China Sells Treasuries: Dollar in Trouble?

[Ronin Truth]

China Sells Treasuries: Dollar in Trouble? (https://www.lewrockwell.com/lrc-blog/china-sells-treasuries-dollar-in-trouble/)

Daniel McAdams (https://www.lewrockwell.com/author/daniel-mcadams/?ptype=lrc-blog)


China is selling “tons” of US Treasuries, Bloomberg tells (http://www.bloomberg.com/news/articles/2015-10-18/china-s-selling-tons-of-u-s-debt-americans-couldn-t-care-less-) us today, but Americans “couldn’t care less.” Should they? Ron Paul’s view today in the Liberty Report:



https://www.youtube.com/watch?v=HOxHFZZemhs


12:35 pm on October 19, 2015

The Best of Daniel McAdams (https://www.lewrockwell.com/author/daniel-mcadams/?ptype=lrc-blog)




https://www.lewrockwell.com/lrc-blog/china-sells-treasuries-dollar-in-trouble/

[Zippyjuan]

How many are "tons"?

[Ronin Truth]

How many are "tons"? How much does one of them weigh?

[Zippyjuan]

Most of them are digital- not physical.

As of August, China had $1.2705 trillion worth. August year before, they had $1.2697 trillion. https://www.treasury.gov/ticdata/Publish/mfh.txt

[Ronin Truth]

Most of them are digital- not physical. Then tons REALLY are a bunch. :eek:

[ClydeCoulter]

Then tons REALLY are a bunch. :eek:

Well, it depends on how you look at it. If an electron's mass is 9.11×10−31 killograms then you have to compute how many electrons are used to store or transfer those values that represent the thing being sold. :D

[Ronin Truth]

Well, it depends on how you look at it. If an electron's mass is 9.11×10−31 killograms then you have to compute how many electrons are used to store or transfer those values that represent the thing being sold. :D

The OP says "tons". That's good enough for me. ;) I have no independent contrary measurements.

[Bern]

http://www.zerohedge.com/news/2015-09-08/mystery-buyer-us-treasurys-revealed

[Ronin Truth]

http://www.zerohedge.com/news/2015-09-08/mystery-buyer-us-treasurys-revealed

Belgium, eh? Better owned by the EU than China? Hmmm, I'm not so sure. Beware the Rothschild Zionists. :eek:

[fatjohn]

Belgium, eh? Better owned by the EU than China? Hmmm, I'm not so sure. Beware the Rothschild Zionists. :eek:

I'm from belgium and i can confirm that we do in fact own

http://memecrunch.com/meme/1JQEN/one-billion-dollars/image.jpg?w=470&c=1

[Ronin Truth]

I'm from belgium and i can confirm that we do in fact own

http://memecrunch.com/meme/1JQEN/one-billion-dollars/image.jpg?w=470&c=1

You really could use a world economic update from your #2, for while you've been cryosleeping, Doctor.

A billion is just barely even couch cushion lost chump change these days.;)

[cocrehamster]

And rates on 5, 10, and 30 year treasuries all went down today. 2015 now and we're still waiting for this mythical dollar collapse.

[Zippyjuan]

http://www.zerohedge.com/news/2015-09-08/mystery-buyer-us-treasurys-revealed

Belgium is the financial center of Europe. With the tightening of European lending rules, high quality collateral is now required for loans and the use of US Treasuries for that soared. Euroclear is a processing center for such loans. http://www.bloomberg.com/news/articles/2014-05-06/euroclear-dtcc-to-set-up-collateral-joint-venture It isn't China or the government of Belgium buying them.

[Bern]

Looks like no one read past the first paragraph of the linked page. Belgium was a processing center used by China for buying Treasuries over a year ago. That stopped when China started selling.
...
And while we knew that China was selling - and following the record selling of FX reserves in August, so does everyone else - an even more interesting question emerged: who is buying?

Thanks to the WSJ we now have the answer: "A little-known New York hedge fund run by a former Yale University math whiz has been buying tens of billions of dollars of U.S. Treasury debt at recent auctions, drawing attention from the Treasury Department and Wall Street."

The hedge fund in question, Jeffrey Talpins' Element Capital Management, which according to the WSJ has become "the largest purchaser in dozens of government-bond auctions over the past 10 months, people familiar with the matter said. The buying is part of an apparent effort by the fund to use borrowed money to exploit small inefficiencies in the world’s most liquid securities market, a strategy that is delivering sizable profits, said people close to the matter."
...

Element has been the largest bidder in many of the 62 Treasury note and bond auctions between last November and July, these people said. At many recent auctions, some of which involved sales of more than $30 billion of debt, Element purchased about 10% of the issue, these people said. That is an unusually large figure, analysts said.

And while Element may have grown substantially, some wonder how its most recent AUM of $6 billion can sustain this ravenous buying spreed.


Element’s activity has raised questions because the cumulative purchases far exceed the hedge fund’s $6 billion in assets under management. Treasury officials, who frequently meet with large auction participants, have asked Element about its activity, said someone close to the matter.
...
Which brings us back to the "how much leverage is involved" question, because one bad day for Element and suddenly the fund could be forced to unwind its giant Treasury book into what is already a very illiquid market.
...
Only problem is nobody knows just how much more leverage, and whether Element's leverage isn't slowly but surely creeping up to Merton and Merrywether levels.
...
But the biggest risk by far is that now that the "mystery buyers" has been exposed, it won't take long for the other, much bigger players - i.e., all the central banks who have been desperate to push yields lower to "confirm" the self-fulfilling narrative that the economy, and inflation, are growing - to inflict the proverbial "max pain" upon Element. In fact, if Talpins is indeed very long TSYs, and has lot of leverage embedded in the trade, one may expect a concerted shorting effort to find out just how much leverage is incorporate in the trades, and push it to the point of breaking. After all, hedge funds exposed with massive positions rarely survive an onslaught by their peers who seek to do just that - inflict "max pain" (see Ackman and Herbalife).

If so, China's selling of TSYs may very soon inflict precisely the kind of damage on US paper not because it is selling, but because the biggest "mystery" buyer of US paper has just been revealed and whose continued ability to keep buying unimpeded is now suddenly very much in question.

What's worse, if the result of a coordinated attack on Talpins leads to an LTCM-type blow up, hang on to your hats because the recent volatility in the equity market will be nothing compared to what is coming to the MOVE, TYVIX and US Treasurys...
...

The OP in this thread says, "don't panic, all is well" because "US hedge funds" are buying treasuries, implying the market is robust, liquid and safe. If ZH is correct, the market is much more limited, illiquid and riskier than advertised.

[Madison320]

And rates on 5, 10, and 30 year treasuries all went down today. 2015 now and we're still waiting for this mythical dollar collapse.

Yup. It's confirmed. Printing money does not devalue your currency. Case closed.

[cocrehamster]

Yup. It's confirmed. Printing money does not devalue your currency. Case closed.

If there's one thing that's confirmed it's that the austrians have been wrong about everything having to do with monetary policy and what effect it would have over the last 7 years. They just keep repeating their inflation and dollar collapse predictions. Meanwhile the dollar has only been getting stronger.

[Ronin Truth]

what government has done to our money

https://www.google.com/?gws_rd=ssl#q=what+has+government+done+to+our+mone y+

[cocrehamster]

^ I've read it.

[Ronin Truth]

^ I've read it.

Would you care to critique it?

[dannno]

If there's one thing that's confirmed it's that the austrians have been wrong about everything having to do with monetary policy and what effect it would have over the last 7 years. They just keep repeating their inflation and dollar collapse predictions. Meanwhile the dollar has only been getting stronger.

Actually many Austrian economists said it could take 5-10 years for another financial collapse which would then likely lead to a dollar collapse.

Not one Austrian economist, that I'm aware of, said that the economy might not appear better, in some respects, in the mean time. The entire theory is that they create bubbles and they pop. We are in a bubble, so how does that make Austrian economics wrong?

You don't seem to understand Austrian economics very well.

[Zippyjuan]

Actually many Austrian economists said it could take 5-10 years for another financial collapse which would then likely lead to a dollar collapse.

Not one Austrian economist, that I'm aware of, said that the economy might not appear better, in some respects, in the mean time. The entire theory is that they create bubbles and they pop. We are in a bubble, so how does that make Austrian economics wrong?

You don't seem to understand Austrian economics very well.

Link to the Austrian economist's time frame for the collapse of the dollar? Peter Schilff keeps saying it will happen "soon" or in the next couple years. Every year it is still "soon" or in "the next year or two".

[cocrehamster]

If anyone is interested in an alternative perspective this is a good, shirt read on some of the flaws in the Austrian view.
http://www.pragcap.com/understanding-why-austrian-economics-is-flawed/

[TheCount]

And rates on 5, 10, and 30 year treasuries all went down today. 2015 now and we're still waiting for this mythical dollar collapse.

Some fads never go out of style. Buy silver! Crash JP Morgue!

[devil21]

And rates on 5, 10, and 30 year treasuries all went down today. 2015 now and we're still waiting for this mythical dollar collapse.


Some fads never go out of style. Buy silver! Crash JP Morgue!

Pay no attention to Chinese President Xi recently visiting two of the three "city states", most recently hanging out in the City of London. He's just sharing pics of his grandkids with the Rothschilds.

The USD reserve standard is being dismantled. The "dollar" as a domestic currency will remain but will change from a FRN to a Treasury note.

[Danke]

Some fads never go out of style. Buy silver! Crash JP Morgue!

http://theeconomiccollapseblog.com/archives/tag/jp-morgan

[oyarde]

http://theeconomiccollapseblog.com/archives/tag/jp-morgan

Yeah , I have been busy working on a set of Barber , silver halves & dimes , a third set of Mercury dimes , set of Sitting Liberty dimes and those peckerwoods have even more than I .LOL

[oyarde]

If I had any treasuries , tons , lbs or ounces , I would be rid of that junk too.

[dannno]

Link to the Austrian economist's time frame for the collapse of the dollar? Peter Schilff keeps saying it will happen "soon" or in the next couple years. Every year it is still "soon" or in "the next year or two".

I don't know why you continue to lie and cherry pick his quotes.... He has said many times it could be 5-10 years, or it could be AS SOON as the next year or two.

[dannno]

If anyone is interested in an alternative perspective this is a good, shirt read on some of the flaws in the Austrian view.
http://www.pragcap.com/understanding-why-austrian-economics-is-flawed/

The first sentence is total bullshit and tells me that they, and you, have zero understanding of Austrian Economics. Reading critiques of Austrian Economics by people who don't understand it is like watching a fitness program by an elderly person in a wheelchair.

The rest of the arguments on that article are just as bad..

[cocrehamster]

The first sentence is total bullshit and tells me that they, and you, have zero understanding of Austrian Economics. Reading critiques of Austrian Economics by people who don't understand it is like watching a fitness program by an elderly person in a wheelchair.

The rest of the arguments on that article are just as bad..

I think it's pretty clear that you would rather keep your head in the sand than listen to another perspective.

[dannno]

I think it's pretty clear that you would rather keep your head in the sand than listen to another perspective.

No, it's just that a good portion of Austrian Economics is dedicated to debunking that crap and it's all out there, black and white, and YOU are the one unwilling to listen to another perspective. If you understood Austrian Economics you could easily have all of those questions answered. But you don't understand, won't listen or don't want to. I actually already answered one for you in another thread that is related to the first sentence of the article and clearly you have completely ignored it. Did you miss my post or you need me to repeat myself? How many times would you like me to repeat myself? Because trolls never learn. I've said the exact same thing to Zippy probably 40 times that I said above, and he still repeats the same garbage. Something tells me you are going to be the same way. I guess the anti-Rand trolls have arrived.

[Ronin Truth]

austrian economics

https://www.google.com/search?q=aust....0.Mc36MgGxLRo (https://www.google.com/search?q=austrian+economics&hl=en&biw=&bih=&gbv=2&oq=austrian+economics&gs_l=heirloom-serp.12...0.0.0.7375.0.0.0.0.0.0.0.0..0.0....0...1 ac..34.heirloom-serp..0.0.0.Mc36MgGxLRo)

[Zippyjuan]

I don't know why you continue to lie and cherry pick his quotes.... He has said many times it could be 5-10 years, or it could be AS SOON as the next year or two.

I don't see any alternative quotes being provided.

[cocrehamster]

No, it's just that a good portion of Austrian Economics is dedicated to debunking that crap and it's all out there, black and white, and YOU are the one unwilling to listen to another perspective. If you understood Austrian Economics you could easily have all of those questions answered. But you don't understand, won't listen or don't want to. I actually already answered one for you in another thread that is related to the first sentence of the article and clearly you have completely ignored it. Did you miss my post or you need me to repeat myself? How many times would you like me to repeat myself? Because trolls never learn. I've said the exact same thing to Zippy probably 40 times that I said above, and he still repeats the same garbage. Something tells me you are going to be the same way. I guess the anti-Rand trolls have arrived.

Literally all you have said in this thread is that people "don't understand Austrian economics. Please stop repeating yourself and try to make a coherent point.

Do you disagree that Austrian economics is based on a monetary system that we don't have? Did the predictions on what impact QE and large budget deficits would have made by people by Peter Schiff and Bob Murphy not prove to be completely inaccurate? Why were they so wrong?

[dannno]

Do you disagree that Austrian economics is based on a monetary system that we don't have?

Austrian economics is a critique of centrally planned monetary systems, and an argument for free markets and financial sectors.



Did the predictions on what impact QE and large budget deficits would have made by people by Peter Schiff and Bob Murphy not prove to be completely inaccurate? Why were they so wrong?

No, they have not proven to be inaccurate.

The first sentence of your link states that they are wrong because the Fed was able to prop the markets back up. There is NOTHING, not one argument from Austrians saying that the Fed cannot prop the markets up - in fact, the entire basis for Austrian economics is that not only do governments prop up the markets artificially, but when a crash happens they tend to try and fix it by propping them back up using loose monetary policy which destabilizes and distorts the markets in the future even more which will ultimately lead to crash that is even worse. You anti-Austrians tend to use this time in the middle, the five or so years between crashes to try and say that we are wrong when the bubble that we are experiencing is part of what Austrians predict will happen.

Did you miss the post I wrote to zippy above about the timelines? This is a huge misconception by people who try to debunk Austrian economics, that some how because the next crash hasn't happened yet that some how they are wrong.

[Zippyjuan]

Austrians don't believe in statistics (unless those statistics support their theories).
Austrians don't make predictions (but make sure you are aware of the few times they were right).
Austrians say there will be a crash. The fact that one does not happen only means that the timing was wrong not the theory. (But again, see the note about not making predictions). Eventually there will be some market correction and they will declare victory. "See- we told you so!"

[cocrehamster]

No, they have not proven to be inaccurate.



I'm just going to leave this here...
http://econlog.econlib.org/archives/2009/12/double-digit_in.html


It's interesting though that the link to Murphys original post is now dead haha.

[dannno]

I don't see any alternative quotes being provided.


Peter Schiff Blog

Economy and Markets
June 14, 2010
Gold Can Reach 5,000 To 10,000 In The Next 5 to 10 Years
http://peterschiffblog.blogspot.com/2010/06/gold-can-reach-5000-to-10000-in-next-5.html


Most of the quotes I've heard from Peter Schiff on markets crashing in the next 1-2 years he has said that it could happen as soon as 1-2 years. You might be able to cherry pick a quote somewhere where it sounds like he is more sure it will happen in that timeframe, but most of the time he prefaces his predictions that it will happens soon that it COULD happen soon. That is not incorrect.

[cocrehamster]

Austrians don't believe in statistics (unless those statistics support their theories).
Austrians don't make predictions (but make sure you are aware of the few times they were right).
Austrians say there will be a crash. The fact that one does not happen only means that the timing was wrong not the theory. (But again, see the note about not making predictions). Eventually there will be some market correction and they will declare victory. "See- we told you so!"

Great post.

[dannno]

I'm just going to leave this here...
http://econlog.econlib.org/archives/2009/12/double-digit_in.html

Now that I've made like 5 posts in this thread about timelines, would you like me to repeat myself and make more?

[Zippyjuan]

Peter Schiff Blog

Economy and Markets
June 14, 2010
Gold Can Reach 5,000 To 10,000 In The Next 5 to 10 Years
http://peterschiffblog.blogspot.com/2010/06/gold-can-reach-5000-to-10000-in-next-5.html

That seems to be a rarity. Mostly he does say "next", "next couple", or "next few" years. Six months before that blog he was interviewed on Glen Beck. http://krugman.blogs.nytimes.com/2011/12/15/inflation-predictions/


PAYNE: So, where are you then, Peter, with respect to inflation? Do you think this is going to be the big story of 2010?

SCHIFF: You know, look, I know inflation is going to get worse in 2010. Whether it’s going to run out of control or it’s going to take until 2011 or 2012, but I know we’re going to have a major currency crisis coming soon. It’s going to dwarf the financial crisis and it’s going to send consumer prices absolutely ballistic, as well as interest rates and unemployment.

2012: Gold to $5,000 in two years ("next couple of years" to be exact). Interview starts 1:35. Gold peaked in 2011 at $1900.


https://www.youtube.com/watch?v=3VTf1iX-RMo

[dannno]

Great post.

No, it's a horrible post. Austrians don't believe in bullshit statistics like CPIs that don't include food and energy.

Austrians make relatively vague predictions that eventually we will see a correction from the bubbles that are being created by the Fed, and that eventually we will see a currency crisis because there is no possible way to make an absolute prediction about when exactly the market will collapse.. There are too many factors that don't even exist yet because those factors exist in the future - such as how much the government will destroy our currency to continue propping up markets, as well as a bunch of economic activity that hasn't even happened yet.

Austrians are the only ones who explain WHY we have bubbles and crashes - for example they saw that we were going to create a housing bubble and they called it out - then when the housing bubble was created they said it was going to pop while mainstream economists said everything was fine - then the bubble popped and the same people who said everything was fine are still in charge and create more policies to create more bubbles with QE and such, which will prop up the economy for some time until it fails. Economically we are drug addicts and the Fed is the heroin.

[cocrehamster]

Now that I've made like 5 posts in this thread about timelines, would you like me to repeat myself and make more?

Are you saying there wasn't a time line on Murphys losing bet?

[dannno]

That seems to be a rarity. Mostly he does say "next", "next couple", or "next few" years. Six months before that blog he was interviewed on Glen Beck. http://krugman.blogs.nytimes.com/2011/12/15/inflation-predictions/

Nice cherry pick...

[dannno]

Are you saying there wasn't a time line on Murphys losing bet?

Is Murphy the singular voice of Austrian economists? If the currency crisis happens in 2017 he may lose the bet, but does that mean he was wrong about Austrian economics?

Why do you think all of Austrian economics hinges on this guy's bet? I don't even know who he is..

Also, how do you know he hasn't already won the bet? Who is calculating this CPI, what basket of goods is being used?

The stock market is going up a lot - that's a price - housing has been going up a lot - that's a price. How do you know we haven't seen 10% inflation?

I don't see how anybody will be able to collect on this bet because there was never a basket of goods that was selected to compare.

[cocrehamster]

Nice cherry pick...

Lol so he proves you wrong and that's "cherry picking"? Pathetic.

[cocrehamster]

Is Murphy the singular voice of Austrian economists? If the currency crisis happens in 2017 he will lose the bet, but does that mean he was wrong about Austrian economics?

Why do you think all of Austrian economics hinges on this guy's bet? I don't even know who he is..

What if 2020 comes around and there is still no currency crisis? 2030? At what point would you concede that they were wrong?

[dannno]

Lol so he proves you wrong and that's "cherry picking"? Pathetic.

He didn't prove me wrong, Peter is warning people saying it COULD happen in the next 1-2 years so they will prepare. He realizes another crash may not happen until 5-10 years out. Why does he do this? Because it is better to prepare sooner than later, it is better to fix our problems now rather than hold off until later.

It doesn't mean that he is wrong, it CERTAINLY doesn't mean that Austrian economics is wrong.

[Zippyjuan]

No, it's a horrible post. Austrians don't believe in bullshit statistics like CPIs that don't include food and energy.

Austrians make relatively vague predictions that eventually we will see a correction from the bubbles that are being created by the Fed, and that eventually we will see a currency crisis because there is no possible way to make an absolute prediction about when exactly the market will collapse.. There are too many factors that don't even exist yet because those factors exist in the future - such as how much the government will destroy our currency to continue propping up markets, as well as a bunch of economic activity that hasn't even happened yet.

Austrians are the only ones who explain WHY we have bubbles and crashes - for example they saw that we were going to create a housing bubble and they called it out - then when the housing bubble was created they said it was going to pop while mainstream economists said everything was fine - then the bubble popped and the same people who said everything was fine are still in charge and create more policies to create more bubbles with QE and such, which will prop up the economy for some time until it fails. Economically we are drug addicts and the Fed is the heroin.

As I said, Austrians don't trust figures unless they support what they want to see.

CPI DOES include food and energy prices.

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


Has the BLS removed food or energy prices in its official measure of inflation?
No. The BLS publishes thousands of CPI indexes each month, including the headline All Items CPI for All Urban Consumers (CPI-U) and the CPI-U for All Items Less Food and Energy. The latter series, widely referred to as the "core" CPI, is closely watched by many economic analysts and policymakers under the belief that food and energy prices are volatile and are subject to price shocks that cannot be damped through monetary policy. However, all consumer goods and services, including food and energy, are represented in the headline CPI.

Most importantly, none of the prominent legislated uses of the CPI excludes food and energy. Social security and federal retirement benefits are updated each year for inflation by the All Items CPI for Urban Wage Earners and Clerical Workers (CPI-W). Individual income tax parameters and Treasury Inflation-Protected Securities (TIPS) returns are based on the All Items CPI-U.

[dannno]

What if 2020 comes around and there is still no currency crisis? 2030? At what point would you concede that they were wrong?

I'm not a fan of timelines, although I do understand why people like Schiff use them to help people get prepared. We will DEFINITELY see a market crash or major correction by 2020, probably much sooner and I would say it will likely be the trigger for the currency crisis - however - the government will try to prop it up again - I really don't think they will be able to. Our interest rates are already zero, we are already over-extended and have huge debts so I don't see how they can prop up the economy without creating huge amounts of inflation.

[cocrehamster]

Apparently austrians have so many little rules and qualifications that they've made up that they can never be wrong. At least in the minds of bafoons like Dannno.

[Zippyjuan]

Doomsday just seems to keep getting pushed farther and farther into the future. But one day!!......

[Ronin Truth]

Doomsday just seems to keep getting pushed farther and farther into the future. But one day!!......

It may synch up as a part of the approaching Fourth Turning.

[dannno]

As I said, Austrians don't trust figures unless they support what they want to see.

CPI DOES include food and energy prices.

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

How MUCH food an energy? How much rent? You don't think it is biased?



But if you simply focus on price, especially on those staple commodity goods and services that haven't radically changed over the years, the underreporting of inflation becomes more apparent.

We randomly identified price changes of 10 everyday goods and services over two separate 10 year periods, and then compared those changes to the reported changes in the Consumer Price Index (CPI) over the same period. The 10 items, which we selected are: eggs, new cars, milk, gasoline, bread, rent of primary residence, coffee, dental services, potatoes, and electricity.

We know that people do not spend equal amounts on the above items, and we know their share of income devoted to them has changed over the decades. But as we are only interested in how these prices have changed relative to the CPI, those issues don't really matter. We chose to look at the period between 1970 and 1980 and then again between 2002 and 2012, because these time frames both had big deficits and loose monetary policy. But they straddle the time in which the most significant changes to inflation measurement methodology took effect. And while nominal price increases rose much faster in the 1970's, the degree to which the prices rose relative to the CPI was much, much higher more recently.

Between 1970 and 1980 the officially reported CPI rose a whopping 112%, and prices of our basket of goods and services rose by 121%, just 8% faster than the CPI. In contrast between 2002 and 2012 the CPI rose just 27.5%. But our basket rose by nearly double that rate – 52.1%! So the methods used in the 1970's to calculate CPI effectively captured the price changes of our goods, but only got half of those movements more recently. How convenient.

Just to make sure, we ran the same experiment with 10 different goods and services. This time we chose: sugar, airline tickets, butter, store bought beer, apples, public transportation, cereal, tires, beef and veal, and prescription drugs. The results were notably similar. The basket increased 1% faster than the CPI between 1970 and 1980 and 32% faster between 2002 and 2012. In both cases we selected a random array of food and non-food items.

To be convinced that the CPI does a poor job in gauging the cost of living, all one needs to do is look at health insurance. According to the Kaiser Survey of Employer Sponsored Health Insurance, the average annual total cost for family health insurance in 2012 was $15,745, or more than one third of the median family income of $45,018 per year. Yet these costs are largely factored out of the CPI. In 2011, health insurance costs did not even merit a one percent weighting in the CPI. Furthermore, as far as the Bureau of Labor Statistics is concerned, health insurance costs are well contained. From 2008 through 2012, the BLS' “Health Insurance Index” increased just 4.3% (total), which is far below the general rise of the CPI. In contrast, the Kaiser Survey showed family coverage rising 24.2% over that time.

http://www.investmentnews.com/article/20130122/BLOG09/130129993/peter-schiff-why-krugman-co-is-dead-wrong-about-inflation

[dannno]

Apparently austrians have so many little rules and qualifications that they've made up that they can never be wrong. At least in the minds of bafoons like Dannno.

No, you just keep making intellectually weak arguments that show you don't even have a basic understanding of Austrian economics.

[Zippyjuan]

How MUCH food an energy? How much rent? You don't think it is biased?




http://www.investmentnews.com/article/20130122/BLOG09/130129993/peter-schiff-why-krugman-co-is-dead-wrong-about-inflation

They looked at ten items and decided the CPI must be wrong? If you want to call a basket of goods too limited and biased... they have it.

CPI looks at 80,000 items every month in over 200 different categories. http://www.bls.gov/cpi/cpifaq.htm
Each gets weighted based on the percent of the average household budget spent on it. Food for example accounts for eleven percent of the average household's expenses so food counts as eleven percent of the CPI. Yes, eggs are up. But eggs account for a tiny fraction of that eleven percent food accounts for.


What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:

FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

Also included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls. In addition, the CPI includes taxes (such as sales and excise taxes) that are directly associated with the prices of specific goods and services. However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services.

The CPI does not include investment items, such as stocks, bonds, real estate, and life insurance. (These items relate to savings and not to day-to-day consumption expenses.)

For each of the more than 200 item categories, using scientific statistical procedures, the Bureau has chosen samples of several hundred specific items within selected business establishments frequented by consumers to represent the thousands of varieties available in the marketplace. For example, in a given supermarket, the Bureau may choose a plastic bag of golden delicious apples, U.S. extra fancy grade, weighing 4.4 pounds to represent the Apples category.

How are CPI prices collected and reviewed?
Each month, BLS data collectors called economic assistants visit or call thousands of retail stores, service establishments, rental units, and doctors' offices, all over the United States, to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. These economic assistants record the prices of about 80,000 items each month, representing a scientifically selected sample of the prices paid by consumers for goods and services purchased.

As I said, statistics only matter when they support the theory- otherwise it is the statistics which must be wrong- not the theory. So what is being argued? That the statistics must be wrong. But how do you know when the Austrian's promised corrections occur? With statistics. Government statistics.

[dannno]

They looked at ten items and decided the CPI must be wrong? CPI look at 80,000 items in over 200 different categories. http://www.bls.gov/cpi/cpifaq.htm
Each gets weighted based on the percent of the average household budget spent on it. Food for example accounts for eleven percent of the average household's expenses so food counts as eleven percent of the CPI. Yes, eggs are up. But eggs account for a tiny fraction of that eleven percent food accounts for.



As I said, statistics only matter when they support the theory- otherwise it is the statistics which must be wrong- not the theory. So what is being argued? That the statistics must be wrong. But how do you know when the Austrian's promised corrections occur? With statistics. Government statistics.

You completely miss the point of the exercise, it's absolutely amazing how dishonest you are able to operate.

You don't necessarily need thousands of items when you have a few staple food items, gas, new cars, rent and all of the MAJOR expenses that people spend their money on. If the basket of goods they use encompasses 80-90% of what most consumers tend spend their money on, then you are going to get a pretty good idea of what is going on. In fact, including thousands of items if anything makes it more confusing and easier to manipulate. This was a great exercise to do a basic reality check of our reported CPI numbers and showed that several decades ago it was fairly accurate whereas today it seems to be approximately halved.

The point was that when they compared their basic basket of goods which most people would agree is fairly representative of what people buy, from 1970 - 1980, the official CPI tracked pretty closely.

When the same basket of goods was compared to 2002-2012, the CPI only saw HALF the inflation of the same basket of goods. They tried another basket of goods that was pretty typical of what people bought and saw similar results.

If you don't see a major problem with this, then you are purposely trying to ignore major problems.

[Zippyjuan]

If the basket of goods they use encompasses 80-90% of what most consumers tend spend their money on, then you are going to get a pretty good idea of what is going on.

Do you honestly think that the ten items they chose represent 80- 90% of what most consumers tend to spend their money on?

80,000 items is going to be a lot closer to representing what people actually do spend money on.

Your piece also noted:


We know that people do not spend equal amounts on the above items, and we know their share of income devoted to them has changed over the decades.

CPI changes weighting every ten years to adjust for share of income going to items and categories changing to better reflect actual spending habits. People don't buy VCRs much anymore. So their weighting has fallen significantly since 1980 for example.

[dannno]

Do you honestly think that the ten items they chose represent 80- 90% of what most consumers tend to spend their money on?

80,000 items is going to be a lot closer to representing what people actually do spend money on.

Depends on how you weight it..

The fact that they considered housing, cars, health care, dental care, energy and several popular, staple food items tells me that they captured a good majority of what Americans buy.

YOUR JOB, should you choose to accept it, would be to defeat my argument by explaining why from 1970-1980 the CPI tracked these items so closely, yet from 2002-2012 the CPI did NOT track closely to this particular basket of goods that represents the vast majority of what people spend their money on.

[Zippyjuan]

Depends on how you weight it..

The fact that they considered housing, cars, health care, dental care, energy and several popular, staple food items tells me that they captured a good majority of what Americans buy.

YOUR JOB, should you choose to accept it, would be to defeat my argument by explaining why from 1970-1980 the CPI tracked these items so closely, yet from 2002-2012 the CPI did NOT track closely to this particular basket of goods that represents the vast majority of what people spend their money on.

Yes- the weighting is important. See my update to my previous post.

As for explaining why your number is wrong- I did- ten items is not necessarily representative of all items people spend their money on. The sample size is too small. I go with the much larger sample size as being more representative of reality. What percent of your budget did you spend on buying a new car this year? What percent did you spend on eggs? What percent to dental services? Does their list meet your 80- 90% standard you suggested? Also we don't know if they gave any weighting to their items.

You believe the small basket because the results the giant basket gives don't meet what you thing things must look like. Therefore, it must be wrong.

Unsurprisingly the article is from Peter Schiff who thinks the government is conspiring to hide the real rate of inflation to make him look bad.

[dannno]

What percent of your budget did you spend on buying a new car this year? What percent did you spend on eggs? What percent to dental services? Does their list meet your 80- 90% standard you suggested?

If you add housing, electricity, milk and gas then ya, that's a pretty good chunk. And I think those prices track pretty well with the prices of other similar goods - for example if gas goes up, it generally hits the price of all commodities since they need to be transported.



know if they gave any weighting to their items.

You believe the small basket because the results the giant basket gives don't meet what you thing things must look like. Therefore, it must be wrong.

Again, the advantage of using a smaller basket that contains the majority of what people buy means that it is easier to analyze and do a reality check. A bigger basket of goods CAN provide more accuracy, if the bigger basket is representative of what people buy. But if you are including thousands of items it is more difficult to see whether that basket is actually representative. A bigger basket is not NECESSARILY more representative of what people buy.

But the goal of that exercise was not to show the difference in the CPI from 2002-2012 and then just say it is wrong, the goal was to compare it to 1970-1980 and see what the change in CPI calculations do to a typical basket of goods that contains a majority of what people buy. That's why the weighting wasn't so important, as the article stated, because a comparison was being done from a different period to see what the changes were. The fact that the old CPI tracks so closely and the new CPI is so far off is a huge indicator that there is something wrong with the current CPI calculation.

[devil21]

What if 2020 comes around and there is still no currency crisis? 2030? At what point would you concede that they were wrong?

It's clear by now that media sycophants, on behalf of their central bank masters, are working very hard to keep the progression of major global currency changes (a currency crisis....aka loss of faith in the dollar) under the radar so as to not spook the general population too much, while their standard of living declines. Surely you see the dollar being removed as sole reserve currency as I type this, right? Is that not a currency crisis? What does it say about the dollar when China cutting rates drives up dollar denominated US stock markets? Can't be much about the US economy, which most economists know is in deflation. Must be about the ascension of the yuan instead. I covered much of this perception change in my "Canadian appeals court" thread in this subforum.

Btw, it doesn't take a rocket scientist to predict "more money printing", as it is the Keynesian prediction that is never wrong.

[Ronin Truth]

http://www.bls.gov/data/inflation_calculator.htm

[devil21]

Obviously I'm very bearish but if no stock crash occurs and the markets continue upward, it's a sign of the dollar rapidly losing value as the reserve status is lessened or outright removed. Stocks are essentially an inflation hedge just like metals are.

[TheCount]

Obviously I'm very bearish but if no stock crash occurs and the markets continue upward, it's a sign of the dollar rapidly losing value as the reserve status is lessened or outright removed. Stocks are essentially an inflation hedge just like metals are.

So if stocks go down it's a bad thing and if they go up it's a bad thing. Got it.

[TheCount]

http://theeconomiccollapseblog.com/archives/tag/jp-morgan

...


DEFINITION of 'Depository'

On the simplest level, depository is used to refer to any place where something is deposited for storage or security purposes. More specifically, it can refer to a company, bank or an institution that holds and facilitates the exchange of securities. Or a depository can refer to a depository institution that is allowed to accept monetary deposits from customers.

http://www.investopedia.com/terms/d/depository.asp

[cocrehamster]

But Theeconomiccollapseblog.com says an economic collapse is coming! It must be true! Thanks Danke!

[Danke]

But Theeconomiccollapseblog.com says an economic collapse is coming! It must be true! Thanks Danke!

Yes, attack messenger, not the message. Did read the article about the large increase of JP Morgan silver purchases?

[dannno]

So if stocks go down it's a bad thing and if they go up it's a bad thing. Got it.

If there is a lot of monetary inflation, debt and malinvestment, then yes, stock prices will not provide a good gauge for economic prosperity.

[cocrehamster]

Yes, attack messenger, not the message. Did read the article about the large increase of JP Morgan silver purchases?

I did start to and it was purely speculation coming from an obviously not credible CT website.

[Danke]

I did start to and it was purely speculation coming from an obviously not credible CT website.

If you google it, it appears on many sites. I guess they are all CT sites...

[Zippyjuan]

If you add housing, electricity, milk and gas then ya, that's a pretty good chunk. And I think those prices track pretty well with the prices of other similar goods - for example if gas goes up, it generally hits the price of all commodities since they need to be transported.




Again, the advantage of using a smaller basket that contains the majority of what people buy means that it is easier to analyze and do a reality check. A bigger basket of goods CAN provide more accuracy, if the bigger basket is representative of what people buy. But if you are including thousands of items it is more difficult to see whether that basket is actually representative. A bigger basket is not NECESSARILY more representative of what people buy.

But the goal of that exercise was not to show the difference in the CPI from 2002-2012 and then just say it is wrong, the goal was to compare it to 1970-1980 and see what the change in CPI calculations do to a typical basket of goods that contains a majority of what people buy. That's why the weighting wasn't so important, as the article stated, because a comparison was being done from a different period to see what the changes were. The fact that the old CPI tracks so closely and the new CPI is so far off is a huge indicator that there is something wrong with the current CPI calculation.

Bigger basket gives the most realistic results. Consider flipping a coin. Flip it twice. Heads comes up both times. Does that mean the odds of getting heads is 100%? The advantage of a small sample- right? But the odds of getting heads should be 50% if it is a balanced coin. Flip it eight more times. Now we have six heads and four tails. Is the odds of getting heads 60%? No, but with a larger sample we are getting closer to the true odds. Flip a bunch more. 100 times. 48 tails, 52 heads. Closer but not quite. Flip 1000 times. 500 heads and 500 tails. The bigger the sample, the closer to the real situation. You may luck out and get one heads and one tails. But you could also have no heads and two tails. Smaller sample results are often misleading. Ten items is too small of a sample to be able to extrapolate much useful information.

What you showed was not flaws with the CPI but flaws with the ten item basket since those items are included in the CPI- along with 80,000 other items.

[Zippyjuan]

Yes, attack messenger, not the message. Did read the article about the large increase of JP Morgan silver purchases?

Chart of JP Morgan silver indicates that it is "Depository Silver Stocks". That is silver they are holding for customers- not silver they bought and are holding for themselves.

http://theeconomiccollapseblog.com/wp-content/uploads/2015/04/JP-Morgan-Silver-425x321.jpg

http://www.buysilverbullion.com/storage/depository/


For a good storage option, consider a depository. A depository is defined as a “bank or company which holds funds or securities deposited by others, and where exchanges of these securities take place.” This is a method of private and secured vault storage.

It indicates "Registered silver stock" and "Eligible silver stocks".

http://silverdoctors.blogspot.com/2011/08/q-with-doc-whats-difference-between.html


The Eligible category means that the silver meets the exchange requirements. Exchange requirements include purity, size (eligible silver bars must weigh within 10% plus or minus of 1000 ounces), and also must be from (stamped with) an exchange approved refiner.
Eligible silver essentially means that the silver is stored in COMEX warehouses, and conforms to exchange standards. It is being stored in the COMEX warehouse for a private party, but it is NOT available for delivery to contracts.
For example, Warren Buffet decides to store 30 million ounces of silver owned by Berkshire Hathaway (he has no intention of making the silver available for sale at current prices) in a COMEX vault rather than his Omaha basement, he could do so, and the silver would be eligible inventory.

Registered silver means that the silver is fully available for delivery to longs who stand for bullion delivery.
Registered silver used to have a paper bearer warrant attached for delivery, but these paper warrants are reportedly being phased out.
To simplify, registered silver is deliverable- or available for delivery to a long standing or demanding bullion delivery.

Eligible silver can become registered, and vice-versa. (i.e. the owner can decide to make his silver available for sale at a certain price)
This is seen almost daily in the adjustments section of the COMEX inventory data reports.
In order for eligible silver to become registered, the owner must have an exchange licensed depository (Brink's, The Delaware Depository, HSBC, JPM, or Scotia Mocotta) issue a depository receipt (warrant).
In addition, the bars must total 5,000 ounces (size of 1 contract) plus or minus 6%.

So it is silver for futures markets.

[cocrehamster]

Chart of JP Morgan silver indicates that it is "Depository Silver Stocks". That is silver they are holding for customers- not silver they bought and are holding for themselves.

http://theeconomiccollapseblog.com/wp-content/uploads/2015/04/JP-Morgan-Silver-425x321.jpg

http://www.buysilverbullion.com/storage/depository/



It indicates "Registered silver stock" and "Eligible silver stocks".

http://silverdoctors.blogspot.com/2011/08/q-with-doc-whats-difference-between.html



So it is silver for futures markets.


But that makes too much sense! I assumed they were custodian for the silver in a silver ETF or something along those lines but don't really care enough to research it. They were talking about like $55 million dollars worth which is a pretty insignificant amount (not of silver necessarily but relative to the financial markets).

[Danke]

So you two are saying their customers are increasing their holdings by 10x + in the last couple of years?

[TheCount]

So you two are saying their customers are increasing their holdings by 10x + in the last couple of years?

Likely, given the decreasing price of silver. Also, they may be increasing their customer base. Pretty easy to do when they didn't have a depository at all prior to 2011.


Or it's a secret illuminati plot to something something something the something something.

[dannno]

Bigger basket gives the most realistic results. Consider flipping a coin. Flip it twice. Heads comes up both times. Does that mean the odds of getting heads is 100%? The advantage of a small sample- right? But the odds of getting heads should be 50% if it is a balanced coin. Flip it eight more times. Now we have six heads and four tails. Is the odds of getting heads 60%? No, but with a larger sample we are getting closer to the true odds. Flip a bunch more. 100 times. 48 tails, 52 heads. Closer but not quite. Flip 1000 times. 500 heads and 500 tails. The bigger the sample, the closer to the real situation. You may luck out and get one heads and one tails. But you could also have no heads and two tails. Smaller sample results are often misleading. Ten items is too small of a sample to be able to extrapolate much useful information.

What you showed was not flaws with the CPI but flaws with the ten item basket since those items are included in the CPI- along with 80,000 other items.

I've taken graduate level statistics, I don't need lectures on sample sizes. I agree that if a one wanted to calculate a CPI that is more accurate, they will want to use a large quantity of weighted items.. but that doesn't mean more weighted items = automatically more accurate especially if they are attempting to fudge the numbers.. It allows them to obfuscate sort of like what you do.

I already explained what the experiment was attempting to accomplish with a smaller basket, which contained a majority of what people typically spend their money on, why that is actually beneficial to that particular experiment and how the results from two different baskets gave the same results - the modern CPI is clearly under-reporting actual inflation compared to the old CPI as well as their chosen basket of goods.

[Danke]

Likely, given the decreasing price of silver. Also, they may be increasing their customer base. Pretty easy to do when they didn't have a depository at all prior to 2011.


Or it's a secret illuminati plot to something something something the something something.

How does that account for their 5 million then?

[TheCount]

How does that account for their 5 million then?

Which 5 million is theirs?

[devil21]

Chart of JP Morgan silver indicates that it is "Depository Silver Stocks". That is silver they are holding for customers- not silver they bought and are holding for themselves.

We should ask Jon Corzine if there is a difference, when SHTF.


So if stocks go down it's a bad thing and if they go up it's a bad thing. Got it.

Such is the nature of denominating a market in illusory money. Neither outcome is good for the little people. One means their money disappears. The other means their money disappears. Funny that. Does that mean the purpose of the stock market is to ensure people's "money" disappears one way or another? Hmm.....

[Zippyjuan]

I've taken graduate level statistics, I don't need lectures on sample sizes. I agree that if a one wanted to calculate a CPI that is more accurate, they will want to use a large quantity of weighted items.. but that doesn't mean more weighted items = automatically more accurate especially if they are attempting to fudge the numbers.. It allows them to obfuscate sort of like what you do.

I already explained what the experiment was attempting to accomplish with a smaller basket, which contained a majority of what people typically spend their money on, why that is actually beneficial to that particular experiment and how the results from two different baskets gave the same results - the modern CPI is clearly under-reporting actual inflation compared to the old CPI as well as their chosen basket of goods.

So despite all that, you still think the ten sample basket is likely the most accurate and proof the 80,000 item one must be wrong. OK.

[Danke]

I've taken graduate level statistics, I don't need lectures on sample sizes. I agree that if a one wanted to calculate a CPI that is more accurate, they will want to use a large quantity of weighted items.. but that doesn't mean more weighted items = automatically more accurate especially if they are attempting to fudge the numbers.. It allows them to obfuscate sort of like what you do.

I already explained what the experiment was attempting to accomplish with a smaller basket, which contained a majority of what people typically spend their money on, why that is actually beneficial to that particular experiment and how the results from two different baskets gave the same results - the modern CPI is clearly under-reporting actual inflation compared to the old CPI as well as their chosen basket of goods.

http://www.econmatters.com/2015/10/the-inflation-lie.html?m=1