Emergency Fed Meeting Scheduled for Monday

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Emergency Fed Meeting Scheduled for Monday

Post by ppnewbie » Fri Feb 11, 2022 7:02 pm

Getting nervous! Not for my GB but for my all stock taxable account.
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Re: Emergency Fed Meeting Scheduled for Monday

Post by I Shrugged » Fri Feb 11, 2022 9:43 pm

I got a belly laugh watching the evening news. First they said that the just released inflation numbers took economists by surprise. Then blah blah blah. They ended with the line that economists say inflation should be back down to 3 percent in a few months.

Okay then! ::)
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Re: Emergency Fed Meeting Scheduled for Monday

Post by ppnewbie » Sun Feb 13, 2022 1:32 am

I Shrugged wrote:
Fri Feb 11, 2022 9:43 pm
I got a belly laugh watching the evening news. First they said that the just released inflation numbers took economists by surprise. Then blah blah blah. They ended with the line that economists say inflation should be back down to 3 percent in a few months.

Okay then! ::)
IMHO
The national media right or left has become just hollow words. They should just put cartoons on during prime time. Or maybe all news programs should be run by former comedians. That will give them a little more credibility then they currently have.
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Re: Emergency Fed Meeting Scheduled for Monday

Post by I Shrugged » Sun Feb 13, 2022 6:27 pm

I don’t usually worry about what the numbers really are. But I decided to see what shadowstats.com has right now.

Official inflation: 7.5%
If using <1990 method: 10%
If using <1980 method: 15%

I feel certain we are in true double digits.
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Re: Emergency Fed Meeting Scheduled for Monday

Post by murphy_p_t » Sun Feb 13, 2022 6:54 pm

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Re: Emergency Fed Meeting Scheduled for Monday

Post by dualstow » Sun Feb 13, 2022 7:18 pm

I Shrugged wrote:
Fri Feb 11, 2022 9:43 pm
I got a belly laugh watching the evening news. First they said that the just released inflation numbers took economists by surprise. Then blah blah blah. They ended with the line that economists say inflation should be back down to 3 percent in a few months.

Okay then! ::)
O0 Made me smile. As does your avatar every time I see it. Saint Joe 😂
ppnewbie wrote:
Sun Feb 13, 2022 1:32 am

IMHO
The national media right or left has become just hollow words. They should just put cartoons on during prime time. Or maybe all news programs should be run by former comedians. That will give them a little more credibility then they currently have.
My father recently observed that the news used to be about reporting, whereas now it seems to be about everything else. Analysis, speculation, etc.
Sam Bankman-Fried sentenced to 25 years
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Re: Emergency Fed Meeting Scheduled for Monday

Post by D1984 » Sun Feb 13, 2022 10:27 pm

I Shrugged wrote:
Sun Feb 13, 2022 6:27 pm
I don’t usually worry about what the numbers really are. But I decided to see what shadowstats.com has right now.

Official inflation: 7.5%
If using <1990 method: 10%
If using <1980 method: 15%

I feel certain we are in true double digits.
I can't walk a mile in your shoes so I can't say whether your "personal inflation rate" is in the double digits or not (FWIW mine isn't..at least not as of right now). However, Shadowstats simply isn't credible as a source and has been debunked in multiple places.

Even if it hadn't been, you should be wary of trusting a source that refuses to open up their methodology to any kind of peer review by unbiased outsider reviewers in a fully transparent fashion (which, unlike the BLS, Shadowstats has to my knowledge so far refused to do).

Finally, 15% inflation would imply negative real GDP growth i.e. a recession seeing as how nominal GDP (i.e. raw GDP not adjusted for any change in inflation) from 12-31-2020 to 12-31-2021 increased by 11.71%. Fair enough, but......the definition of negative real GDP growth is a recession....that's not my opinion; that's merely a simple accounting identity; disagree with my opinions as you wish but you can't disagree with mathematics. If you believe we are actually in a recession (i.e. any increase in GDP and then some is entirely an illusion cloaked by higher-than-reported inflation) then ask yourself this question...does unemployment usually go DOWN during recessions (as indeed unemployment did go down quite sharply from Dec 2020 to Dec 2021...and if you think that the U1 or U2 unemployment rate understates actual unemployment feel free to use the U3, U4, U5, or U6 broader measures of unemployment as they all show the same general trend)? Does the EMPOP (employment to population ratio) typically rise during recessions (it has risen since 12-31-2020)? Does demand for fuel generally surge during recessions (as indeed it has over the past year or so)? Do VMTs (vehicle miles traveled) typically rise smartly during the summer (like they did in the summer of 2021) during recessions? If all these indicators aren't currently saying recession then on the basis of what evidence are we in a period of negative real GDP growth (i.e. a recession).....other than the fact that you (or someone else) "feel certain" of something (here's a quick hint: facts don't care about one's feelings).
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Re: Emergency Fed Meeting Scheduled for Monday

Post by ppnewbie » Mon Feb 14, 2022 1:42 am

Not a rigorous review of these personal stats, but my families personal monthly expenses have gone up over 20 percent. I need to go through the bills and compare like for like to see exactly where the increase is coming from. Fuel ks definitely one I know for sure.
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Re: Emergency Fed Meeting Scheduled for Monday

Post by I Shrugged » Mon Feb 14, 2022 9:23 am

Housing alone is up tremendously. Both in purchase prices and in rents. Rents are nuts right now.
Food, up a lot. Bacon is often $10 a pound.
Fuel, up a lot.
Cars and trucks are at unimaginable levels.
Clothing seems to be up at some places, but probably not much overall.

But yeah, other than housing, food, and transportation, inflation isn't bad. :)

D1984, that's why I don't watch the numbers. And I take any of the alternatives with proper skepticism. But as Justice Potter Stewart said about obscenity, "I know it when I see it". And I'm seeing it. The official numbers might be transparent and peer-reviewed, but they are flawed.
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Re: Emergency Fed Meeting Scheduled for Monday

Post by Xan » Mon Feb 14, 2022 10:12 am

I Shrugged wrote:
Mon Feb 14, 2022 9:23 am
Housing alone is up tremendously. Both in purchase prices and in rents. Rents are nuts right now.
Food, up a lot. Bacon is often $10 a pound.
Fuel, up a lot.
Cars and trucks are at unimaginable levels.
Clothing seems to be up at some places, but probably not much overall.

But yeah, other than housing, food, and transportation, inflation isn't bad. :)

D1984, that's why I don't watch the numbers. And I take any of the alternatives with proper skepticism. But as Justice Potter Stewart said about obscenity, "I know it when I see it". And I'm seeing it. The official numbers might be transparent and peer-reviewed, but they are flawed.
Housing is kind of a weird one, as if you own your house your expenses aren't going up too much (with the possible exception of property taxes, after some amount of lag). But if you're WANTING to own a house (or upgrade) then you're really feeling it.
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Re: Emergency Fed Meeting Scheduled for Monday

Post by ppnewbie » Mon Feb 14, 2022 1:29 pm

Xan wrote:
Mon Feb 14, 2022 10:12 am
I Shrugged wrote:
Mon Feb 14, 2022 9:23 am
Housing alone is up tremendously. Both in purchase prices and in rents. Rents are nuts right now.
Food, up a lot. Bacon is often $10 a pound.
Fuel, up a lot.
Cars and trucks are at unimaginable levels.
Clothing seems to be up at some places, but probably not much overall.

But yeah, other than housing, food, and transportation, inflation isn't bad. :)

D1984, that's why I don't watch the numbers. And I take any of the alternatives with proper skepticism. But as Justice Potter Stewart said about obscenity, "I know it when I see it". And I'm seeing it. The official numbers might be transparent and peer-reviewed, but they are flawed.
Housing is kind of a weird one, as if you own your house your expenses aren't going up too much (with the possible exception of property taxes, after some amount of lag). But if you're WANTING to own a house (or upgrade) then you're really feeling it.
Houses in the neighborhood I grew up in went from about 170ish to 500 in about 3 years.
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Re: Re: Emergency Fed Meeting Scheduled for Monday

Post by D1984 » Mon Feb 14, 2022 2:23 pm

I Shrugged wrote:
Mon Feb 14, 2022 9:23 am
Housing alone is up tremendously. Both in purchase prices and in rents. Rents are nuts right now.
Food, up a lot. Bacon is often $10 a pound.
Fuel, up a lot.
Cars and trucks are at unimaginable levels.
Clothing seems to be up at some places, but probably not much overall.

But yeah, other than housing, food, and transportation, inflation isn't bad. :)

D1984, that's why I don't watch the numbers. And I take any of the alternatives with proper skepticism. But as Justice Potter Stewart said about obscenity, "I know it when I see it". And I'm seeing it. The official numbers might be transparent and peer-reviewed, but they are flawed.
I have stated before that your personal CPI may differ from the official number (based on what percentage of each good or service you buy vs what the official CPI weights it at ) but that is still no reason to see the CPI itself as flawed (or even more sinisterly, as deliberately gamed or nerfed in order to hide inflation) or to cite some unreliable garbage like Shadowstats. The official weighting of each component is available to the public at https://www.bls.gov/cpi/tables/relative ... e/2021.htm ; what weightings specifically do you disagree with?

Now, as to the things you have complained about in your post:


HOUSING:

Housing is kind of weird, as Xan alluded to. First of all, BLS doesn't actually use a housing price index itself (such as the Case-Shiller 10-city composite) but something called "Owner Equivalent Rent" (OER) which is basically how much an owner would be able to rent the home for that they are now owning. Now, OERs have gone up (I haven't checked the latest figures but IIRC the reading for the end of December 2021 was up in the mid single digits Y-O-Y; note that BLS/BEA only takes rent readings every few months--rather than monthly as for most CPI items--so chances are when the next one is taken it may very well be in the high single or low double digits Y-O-Y) but not as much as housing prices have (the abovementioned Case-Shiller index having risen by roughly 25% in the past year). If one wishes to compare how much housing costs on an ongoing basis, using OERs (or actual rents themselves which are a separate subcategory from OERs in the housing CPI component category) makes sense; if one wishes to calculate how much it actually cost to buy a home for cash right at the moment then using an index like the Case-Shiller makes more sense. The BLS uses the OER cost rather than housing price itself because:

A.If you used a pure housing price index rather than OERs you would have to also account for things like mortgage rates and weighting the mortgage rate paid by credit score (since two buyers of, say, a $400K house might end up with wildly different monthly payments if one has an 830 FICO score and the other has a 618 FICO score) since most people don't buy homes for cash,

B. Most people don't buy homes every day (or week or two weeks or month) like they do other consumption basket goods measured by the CPI; as such OER is likely a more representative equivalent since most people DO pay some form of housing payment (either rent or a mortgage) every month,

C. If you used a housing price index as a proxy for owner-occupied housing costs then it would tend to wildly overstate most people's housing costs during a period of rapidly rising property prices (2001-2006 or late 2020 to today) and conversely wildly UNDERstate them during periods of flat or falling prices (early 1990s, late 2006-mid 2012) because again, people aren't out buying homes every day; once you own a home you are essentially "renting" it from yourself (you are basically paying yourself a phantom rent--the OER--and in return receiving a roof over your head i.e. you are in essence both the landlord and tenant; the value of that roof over your head is the OER) and as such OER is the more relevant comparison.

Second, note that housing price haven't risen as much in some area as they have in others. Housing where I live is up around 16% Y-O-Y (and by that I mean housing prices in my area and not OERs); if you live in a large MCOL, HCOL, or VHCOL city your housing price index may very well be up by 25% (or even more)

Finally, the main reason housing prices have risen so much is that we stopped building as many new houses as needed after 2006-07 and never really got back to trend. You want housing prices to stabilize and/or even start falling? Build about 13-16 million new housing units (esp in large metro areas and their immediate surrounding suburbs) to make up for the dearth since 2007 and watch housing prices start to fall. The problem is that a high demand for housing brought on my low mortgage rates (and by Millennials entering their prime homebuying years) is running up against a wall of building restrictions and outright NIMBYism; normally in a free market rising prices incentivize suppliers to supply more of a given good or service but NIMBYism keeps that from happening with housing (especially in desirable areas where all the good jobs are). You want lower housing prices? Then fight tooth and nail against the NIMBY problem and get more housing built.

FWIW the BLS weights housing (OER) at 24.25% and actual rent at around 7.4%. At around 31.65% combined that is within the range (albeit possibly on the lower end of that range) that the typical American spends on housing.


ENERGY

Gasoline prices are indeed up a lot Y-O-Y. With that said, gas prices (and energy prices in general) are what economists tend to consider "non-sticky" prices (i.e. unlike, say, wages, gas prices can--and do--rise and fall easily) and as such aren't a good indicator of general price trends (if you used gas prices as such an indicator by themselves then we would've been said to have Great Depression-level deflation during much of early 1981 to late 1986, 1996 to early 1999, 2001, 2020, 2008, and mid-2014 through early 2016; obviously this is absurd on its face) nor an indicator of when it is time to tighten rates....unless you want to do like the ECB did and tighten unnecessarily in 2008--thus making a recession worse--and again in 2011-12 (thus helping turn what was a recovery into a virtual double-dip recession). Unfortunately, the general public tends to focus on gas prices as exactly such an indicator (probably because gas prices are posted everywhere and also because gas prices DO change so easily and quickly). Bottom line, unless you were out complaining about actual deflation in 1982, 1985, 2001, 2015, or 2020 (which again, would be ridiculous because we didn't have overall deflation in those years....just big falls in energy prices) then it makes no sense now to focus simply on gas prices as a measure of inflation.

With the above said, gasoline is weighted at about 3.82% in the total CPI. If your gasoline spending is more than that percent of your income then yeah, I guess your personal inflation rate is higher. The BLS has to take what the average American spends on gasoline as a percent of income and use that for its CPI calculation; if that's different than what percent of your own income you spend on gas then your personal CPI will tend to be higher/lower.

The long-term solution for high gas prices is to switch to a renewables (and possibly nuclear/LFTR/fusion as well if it can be done cost-effectively) powered economy; sunlight and wind are themselves free and thus price increases on them are a non-issue; the costs for renewables are in the solar panels/windmills/energy storage itself and those--unlike oil--tend to have a long term trend of steadily decreasing real prices as technological innovation continues.


AUTOMOBILES (USED AND NEW)

Yep, prices on these are up a lot. The BLS isn't being sneaky or trying to hide this or nerf the numbers, though; their data fully admit this; it shows used vehicle prices being up some 40% Y-O-Y and new vehicle prices up a bit under 13% Y-O-Y ( https://www.bls.gov/news.release/cpi.nr0.htm ). BLS weights both used and new car prices in their "transportation" component section of the CPI but said section also includes other transportation services (which I'm going to assume would be car rentals, monthly lease payments for leased cars and trucks, public transit fares/costs, subway fares, taxi fares, airfare, car insurance, motor vehicle repairs, motor vehicle parts, motor vehicle tag and license fees, etc) which were up on average only around 5.6%. New and used motor vehicles combined amount to around 9.2% of the total CPI ( https://www.bls.gov/cpi/tables/relative ... e/2021.htm ); given that the "transportation" component section of the CPI accounts for 18.2 % of the total CPI ( https://www.bls.gov/cpi/tables/relative ... e/2021.htm ) I presume the other 9% or so is weighted towards other transportation services (which again, only increased in price a bit over 5%). I suppose whether this weighting reflects one's own personal reality or not depends on whether one is in the market for a new (or used) car right now or not. If you are in the market for such, then yes, your personal inflation rate is probably higher by a lot than the CPI would suggest; if you aren't (i.e. you own a car right now either outright free and clear or with a car payment) then your personal CPI might well be lower. For me, I own a used car bought in mid-2019 (and I plan to drive it until the wheels fall off) and my car payment hasn't changed one bit (it isn't like inflation is going to build a time machine and go back to late April 2019 and increase either the price of the car or the interest rate on the loan). My interest rate on the loan (a 66-month note BTW....I could've paid the car off in a lot less time than that.....hell, I could've bought it for cash....but I figured if the bank was going to lend me money at such a relatively low rate for such an absurdly long rate of time then why not take the loan and invest the cash instead; turns out I was right to have done this) is well under the current CPI and the value of the vehicle is now easily worth more than the loan amount outstanding....heck, come my May 2022 car insurance renewal I may see what they will pay if the car were to be totaled and if it is more than the outstanding loan, I might just cancel my GAP coverage, get a partial refund for the months of the GAP coverage remaining, and see if I can re-fi to a loan with a slightly lower rate than my current one (even if the Fed does raise rates if I can re-fi before they raise them more than a percent or so I should still be able to easily beat my current rate). As such, the "new and used cars" component of my "personal" transportation CPI increased at around 0% the last 12 months.

I feel for you if you are trying to buy a used or new car right now but the issue (skyrocketing inflation in car prices) is mostly caused by a lack of supply of new cars brought on by the chip shortage, not by too much demand for cars caused by too much money sloshing around the system (i.e. if supply and demand are in balance when both are at value "X" you can have "too much money chasing too few goods" as either "money = 2X" while supply is still only at "X" or something like "money = X" while supply is now at, say, "0.5X". What we have today is a lot closer to the latter than the former) . We are producing less new cars monthly right now than we did during the darkest depths of the Great Recession (roughly early 2009 to summer 2009... see https://fred.stlouisfed.org/series/DAUPSA ) despite having some 26 million more people now than we had back then! I used to work in the automotive industry and let me tell you, the manufacturers would LOVE to make as many cars as they can with prices being what they are right now.....but you can't make the cars unless you've got the chips. Fix the chip shortage, produce enough cars, and car prices will fall--or at least normalize and stop rising and stay relatively flat--within very short order.

As to HOW to fix the chip shortage....well, that's a different story for a different time.


MEAT/BACON/BEEF/ETC

For "food at home" (food away from home i.e. at restaurants is another category of its own) the BLS has a subcategory for meat/fish/poultry which amounts to around 1.80% of total CPI. As perhttps://fred.stlouisfed.org/series/CUUR0000SAF112 this category (well, the closest category I could find in FRED....this subcategory includes eggs too but is otherwise identical....if you include meat/fish/poultry/eggs then the whole category increases to around 1.89% of CPI instead of just 1.80% as per https://www.bls.gov/cpi/tables/relative ... e/2021.htm) has increased approximately 12.21% Y-O-Y. The reason that this increase did not show up more in the CPI is that this subcategory is less than 1.9% of total CPI; even a, say, 40% increase in prices in said subcategory wouldn't budge overall CPI very much.

I do personally spend a bit more of my income than this on meat so my personal CPI is probably higher than the "official" measure in this category (but this is more than offset by the fact that I own my home albeit with a 30-year mortgage, own my car with a 5.5 year note, and don't have to commute or drive very far so gas prices don't carry much weight in my personal CPI).

Meat prices are actually one area where pure profiteering plays a decent sized role (although far from the only causative factor) in the rise of prices. Farmers and ranchers aren't getting nearly as higher of a price for their cattle and/or hogs as consumers are paying for meat (especially choicer cuts like steaks). Given that four large meatpacking companies pretty much have the entire meat market to themselves (i.,e. they act as a sort of quasi-monopsony when buying from farmers and an oligopoly when selling to grocery stores and restaurants) and given that their profits for the last two years were some of their best ever in inflation adjusted terms, and given that their profits were up some 300% since that start of the pandemic (and said companies weren't exactly hurting or losing money on 1-1-2020 either)....well, it seems to me that this is where some judiciously executed WWII-style excess profits taxes of between 65 and 99% on the meatpackers could be quite helpful; there's much less incentive to squeeze consumers for every last dime when you know the result will only be that Uncle Sam gets the lion's share of the resulting profit from such activity. Normally what happens in a free market (or at least what's supposed to happen) is that high prices induce more investment into supply (i.e. meatpackers expanding their operations and farmers raising more cattle/hogs/birds to meet the increased demand that was evidenced by said higher prices); I see little evidence that meatpackers have expanded their operations or are furiously working to increase the amount of meat they are processing and supplying; on top of this, if the meatpacking oligopoly pays farmers as little as it can--and it can do this because if you don't sell to one of the four then who else are you going to sell to...they all but control the market--then farmers have very little incentive to raise more animals and bring them to slaughter. The transmission chain of "higher prices = greater supply = prices falling as more supply comes onto the market" seems to have become broken in the meatpacking industry and if the government has to resort to taxes and/or regulations to fix it then they should go ahead and do so.


CONCLUSION AND FINAL THOUGHTS:

Will your personal CPI be higher/lower than the official one? Almost certainly. That doesn't mean the official data is flawed or deliberately lying; it most likely just means that your consumption basket carries different weights than the BLS's one (which again, is based on Americans on the whole as an average) does.

Should the Fed raise rates to try and stem inflation? I would say yes....but NOT to a Volcker-style 18%! They need to take their foot off the gas, not slam hard on the brakes. Raising rates to double digits would certainly kill inflation (well, it would kill the economy and inflation would just die as as a bystander so to speak as no one had any extra money to spend since unemployment would then be in double digits as well) but that would be like cutting off your hand because you had a big splinter in your finger. Hey, cutting off your hand does technically fix the problem (with no hand or fingers to speak of the splinter totally ceases to be an issue!) but it would be overkill and the collateral damage would not justify what was done to solve the problem.
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Re: Emergency Fed Meeting Scheduled for Monday

Post by ppnewbie » Mon Feb 14, 2022 4:54 pm

What are your thoughts on what the Fed should do? Please don't take that as a smart comeback. I actually am interested in your thoughts because this seems like a very difficult problem.

With inflation, a large part of the population suffers, the dollar starts a death spiral and with it the US Empire, there is a lost generation of people with no ability to save, invest wisely, or buy homes, if you don't raise rates. If you do raise rates, markets crash, 70 million baby boomers in retirement are on the streets, the leverage based financialized US economy crashes.
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Re: Emergency Fed Meeting Scheduled for Monday

Post by Xan » Mon Feb 14, 2022 5:01 pm

ppnewbie wrote:
Mon Feb 14, 2022 4:54 pm
What are your thoughts on what the Fed should do? Please don't take that as a smart comeback. I actually am interested in your thoughts because this seems like a very difficult problem.

With inflation, a large part of the population suffers, the dollar starts a death spiral and with it the US Empire, there is a lost generation of people with no ability to save, invest wisely, or buy homes, if you don't raise rates. If you do raise rates, markets crash, 70 million baby boomers in retirement are on the streets, the leverage based financialized US economy crashes.
Won't the deleveraging be easier the earlier it happens?
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Re: Emergency Fed Meeting Scheduled for Monday

Post by ppnewbie » Mon Feb 14, 2022 7:03 pm

Xan wrote:
Mon Feb 14, 2022 5:01 pm
ppnewbie wrote:
Mon Feb 14, 2022 4:54 pm
What are your thoughts on what the Fed should do? Please don't take that as a smart comeback. I actually am interested in your thoughts because this seems like a very difficult problem.

With inflation, a large part of the population suffers, the dollar starts a death spiral and with it the US Empire, there is a lost generation of people with no ability to save, invest wisely, or buy homes, if you don't raise rates. If you do raise rates, markets crash, 70 million baby boomers in retirement are on the streets, the leverage based financialized US economy crashes.
Won't the deleveraging be easier the earlier it happens?
Yes but I would not necessarily say easier. I told my friend if he saw me wandering the neighborhood in a bath robe, dazed and babbling incoherently, he would know the Fed raised too high.
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