Questions on Inflation

[powayseller]

Isn’t it inevitable that the government must keep printing money to pay for the entitlement benefits? As AG testified to Congress (can’t find link), he can guarantee a future cash flow as much as Congress wants, but he cannot guarantee the worth of that money.

I’m wondering how many people believe the gov’t data on inflation. I know why they want to keep it artificially low: to keep market confidence and to maintain low increases to entitlement programs which are linked to the CPI.

This is what I see going up by 10-15% annually: housing, property taxes, insurance, health care, education, oil. Care to add to the list?

Since CPI is meangingless to us as consumers, why should we use it in planning our finances and futures? It’s so far removed from reality!

The government should just print the real inflation. So what if it’s cyclical?

Real life is cyclical, and any inflation figures which are not, do not reflect economic reality, but wishful thinking.

[powayseller]

Do you think the cessation of M3 reporting has anything to do with firing up the printing presses? The government prints money to pay for entitlements and debt payments, and it’s not noticed because M3 is not printed.

Since inflation is really much higher than the government states (look at commodities going up like crazy), is that the real reason behind the consistent Fed rate hikes? After all, if inflation is really only 2.x%, the Fed could stop raising interest rates.

Assuming inflation is really 8% or 12%, what proof can we find in our daily lives? Wages are not rising, but what should be rising, that we purchase, aside from the items already listed.

[powayseller]

Are services rising fast? Anything wage-related is stagnant, if you believe the stuff about real wages being constant/down over the last 20 years.

I’ve not heard the comment about inflation in bonds. So if bond prices are overvalued, the yield would be too low. Is that it?

I’m seriously eyeing commodities not just as a way to get inflation protection, but also because there is a supply-demand imbalance. And remember there is a difference between buying commodities, and holding stocks of the companies which mine them, produce them, or make the equipment for the activities. The companies are subject to many more variations, whereas the price of the commodity itself is only subject to the actual demand-supply imbalance.

[davelj]

i’m actually semi-optimistic about inflation going forward. i think it’s understated now by a large margin, but i think the next recession will get us back toward something more normal. recall that owner equivalent rents comprise 24% of the CPI. while this has helped understate inflation for the last 10 years – because as we all know real housing prices have gone through the roof relative to rents – when housing prices start dropping, the reverse will be true: owner equivalent rents will overstate inflation. also, aggregate commodity prices will likely drop in the next recession. so, while real inflation does look bad right now, i’m actually mildly sanguine going forward. now, if we could just get the government to stop cooking the figures… that would be something.

[powayseller]

I found the Greenspan link.

In a 2005 testimony to the Senate Banking Committee, Greenspan said , “We can guarantee cash benefits as far out and at whatever size you like, but we cannot guarantee their purchasing power. ”

At least we won’t have to worry about getting our Social Security checks when we retire. The government has a plan after all!

[uncle_git]

Controlling inflation is easy – you just change the inflation basket to include housing instead of rent equivalents in the next year.

Housing will be taking that fast that everything else can be screaming upwards and the basket will still show benign inflation.

Rents when housing is expanding, RE when housing is tanking – that way they can print their way out of this mess and still show inflation as “benign”

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