Brian Kelly

Waiting for Inflation? It May Take Awhile

Bartlesby

That is a very good point, the destruction of financial system as we know it will likely have impacts not considered. For example, how much did securitization contribute to GDP and the potential GDP estimates.


On Feb 25 06:41 PM Bartlesby wrote:

> We must also consider the possibility that these shifts in short
> run supply and demand are structural and not just cyclical, in which
> case we are witnessing a reduction in long run GDP supply (i.e. potential
> output).
>
> If this is the case, your output gap discussed here may actually
> be smaller than you think.

Waiting for Inflation? It May Take Awhile

yes--i agree that the last 50 years are not the best reference for what we are experiencing. We are experiencing something as bad or worse than the depression.

However, what the last 20-30 years does have is a central bank that actively targets inflation - and central bank policy has had a major impact on inflation. If you look at the chart of CPI you can see that since Volcker made it popular to stamp out inflation in the 1980's we have not seen extreme spikes.


On Feb 25 09:28 AM User 143167 wrote:

> What you should really look into in 1930s and 1940s, when interval
> between monetary inflaiton and CPI inflation was short. Also you
> can look into the age between 1870s and 1920s, the intervals were
> even shorter.
> We are now in a scenario that you can't find reference in the past
> 50 years. So I would skip over those decades.

Waiting for Inflation? It May Take Awhile

CPI - I did not use core CPI - I have never understood why the Fed focuses on core numbers --- if oil and food go up, I still have to eat and drive my car, so I can't exclude them, it does not make sense to exclude them from policy decisions.

Imported Consumption - as with any economic analysis, looking at one number in a vacuum can be dangerous. I am just presenting one part of the equation -- although it is a big part.

I think the bigger risk to my argument is increased consumption from China, which I assume you are referencing when you ask about "external demand". If the Chinese stimulus package succeeds in creating internal demand in China then all the spare capacity we have is not going to matter.

For now my chips are placed on weak exports keeping Chinese demand in check...but in these markets...things seem to change literally overnight.

Thanks for the comment.


On Feb 25 09:42 AM Hmm?! wrote:

> Hold on Brian. I am not sure about your article.
>
> Waht about the fact that a large portion of US consumption is imported?
>
> What about external demand for resources? What about a devalued dollar
> increasing the cost of both items above?
>
> CPI? Please confirm you did not use the core CPI, which excludes
> everything that experiences price spikes.