess is that it all comes down to confidence in that the US will be able to pay back its debt in real terms. Right now this confidence is still broadly held, though (imho) ill-deserved. We’ve seen many examples of misplaced confidence in recent years, eg MBS. When the confidence does go away, it can do so in an abrupt way; but since it involves a change in mass psychology it’s impossible to predict the timing in any reliable way.
So I feel pretty comfortable saying that our foreign creditors will cut us loose from the gravy train at some point; but i don’t know when.
Rich
urbanrealtor wrote:
It is
[quote=urbanrealtor]
It is also a given that renminbi does not have a market-based relationship to the greenback.
To me this suggests that the yuan is (or at least could be seen as) effectively a 14-cent unit and not a discrete currency.
[/quote]
It is for as long as they hold the peg, but I don’t assume that that will go on forever. I don’t buy the argument that they will throw good money after bad forever just to prop up the value of their existing dollars. Though they certainly could for a while. But it’s certainly not a long-term sustainable situation.
My guess is that it all comes down to confidence in that the US will be able to pay back its debt in real terms. Right now this confidence is still broadly held, though (imho) ill-deserved. We’ve seen many examples of misplaced confidence in recent years, eg MBS. When the confidence does go away, it can do so in an abrupt way; but since it involves a change in mass psychology it’s impossible to predict the timing in any reliable way.
So I feel pretty comfortable saying that our foreign creditors will cut us loose from the gravy train at some point; but i don’t know when.
Rich
The PRC has connected itself
The PRC has connected itself to the US because it’s their biggest market for their production and has big US investors. The US has also allowed the massive outsourcing of US production to China. The Eurozone has not really allowed this to happen. Unless world markets are drastically realligned, this relationship will probably persist for at least a few more years, if not longer. The internal consumption of the PRC is a bit of a wild card, but doesnt change the fact that they also need to continue their export business if they want to maintain their growth pattern and avoid civil unrest. I think this can will be kicked down the road for a while yet.
But the PRC and Indian central banks buying gold is a clear sign that the producing nations want something more tangible for their production besides debt paper and fiat currency. It’s a vote of no confidence and a hedge against default. And will probably add significant continued upward pressure on the price of gold as the US govt does more and more unsustainable borrowing.
The Fed raising the interest rate would change all this in a heart beat. But what are the odds of this given our economic position?
Rich Toscano wrote:
It is for
[quote=Rich Toscano]
It is for as long as they hold the peg, but I don’t assume that that will go on forever. I don’t buy the argument that they will throw good money after bad forever just to prop up the value of their existing dollars. …
[/quote]
If it were just a matter of propping up their existing stores, then I would agree with you more. I think that the issue is that de-pegging would have broader effect than just diminishing one part of the Chinese portfolio. I think it would damage tremendously their entire business model. Putting that differently, it would eliminate a lot of capital and make it much more difficult to accumulate more.
I think a good way to predict changes to the yuan-dollar relationship is when you see China make a much more substantive shift away from dependence on US consumption.
[quote=Rich Toscano]
…
My guess is that it all comes down to confidence in that the US will be able to pay back its debt in real terms.
…
[/quote]
Confidence suggests a prediction in outcomes that are dictated by non-controlled but predictable forces. I am confident that the sun will rise without having my own control over the forces involved.
China actually has control over the exchange rate and (to a lesser extent) the very underlying wealth for which that money proxies.
They don’t need a good bet. They actually own most of the horses in the race.
Well, we all know how their
Well, we all know how their last inflationary policy ended. I’m not sure when or how this new one will end, but it will no doubt end in tears.
The Govt. WILL step in and
The Govt. WILL step in and “save” the real estate market. The next wave is commercial prop which is crippling cities. Commercial properties are down 40% nationwide. In SD, some areas (Carlsbad, Eastlake, etc.) have double digit vacancy rates. I, without ANY proof, suspect the Govt. will take over mtgs. with a guarantee/buy/take of mtgs. with an “agreement” that when things are great again the Govt. will own a certain % of the home. Yes, it was initially floated when this thing started to unravel. However, I’m with Rich. I have been screaming from the mountain that this current meltdown was upon us. In the rear view mirror we were all prophets. However, my crystal ball is cloudy at this point. Hopefully, Mr. Battiata or Mr. Chamberlin can voice an option to steer us clear of upcoming obstacles. . .
Emperor Bernanke has no
Emperor Bernanke has no clothes and the crowds are starting to catch on. Congress is getting anxious already about next year’s elections and there are rumblings about whether Bernanke should be re-confirmed. The level of cronyism with the likes of Goldman Sachs is making more and more headlines every month. The battle over the next major stimulus component is probably going to be more drawn out. “The” government is not a monolithic entity (with the midterm elections fast approaching) – and there is already a great deal of positioning starting with a year to go.
Yes, the government will TRY to prop up the markets, but we should continue to stress that we are in uncharted territory and have no idea what to expect. Unintended consequences may overwhelm legislative foolishness. IF the 1930’s and Japan since 1990 are our best models, should we really expect something significantly better? China’s over-capacity may prove to be more than they can easily utilize before it’s too late. No more customers here … so where? I think their bubble is going to implode with even bigger consequences than ours did. Then what?
Hey – if you aren’t making
Hey – if you aren’t making any forecasts, I’m not making any comments, so there !
I very much enjoyed this
I very much enjoyed this essay. Rich, you perfectly express my exasperation as well as yours.
Just one quibble: “… inflation could cause rents and incomes to rise up and meet home prices.”
Most people’s incomes, including mine, have not gone up at all over the past decade. In fact in real terms, thanks to inflation, my income has lost 25% of its purchasing power. I really do believe that tons of people all over America, and here in San Diego, are in the same boat. Many people’s budgets are already stretched to the breaking point and beyond.
With global wage arbitrage, China, etc, I see no indications that give me any strong hope of good income increases for me or most people. So, if the prices of staples, rent, gasoline, and other essentials start to jump up, many more people will get pushed over the financial edge. The much-ballyhooed-in-some-circles “coming hyperinflation” could lead in short order to civil unrest or even outright revolution.
I lay no odds whatsoever that a revolution will lead to any good end in America. Hyperinflation, followed by effectively a coup as a backlash, is what happened to Germany in the 1930s.
Re what China will do:
A
Re what China will do:
A columnist over at Minyanville argued in a series of points that China is not in a bubble. One of his notable arguments to this discussion is that:
Thanks Cricket… but nominal
Thanks Cricket… but nominal per capita and median household incomes have risen over the last decade by quite a bit. There are multiple data sources from the Census Bureau, SANDAG, etc showing this.
Even if it hadn’t, though, I don’t think the quibble would be valid. Your argument is that there is downward wage pressure from China etc. Perhaps, but if so, that can be offset by more US money printing. In other words, there may be REAL wage pressure from abroad, but whether that translates into NOMINAL wage declines is simply a policy decision (and one that I think there is no chance will be made).
Rich
It’s not getting into peoples
It’s not getting into peoples hands.
[quote]As the labor market continues to contract, those with jobs have less buying power. In a research note, TrimTabs explained that wages and salaries are still declining sequentially. TrimTabs estimates based on income tax deposits that wages and salaries fell 5.3% y-o-y in September and 4.6% y-o-y in October, steeper than declines earlier in the year even though year-over-year comparisons have become much easier.
Wage and salary data from the Bureau of Economic Analysis (BEA) confirms what TrimTabs has been reporting for months. According to the BEA, wages and salaries fell sequentially in seven of the first nine months of 2009, including a sequential decline of 0.2% in September[/quote]
Arraya wrote:It’s not getting
[quote=Arraya]It’s not getting into peoples hands.
[quote]As the labor market continues to contract, those with jobs have less buying power. In a research note, TrimTabs explained that wages and salaries are still declining sequentially. TrimTabs estimates based on income tax deposits that wages and salaries fell 5.3% y-o-y in September and 4.6% y-o-y in October, steeper than declines earlier in the year even though year-over-year comparisons have become much easier.
Wage and salary data from the Bureau of Economic Analysis (BEA) confirms what TrimTabs has been reporting for months. According to the BEA, wages and salaries fell sequentially in seven of the first nine months of 2009, including a sequential decline of 0.2% in September[/quote][/quote]
I’m talking about the future, not the past.
Rich
Well, what is the mechanism
Well, what is the mechanism to get money into John Q Public’s hands. Because the printing they have done, has not done it.
They have failed to reignite lending(except in the housing sector) and it is contracting steadily and will do so for the foreseeable future.
I agree, that they stopped a monstrous deflationary collapse, and want to inflate, but they aren’t inflating much besides Wall Street and debt. Unless that is their policy, to forget the real economy, then they have failed thus far.
Now eventually the deflation of the real economy, which really shows in tax receipts, jobs and wages, will meet with debt obligations with disastrous consequences unless they find a way to get money into average joes hands. Which they have not done to any degree that matters.
I agree with you that it
I agree with you that it hasn’t really gotten out into John Q Public’s hand yet. But historically it has typically taken 18-24 months for the lagged effects of money printing to raise the general price level, so this isn’t really unexpected. If bank lending doesn’t re-ignite, there are endless mechanisms to get money into the public’s hands — they can monetize whatever they want to.
Rich
Rich Toscano wrote:I agree
[quote=Rich Toscano]I agree with you that it hasn’t really gotten out into John Q Public’s hand yet. But historically it has typically taken 18-24 months for the lagged effects of money printing to raise the general price level, so this isn’t really unexpected. If bank lending doesn’t re-ignite, there are endless mechanisms to get money into the public’s hands — they can monetize whatever they want to.
Rich[/quote]
What do you suppose they want to monetize?
Are you suggesting a specific agenda?
Rich Toscano wrote:I agree
[quote=Rich Toscano]I agree with you that it hasn’t really gotten out into John Q Public’s hand yet. But historically it has typically taken 18-24 months for the lagged effects of money printing to raise the general price level, so this isn’t really unexpected. If bank lending doesn’t re-ignite, there are endless mechanisms to get money into the public’s hands — they can monetize whatever they want to.
Rich[/quote]
Historically, as in when? When have we printed like this? I think this is unprecedented. What do we have to empirically review the situation?
They could, if they wanted to, air drop freshly printed hundred dollar bills into chula vista. However, I don’t see it happening.
Thus far, MBS purchases being the vast majority of printing, which has not left wall street and it won’t. The banks are hoarding because of the tidal wave of losses coming back.
Credit will be contracting through 2011, so money will be becoming scarce that way. This is certain.
To date, they do not have a mechanism to get money into peoples hands and it is in fact, becoming more scare. With no engine for job growth. Tax receipts tell the tale.
Also, if printing were such a cure all, why are the banks still sitting on trillions in bad assets. Citi bank alone has 800 billion in level three. They are all as insolvent as ever.
Tons of printing and no more money in the hands of people and banks are in worse shape than they were a year ago.
So far the real economy is deflating with no recognizable plan to reconcile that problem.
Arraya, check the most common
Arraya, check the most common index of consumer prices, the CPI-U, here at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.
Tell me whether the numbers for 2009 are increasing or decreasing.
patientrenter wrote:Arraya,
[quote=patientrenter]Arraya, check the most common index of consumer prices, the CPI-U, here at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.
Tell me whether the numbers for 2009 are increasing or decreasing.[/quote]
Ok, look at wages, employment and tax receipts. It’s not that complicated. There is less money in the general populace. Prices are irrelevant and influenced by more than supply and value of money.
Less money will eventually lead to lower prices unless other their are other factors such as scarcity and such.
So far, it is very obvious there is less money around.
Money is harder to get for
Money is harder to get for most people. Financial institutions can get it for close to nothing. But they are also saddled with almost worthless assets.
Prices are heavily influenced by supply and demand. Even with all the free money out there, it’s not getting into the consumer or corporate hands for demand increases. Supply is still quite high. Most industrial capacity/utilization is down to under 70%. Commodity stockpiles are huge. Eventhough the DX is under severe pressure, due to QE, no other purchasers around the world, are stepping up to the demand plate.
peterb wrote:…Prices are
[quote=peterb]…Prices are heavily influenced by supply and demand.[/quote]
I have heard that it is impossible for consumer prices to go up in a recession.
So check the CPI-U for October, versus its value when the recession began in December 2007. Up or down?
Too short a horizon for you? Check 1974-1981.
Arraya wrote:….Less money
[quote=Arraya]….Less money will eventually lead to lower prices unless other their are other factors such as scarcity and such….[/quote]
You are debating what will happen in the future. Clearly we disagree about that, and only the future itself can settle who is right. But what has already happened is a fact. And the CPI-U, for all its defects, is the most established measure of the cost of living. And it is up since the recession began in December 2007. In fact, it only decreased for a 5-month period from July 2008 through December 2008, and only by a small amount. Through October, it has increased by enough to almost offset that entire decrease, and it is higher now than it was when the recession began.
Debates are worthwhile, but sometimes it’s good to just lay out hard facts.
patientrenter wrote:Arraya
[quote=patientrenter][quote=Arraya]….Less money will eventually lead to lower prices unless other their are other factors such as scarcity and such….[/quote]
You are debating what will happen in the future. Clearly we disagree about that, and only the future itself can settle who is right. But what has already happened is a fact. And the CPI-U, for all its defects, is the most established measure of the cost of living. And it is up since the recession began in December 2007. In fact, it only decreased for a 5-month period from July 2008 through December 2008, and only by a small amount. Through October, it has increased by enough to almost offset that entire decrease, and it is higher now than it was when the recession began.
Debates are worthwhile, but sometimes it’s good to just lay out hard facts.[/quote]
Cost of living does not prove inflation. It proves prices are going up. Whether prices are going up because of inflation( increase of supply of money and credit) or other means, you need more data.
So the facts are, prices are going up for consumer goods and their is less money in the population(see wages, employment and tax receipts). Since money is becoming more scare with the population(observable and quantifiable) and prices are going up(observable) for consumer goods. What happens to support for home prices and rents?
I’m not saying inflation(the increase of supply of money relative to goods and services) wont come. It’s just not happening now, nor is their an observable method to get money into the general populations hands, which would be needed to inflate.
I’m not really debating, I am trying to identify inflation or an effective and identifiable mechanism for which to create it besides the blanket statement(printing) or looking at prices, which is not inflation, in the classical sense.
Put another way: You can print a hundred trillion dollars and if it just sits in a on a banks balance sheet you are not inflating anything but a balance sheet, if it does not go anywhere. Conversely, if oil goes to $200 it does not mean we are inflating.
Arraya wrote:…..
Cost of
[quote=Arraya]…..
Cost of living does not prove inflation. It proves prices are going up….[/quote]
Did I just wake up in an alternative universe, a Wonderland? Alice, where are you?
Inflation in my world means an increase in the general level of consumer prices.
If you want to pursue a discussion about changes in money supply, or asset price levels, go ahead, but I’ll stay behind 🙂
Edit: I just read through the wikipedia entry for inflation, wondering if I had missed an evolution in the common language over the last 30 years, but I agreed with everything it said. It’s at http://en.wikipedia.org/wiki/Inflation. I think you will find it educational.
patientrenter wrote:Arraya
[quote=patientrenter][quote=Arraya]…..
Cost of living does not prove inflation. It proves prices are going up….[/quote]
Did I just wake up in an alternative universe, a Wonderland? Alice, where are you?
Inflation in my world means an increase in the general level of consumer prices.
If you want to pursue a discussion about changes in money supply, or asset price levels, go ahead, but I’ll stay behind 🙂
Edit: I just read through the wikipedia entry for inflation, wondering if I had missed an evolution in the common language over the last 30 years, but I agreed with everything it said. It’s at http://en.wikipedia.org/wiki/Inflation. I think you will find it educational.[/quote]
Price movements alone have little explanatory or predictive value. For instance, we have lived through a highly inflationary credit expansion over the last couple of decades, but prices have not reacted consistently. Some have risen, as one would expect, but others have fallen, due, for instance, to the effects of global wage arbitrage. For prices to fall in nominal terms during inflationary times, they must be going through the floor in real terms.
I went to the grocery store and milk was cheaper than last week. Did we deflate during that time.
The fact still remains that money is becoming more scare for the population(observable). Prices will follow unless that trend reverses. Which it may but there is NO observable mechanism for this.
I wouldnt trust a govt
I wouldnt trust a govt derived stat for any reason. In my world, rents have come down, used car prices have come down, many food items have come down. Govt $ incentives have been thrown about like crazy. The unwinding is not a smooth event. But I dont see the trend in pricing moving up in the world in whick I purchase things. I trust my own observations. Certainly I have a bias. But I am more interested in big ticket items that day to day costs.
peterb wrote:I wouldnt trust
[quote=peterb]I wouldnt trust a govt derived stat for any reason. In my world, rents have come down, used car prices have come down, many food items have come down. Govt $ incentives have been thrown about like crazy. The unwinding is not a smooth event. But I dont see the trend in pricing moving up in the world in whick I purchase things. I trust my own observations. Certainly I have a bias. But I am more interested in big ticket items that day to day costs.[/quote]
I agree 100%. Also, I think inventory reductions have helped to keep prices on some items from collapsing very much. There are certain annual and semi-annual purchases (new running shoes, etc.) which are not big-ticket and for which I have (hoped but) not realized significant savings. For items like these I have seen strong evidence of lean inventories, and I have even talked to some small-business retailers who have confirmed my suspicions.
Flip-side is that I negotiated a 7% rent reduction 8 months ago (without any debate). This winter I plan to try for another 8% even if I have to consider moving. For me such savings will add up big time as I await the failure of the house-price-propping intervention.
Don’t count on jobs “coming back” in a big way anytime soon. We seem to forget all too quickly how phony the job market became. Wall Street made a killing by helping to trash Main Street over a period of 20+ years. They encouraged manufacturers to abandon communities in this country and generate profit-maximizing machines overseas. They conned Main Street into believing in the “Service Economy”. A good chunk of the service economy devolved into building and flipping unneeded housing stock and all the associated services layered on top of that mess. Maybe the sharks just didn’t think through it enough or maybe they just didn’t care as long as they got theirs – they nearly killed the goose. Bringing the goose back to life is going to require a bit of a miracle – we’ll see …
To summarize,
Short term
To summarize,
Short term price movements are different from whether we are in a deflationary or inflationary state.
Money is becoming more scare for the general population.
Printing does not seem to be making it outside of wall street and into the hands of the public
I don’t see anything changing these trends any time soon
Prices will follow unless trends change
fwiw-Colorado just announced in october that it’s minimum wage is to go down in 2010 because it’s tied to inflation rates.
Arraya wrote:…Prices will
[quote=Arraya]…Prices will follow unless trends change…[/quote]
Paraphrasing: A decrease in money supply/velocity today will lead to lower inflation (possibly negative) tomorrow.
In a complicated world, I accept that this simple theory makes some sense. What I don’t accept is that an increase in money supply is itself inflation. It’s a driver of inflation. Again, just definitions, but sometimes clarity of speech promotes clarity of thought.
Oh, and the price of my favorite candy went down by $0.10. And the general level of prices in District A from Month X to Month Y went down. Ergo, there is negative inflation in the US. I cannot accept this. In a world where prices are changing all the time, and vary by region, and price trends vary by month, it is always possible to cherry-pick your price period and district and measure to get any result you want. The US CPI-U is imperfect, but it is designed to meet these criticisms by providing an average over a large range of prices, over a large range of regions, and is published monthly so you can see for yourself what the pattern is over time.
I wish I could show the chart I made, but the monthly chart of CPI-U is very clear – prices have been marching upward steadily at about 2 1/2 – 3% per year for at least 10 years, with the only blip downward being a temporary 5-month period from July 2008 through December 2008, during which they went down by about 4 1/2 %, a reversal that has since been almost completely retraced as part of a steady continuation in inflation since then.
Just chart the 10-year monthly history of CPI-U yourself and look at the real numbers. Then make your predictions about the future knowingly and separately.
They should have been going
They should have been going up for ever because we have been inflating forever.
Actually, Wiki said the last time CPI dropped was 1955 until 2009. I’m not sure what CPI-U vice the other CPIs means. Anyway, Wiki has CPI dropping from March to August 09.
Ok, lets define the recent
Ok, lets define the recent price moves up as inflation, agreed.
My thesis is that the price support for those prices has been going down steadily for a year or so and will do so for the foreseeable future. Which is also supported by data and, IMO, is the only thing that matters in the short to medium run.
Now I have a headache from thinking about this.
Arraya wrote:….Price
[quote=Arraya]….Price movements alone have little explanatory or predictive value.[/quote]
Debating the causes of inflation, and predicting its future, are all good and worthwhile activities. But “inflation” itself, in the vernacular, means an increase in the general level of consumer prices. My reading of the Wiki article confirms that for me. What predicts the future level of inflation? Lots of theories, and maybe I agree with some of your favorites, but don’t confuse explanations of inflation, or predictors of inflation, or drivers of inflation, or correlates of inflation, with inflation itself.
Rich, I agree with everything
Rich, I agree with everything you’ve said. Thank you for being so patient – more patient that I could ever be – when explaining the basics to your readers.