Doing the math: what the FEDs 2% inflation goal and CPI fudging means for purchasing power

[Steven Douglas]

This is your attempt to have it both ways. Either calculating price inflation is a worthwhile endeavor and we can discuss it, or you disagree and we can go our separate ways.

I'm helping someone right now with a budget. She is in pretty deep shit right now, living on a very small fixed income (pension). She's been on it for almost twenty years, and lived quite comfortably for the first ten. The last ten have been like living in a Star Wars trash compactor scene, as she is being squeezed and nibbled to death on all sides. We're waxing all kinds of creative now, working on substitutions, augmentations, etc., and I have already calculated her price inflation. You know, the ones that affect only her, that no fucking comfortably detached aggregate-thinker would even think to consider. I could feel just how real price inflation was (REGARDLESS OF ITS CAUSES) while grocery shopping with her last week--to the point where all I want to do is punch every price inflation obfuscationist in their daft little throats.

So waddya think...should I take a copy of the CPI and a mountain of other manipulated obfuscating bullshit and talk to her about why her "true inflation signals" are fucked up, anomalous, in her imagination only, or somehow exceptional to some pointy-headed theoretical construct?

So yes, I do remember that the point of this thread was that the OP wanted to say inflation is understated and IS destroying (NOT fucking "going to destroy") purchasing power of individuals. I do agree that there are ways of approximating it or getting a good sense of what it is. Why? Because I have felt it personally, firsthand, and have been fucking living it by proxy through others, practically all my life. What I REJECT are all the reality-disconnected and convoluted ways that government and academics call piss on everyone's heads rain (and with straight faces, no less).

Every time I hear someone try to talk reality with those who are affected first, most, and most adversely by MONETARY INFLATION, I want to jump down their throats and rip everything that is daft and stupid out of them. If I could take them firsthand and show them firsthand--or better yet, live it firsthand--I picture them coming out like Lewis Winthorpe, Dan Aykroid's character in Trading Places, after spending a night in jail.

Starting at 00:45



"I mean, if this place is indicative of the state of correctional institutions in this country, they might as well let all the convicts out. It's far worse on the inside!"

[NoOneButPaul]

Buy silver and gold, stack stack stack!

[ababba]

I'm helping someone right now with a budget. She is in pretty deep shit right now, living on a very small fixed income (pension). She's been on it for almost twenty years, and lived quite comfortably for the first ten. The last ten have been like living in a Star Wars trash compactor scene, as she is being squeezed and nibbled to death on all sides. We're waxing all kinds of creative now, working on substitutions, augmentations, etc., and I have already calculated her price inflation. You know, the ones that affect only her, that no fucking comfortably detached aggregate-thinker would even think to consider. I could feel just how real price inflation was (REGARDLESS OF ITS CAUSES) while grocery shopping with her last week--to the point where all I want to do is punch every price inflation obfuscationist in their daft little throats.

So waddya think...should I take a copy of the CPI and a mountain of other manipulated obfuscating bullshit and talk to her about why her "true inflation signals" are fucked up, anomalous, in her imagination only, or somehow exceptional to some pointy-headed theoretical construct?

So yes, I do remember that the point of this thread was that the OP wanted to say inflation is understated and IS destroying (NOT fucking "going to destroy") purchasing power of individuals. I do agree that there are ways of approximating it or getting a good sense of what it is. Why? Because I have felt it personally, firsthand, and have been fucking living it by proxy through others, practically all my life. What I REJECT are all the reality-disconnected and convoluted ways that government and academics call piss on everyone's heads rain (and with straight faces, no less).

We use aggregate data so we don't have to rely on an anecdote of a single person.

On average, the CPI says that the standard of living has been decreasing but slowly. Now there are some prices that will increase more than others, and some people have a tendency to buy those goods which increase in price the most. This is bad luck but it would exist regardless of the level of increase in average prices. Even if the rate of money creation was zero, the prices of some goods would be going down a lot and the price of other goods could be going up a lot. There might be a lot of ladies out there that are made better off and some that are made worse off. The average over time tells us something about what portion of this comes from monetary policy, which changes the aggregate price level. We live in an economy where relative prices fluctuate around all the time and there are winners and losers.

The appeal to emotion is the opposite of what we should be doing here. Your first reaction, it seems, is to reach for someone to blame and it seems like you always blame the same source for all problems regardless of whether that blame is well founded or not.

[Steven Douglas]

We use aggregate data so we don't have to rely on an anecdote of a single person.

Or fifty million single persons taken individually, for that matter.

The appeal to emotion is the opposite of what we should be doing here.

No, it is precisely what we should be doing here.

Your first reaction, it seems, is to reach for someone to blame and it seems like you always blame the same source for all problems regardless of whether that blame is well founded or not.

No, it really was my last reaction. And the same core source IS always to blame, at the core of a "well founded" chain of causes and effects that really is easy to trace to a single source (by Any True Scotsman, or anyone with an ounce of common sense).

[ababba]

Or fifty million single persons taken individually, for that matter.

No, it is precisely what we should be doing here.

No, it really was my last reaction. And the same core source IS always to blame, at the core of a "well founded" chain of causes and effects that really is easy to trace to a single source (by Any True Scotsman, or anyone with an ounce of common sense).

50 million people is getting close to the aggregate, the aggregate basket is just the average of what a bunch of different people buy.

If corn went up 50% and wheat went down 50%, you would blame the Fed. I get it, you blame the Fed for everything including variance in individual prices, as if there weren't millions of other things that affect individual prices. We clearly both understand the Fed affects the overall price level, but you seem to think that they pin down every individual price with their actions and any harm done to any person is automatically caused by the Fed. It just defies common sense.

[Steven Douglas]

50 million people is getting close to the aggregate, the aggregate basket is just the average of what a bunch of different people buy.

...and then jumbling them into an homogenous, meaningless blob.

If corn went up 50% and wheat went down 50%, you would blame the Fed.

Fucking-A I would. You might enjoy batting at the leaves, and ignoring the roots, but I don't like to waste time. The Fed is exactly where I would start, for all the market distortions that originated with the Fed. Think it's hard to draw a meaningful connection between the Fed and agriculture? It's so easy that anyone with a pair of working eyes and half a brain stem can see it.

I'll provide the dots. You draw the six degrees of Kevin "Fed" Bacon separation lines between them. And if you can't do it, don't worry, there are plenty here who can.

1) Nixon Shock
2) Petro dollars
3) Wars in Iraq and the rest of the Middle East
4) Ethanol
5) Corn

I get it, you blame the Fed for everything including variance in individual prices...

No, that's your obfuscating fingers, trying to get everything framed so that they can point in so many directions, at so many possible causes (and there are many, most of which are minor) that the Fed just gets lost in the jumbled up, obfuscated heap, as one "possible" effect (probably minor, doncha know -- ya just never know!).

TO WIT: (didn't even read this before posting the above, but it's a predictable script, and proves my point)

...as if there weren't millions of other things that affect individual prices.

Game, set, match. Now I'll repeat myself:

...trying to get everything framed so that they can point in so many directions, at so many possible causes (and there are many, most of which are minor) that the Fed just gets lost in the jumbled up, obfuscated heap, as one "possible" effect (probably minor, doncha know -- ya just never know!).

FYI, the Fed's role in everything monetary does not EVER get lost in a "millions of other things" heap for me. The Fed not only causes monetary and price inflation, it FACILITATES every other kind of distortion in the market, making big things out of "millions of other[wise little] things". End the currency debauchery, THEN look at the size of those "millions of other things" that affect prices, both naturally and artificially. What you DON'T do, is work your way backwards, batting at MILLIONS of leaves, most of which could be consequences, unintentional or otherwise, while pretending to address things in a meaningful way.

When Copernicus finally did successfully place the Sun in the center of the solar system (not universe), that was not the end of Ptolemaic epicycles (perfect circles and circles within circles) and equants and such, because he used all of them. We would need a Kepler and others follow after and shake out the cobwebs. But Copernicus had at least put us on the right track, because it did not matter what anyone worked on, so long as the Earth was assumed to be the center of the universe. Likewise, it does not matter how many "price influences" you look at; so long as you leave the Fed as the accepted center of the known monetary universe, EVERYTHING will be incredibly overly-complicated, and completely fucked up.

[ababba]

...and then jumbling them into an homogenous, meaningless blob.



Fucking-A I would. You might enjoy batting at the leaves, and ignoring the roots, but I don't like to waste time. The Fed is exactly where I would start, for all the market distortions that originated with the Fed. Think it's hard to draw a meaningful connection between the Fed and agriculture? It's so easy that anyone with a pair of working eyes and half a brain stem can see it.

I'll provide the dots. You draw the six degrees of Kevin "Fed" Bacon separation lines between them. And if you can't do it, don't worry, there are plenty here who can.

1) Nixon Shock
2) Petro dollars
3) Wars in Iraq and the rest of the Middle East
4) Ethanol
5) Corn



No, that's your obfuscating fingers, trying to get everything framed so that they can point in so many directions, at so many possible causes (and there are many, most of which are minor) that the Fed just gets lost in the jumbled up, obfuscated heap, as one "possible" effect (probably minor, doncha know -- ya just never know!).

TO WIT: (didn't even read this before posting the above, but it's a predictable script, and proves my point)



Game, set, match. Now I'll repeat myself:

...trying to get everything framed so that they can point in so many directions, at so many possible causes (and there are many, most of which are minor) that the Fed just gets lost in the jumbled up, obfuscated heap, as one "possible" effect (probably minor, doncha know -- ya just never know!).

FYI, the Fed's role in everything monetary does not EVER get lost in a "millions of other things" heap for me. The Fed not only causes monetary and price inflation, it FACILITATES every other kind of distortion in the market, making big things out of "millions of other[wise little] things". End the currency debauchery, THEN look at the size of those "millions of other things" that affect prices, both naturally and artificially. What you DON'T do, is work your way backwards, batting at MILLIONS of leaves, most of which could be consequences, unintentional or otherwise, while pretending to address things in a meaningful way.

When Copernicus finally did successfully place the Sun in the center of the solar system (not universe), that was not the end of Ptolemaic epicycles (perfect circles and circles within circles) and equants and such, because he used all of them. We would need a Kepler and others follow after and shake out the cobwebs. But Copernicus had at least put us on the right track, because it did not matter what anyone worked on, so long as the Earth was assumed to be the center of the universe. Likewise, it does not matter how many "price influences" you look at; so long as you leave the Fed as the accepted center of the known monetary universe, EVERYTHING will be incredibly overly-complicated, and completely fucked up.

I hope someone else out there realizes how stupid this is. You've blamed the Fed for everything.

I blame the Fed for two things. The money supply and the rate of increase in the aggregate price level. The money supply they control directly and over time that affects the level of average prices. You think they control everything and everything that's bad is caused by the Fed. Your argument about pointing the blame somewhere else is mind blowing idiocy because that's not what I'm doing. I am blaming the Fed for what they actually control, not for the billion things they don't control.

[Steven Douglas]

I blame the Fed for two things. The money supply and the rate of increase in the aggregate price level.

Oh. Tha's all, tha's it? Just those two little ol' things, all nicely sterilized, benign and contained in a vacuum, with no repercussions, and nothing else that results from that? Does the Fed defy the laws of logic and physics, as it produces no ripples or other effects? I hope someone else out there realizes how stupid this is, that you've blamed the Fed for two things only, and nothing else that happened as a result.

Your argument about pointing the blame somewhere else is mind blowing idiocy because that's not what I'm doing. I am blaming the Fed for what they actually control, not for the billion things they don't control.

I see the Fed as more like Jigsaw, who just wants to play a game. In a very controlled arena, of course. Everything else that happens in his game--well, that's on everyone else's head, I guess we could say, because they have choices too, doncha know.



The mind blowing idiocy is in not understanding the difference between indirect but powerful influence from a position of near-absolute control (over EVERYONE'S CURRENCY), and actual direct puppet-like micro-control over individuals which is ludicrous and not claimed at all. And you know it. Like the "players" in Jigsaw's macabre game, individuals are having normal human reactions to abnormal "demigod-like" influences that are completely beyond their control.

[ababba]

Oh. Tha's all, tha's it? Just those two little ol' things, all nicely sterilized, benign and contained in a vacuum, with no repercussions, and nothing else that results from that? Does the Fed defy the laws of logic and physics, as it produces no ripples or other effects? I hope someone else out there realizes how stupid this is, that you've blamed the Fed for two things only, and nothing else that happened as a result.



I see the Fed as more like Jigsaw, who just wants to play a game. In a very controlled arena, of course. Everything else that happens in his game--well, that's on everyone else's head, I guess we could say, because they have choices too, doncha know.



The mind blowing idiocy is in not understanding the difference between indirect but powerful influence from a position of near-absolute control (over EVERYONE'S CURRENCY), and actual direct puppet-like micro-control over individuals which is ludicrous and not claimed at all. And you know it. Like the "players" in Jigsaw's macabre game, individuals are having normal human reactions to abnormal "demigod-like" influences that are completely beyond their control.

Hey its clear we both think the other is the equivalent of a theist in an atheistic world. I'm not sure where we can go after that.

Obviously everything effects everything else in our world. Unfortunately, this also means that the Fed isn't the sole cause of all our problems. The Fed has an indirect effect on everything. But its not like you say, find the bad things in the world and state that they are caused by the Fed. What I meant by the statements that they control money and indirectly aggregate prices is that I believe any follow on effects need to be traced to these two things.

It seems a lot like the underpants gnomes to be where you seem to be saying

1. Print money
2. ????
3. Everything bad that has ever occurred but none of the good stuff


My logic is something like

1. Print money
2. Too much money chasing too few goods
3. Average prices go up

Which I don't think anyone would argue with as a mechanism. If we want to go beyond this we need some logic instead of assertions.

[Vanilluxe]

Right now, U.S. treasury bonds are the most affordable and safest investment you can buy.