A 5th Economic Condition?

[AgAuMoney]

I aked about the classic pp performance YTD, Tex was kind enough to provide it. To change the subject somewhat and since I own a large amount of PRPFX, YTD 9%, outperforming the classic pp by a bit, it would seem to me the pp needs a more global look.
...
I do not read every post but I wonder if I could steer the discussion to that issue? Would HB have made changes over the laast 12 yrs but still maintaining the basic 25% parts. I do like the 25% allocations.

Also I'm curious to what degree some of you regulars have tinkered with your pp's, and if so, how?

Best to start your own thread with an appropriate subject.  This one has had one major change of subject already, and seems to have a lot of momentum that direction. 

[AgAuMoney]

I think AgAu may be saying that he simply has faith that Bernanke will be able to create inflation no matter how stiff the deflationary headwinds.

Seems like the economy should be showing more signs of recovery by now if his powers of inflation are so strong.

MT, that's about right, at least as far as the $US is concerned.

G, recovery (HB's prosperity) is not the same as inflation.  Innumerable episodes in history show inflation without prosperity, especially if inflation goes extreme.  The 1970's stagflation is one example with moderately high inflation and lack of prosperity.  There are also many examples of prosperity and deflation (primarily before the fiat world) or prosperity with varying inflation.  All of those examples show a disconnect between inflation and prosperity.

[doodle]

AgAu,

I remember when I purchased canadian dollars for under US$0.70 and AUS$ for around US$0.50.  Not any more.

So far I've yet to identify any currency which inspires confidence.  I think the Yuan/Renminbi is probably the most likely to appreciate, but I'm even less fond of China's political (and economic) process than I am that of the western world.

Have you looked at Chile's Unidad de Fomento? It is an interesting concept set up after the hyperinflation of the 60's.

http://en.wikipedia.org/wiki/Unidad_de_Fomento

[Gumby]

You want to believe that the Fed is already causing inflation, but what if it isn't actually causing any inflation...

The Central Bank Is Causing Inflation

That article is outdated.  M2 has picked up dramatically since the first of the year.

It is erroneous to subtract loans from M2.  M2 already includes the proceeds from loans so reducing loan amounts is already accounted.  Subtracting them again is flat wrong.

Well, let's look at the actual data then. M2 is still within the historical levels of growth.





And as the article points out, China's money supply growth is substantially larger than ours is. More importantly, we still have normal levels of inflation in this country.

How about we instead use the actual CPI method used by the gov't before they started modifying it to decrease CPI-indexed payments?  http://www.shadowstats.com/alternate_da ... ion-charts  ''The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980.''

How about we stick to the official data — however flawed it may be — instead of using old and outdated models that economists spent decades debunking to recommend those changes. ShadowStats is well known as a convenient crutch for conspiracy theorists and inflationists.

Instead of saying, "interesting, maybe they have a valid argument..." you just dismiss those opposing arguments — even though neither you nor I really understand all the nuances of the monetary system. Whereas, I'm simply saying that I don't know whether Bernanke can bring inflation or not.

The only thing you accept is that maybe bernanke COULD create inflation.  But actually what you are saying is that the inflation arguments have no merit because all these other people say they don't even when you apparently do not understand the data they are using.

Uh, no. I never ever said that the inflation arguments have no merit — and I'd appreciate it if you didn't put words like that in my mouth. Of course, inflation arguments have merit. That's why I hold 25% of my wealth (now 30%) in Gold! I simply said that the deflationists also have a valid argument. What's so wrong about that??

But, I hope you're not implying that you understand all of the nuances of the monetary system? None of us do. It's too complex for any one person to know.

Why are you so sure of your ability to figure out the direction of the economy?

Not the direction of the economy, just what has been happening with inflation.

Wait, what does the past have to do with the future? Do you have a crystal ball I don't know about?  :P

[Gumby]

I think AgAu may be saying that he simply has faith that Bernanke will be able to create inflation no matter how stiff the deflationary headwinds.

Seems like the economy should be showing more signs of recovery by now if his powers of inflation are so strong.

MT, that's about right, at least as far as the $US is concerned.

G, recovery (HB's prosperity) is not the same as inflation.  Innumerable episodes in history show inflation without prosperity, especially if inflation goes extreme.  The 1970's stagflation is one example with moderately high inflation and lack of prosperity.  There are also many examples of prosperity and deflation (primarily before the fiat world) or prosperity with varying inflation.  All of those examples show a disconnect between inflation and prosperity.

You raise good points. Thanks for pointing that out. However, isn't there a strong correlation between the rate of change in disposable income and inflation?



If unemployment remains high, and disposable income doesn't start to increase, how is inflation supposed to take hold?

[smurff]

My all time favorite make work program has to be FDR hiring photographers to drive around the country in the 1930s to take pictures of pathetic looking people to help convince everyone that the government ought to hire people to do things like drive around and take pictures of pathetic looking people.

If I was one of those pathetic looking people and a person drove up and said they were from the government I would ask if they were there to help me.  When they said that they hadn't brought any food for my empty stomach or soap to clean my dirty face, but that they would like to take my picture I might have a pretty pathetic look on my face too. 

Were we not admiring some of those photos a few months ago (maybe last year) on this very forum? They were on a website devoted to yesteryear photos.  They were in color, as I recall, complete with dirty and pathetic faces as well as smiling faces--and the prices listed for various goods on the store's menu board were (by today's standards) hilarious.  But the photos were amazing, and because they were in color that had been preserved over nearly 70 to 80 years, they were also beautiful.  They are great primary sources for historians, showing the kinds of clothing people wore, food they ate, what automobiles looked like, what a small-town commercial street looked like, prices charged for things, etc. 

I also recall reading an interview with someone involved with the photojournalism project of that era (either as a photographer or a subject).  Often the sad, pathetic looks came from photographer instructions and not from any contemporaneous feelings of sadness on the part of the subjects of the photos.  The photographers had all they could handle trying to get the people to stand still and cut out the and  .

[smurff]

Not to make light of the Great Depression, but it looked a bit better in color:

http://www.dailymail.co.uk/news/article ... ssion.html

Of course many of these are early WWII vintage.

Thanks, WildAboutHarry, those are the kind of pics I was talking about.  Very nice.