Seeking Alpha

"A little inflation would be good for the economy and good for equities," Jeff Miller asserts....

"A little inflation would be good for the economy and good for equities," Jeff Miller asserts. Core inflation is close to zero, and Bernanke is handling the money supply just fine. "Understanding inflation is now the single biggest challenge for investors," Miller writes. "There is a lot at stake."
Comments (78)
  • Frank Choi
    , contributor
    Comments (115) | Send Message
     
    It's quite obvious that Bernanke does not understand economics nor a very relative term like inflation-- and whoever this Jeff Miller person is, he obviously is just a clueless The blind leading the blind.
    17 Feb 2011, 06:18 PM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    What part of Miller's article do you disagree with? All he is saying is that certain prices going up do not equal inflation - and he's absolutely correct. How would YOU define inflation? "The prices of things I buy are going up" ? The increase in commodity prices looks more like a supply and demand issue than a monetary policy issue and I don't see many prices going up beyond commodities.
    17 Feb 2011, 08:48 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    I believe commodity price increases are a direct effect of QE Dollars.

     

    If you look at the volumes on the NYSE and wonder where the volume went take a look at the volumes on the Chicago Mercantile Exchange, you will find your answer...

     

    Supply and demand issues that's a laugh
    17 Feb 2011, 09:21 PM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    So why are commodities under supply and demand pressure (coal, wheat, etc.) increasing in price while commodities with plenty of supply (nat gas) not increasing in price? Additionally, why would legitimate supply disruptions NOT increase speculation volume in that market?
    17 Feb 2011, 09:29 PM Reply Like
  • Wildebeest
    , contributor
    Comments (778) | Send Message
     
    "
    So why are commodities under supply and demand pressure (coal, wheat, etc.) increasing in price while commodities with plenty of supply (nat gas) not increasing in price? Additionally, why would legitimate supply disruptions NOT increase speculation volume in that market?"

     

    but elsewhere commodities that are under no supply/demand pressure, i.e. large surpluses exist, such as aluminum and nickel, are also increasing in price. In other words if you look across commodities there is no consistent link between supply/demand and price (it is there in some cases and not in others).
    17 Feb 2011, 09:34 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Come on Troll, teach me something...

     

    Coward
    17 Feb 2011, 09:57 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Impressive, Your troll thumbs down tears only make me stronger:-)

     

    Cowards
    17 Feb 2011, 10:02 PM Reply Like
  • alphaman991
    , contributor
    Comments (94) | Send Message
     
    Please stop cluttering this comment board with numerous paranoid comments about "trolls". Does a thumbs down really affect your life at all? Thought not. Who cares?
    17 Feb 2011, 10:07 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    I care that's why I'm posting sir... Move along sir
    17 Feb 2011, 10:15 PM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    I can't comment on each and every commodity. However, commodity speculation has existed long before QE2 and if unjustified will end with prices crashing back down to Earth. When demand fell during the recession so did commodity prices. If the change in price is "inflation" why aren't all prices increasing and not just commodities?
    17 Feb 2011, 10:18 PM Reply Like
  • Frank Choi
    , contributor
    Comments (115) | Send Message
     
    JB1982:
    "What part of Miller's article do you disagree with? All he is saying is that certain prices going up do not equal inflation - and he's absolutely correct. How would YOU define inflation? "The prices of things I buy are going up" ? The increase in commodity prices looks more like a supply and demand issue than a monetary policy issue and I don't see many prices going up beyond commodities. "

     

    If there is so much slack in the output gap as Bernanke says is the reason he's so bent on inflation targeting, then why have prices risen. Moreover, the increase in commodity prices would not be a result in supply/demand factors as 1) demand is apparently dead and 2) the output gap deficiency.

     

    Inflation can be defined many ways: a decline in purchasing power, too much money chasing after too few goods, or basic affordability. There is currency inflation, commodity inflation, food inflation-- all different terms to measure the ability of a person to afford certain prices. Core inflation is a joke measure and an excuse for Bernanke to engage in social class genocide. Tell the poor, the working poor, the middle class, families on food stamps, people struggling to get to work if they have work and put food on the table there is no inflation-- the very same inflation that Bernanke has created by capitalizing TBTF institutions and forcing people into the market to speculate as there is no reward for savers.

     

    Like I said before: the blind leading the blind.
    17 Feb 2011, 11:58 PM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    Commodity prices are rising because of global supply / demand issues. The supply of coal is constrained because of flooding in Australia (a big exporter) and demand is strong in China (a big importer). The output gap Bernanke is referring to is in America ... not the entire planet.

     

    And no, inflation can't be defined however you want to. Inflation is the rise in the general price level NOT the rise in a few goods or categories of goods. There is no such thing as "food inflation" as food is just one category of goods.

     

    The reason people are suffering is not an inflation issue it's an issue of a weak economy... which is why monetary policy is so accommodative.
    18 Feb 2011, 06:26 AM Reply Like
  • Frank Choi
    , contributor
    Comments (115) | Send Message
     
    General price level is impossible to gauge-- you either include everything or else it then becomes relative. By the way, there is plenty of coal in the world, so your example is far from convincing.
    18 Feb 2011, 10:10 AM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    Yes calculating the general price level is hard but that's what things like CPI, PPI and the GDP deflator try to do. CPI measures the aggregate price level of all consumer goods. Relative price levels just represent the economy attempting to allocate resources to different parts through pricing signals. An increase in the aggregate price level is what inflation is - the same number of goods and services bought but more money used to buy them.

     

    BTW what do you mean by "plenty of coal in the world" ? Are you suggesting that coal still in the ground counts as supply? Supply is the PRODUCTION of coal which has been seriously diminished in Australia due to the floods.
    18 Feb 2011, 11:42 AM Reply Like
  • Frank Choi
    , contributor
    Comments (115) | Send Message
     
    Dude, you obviously don't get it this argument is veering from the original point. Maybe this will help: www.zerohedge.com/arti...

     

    Coupled with the fact that we have high unemployment and people struggling to afford food and other basic necessities (including coal), margin compression can be a possible outcome for corporations. If that is the case then where's the hiring going to come from? Inflation does not equal good economy, but rather increasing end demand and you can't manipulate one to get the other.
    18 Feb 2011, 12:18 PM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    That article you linked to has horrible information... annualized one and a half month's data... really? Hardly a good predictor of future inflation!

     

    Monetary policy does have its shortcomings. It's no magic cure-all but it does work.
    18 Feb 2011, 01:59 PM Reply Like
  • Frank Choi
    , contributor
    Comments (115) | Send Message
     
    You should try clicking on the links in the article to get more information-- here's what you missed: bpp.mit.edu/daily-pric.../

     

    Data goes back to OCT 2007. Also, it's to illustrate my point on how inflation is relative and that inflation exists today in various forms. Thus, proving it isn't good for the economy like my previous post indicated.

     

    And as far as your faith in monetary policy goes, you should study history more closely. Booms and busts resulting in mass economic carnage are the results of monetary policy and central banking, but that's a whole other subject for another day. I have no doubt monetary policy works, but you should be asking yourself for whom does it work for.
    18 Feb 2011, 05:00 PM Reply Like
  • Fueled By Randomness
    , contributor
    Comments (290) | Send Message
     
    "Core inflation" is obviously not calcuated based on products that people actually buy more than once a year.
    17 Feb 2011, 06:26 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Exactly, The CPI Index is a joke as a gauge of inflation... It is really funny when they change the items that compose the CPI to make it fit the needed result.

     

    Politicians get a COLA (Cost of Living Allowance) increase but retired folks can't get a Social Security increase due to the CPI, can ya smell the hypocrisy...
    17 Feb 2011, 09:25 PM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    Social Security payments aren't indexed to CPI.
    17 Feb 2011, 09:32 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Agreed the payments are not, but the annual cost of living adjustment is...
    17 Feb 2011, 09:49 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    JB1982,

     

    Do you suppose you are one alias of the Bernake Fanboi Troll Patrol???

     

    I'm starting to see a pattern here:-)
    17 Feb 2011, 10:04 PM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    Your original post complained that retired folks don't get COLA increases and now you complain that they do. The main problem for retired folks is that they spend more on things that have gone up in price (food + fuel) while spending less on things that have stagnated in price or fallen (recreation, technology, clothes). It's not that the CPI is wrong.
    17 Feb 2011, 10:07 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    You miss my point sir.

     

    CPI is used to justify NOT giving COLA increases to Social Security recipients yet it is clearly disconnected from it's intended purpose as a measure of economic stress on the consumer. The CPI's blatant manipulation by reordering the weight of each item in the basket relegates it's purpose to sideshow smoke and mirrors economics...
    17 Feb 2011, 10:24 PM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    How have the weights been reordered to misrepresent reality? They DO need to be reordered every now and then to remain accurate. What the typical family bought in 1950 is different then now. Again, it's more an issue that SS recipients buy at different weights than the "typical" household. It's the reverse of the 90's when oil was cheap and yet CPI was positive... and seniors got their benefit hikes.
    17 Feb 2011, 10:32 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    I guess the easy way to settle this is:

     

    Do you believe we are currently experiencing significant inflation at the real world consumer level and do you believe the CPI accurately reflects this stress thus making it an accurate economic barometer.
    17 Feb 2011, 10:48 PM Reply Like
  • lobsterboy98
    , contributor
    Comments (19) | Send Message
     
    Hey Jeff - what was end resulting income on your tax return? Guys like you who don't acutally live paycheck to paycheck would suggest such a thing.
    17 Feb 2011, 06:40 PM Reply Like
  • wyostocks
    , contributor
    Comments (7620) | Send Message
     
    Why does anyone care what anyone named Jeff Miller says or does?
    Who the hell is he? Please post his resume.
    17 Feb 2011, 06:42 PM Reply Like
  • Jake Silberman
    , contributor
    Comments (36) | Send Message
     
    Just because one thinks Bernanke's free money policy is getting very dangerous does not mean stocks should not be bought. Free money is great for fueling stock appreciation. Any fear of deflation at this stage is a joke. Free money for the world's reserve currency is surely fueling worldwide inflation and now social unrest. The prudent saver is punished while speculators clean up.
    17 Feb 2011, 06:45 PM Reply Like
  • nobby73
    , contributor
    Comments (1177) | Send Message
     
    We have input price rises outpacing output prices, wages stagnating and if there is so much free money, why does it all end up sitting in reserves at the Fed? Seems to me, margin compression is a reality nearly all businesses will face, and frankly, I don't see why this is so great for stocks..
    17 Feb 2011, 06:49 PM Reply Like
  • Jake Silberman
    , contributor
    Comments (36) | Send Message
     
    Free money eventually finds a home, and stocks rise despite margin compression and valuations can become quite illogical. Greenspan's deflation fears, where he lowered the Fed Funds rate to 1%, directly contributed to the greatest housing bubble we have ever seen.
    17 Feb 2011, 07:29 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Too bad the free money is moving into commodities futures contracts...
    17 Feb 2011, 09:31 PM Reply Like
  • rooftop
    , contributor
    Comments (140) | Send Message
     
    "Core inflation — which excludes volatile food and energy prices and is therefore often a better predictor of where inflation is headed."

     

    Therein lies the problem. Academics can hide behind inadequate definitions to "prove" their points. Core inflation is irrelevant if you pay your own bills and so therefore are the opinions of (central) bankers and those of their ilk.
    17 Feb 2011, 06:49 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Bravo Sir

     

    The Thumbs down Trolls will not like your comment
    17 Feb 2011, 09:31 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    One person with 5 accounts.... WOW what a winner:-)

     

    Coward
    17 Feb 2011, 09:52 PM Reply Like
  • Vuke
    , contributor
    Comments (1645) | Send Message
     
    If what I'm seeing is "close to zero" I'd hate to see Jeff's "little inflation".
    17 Feb 2011, 06:54 PM Reply Like
  • Bill S. Friend
    , contributor
    Comments (711) | Send Message
     
    What this economy needs is alot of inflation right now and Bernanke has set about to produice it. The trouble is that despite his best efforts and claims to the contrary, the dollar remains somewhat stable. We could use about 50% inflation over the next 5-10 years just to pull this economy out of the ditch.
    17 Feb 2011, 07:00 PM Reply Like
  • Hoopono
    , contributor
    Comments (218) | Send Message
     
    Bill, I'm with you in general, but the 50% inflation over the next 5-10 years is a little over the top. You think?
    17 Feb 2011, 07:05 PM Reply Like
  • mikeybronx
    , contributor
    Comments (347) | Send Message
     
    i believe the 2% to 4% annual inflation many of us have grown up with would be just the medicine for the economy. it was very manageable.
    17 Feb 2011, 07:37 PM Reply Like
  • Pathfinder's
    , contributor
    Comments (117) | Send Message
     
    Since we have been in a Disinflation or even Deflation for the past few years, it will take a number of years before we see real inflation. That said, with Energy and Food Goods heading up at almost geometric numbers, the average guy on the street will feel the Inflation first.
    Don't look for C.O.L. Wage increases or Social Security Increases though. We will all have to tough it out.
    17 Feb 2011, 08:24 PM Reply Like
  • rooftop
    , contributor
    Comments (140) | Send Message
     
    "We will all have to tough it out"? Listen I used to believe in capitalism. I was a private sector fan and I hated unions because to me they were lazy, good-for-nothing slackers that served only to bankrupt companies through outrageous wage demands that far exceeded the value of even skilled labor, never mind unskilled and semi-skilled. I hated public sector unions even more, because they sponged of ME, the private sector working taxpayer.

     

    Well guess what, these alleged capitalists running the show now have managed to privatize their insane profits and completely socialize their losses and that isn't capitalism, that's just criminal.

     

    So to hell with "we will all have to tough it out", the truth of the matter is that the middle class will get squeezed, the underclass will sink further into despair and poverty, and the white collar criminals at the top of the chain will continue to plunder from those two classes. They won't tough anything out, they will continue to steal and live the high life.

     

    It won't impact me very much, because really I am fortunate and lucky in terms of income, debt, wealth, education, and so on. But it's still wrong and eventually it will come crumbling down, but it will probably take a decade or two.
    17 Feb 2011, 10:29 PM Reply Like
  • Bill S. Friend
    , contributor
    Comments (711) | Send Message
     
    50% does seem over the top I will admit, but the debt level is so vast its incomprehensible. Spending seems to have no limit, and there are proverbial safes and pianos hanging over the economy in the form of derivatives, throw in black swans waiting in the wings. Corporations profits are high, and their lobbists are busy in Washington writing off their expense accounts. Politicians are reticent to tackle the tough issues namely entitlements. A couple of years ago we were skating along the brink of destruction yet we have not addressed the tough issues needed to steer us back to a sustainable course.
    18 Feb 2011, 02:35 AM Reply Like
  • Bill S. Friend
    , contributor
    Comments (711) | Send Message
     
    4% per year compounded interest works out to almost 50% over ten tears.
    20 Feb 2011, 12:09 PM Reply Like
  • AxiosCap
    , contributor
    Comments (291) | Send Message
     
    I continue to be amazed that PhD's can write such ridiculous comments. But then again, they are all trained in the Keynesian school of thought, so maybe I shouldn't be so surprised. These are the same people that think that just because we can print money we can never go belly up. I wonder what the Germans think of that?

     

    Also, the idea that inflation is good and deflation is bad is...well it's just dumb, and frankly I'm tired of people pushing the idea like it's gospel. What is good about inflation? Higher earnings? Higher salaries? Not so much when the cost of everything is going up, too. Nothing is better than price stability IMO. Wouldn't it be great to know that $100 today will equal $100 5 years from now or 10 years from now? Instead it just about takes $100 to fill up a SUV. Money has little meaning when it's treating with such disrespect.
    17 Feb 2011, 07:08 PM Reply Like
  • alphaman991
    , contributor
    Comments (94) | Send Message
     
    Your comment is ridiculous. Technically, we never can go belly up, all the govt's debts are denominated in dollars, we can always inflate our way out by printing (not that we should). The Germans debts post-WWI were denominated in gold and other commodities, hence the need to "trick" commodity markets through ever accelerating inflation.

     

    Technically price stability is fine, but low rates of inflation increase wage flexibility and competitiveness due to our cultural norms. For example, people get extremely upset if you lower their wages by 2% in an environment with price stability. They are less upset with constant nominal wages in a background of 2% inflation, leading to the same 2% drop in real wages. Again its not ideal, but if you need to lower wages to regain competitiveness like Greece, controlled moderate inflation is very helpful.

     

    Jeff Miller actually has very good articles, read one or two before you start insulting him.
    17 Feb 2011, 07:17 PM Reply Like
  • bricki
    , contributor
    Comments (1099) | Send Message
     
    Deflation is seriously bad news. Essentially it discourages investment because it causes a net negative bias on returns on the investment. The result is a stagnant or declining economy.

     

    Inflation isn't exactly great either, but in small amounts its effects are less dire than those of deflation.
    17 Feb 2011, 07:35 PM Reply Like
  • JohnBinTN
    , contributor
    Comments (3583) | Send Message
     
    If wages would keep up with inflation, it's not such a bad thing. :) My family's debt is priced in 2007 dollars, and the interest rate is fixed.
    17 Feb 2011, 07:38 PM Reply Like
  • AxiosCap
    , contributor
    Comments (291) | Send Message
     
    We can never go belly up? Think again. If you print ad infinitum just where are you going to get new investment dollars? Where are you doing to get people to buy new debt issues? How are people here going to buy goods from other countries when the prices go up 5x? 20x? You think a BMW is expensive now? What if the Euro/Dollar ratio is 4:1 instead of 1.3:1? That cheap TV from Korea just got really expensive. Corn will go from $7/bushel to 40 or 50. Good luck with beef and chicken prices at that level. That's going to bankrupt everybody. What happens when interest rates go from 3-4% to 8-10%? What happens when interest expense outweighs revenues like what's coming in Japan? You're just going to print your way out of that? Good f***ing luck with that. Currency debasement is bad news and there is no good outcome.

     

    BTW - what's Miller is proposing is no different from Krugman and I will crucify that clown until there's no breath left in my body.
    17 Feb 2011, 07:52 PM Reply Like
  • mikeybronx
    , contributor
    Comments (347) | Send Message
     
    "A little inflation would be good for the economy and good for equities," Jeff Miller asserts.

     

    the markets are always behind the curve and Mr. Miller seems to think inflation hasn't arrived yet. Its like a marathon runner becoming thirsty and drinking to avoid dehydration. the fact the runner is thirsty just verifies that dehydration has already set in. the fact that the market is discussing the possibility of inflation only confirms it has already been with us but no one took time to notice.
    17 Feb 2011, 07:19 PM Reply Like
  • wyostocks
    , contributor
    Comments (7620) | Send Message
     
    Who is Mr. Miller?
    17 Feb 2011, 07:42 PM Reply Like
  • mikeybronx
    , contributor
    Comments (347) | Send Message
     
    i think he is Barney's cousin
    17 Feb 2011, 07:49 PM Reply Like
  • mikeybronx
    , contributor
    Comments (347) | Send Message
     
    wyostock,
    i can not believe some moron gave you a thumbs down for asking a question LOL. you can't make this shit up! this thumbs up is for you.
    17 Feb 2011, 08:22 PM Reply Like
  • wyostocks
    , contributor
    Comments (7620) | Send Message
     
    Thanks Mikey. I don't always agree with you but we may have more common ground than I thought.
    17 Feb 2011, 09:07 PM Reply Like
  • Hoopono
    , contributor
    Comments (218) | Send Message
     
    The dis-connect here is that there are two inflations: one the type that us regular people deal with day in, day out. The other is the government/academic type which for lots of reasons (good and bad in my view) are only relevent to those who understand and follow them. Getting all work up over this is nonsense.
    17 Feb 2011, 07:25 PM Reply Like
  • Credible Clarity
    , contributor
    Comments (160) | Send Message
     
    Many are calling it "biflation" Biflation is a situation where both deflation and inflation have powerful influences simultaneously. It can be very difficult.

     

    Currently macro trends look to be setting up a biflationary landscape. The deflationary trend in some important assets and incomes is continuing . Housing prices sink lower as deleveraging continues, inventory rises, and distrust of the foreclosure, title, and financing process worsens.
    Incomes for most households are negatively impacted by downward pressure on wages from the credit contraction, pension issues, and questions about employee costs (mandated health care, payroll taxes, social security), as well as reduced returns on investments (fixed income not equities at the moment), and valuations of assets such as cars and homes.

     

    Meanwhile, the prices of daily living expenses are poised for rises - or inflation. Necessities such as food, energy and water have mostly been moving higher.

     

    Simple math - required purchases will cost more while the resources with which to buy will be reduced. The wealth effect the Fed is creating via higher prices for equities works a bit, but if people actually cash in their "gains" to obtain actual income, then that bubble would burst. Of course, most of the buyers aren't households but HFTs these days.
    17 Feb 2011, 07:35 PM Reply Like
  • bmcpic
    , contributor
    Comments (150) | Send Message
     
    I don't think you need to invent some fancy new word for this - you just have to realize that price increases or decreases are not synonymous with inflation and deflation. It is possible for inflation to stay constant and for prices to fluctuate wildly. Rising food prices can be caused by any number of factors - as can rising energy prices. Rising prices does not equal inflation. You cannot, by definition, have both inflation and deflation. The dollar is either inflated compared to the benchmark or it isn't. It cannot be "inflated" in one sector and "deflated" in another. Yes, prices can be up in one sector, and down in another, but not inflation. Price does not mean inflation. It sometimes does, but not always. This mistake is constantly made on SA.
    17 Feb 2011, 07:57 PM Reply Like
  • Agbug
    , contributor
    Comments (1085) | Send Message
     
    Credible Clarity is using a term I heard recently from another source - biflation. It was loosely defined as the things you already own, or have paid for such as housing, pension benefits, etc. are deflating while the things you need to buy with today's $ are inflating. There are exceptions of course, but I don't think this is the last time you'll be hearing this term.
    17 Feb 2011, 09:14 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Unless you are hungry...
    17 Feb 2011, 09:37 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Unless you are Hungry trying to pay your bills and your government is telling you there is not a problem but you can see it all around you...
    17 Feb 2011, 09:54 PM Reply Like
  • Rightwing
    , contributor
    Comments (123) | Send Message
     
    Jeff Who??
    ...so if a little inflation is good for equities, and good for the economy.... should we assume that a lot of inflation would be great for equities, and great for the economy..???.. Sweet.
    17 Feb 2011, 07:43 PM Reply Like
  • mikeybronx
    , contributor
    Comments (347) | Send Message
     
    with health and wealth set aside, too much of anything isn't good for you. moderation has always worked for me. a little dab will do you.
    17 Feb 2011, 07:59 PM Reply Like
  • bmcpic
    , contributor
    Comments (150) | Send Message
     
    It all matters in terms of how you define inflation. Most people here, for some reason I don't understand, define inflation in terms of price. Rising food prices? Inflation. Rising energy prices? Inflation. Decreasing natural gas prices? Uh... deflation?

     

    Inflation measures the purchasing power of the US dollar against a certain benchmark - be it gold, other currencies, a basket of assets, etc... Price is what you pay for a good, based on many, many factors, including inflation, if it is present.

     

    Its easy to see that equating rising prices with rising inflation is silly. Clothes have jumped in price because of the Egyptian riots. This has been well publicized - cotton exports have fallen to almost nothing. So, since cotton prices are up approx. 58%, does that mean we have 58% inflation? Of course not. The price has fluctuated due to supply and demand. Now, it is possible if prices rise 56% that it is due to inflation - that is possible. But rising prices does not equal inflation as a rule.

     

    You can easily tell if a rise in a commodity price is due to inflation or another cause - look up its price in a few other currencies. For example, lets take oil. Oil has risen across the board, probably due to the Gulf Moratorium, closing of the Suez and the Alaskan pipeline - oil supply has been drastically restricted. Now, if the rise in oil was due to inflation - as many, many SA commentators has screamed at the top of their lungs - look at food prices! look at energy prices! - you would not see a rise in oil prices in any other currency. That is, if it was the erosion of purchasing power in the USD causing the rise in prices, you wouldn't see a rise in the Euro price - just the USD price. However, oil prices in nearly every currency have risen by exactly the same amount - making it virtually certain that the price increases have nothing to do with inflation, and much more to do with either higher demand or scarcer supply.

     

    Most commentators on this site seem to think that because the US government is running the printing press, there must be inflation. You might be right. I say again: you might be right. However, be very careful of confirmation bias (where because you believe X, you automatically shut out all arguments for Y). There might be inflation, or inflation coming, but you can't conclude that from a rise in prices, especially in food or other volatile commodity prices. There are too many other factors that go into price to isolate it as inflation without a much deeper inquiry. It is a common trap to equate price to inflation. Its silly.
    17 Feb 2011, 08:08 PM Reply Like
  • Agbug
    , contributor
    Comments (1085) | Send Message
     
    bmcpic, I take exception to some of the examples given, such as cotton.

     

    Cullen Roche posted this article with a cotton chart embedded and it clearly shows cotton taking off 6 months ago and the price is up 300% since then. Not when Egypt imploded.

     

    seekingalpha.com/artic...

     

    Same for silver, the S&P. The Alaskan pipeline was down for 5 or 6 days and doesn't run anywhere near capacity. The storage tanks in Valdez easily take up the slack. It's a commodities bubble driven by loose monetary policy.
    17 Feb 2011, 09:41 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Commodities prices are being driven up by futures market speculation plain and simple...
    17 Feb 2011, 09:43 PM Reply Like
  • bmcpic
    , contributor
    Comments (150) | Send Message
     
    Agbug,

     

    It all depends on the time frame you choose. I marked the "since" as when Egypt closed the Suez canal, drastically reducing exports, which did not occur until well into the disturbance. Since 0 AD, Cotton is up a whole lot more. I didn't specify six months.

     

    You might be right. Again, I say it, *I am not arguing that it is supply and demand*. What I am saying is that it takes a whole heckuva lot more analysis than saying "Prices are up... damn Bernake!!!!!!!!!"
    17 Feb 2011, 09:47 PM Reply Like
  • Agbug
    , contributor
    Comments (1085) | Send Message
     
    bmcpic, I am not sure either and in general am not a Bernanke basher. I view that whole thing as a co-dependent relationship between the hill and the Fed, to use a '90s term. I usually stick to silver as a hobby and the silver champions are mostly about manipulation and JPM. But when you look at the cotton chart, the $INDU chart, etc. many markets have that pattern that started on 9/10. The pattern appears to be linked to QE II. Also, I didn't hear that the canal had been closed?
    17 Feb 2011, 10:23 PM Reply Like
  • Bill S. Friend
    , contributor
    Comments (711) | Send Message
     
    Prices have a tendancy to overcorrect, just look at gold vs. oil and tell me there is no inflatiion. Mix in some governmental tinkering in select market sectors and the numbers can be misleading. Its becoming increasingly clear we are headed for some dollar devaluation, which is needed to monetize some of this huge wad of debt working through the system, the pig in the python. Surely speculation has some influence on market trends as well, but in the case of the Euro its only natural to see investors flee to preserve wealth. I actually think the faltering Euro has disrupted the planned monetization of the dollar debt. The dollar has proven to be resilient, but it could turn on a dime.
    18 Feb 2011, 02:51 AM Reply Like
  • bmcpic
    , contributor
    Comments (150) | Send Message
     
    "Prices have a tendancy to overcorrect, just look at gold vs. oil and tell me there is no inflatiion"

     

    I am looking at Gold and Oil. I am telling you there is no inflation. If there inflation, the USD price would have risen but other prices would have stayed constant. Oil is up against virtually every currency by an equivalent amount. Therefore, we can conclude the rise in the price is not due to the erosion of the USD purchasing power - if it were, oil would be up in dollars and flat in everything else. It isn't.
    18 Feb 2011, 09:51 AM Reply Like
  • Jeff Miller
    , contributor
    Comments (1600) | Send Message
     
    This is pretty funny! Most of the questions and comments are covered in the article itself. But why bother to read anything if your mind is already made up?

     

    Meanwhile, those who are really interested are welcome to engage in discussion either on my blog, or on the SA article.

     

    I would be happy to welcome some new readers and people willing to discuss issues on the merits.

     

    Jeff
    17 Feb 2011, 08:28 PM Reply Like
  • wyostocks
    , contributor
    Comments (7620) | Send Message
     
    I repeat my question.
    Why should anyone care what you have to say?
    What is your resume and why are to be taken any more thoughtfully than any other poster on SA?
    Do you have credentials that the rest of us (most anyway) don't have that we should comment on your comments? Even though we did. But thats the fun of SA.
    17 Feb 2011, 09:12 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    I bet you will rate 6-8 thumbs down in short order...

     

    When Trolls attack:-)

     

    Great comment by the way!
    17 Feb 2011, 09:46 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    wyostocks
    Who is Mr. Miller?
    ======================...
    by: Jeff Miller March 04, 2008

     

    Markets can, should, and will look ahead...
    Media types and bloggers have a fixation with scare tactics like "stagflation." The cooler heads, like Bob McTeer, try to make careful and reasonable comparisons. Take a look at his latest thoughts. <link>

     

    Meanwhile, the markets have underestimated the impact of Fed rate cuts and the stimulus package. These will start to show up very soon -- perhaps in a month or so.

     

    A Final Observation
    There are other policy actions in the works. It is popular to point at the list of potential housing foreclosures. In fact, it is open season for those working to avoid disaster.

     

    So many are so busy at the job of criticizing government officials. In this environment it is easy for the investor to forget a key point.

     

    Those who chose to work in government did so because they wanted power rather than salary. When we tally up the results, whom do you think will be proven correct: The critics, or those who actually have the power?

     

    Our bet is with the Fed and the Treasury.
    18 Feb 2011, 02:15 AM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    by: Jeff Miller March 05, 2008

     

    The Federal Reserve, the Economy, and Stocks

     

    The choice for the investor is easy. On the one hand, you can accept the arguments of the market pundits who think that government officials are too stupid and academics are too smart, and both are therefore out of touch. Alternatively, you might consider the possibility that some very bright and capable people choose different career paths. They are all good at what they do
    .
    We do not indulge in short-term market calls. On somewhat longer basis, the averages are still trading at the level when our Gong Model (report available upon request) indicated a good risk/reward for those with a multi-month horizon.

     

    We are also very confident that a solution for monoline insurer problems will be forthcoming. The market skepticism on this subject has been vastly overdone. This is an important development for financial stocks, particularly Merrill Lynch (MER).

     

    Full Disclosure: We are long MER.
    18 Feb 2011, 02:48 AM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Inflation is a persistent increase in prices, triggered when demand for goods is greater than the available supply
    ======================
    IMHO
    We do have inflation caused by USD oversupply
    It different this time.
    There is no oversupply of USD in hands of population.
    It in BANKs (via QE).
    Since Banks do not shop in grocery stores, they spend USD in Markets, creating inflation in Energy Commodities and Market Equities
    Let call it bankflation

     

    Rising price for general population is by product of bankflation and not caused by cash in hands

     

    For who it is good, but for commodities and energy and market equities producers.

     

    For how long, but for duration of QE(?)
    17 Feb 2011, 09:36 PM Reply Like
  • JohnLocke
    , contributor
    Comments (381) | Send Message
     
    Bravo Sir!

     

    Hit the nail on the head...
    17 Feb 2011, 09:55 PM Reply Like
  • cbc
    , contributor
    Comments (411) | Send Message
     
    Ahhhhhhhhmen. Incredibly said and I welcome any thumbs down. I beg for any arguments to what he said.
    17 Feb 2011, 11:12 PM Reply Like
  • bmcpic
    , contributor
    Comments (150) | Send Message
     
    His argument isn't incorrect, juts misplaced. Miller's article, if you read it, does not argue that there is no inflation. Rather, he argues that you cannot infer high inflation from high prices. I don't see what coddy's comment has to do with the article.
    18 Feb 2011, 09:53 AM Reply Like
  • Rightwing
    , contributor
    Comments (123) | Send Message
     
    well ..i am still waiting on:
    Barney Miller,
    Dennis Miller,
    Reggie Miller,
    Ryan Miller,
    and Steve Miller(minus the band)...
    ....before any further comments.
    Thank You, Thank You very much....

     

    JohnLocke--thumbs up bud.
    17 Feb 2011, 11:56 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|