Visualizing Global Inflation Rates

Here’s a follow-up on yesterday’s US CPI release.  The following chart shows the year over year changes in global inflation.  I’ve included most of the major economies including the USA, China, Japan, UK, and EMU.

Consistent with the rather stagnant global economy, inflation rates appear stagnant as well.  It’s clearly not just a US or European phenomenon.  And it’s clearly not just a BLS data conspiracy.  It’s just a world of low inflation largely due to weak economic environments.

Chart via Orcam Investment Research:


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.

More Posts - Website

Follow Me:

  • TheArmoTrader


  • frederick

    Its a global conspiracy!

  • Explorer

    Hey Cullen,
    Why not also add other English speaking countries to all your charts etc?

    If India’s middle class read you at the same rate as US middle class you could probably double your readership!

    And we in Australia love to see ourselves included in international comparison!

  • Nils

    Get your own Cullen!

  • Alberto

    If wages are not growing in real terms and inflation is low but not zero will you be happy ? Of course you are if you are a rentier living on your capital gains until they last. But if you’re Joe the Plumber probably not. This is a must read commento from Tim Morgan a highly respected economist with Tullet Prebon:

    Fact is that people prefer loosing time speaking about hyper something instead of speaking about little problems, those little problems that make the average citizen 2% poorer every year, year after year.

  • bart

    Quick – stop all the seniors living only on Social Security from getting rich since the BLS overpays them so much via CPI adjustments!

  • bart

    The IMF world inflation data is quite different.

    Emerging countries are currently running at 6.2% inflation, up from 1% last June.
    The world is currently running at 3.4% inflation.

  • flow5

    This is just so you never make a forecasting error again. The first column is the roc in the proxy for real-output (exactly 10 months for the last 100 years). So stocks are still a buy.

    The second column is the roc in the proxy for inflation (exactly 24 months for the last 100 years). So gold is a sell.

    The surrogate for MVt is required reserves on the BOG’s H.3 release, ignore all seasonally “mal-adjusted” figures. This concept represents a trillion dollars of proprietary “intellectual property”.

    The roc in the proxy for inflation peaks this month.

    2012-09 ,,,,,,, 0.033 ,,,,,,, 0.158
    2012-10 ,,,,,,, 0.018 ,,,,,,, 0.150
    2012-11 ,,,,,,, 0.025 ,,,,,,, 0.138
    2012-12 ,,,,,,, 0.038 ,,,,,,, 0.125
    2013-01 ,,,,,,, 0.043 ,,,,,,, 0.148
    2013-02 ,,,,,,, 0.043 ,,,,,,, 0.155 spike
    2013-03 ,,,,,,, 0.053 ,,,,,,, 0.138
    2013-04 ,,,,,,, 0.043 ,,,,,,, 0.133
    2013-05 ,,,,,,, 0.033 ,,,,,,, 0.135
    2013-06 ,,,,,,, 0.025 ,,,,,,, 0.128
    2013-07 ,,,,,,, 0.025 ,,,,,,, 0.108
    2013-08 ,,,,,,, 0.018 ,,,,,,, 0.070

    The roc in the proxy for real-output is still climbing. Stocks should resume their upward path after the seasonal pressure ends in the next 2 weeks.

    “Bankrupt you Bernanke” is directly responsible for this confiscation. It is axiomatic that gas prices will peak as the rate-of-change in monetary flows MVt (our means-of-payment money Xs its transactions rate-of-turnover) peaks. The roc in the proxy for inflation (a 24 month cummulative figure), spikes in Feb. This is inviolate & sacrosanct. It is the “Holy Grail”. It needs no disclaimer.

  • DAB


    Your looking at the GDP chart not inflation.

  • flow5

    See: “Primary Dealer Cash Shortage?” by ZeroHedge Contrary to ZeroHedge stocks are going to go higher.

    The seasoanls fool people. See how the effective FFR has been ticking up? (.13%->.15%)

    This indicates there is some pressure in the interbank market for additional required reserve balances. You wouldn’t think that would be a problem with so many excess reserves in the system. Obviously not so when the Fed drains (mops up) reserves after the holidays.

    ” * Indicates the last day of a maintenance period”

    02/20* 0.15 0.04 5/16 0.04 0.00 – 0.25

    02/19 0.15 0.05 5/16 0.04 0.00 – 0.25

    02/18 Holiday – No data.

    02/15 0.16 0.05 5/16 0.04 0.00 – 0.25

    02/14 0.14 0.05 5/16 0.04 0.00 – 0.25

    02/13 0.14 0.05 5/16 0.04 0.00 – 0.25

    02/12 0.13 0.05 5/16 0.04 0.00 – 0.25

    02/11 0.14 0.09 5/16 0.04 0.00 – 0.25

    02/08 0.14 0.05 5/16 0.04 0.00 – 0.25

    02/07 0.13 0.10 5/16 0.04 0.00 – 0.25

  • flow5

    I.e., “Bankrupt you Bernanke” is incompetent. And everyone’s got the wrong idea.

    Seasonal adjustments have their roots in the fallacious “real bills” doctrine:

    “In the original federal reserve act of 1913 “It was anticipated that credit extended by the Federal Reserve Banks to commercial banks would rise & fall with seasonal & longer term variations in business activity”

    And: “From the beginning, the Federal Reserve was reasonably successful in accommodating the seasonal swings in the demand for currency—in the terminology of the act, providing for “an elastic currency”.”

    The FOMC is tasked to provide yearly seasonal adjustments as business activity waxes (the FRBNY’s “trading desk” injects reserves) & wanes (mops them up). And the problem is the FOMC doesn’t recognize that the theory & mechanics are the same for seasonal mal-adjustments & the “real Bills” arguments.

    The Fed screwed up during the holidays. They always do. This year is worse than others. This delays any concerted effort to manage “expectations”. When will the Fed be “back-on-track”? – probably, once again, thru sheer luck (or when both inflation & the economy simply “stall-out”).

    Monetary policy objectives should be formulated in terms of desired roc’s in monetary flows (MVt) relative to roc’s in real-gDp. Contrary to economic theory, & Nobel laureate, Dr. Milton Friedman, monetary lags are not “long & variable”. The lags for monetary flows (MVt), i.e. the proxies for (1) real-growth, & for (2) inflation indices (for the last 100 years), have been mathematical constants.

    However, the FED’s target (interest rates), is INDIRECT, varies WIDELY OVER TIME, & in MAGNITUDE. What the net expansion of money will be, as a consequence of a given injection of additional reserves, nobody knows until long after the fact (& since Oct 2008, the Fed’s new IOeR policy has emasculated this “open market power”). The consequence is a delayed, remote, & approximate control over the lending & money-creating capacity of the banking system.

    The money supply (& commercial bank credit), can never be managed by any attempt to control the cost of credit (i.e., thru pegging the interest rate on governments; or thru “floors”, “ceilings”, “corridors”, “brackets”, etc). In other words, Keynes’s liquidity preference curve is a false doctrine.

    Irving Fisher’s “equation of exchange” is a truism: roc’s in MVt = roc’s in n-gDp. Roc’s in bank debits (our means of payment money times its rate of turnover-MVt) can serve as a proxy for all transactions (aggregate monetary purchasing power). I.e., without the IOeR policy, member bank legal reserves should grow at no greater rate than would allow rate of increase in monetary flows to equal the rate of increase in real output.

    There is evidence to prove that [roc] in nominal-gDp can serve as a proxy figure for [roc] in all transactions (the R2 was always > .95 up until the Fed discontinued the G.6 debit & deposit turnover release in 1996). Rates-of-change in real-gDp have to be used as a policy standard. Don’t need a disclaimer. This is, & always has been, the “Holy Grail”.

  • flow5

    I give you the Gospel – a trillion dollars of proprietary “intellectual property”:

    Not “seasonally mal-adjusted” required reserves:

    1/17/2007 ,,,,,,, 38275
    1/31/2007 ,,,,,,, 47566
    2/14/2007 ,,,,,,, 39070
    2/28/2007 ,,,,,,, 43272
    3/14/2007 ,,,,,,, 38149

    These are of course the “true ups”. But if you look at the original figures you will find that Bernanke drained $7b of reserves in one reserve maintenace period. That’s fundamental. So you know gold & stocks were going to fall in response. My post said “if gold doesn’t fall there’s a new paradigm”.

    Some people think Feb 27, 2007 started across the ocean. “On Feb. 28, Bernanke told the House Budget Committee he could see no single factor that caused the market’s pullback a day earlier”. In fact, it was home grown. It was the seventh biggest one-day point drop ever for the Dow. On a percentage basis, the Dow lost about 3.3 percent – its biggest one-day percentage loss since March 2003.

    MMT’ers pontificate: “provide the required reserve levels as a matter of automatic operational response”

    Stupid. Where was the automatic accommodation in Feb 2007 when the Fed drained reserves by 7b & stocks fell 3.3%.

    In the latest biweekly reporting period the roc in legal reserves hasn’t decelerated. Don’t fight the Fed (required reserves)

  • Cullen Roche

    I’m not an MMTer so move on. Thanks.

  • flow5

    Bart you could learn something here.

  • flow5

    “I’m not an MMTer so move on. Thanks”

    So you disagree with JKH’s?:

  • Cullen Roche

    That’s not a MMT view. It’s the endogenous money view. It’s been around for a hundred years. And JKH is a Monetary Realism co-founder. He is most definitely not a MMTer.

  • bart
  • bart

    Cullen and I sometimes see eye to eye, and sometimes not.

    Our biggest issue is on CPI/inflation… and he’ll learn one day. -wink-

  • bart

    Keen has it wrong too, per the simple history & facts.

  • flow5

    Bart you should be able to help develop this:

    2012-12 110684 0.15 0.50
    2013-01 117329 0.17 0.59
    2013-02 117554 0.17 0.62
    2013-03 117554 0.21 0.55
    2013-04 117554 0.17 0.53
    2013-05 117554 0.13 0.54
    2013-06 117554 0.10 0.51
    2013-07 117554 0.10 0.43
    2013-08 117554 0.07 0.28

    Because the lags are fixed you can simply use Excel to calculate a roc ex-ante. You can’t analyze the roc in RR ex-post (because velocity & the FRBNY’s true ups distort the trajectory).

    You can get more sophisticated but its not necessary to tell where things are headed. E.g., the lengths between bank debits & RR are only identical (as the weighted arithmetic average of reserve ratios & reservable liabilities remains constant), etc.

  • Mike

    The popular/consenus opinion is that the ongoing efforts aimed at relative currency devaluation and super accomodation by worldwide central banks will lead to accelerating and potentially out of control inflation. Thus gold’s run over the last decade. I believe the exact opposite.

    The central banks are trying very, very hard to create inflation. They will not be successful. Ultimately the Deflation that they are trying to stave off will win the war, and we will have a long-term deflationary period, worldwide, until the next great War. Then the deck will get re-shuffled.

  • bart

    My current project backlog is about 2 months, flow5 – sorry.

  • flow5

    2013-02 ,,,,,,, 0.043 ,,,,,,, 0.155 spike
    2013-03 ,,,,,,, 0.053 ,,,,,,, 0.138
    2013-04 ,,,,,,, 0.043 ,,,,,,, 0.133
    2013-05 ,,,,,,, 0.033 ,,,,,,, 0.135
    2013-06 ,,,,,,, 0.025 ,,,,,,, 0.128
    2013-07 ,,,,,,, 0.025 ,,,,,,, 0.108
    2013-08 ,,,,,,, 0.018 ,,,,,,, 0.070 commodity prices bottom

    This is worth more money than anyone would ever guess.

  • Hans

    Duplicated comment detected ?

  • peter

    Dear Flow5 ,

    may i know what data you used and how you calculate the values in the second an third columns?

    2012-09 ,,,,,,, 0.033 ,,,,,,, 0.158
    2012-10 ,,,,,,, 0.018 ,,,,,,, 0.150
    2012-11 ,,,,,,, 0.025 ,,,,,,, 0.138
    2012-12 ,,,,,,, 0.038 ,,,,,,, 0.125
    2013-01 ,,,,,,, 0.043 ,,,,,,, 0.148
    2013-02 ,,,,,,, 0.043 ,,,,,,, 0.155 spike
    2013-03 ,,,,,,, 0.053 ,,,,,,, 0.138
    2013-04 ,,,,,,, 0.043 ,,,,,,, 0.133
    2013-05 ,,,,,,, 0.033 ,,,,,,, 0.135
    2013-06 ,,,,,,, 0.025 ,,,,,,, 0.128
    2013-07 ,,,,,,, 0.025 ,,,,,,, 0.108
    2013-08 ,,,,,,, 0.018 ,,,,,,, 0.070

    thank you

  • flow5

    “It may not be fast enough for some consumers, but the drop in pump prices is accelerating.

    A man pumps gas on February 4, 2013 in Miami, Florida. (Photo by Joe Raedle/Getty Ima …Retail gasoline prices are down a penny overnight to $3.74 a gallon for the national average on Tuesday, which is down 3 cents from a year ago. Last month, pump prices on average were the highest on record for February.

    Analysts said the gasoline price slide could continue.

    (Read More: US Oil and Gas Boom Is Taking Many by Surprise)

    “The savings could widen out to 20 cents to 25 cents per gallon this month,” said OPIS analyst Tom Kloza. “The expanding gap should come as much cheaper wholesale prices work their way downstream and are compared with very steep increases that were characteristic of March 2012.”

    In 2012, almost every March day saw retail gasoline creep higher.

    (Read More: Finding an Edge in America’s Booming Energy Market)

    Based on recent demand patterns, OPIS estimates that every penny of national savings on gasoline adds up to about $3.57 million per day.

    “If U.S. gasoline prices move to say a 20 cent per-gal deficit to last year, there should be about $71.4 million more daily spending power for consumers after they take care of their fuel needs,” Kloza said.

    (Read More: Tumbling Oil Prices May Have Further to Fall)

    So far the biggest year-over-year price drops have been in California, Indiana, Michigan, Oregon, and Washington. But gasoline prices in Colorado and North Dakota, for example, are still significantly more expensive than a year ago”

    Confirmation: Roc’s in MVt (the proxy for inflation) peaked in Feb