Agflation! 10 comments
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Stagflation: The classic 1970s term for high inflation (+6%), very anemic growth (0-2%)
Blahflation: Street Insight's Doug Kass term circa 2006 (video)
Stagflation Lite: was what NYU's Nouriel Roubini called it in June 2006;
Demi-Stagflation: My own term for elevated inflation and soft growth (May 2005)
Inflastagdeflation: Minyan Keven Depew's term for understated Inflation, stagnant wages and incomes, and price cuts in markets that are either highly competitive or experiencing weak demand.
To this list of clever wordsmithing, we add one more phrase, courtesy of Raymond James Chief Strategist, Jeff Saut.
That word is Agflation:
"These inflationary leanings were reflected in last week’s headline CPI figures (+0.7% in May), which were the second highest in 16 years, that is still not being reflected in the laughable “core figures” (+0.1%), begging the question, “Can this particular ‘conundrum’ continue?!”
Again, commonsense says NO, since the 25% increase in the Goldman Sachs Commodity Index over the past five months suggests that eventually commodity prices will bleed into the core readings.
This “agflation” has left grain prices at 10-year highs, stoking inflation fears in Europe and putting central bankers there on alert. Also adding to the agflation-agitations has been worldwide drought conditions, a fact that has not been lost on China, where foodstuff consumption accounts for a large portion of disposable income. Consequently, China has raised interest rates substantially over the last 12 months. Even Japan may have to join the international rate-rape since Japan’s 1Q07 GDP was revised recently to +3.3%, from 2.6%, implying that growth there is stronger than both here and Europe. If Japan raises rates, it would have wide ranging implications for the ubiquitous “carry trade” that drove usage of currency and stock derivatives up 24% in the first quarter of this year to an astounding $533 trillion, but that is a discussion for another time." (emphasis added)
As we noted this past weekend, the prices for commodities in general, and agricultural commodities in particular, had reached all sorts of highs: Wheat prices hit 11-year high; Oil Rises to Nine-Month High; Copper Gained; Gold, Silver Rise; Corn, Soybeans Rise; Cotton Extends Rally to Three-Year High; Cost of Gas and Food Rose Sharply Last Month;
The absurd list of what doesn't go into "core" inflation is long, and ever more ridiculously, getting longer: Wheat, Oil, Copper, Gasoline, Gold, Silver, Corn, Soybeans, and Cotton.
Oh, and education and medical care never seems to have much impact, regardless of the extraordinary price gains they have seen over the previous decade -- the past 5 years in particular.
Then there is the actual cost of Housing, not properly reflected in the BLS Consumer Price Index [CPI].
But other than all these items going up in price, there is no inflation.
>
Source:
“Curves”
Jeffrey Saut
Investment Strategy
Raymond James, June 18, 2007
http://tinyurl.com/2xtnjy
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"But other than all these items going up in price, there is no inflation."
Another phony statement which implies that somebody or some statistic is saying there is no inflation. In reality the headline number shows significant inflation and even the core number is always positive and also showing substantial inflation.
But somehow this guy thinks if he implies that others are saying there is no inflation, his foolish readers might actually believe it.
It really is astonishing the amount of deception buried in Ritholtz chatterings.
One might presume that much of it is self-deception, but as long as Barry believes that an audience believes his b.s., I guess he will keep piping it into the net.
John.
LOL
Dude WTF does that mean - excuse my French. There is no inflation??? Man we wrote better theses than this when we were in 9th GRADE!!!
How the hell do you stay employed making this type of statement? Who takes you seriously?
Equally astonishing is the amount of stupidity - wonder why the editors let this pass?
As always, 0 + 0 = zeR0! = NO VALUE ADDED
I have a suggestion to help you avoid future confusion about inflation:
Use the headline inflation figure.
Your repetitive argument that the core inflation calculation understates inflation is getting dull. And since the headline number is produced and reported in the same report, why don't you just use the headline number ?
As far as I can tell there is no clandestine and nefarious operation which is trying to hide the headline inflation number from delusional economic journalist bloggers.
Can't you find some other false problem to solve ?
John
Observing Barry's rantings for a couple of months now and looking at his educational background, I've come to some preliminary conclusions about his confused and self-serving arguments:
1. His background in mathematics suggests a gravitation toward problem solving
2. In order to satisfy a need to solve problems, he concocts problems that do not exist in reality and then convinces himself that he has an answer to the imaginary problem
3. He's probably a lone wolf, and doesn't really have anyone around him that cares enough to tell him he is full of it, so he continues to create false problems which only he can solve instead of identifying real problems with real solutions.
I will continue to observe the subject's online rantings for further analysis. Stay tuned.
John
Without getting personal, I think most of your inflation posts rehash each other. I know what's going on in energy and commodity prices every morning before I leave for work, but I buy lots of other things besides food and gasoline. Electronics are cheaper. My cars are cheaper (I buy used and get good deals). My beer bill is up from 25 years ago -- but by less than half my income.
You are guilty of the selective analysis you accuse the BLS of.
Thank you for reinforcing my main point: Anyone that is not unconscious does know that inflation is and always has been present in the U.S. economy (with the exception of the Great Depression).
Where Ritholtz (and you) seem confused is the ridiculous notion that it is somehow a hidden phenomenon. In reality the headline inflation number does a pretty decent job of capturing overall inflation, and for people that prefer to pull out food and energy that number is available as well.
Buried in Ritholtz repetitive rantings is the ridiculous notion that the stock market reacts only to the core inflation number, and that the government bureaucrats are hiding important information from the markets. This really is a phony argument, and yet Ritholtz seems to have built a theme around it.
I have examined many of Ritholtz arguments and discovered that they often start with a phony premise and end with a description of reality.
He seems to be a master of exposing his own phony premises as phony.
John
P.S. The BLS statistics have well known flaws in methodology, but the idea that professional analysts are not aware of these flaws or are somehow focusing only on core inflation is just stupid.
A: Because it was obvious to begin with. And I quote you; "...what anyone that is not unconscious knows, we have had actual cost of living in excess of the reported CPI for many years".
There is enough noise out there without a pathological restatement of the obvious. Perhaps some of the "flakes" were hoping to drive this point home to instigate change.
Legislated, subsidized ethanol production from corn is the driver. The irony is that oil refiners are balking at expanding capacity because they don't see the long term gains because of our push to biofuels. So we're also paying via higher gasoline and heating oil prices - just the opposite what corn ethanol was supposed to do.
Yes, metal prices are high due to the global expansion and like all commodity cycles these too will correct when production suffiently expands. As it will with grains. It may take a couple years but never underestimate the ability of the world to rise to meet the challenges when there is a profit to be made. Remember the "great grain robbery" of the 1970's when the USSR swooped into the world market and caused food inflation - plus we had the corn blight and a couple of droughts thrown in for good measure? At its peak around 1980 there were numerous pundits writing that the world would not be able to feed itself. It was then followed by the dismal ag markets of the 1980's.
I agree with the Fed. Ag doesn't belong in the core simply because they have no means to fight it and it is extremely cyclical. What good would raising interest rates do for food prices? Or metals prices - since they have been primarily driven by the global expansion boom - and are self correcting since there's so much profitability in producing metals. It'll just take a little more time.
Please let me know if I can read better then everyone else.
Also, to you folks who have to shit on someone's opinion. Stop wasting my time. You sound like Berry Cudlow on CNN (or is it MSNBC). HA HA.