Money Supply Update – Still No Inflation Here Either…

It’s abundantly clear by now that the many hyperinflation and even high inflation theories following the various government policies after the financial crisis, have been entirely wrong.  While this has become very clear in recent CPI readings it’s also apparent in many independent gauges.  For instance, the Billion Prices Project is now showing inflation crashing down to just 1.5%.  This has been a superb indicator of inflation and if it holds true to trend the CPI isn’t turning up any time soon.  See Figure 1 below.

Equally interesting is the broader money supply indices.  While the government stopped tracking M3 long ago, some independent sites still track it.  What does it show?  The same trend in the broader inflation indices.  M3 is plunging lower in both of the widely followed independent M3 indices.   This is all worryingly reminiscent of Japan….

(Figure 1 – Billion Prices Project

 (Figure 2 -Via

 (Figure 3 -via Shadow Stats)


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • But What Do I Know?

    You know what would get the M3 money supply to grow again? Higher interest rates!

    Look at the chart–M3 is correlated to the Fed Funds rate.

  • http://na Torch

    The low interest rates are preventing investment. Everyone who has desired low interest financing and could qualify for it has gotten it years ago. Now the low rates are causing banks and other investors to sit on their wallets as the potential returns from lending do not justify the risks. The banks must speculate in the markets as their lending activities are not profitable. This might be good for the markets but it leaves us stuck with a slowing economy and no job growth. The current gdp growth rates hardly account for the inflation rate! Expect more speculation by the “too big to fail” crowd. It’s the only way they can get the juiced up profits their CEO’s and board members need to justify their astronomical bonuses.

  • Clearly_Irrational

    So assuming I understand MMR properly the correct response would be to increase deficit spending significantly. Any way to know how much would be the right amount?

  • Cullen Roche

    Not necessarily spending. Tax cuts would work fine as well. Here’s what I said in the latest QA:

    if we use Okun’s Law (which is not terribly accurate) we can assume that with an unemployment rate 4% above the traditional full employment rate of 4% we likely need another $800B in the deficit. So let’s start with a tax cut that big and see how things progress over the next 2 years. My guess is our economy would be well on the way to a sustainable recovery.

  • Patrick

    “It’s abundantly clear by now that the many hyperinflation and even high inflation theories following the various government policies after the financial crisis, have been entirely wrong.”

    I’m not clear on how you come to this conclusion. The charts appear to show inflation climbing with both money supply, and QE2, in pretty good correlation. Those of us who believe high inflation or hyperinflation think it will come due to government policies. The association between the policies and inflation seems to have been borne out. So the real question is, when the global economy turns, what will be the policy actions? There are basically 2 possibilities, austerity or easing. If it’s austerity obviously there won’t be inflation, but since it will most likely lead to a deflationary depression. Since the current leadership is terrified of deflation, and has already shown what it will do in that situation, those of us who believe in high inflation believe that we will first see deflation, which will be followed by significant easing, which will ultimately result in runaway inflation. Whether it’s just high (20% per annum or more), or hyper is relatively unimportant to me.

    No determination of which camp is right is valid until the US is back to a sound and sustainable growth based on fundamentals and markets that are not manipulated.

  • http://na Torch

    Yes, what we need is big bags of money dumped on everyone. That will fix both the markets and the economy. What a delusion!

  • Windchaser

    The charts seem to show M3 pretty flat. It’s the first derivative of M3 that’s dropping – both charts show the M3 growth rate at ~2.5% and decreasing.

    In other words, it’s not correct to say that M3 is plunging.. at least, not yet. It looks like M3 growth is dropping at about 0.5%/month, so if the current trends continue, we should be hit 0% in about 3-6 months, and experience deflation thereafter.

  • VII

    Isn’t it time for our monthly “Gold Bubble” public debate?

    Gold Bubble…then double dip recession talk….then will the Fed launch QE3.
    The fed launches QE3 and we move to phase 2.

    Gold Bugs claim victory over the gold bears…the Stock Bulls tell the gold bugs stocks are better and claim victory over both. We then all argue while the SPX goes to 2,100 as the Fed launches succesive QE3,4 and 5 at once just for good measure.

  • rhp

    not saying you’re not on the right track, but the deficit spending would have to end up in the hands of the 99% and not continue to be concentrated in the upper 1% as has been the trend. Also, don’t you think foreign market viability is also a very important consideration in our return to economic prosperity? This goes to the root of your whole “decoupling” argument.

    Bottom line: I think you are correct that deficit spending helps, but incorrect in thinking you can predict amount of deficit spending and economic upturn. The above mention variables can swamp out the single factor of deficit spending…..



  • rhp

    oops! shoulda said “tax cuts” as opposed to deficit spending, but to me, similar…….

  • rhp

    VII, I think your sequence is off. No gold takeoff UNTIL QE3 is announced. Gold rises now based on perceived deterioration in fiat currencies. No central bank intervention…no gold takeoff. Gold and stocks will then enter close correlation again because of weirdly different psychologies driving both risk on behaviors. Kinda like the bootleggers and the Temperance Union…….

    Both stock bulls and gold bugs can claim victory…… But to me, unless economies of the world actually DO recover, the victories are short lived and both crash.

    Until we get stock market gains based on fundamentals and not central bank interventions we will not see negative correlations between gold and stocks…

    my 2 cents…

  • Patrick

    I believe deficit spending works, but is too dangerous to use at the current debt levels.

    We’re already deficit spending to the tune of 8-10% of GDP, adding another $800B per year would bring that up to about 15% of GDP. After two years of that our debt would be around 130-140%, and we’d still be spending at a deficit of 8-10% after that, probably higher due to increased debt service costs.

    That is the catch 22 of our current situation, the best solution to the problem is not viable as it only creates a bigger problem in the near future.

  • VII


    I was just messing around –

    My head is filled with what to do when X shows up and how to tell if I’m wrong. But trying to get some of these set ups right when outside forces are allowed into the markets keeps you on your toes.

    It is part of the evolution of markets to become free once again. Like all slaves to any master…the will to be free will always win out. It takes Monetary Men messing with Markets for them to become free again.

    How do you get rid of speculators? You let them speculate. You don’t protect and try and regulate them. The best way for Central Bankers to get rid of deflation is to allow deflation. You must go down to go up. The best way for Central Bankers to lower unemployment….I wish I knew. But it’s not to target the Russell or SPX. Best way for central bankers to ensure stable markets is to allow them to become so unstable…both the central bankers who’s polices led to this instability as well as Excutives, Investors and shareholders who sat idle why better decisions should have been implemented all fail. When they lose their capital…all the good investors who took care of capital will come in and take over. Until you let them come in with the “good money” that has real skin in the game….it’s all fluf and BS.
    In my opinion.

  • VII

    TO follow up on my own post… as a total aside.

    I’d like to congratulate the Leaders who got together to form college Footballs final Four football playoffs.

    It may not be perfect when it’s done…but they moved in a direction to rid the system of “some” of the greed and self serving interest. How much money they receive now may be the reason why…but…I applaude them for trying to create something now that allows free markets to decide who is and isnt’ the best. In the end the best team should be crowned.

    It’s a start and hopefully one that continues into our markets here and in Europe. I know with todays sell off were closer.

  • anon

    Patrick, Cullen’s point is that the high/hyper-inflation arguements have been based on “traditional” views of how the monetary system work. These are based around:
    – banks lend from reserves
    – the reserves come first
    – THE PROCESS IS AUTOMATIC – i.e. if the FED creates the bank reserves the money will start flying out of their vaults automatically!

    If I said in 2007 to a person who believe in these traditional rules that the FED is going to TRIPLE its balance sheet buying bonds and “printing money” over the next few years, but it won’t be all that inflationary, that person would have said “nonsense – the inflationary implications of such a reckless thing are massive and its certain it will quiclky lead to hyperinflation”.

    Clearly this has not happened. Many are still keen to say “oh you wait, its still coming and it will be terrible”. I however prefer to focus on the “WHY” – are there alternative theories on the monetary system that better explain what we’ve just witnessed. Chartalism/MMT/MMR type theories have done an excellent job at explaining things. As well as explaining why Europe is a mess and why Japan can borrow for 10 years at near-zero with 230% debt to GDP.

    You’re welcome to take the “oh you just wait” view like Mark Faber etc or you can work really hard to understand why these “traditional” views may be wrong in the modern world…

  • http://na Torch

    The Fed is attempting to break the supply/demand curve we all learned in business school by trying to defeat deflation by keeping prices high while demand weakens. This is a sure loser.

  • Chuck

    But MMR/MMT does not really care about total debt in relation to GDP. As an economy grows over time debt must grow over time. I have not seen any alarm over Japan’s 200% debt to GDP. I don’t know if there is some max limit that would cause MMR/MMT to be alarmed because even if someone said “well at some point interest payments would swamp production capability” I guess you could just print more money (which are just points on a scoreboard) to fix it.

    I think the only max pain point for a MMR/MMT person is when interest payments on debt swamped the production ability of an economy hence creating inflation above where it would be comfortable. I don’t know if that is at 400% debt to GDP, 800%, 1500% or 2000% but we’re not close. Neither is Japan.

  • rhp

    “You must go down to go up” ahh, the teachings of Lao Tzu as grasshopper learns at feet of Master VII! “To be made straight, first you must be bent….”

    lol, I enjoy your messing around….



  • Patrick

    It’s all about interest rates, Japan is still able to muddle along, but their economy is in the trash, over the last 20 years they haven’t had a single year where their GDP grew above 2%, and the average has been about 1% per annum. And most of Japan’s debt is held internally, so they have much more power to keep interest rates low, but that won’t last forever.

    The U.S. does not have the luxury of internally held debt, and while we have a reserve currency which allows us to keep rates low, but that won’t always be the case, and the more debt, and the higher our deficit, the less attractive our currency looks as a reserve.

    My point is that there is a level at which the debt becomes too much, and although there’s no exact number, and it changes from country to country. I think Japan is the best case scenario, and we will not likely be able to get to 200% (in my belief). On the other hand, I believe Japan has passed the point of no return and it will end badly for them, while we still have time to mend our ways, but the more we deficit spend, the closer we will get to the same situation as Japan.

  • Patrick

    I’ve read MMT/MMR theory and I don’t buy it, some of it’s useful, but to me there are some gaping holes that are just glossed over. Regarding 2007, The feds actions WERE inflationary, but conducted in a deflationary environment, so you get mild inflation as the result. Nothing shocking there, and it’s certainly not proof that high inflation doesn’t result from types of actions.

    QE2 happened and all commodities shot up, had it continued as many wanted, it would have been worse, but they stopped it so the high inflation environment ended. This high inflation was destabilizing so much so that it caused the Arab Spring, which is poorly named because nothing seems to have improved in the Middle East, and by many counts things are worse than before.

    The charts presented show a pretty strong correlation between FED easing actions, and inflation. The FEDS actions are inflationary, and they are becoming less and less effecting, while at the same time, the problems we are facing are getting bigger. Hence the theory that there will be a recession, followed by deflation, which will be responded to by the FED with massive easing as they believe they have inflation under control, and when they find out that they don’t, it will be too late.

    If somehow they are able to get things under control without triggering hyperinflation, then interest rates will go up and the U.S. gov will be unable to service it’s debt, meaning either much higher taxes, significantly reduced spending, or money printing. And the inflationary camp believes that the politicians will be unwilling to raise taxes, or cut spending, enough and will start printing, which will eventually result in high inflation. Once high inflation gets a hold, the only way to prevent it is to raise interest rates higher than inflation, which the U.S. will be unable to do due to the high debt load.

    It’s not going to happen tomorrow, but it is going to happen. The debt load is too high, and the political will to take the necessary steps to deal with the debt is too low.

  • Cullen Roche

    MMR is totally different from MMT. MMT is really just a policy prescription based on the state theory of money. MMR totally rejects these ideas. You might want to read my primer again since it’s been updated to account for this fact.

    I would agree with you that the govt’s actions have been inflationary and appeared less so only because we’ve been in a deflationary environment. But this was not mainly due to QE. It was mainly due to the fiscal aid and the Fed’s loan programs which stopped massive defaults from occurring.

  • Patrick

    Agree 100% with your second paragraph, in my opinion all the QE to date has paled in comparison to the other aid and loan programs. I’ll re-read your MMR changes as it’s certainly been a while since I last read it.


  • zebra

    rent and house price has gone up a lot.. is that inflation? these are probably the largest portion of most household’s spending.

  • Bond Vigilante

    Is this meant to convince me, we’re not approaching Hyper-/High inflation ? I don’t need to be convinced. One look at the CRB index since early 2007 is enough. The CRB index this year didn’t take out the 2011 high. So, where’s the inflation ?

  • Bond Vigilante

    I am happy to re-start this discussion. Gold isn’t in a bubble yet. But I use the 1979 scenario where gold went through the roof and in 1980 it came back down to earth. And I already have price target where gold will/could peak. And no, I am NOT going to tell you what that number is.

  • JH

    You can beat the “no inflation” drum all you want, but the people who pay the bills know that is complete BS.
    Government reports and charts are a lame argument compared to the actual experience of the people who are writing the checks and paying the bills.
    Perhaps this should be your next article title..
    “Who are you going to believe? Me, or your lying eyes.

  • Dunce Cap Aficionado

    Just to be clear, does your definition of Hyperinflation somehow reflect ‘runaway inflation?’

    Also, you are of the belief that ‘high levels of inflation’ can lead to Hyperinflation, yes? Just trying to get a grip on your view.

  • Dunce Cap Aficionado

    I pay the bills and have no F’ing clue what you’re talking about.

  • http://na Torch

    Don’t you go to the stores to buy anything? Groceries cost more. Clothing is up. Look at the quality of the clothing. Can’t you see that goods are being made more cheaply and don’t last as long. Gas is still not cheap by any means. The inflation indexes used by the government were re-jiggered to underestimate inflation so that the country could go on a credit bing without the perception of inflation. That’s why they stripped out food and gas from the core inflation numbers… they could justify lower and lower interest rates. When home prices went thru the roof was it reflected in the inflation data? Nope! Go to the store buy some groceries. Look around. Are the prices staying the same? Are you getting the same or better quality goods for the same number of dollars as last year? Don’t just listen to the government…use your eyes and ears too.

  • JH

    Well see if you can follow this; beef is up 16% in 2 years, healthcare is rising at 7% a year, education costs are skyrocketing. Everything continues to go up.
    Worldwide inflation statistics are running in the 7% to 9% range, and yet here in America we continue to feed the people the propaganda that inflation is 2%.
    The use of substitution and hedonics in the calculations of inflation are a blatant lie and a shameful attempt to conceal the truth from the taxpayers in order to support a continuing policy of deficit spending and a debt based economy. The beneficiaries of this policy are clearly the banks and Wall St who continue to prosper at the expense of the American people whose net wealth continues to decline.

  • Pierce Inverarity

    We would all love to have discussions with you, but you do not discuss. You simply reiterate your points and refuse to answer questions.

  • Pierce Inverarity

    Cullen ALWAYS puts the Billion Price Project on there. The numbers from this do not significantly differ from the government numbers.

  • Bond Vigilante

    This is where I stand today:
    1. (Hyper-)Inflation is the situation where the value of money decreases, against a number of asset classes. We had inflation from about 1945 up to 2007. And that includes price inflation (as a result of shortages & (short term)speculation).
    In the 2nd half of the 1960s and 1970s we had A LOT OF price inflation. From 1981 up to 2007 we had asset inflation (the “good”” inflation) in stocks, bonds and real estate.
    2. Deflation is the situation where the value of money increases relative to a whole range of asset classes.

    3. Hyper-Inflation can only occur when a central bank starts to literally print money (banknotes) precisely because the credit/debt creation mechanism is broken (like today). But in the current deflationary environment people who get their hands on those banksnotes will use those notes to pay down their debt (=deflation).

    So, that’s why Hyper-Inflation only has a chance of kicking in when A LOT OF credit/debt has been destroyed. Because then people will start using those notes to buy stuff again, instead of paying down debt.

  • Bond Vigilante

    1. “”Conquer the Crash”” (Robert Prechter, 2002 & 2010).
    2. Hugh Hendry (he read “”conquer the crash””).

    I can recommend the book to everyone.

  • http://na Torch

    Cullen I appreciate your web site and the information presented but with all due respect your gauges are irrelevant unless the fed starts to use them to set monetary policy. Just like the opinions of myself and everyone else out here in the general public they are irrelevant. The government is in collusion with corporations and wall street who will always want cheaper credit. The government wants prices to go up as they enjoy the tax revenues from the price increases. If prices go down their tax revenues decrease and they are forced to cut spending (state and local govts. in particular). All of this collusion is now working to the detriment of the economy and our society. Young folks today are more focused on their “credit score” than on saving money and building a solid financial foundation for themselves. When I was a young man I never thought about my credit score, nor about how much credit I could get. Now days it’s people’s primary concern. What a crazy mind set. Why can’t people understand that when they take credit they are selling themselves to the person they are borrowing money from and becoming their slave. When was the last time you heard someone use the phrase………”Neither a borrower or a lender be.” Excessive easy credit is ruining our economy, people’s person lives, democracy and our work ethic.

  • Pierce Inverarity

    Bond Vigilante = Robert Prechter??

  • Bond Vigilante

    Robert Prechter was born in 1949. I am MUCH younger and I don’t live in Atlanta, GA.

  • Bond Vigilante
  • Bond Vigilante
  • B Ferro

    What makes gold go higher from here? This is arguably a panacea-type environment from a fundamental perspective for the metal and yet here we are, ~20% off its highs. The sell-off of note in the 90s tech bubble, that being 98, was short and fast and was punctuated by immediate accumulation thereafter pushing to new highs. This hasn’t happened yet in gold – it’s just a slow, grind lower, almost as if there’s no interest in the metal. Also, if you look at gold historically, as opposed to silver, it actually takes some time for the thing to fall. Even in the late 70s / early 80s bubble top, it took ~2 years for the thing to decline 50%. I would say it ~20% lower in less than year puts us right on target.

  • B Ferro

    Great post – I’m incredibly frugal myself. The most expensive thing I’ve purchased in the past three years was arguaby a pair of retro Air Jordans off ebay. I totally agree with the mindset that every dollar spent is an equivalent amount of your freedom squandered. Nothing more exciting than saving and not spending.

  • Dunce Cap Aficionado

    “The use of substitution and hedonics in the calculations of inflation are a blatant lie and a shameful attempt to conceal the truth from the taxpayers in order to support a continuing policy of deficit spending and a debt based economy”

    Hedonics calculations would be a blatant lie if the products/services never advanced in underlying value. That is to say, if healthcare never improved in quality (“advanced”) then hedonics would not apply. Why compare Healthcare from decades ago with today as if they are the same thing? Not even remotely the same animal. Even a few years ago- 3 years ago an inoperable brain tumor on the brain stem was literally a death sentence, now drugs exist that work to stop the growth of and sometimes reduce the tumors size taking the patients expected life span from 3-6 months to an unknown time as those on the drug(s) are still alive and kicking! And that’s just ONE example of an advance in healthcare. Do you think that’s the same exact product, worth the same exact underlying value? They’re wildly different. This same principle (which is the basis for hedonics) applies to any and all products/services. Hedonics only doesn’t apply (or is a ‘lie’) if the product or service is unchanged in underlying value. (Yes, the cost of something goes up as its value goes up…) Would you say a TV from 2000 is worth the same underlying value as a TV from 2012 (yes, even if you could transport the TV from 12 years ago right off the assembly line to your living room in 2012)? No, they have different values, and that is what hedonics attempts to regulate, that inflation gauges over time do not have a way of calculating that change in underlying value.

    You’ve named 3 things that have gone up in price, beef healthcare (wild advances as tech advances as does R&D so the product’s value is advancing along with the cost- not inflationary) and a non-specific statistic on education. Education has been on an unhealthy incline in price for quite some time (especially considering the product) and has nothing to do with what most people who claim there is unhealthy inflation believe to be the cause- it predates their timeline, but I digress- You’ve named 3 items, the Billion Prices Project includes those three things plus 999,999,997 other things and you think you’ve made your point?

    For years others have made the same point your making now on this very site with gasoline or other core expenses (to households) as the key to the argument. They use the same rhetoric including the ‘pay the bills’ line (its tired, stop it). Until you have data a little more varied then 3 items, few who don’t already agree with you will ever be swayed. NOW- this is not to say that there have not been increases in prices to core expenses to households that have made difficult economic times more difficult. NO ONE has claimed that. As the bill payer I’ve made changes to my standard ‘expenses’ to cope with difficult economic times. I wish I didn’t have to, I wish I was getting paid what I ‘deserve’ so on so forth, just like you. But to claim that because of this situation, there is inflation (or as you insinuate high, levels of inflation) across the entire economy is unfounded.

    I know we’ll never agree on any of this, I’ve had this conversation with countless posters here over the last 2 years, as have many others. 99% of the time no one changes anyone’s mind. But let me ask you should you wish to continue the discussion- Do you believe the US is headed for Hyperinflation? Or do you simply see further economic downturn due to “high” levels of inflation?

    I’ll leave you with this- I bet we could both agree that even warranted increases in prices based on increases in underlying value are not a ‘great’ scenario if wages are not keeping pace and/or stagnant.

  • Aar Bee

    What do you mean.. 70% of the US debt is domestically held.

  • http://na Torch

    Beef going up 16% must be due to new improved beef!

  • Dunce Cap Aficionado

    That is an excellent way of thinking about saving.

    My problem is I like exhibiting my freedom :)

  • Leverage

    You’re assigning central banks power that CURRENTLY they don’t have.

    Credit capacity of society and economy has been reached, lower rates are not going to propel credit growth in any significant and temporary way.

    This is something a lot of market participants do not get (yet), that central banks are powerless until they start to create transmission channels to the real economy that work in the current situation (cheaper credit doesn’t add much), through fiscal policy or thought direct market manipulation (for example buying a shitload of MBS and instating the banks to lower principals in exchange).

  • Dunce Cap Aficionado

    Beef has high inflation over 2 years therefore the entire economy does; is that’s the argument you’re making?

  • http://na Torch

    No, but if food and energy are to be stripped from the core inflation data used by the fed because of their volatility. Then shouldn’t computers and electronics be stripped from the component as well as they drop like a rock in just a year after their introduction. What would this do to their core inflation numbers?

    My point is this: whenever someone tells you that something is very complicated there is an excellent chance they are tampering with the data. Fortunately for the manipulators, computers have enhanced their ability to massage data. There is an excellent book that use to be recommended reading in business school. The title is: Lies, Damn Lies and Statistics.

  • Dunce Cap Aficionado

    Neither the Billion Prices Project, nor Cullen’s personal guage, are compiled or used by the Fed. What reason does Cullen have to lie to you, or supprot the Fed possibly lying to you? He’s ripped the Fed repeatedly over other aspects of their operations.

    “For every complicated and subtle question there is a simple and straight forward answer, which is wrong.” H.L. Mencken

  • http://na Torch

    I do not accuse Cullen of lying. I believe he believes his data. I don’t, because my real world experience each day when I go into the market place tells me otherwise. Are your grocery bills going down? Are you getting more for your dollar? Are the products you’re buying lasting longer and of better quality? My pocket book tells me there’s inflation. Does Cullen go out into the world and gather his data himself or does he derive his data from other statistics that someone else has compiled? Does Cullen and other statisticians have a bias when compiling data or are they above such things? You will have to answer those questions for yourself….as you know I am wrong.

  • Boston Larry

    Let me see. The most expensive thing I buy is a house. My son is buying a house at month-end and I can’t believe how cheap it is, how much house he is getting for his dollars. No inflation there. Second most expensive: a car. Not falling like housing, but also rising very slowly. The newest model of the 2 yr old car I own doesn’t cost more than 2 or 3 percent over what I paid for mine. Maybe 1.5% a year. The cost to heat my house has gone down over the past two years. What we seem to have is inflation in a few pockets of the economy, but not overall. Definitely very little inflation in wages and salaries.

  • Johnny Evers

    Some interesting questions raised here.
    For one, do advances in technology negate inflation? For example, TV used to be free. But a set, plug it in. Now, some people pay $50 a month to watch cable TV. Is that inflation, or an increased standard of living?
    Health care used to be cheap, but now we pay more, but a lot of that is to keep old people alive another year or two. Does that add to my standard of living? Or is inflation? (It’s worth noting that for all we spend on health care, our outcomes are no better than countries that don’t spend as much.)
    A ticket to the bleachers at Wrigley Field used to cost me $2.50, beck when I was making 5 bucks an hour busing tables. Now a bleacher ticket costs $21. Are the Cubs any better than it was in 1979?

    In general, I do think the fix is in when it comes to government reporting of inflation. I can very easily look at my Quicken Budget and see that I am spending more on the same things I bought last year.

  • Dunce Cap Aficionado

    “Are your grocery bills going down? Are you getting more for your dollar? Are the products you’re buying lasting longer and of better quality? My pocket book tells me there’s inflation.”

    No, my grocery bills aren’t showing me inflation (actually cut back on red meat in September 2008- sheerly by coincidence though, I freaking love steak but needed to lose weight ;), I get most of my protein from eggs & lentils now). That doesn’t mean your’s aren’t, though. So there’s inflation in your groceries, that means there’s high levels of inflation to you across the entire economy?

    Am I getting more for my dollar?- sometimes yes, sometimes no.

    I don’t know you’re any more wrong than you know I am (that line comes curteousy of 3.5 years of speaking to lawyers on a daily basis). What I have decided for myself is that cost-push inflation in commodities that greatly affect the bottom line of a household (which I personally am not seeing to the degree you are) is not the same as inflation across the entire economy, so call me crazy.

    I’m going to repost something I said to JK since we seem to be going in circles, “I bet we could both agree that even warranted increases in prices based on increases in underlying value are not a ‘great’ scenario if wages are not keeping pace and/or stagnant.”

    (Friendly note, the reply button, shaped like an old return arrow key symbol, in the bottom right of each post makes the coversation a little more ‘trackable’).

  • Dunce Cap Aficionado

    I think that’s a very fair assment Johnny.

    My point has been that higher expenses in a household’s budget does not an economy wide trend in all prices make.

    Also, I don’t think I fully agree with “For one, do advances in technology negate inflation?” I think its more along the lines of “Is it fair to compare the market price of two products that are not identical without at least noting the difference?”

  • Dunce Cap Aficionado

    JH* not JK.

    Too many JX(X) commenters here….

  • Patrick

    And Japan’s is at about 95% held and purchased domestically. In other words the U.S. has six times as many buying debt externally in relation to GDP, that’s a big difference.

  • Cullen Roche

    The Primary Dealers are required to bid at Tsy auctions. Your concerns about there not being enough demand are unfounded.

  • Pierce Inverarity

    I don’t care.

  • http://na Torch

    Sure was fun to stir the pot. See how upset people get when you question their biases? We all want so badly to believe. Good diet choices too. Myself, I’m a vegetarian but even the cost of black beans and lentils have gone up.

    By the way, “the most expensive thing you buy” your home is not included in the fed’s core gdp data otherwise the fed would have been forced to intervene during the hugh run up in home prices during the housing boom. That would have possibly prevented the housing market melt-down. Oops more bias coming out. Have a nice weekend all.

  • Dunce Cap Aficionado

    Cullen includes it in his data ;) have a good weekend torch.

  • Patrick

    MF Global & Lehman Brothers were once primary dealers. How useful are those requirements when the entity no longer exists?

    I didn’t go through the entire list, but it looks like more than half of the rest are foreign controlled banks.

    The majority of the rest are too big to fail banks who will only survive the next downturn by massive bailouts by the U.S. gov.

    Even if they were all sound businesses and they all intended to stay primary dealers, are they required to bid at amounts the U.S. government determines? If not then they would bid in a sensible manner for their profitability, and if yes, then the whole thing is a farce.

  • Bond Vigilante

    Interest rates going higher, anyone ? Everyman and his dog on this blog seem to think rates can only go lower and seems to positioned accordingly. So, I wouldn’t surprised to rates go (much) higher. Too many investors are on one side of the boat. Investors seem to have poured LOTS of money in bonds and have pushed rates this low.

  • Bond Vigilante

    4. Rising interest rates from 1945 up to 1980 is actually deflationary because the value of T-bonds/debt falls against money. But in the same timeframe that deflation was offset by other inflationary forces elsewhere (like rising wages).
    5. Interest rates falling from 1981 were actually inflationary because the value of bonds rose relative to money.
    6. If/When interest rates (on BUNDS, T-bonds, Gilts, staatsleningen, etc.) start to rise (now ??) then that would be the MOST destructive DEFLATIONARY blow stacked upon the already giant pile of deflationary forces.

    Interesting video:

  • Bosscauser

    Chart oil prices and you will see over the years that “inflation” pretty much goes hand in hand with the rise but not the fall.

    Isn’t because prices don’t fall because we continue pretty much buying the same things over and over and become used to paying more than previously. And as employers continue to pay higher wages they are, at best, reluctant to lower their prices. So, the effect is we pay more, substitute, innovate new or, horrors, do without.

    Also,it’s my understanding that bankrupt, scared, unemployed or tapped out consumers is not a prescription anytime soon for much inflation let alone hyper-inflation.

    Doesn’t anyone find it interesting that we have been hostage to the oil market for so long we no longer can put our finger on the true cause of our economic problem… we can’t live with or without the stuff, LOL

  • jjames

    sometimes i think cullen’s mad because he missed the boat on gold.

    cullen’s next big prediction: “the world is not coming to an end”

    hyperinflation is more rare than a stock market crash. that doesn’t mean it can’t happen, or won’t. to keep patting yourself on the back because hyperinflation hasn’t occurred yet is silly.

    its a good thing other currencies around the world have devalued as well, and that a sluggish economy has kept prices reasonable.

    but there’s a high rate of inflation in a poor economy. that’s still undesirable.

    how would that inflation graph look if they calculated the cpi using the same method as in the 80’s?

  • jjames

    ………….and no inflation? lmao!

  • nwcynic

    There is inflation – go to any grocery store and you’ll see it. certainly my cellphone bill isn’t any lower than it was 5 years ago. But that said, why hasn’t hyper inflation taken hold?

    Simple- banks are not lending to private businesses. Show me 1 SMB that has received an increase in lines and I’ll show you 100 more that are begging for it.

    As a small business owner with great margins (25% EBIDTA) I can’t find a single bank wiling to fund growth. If I can’t grow, I can’t hire more people, nor turn more money back to the economy, etc.

    All the money that has been printed and given to the banks has gone to shore up their balance sheet & to fund speculative investments. If you look at all the banks and take their % of investment verses % of loans – the % of paper investments has gone thru the roof while loans outstanding have continued to shrink.

    We’ve liquified the banks but we are starving the private business economy. this is one reason our economy is slowing and why we don’t have hyper inflation.

  • Windchaser

    Y’know, I’d find the inflationistas a lot more credible if they actually recorded a broad spectrum of prices over a period of time, wrote them down, then published them. Otherwise, I suspect there’s quite a bit of confirmation bias – they notice, and remember, increasing prices far more often than they do decreasing prices.

    Cognitive biases often ruin casual analysis attempts.