Pragmatus

Inflation Expectations: Main Street vs. Wall Street

It is useless to write anything about inflation if CPI figures are used. Since the 90s the CPI has been nearly beaten out of all recognition by those in government who were desperate to maintain the illusion of low inflation. If the same criteria were being used now to calculate the CPI as was used in the 1970s, the annual rate would be between 8% and 10%. Real inflation is reflected much more accurately by the declining dollar and the soaring prices of oil, food and commodities. Sooner or later everyone will realize that the official CPI is nothing more than an elaborate fairy tale.

Why Today Is Different From the Inflationary 1970s

Jake--you can't have wage inflation if the CPI is jiggered not to recognize price inflation.

1. The dollar has fallen against all major currencies.
2. The price of oil and its products has at least doubled in the past year.
3. The price of food has nearly doubled in the past two years.

All three phenomena are another way of saying "the US dollar is suffering from inflation".

Why Today Is Different From the Inflationary 1970s

Yes, a simple comparison between the way CPI was calculated in the 1970s-80s and now is quite instructive. An ongoing survey I have been making over the past few years, based on products I buy all the time, indicates a real inflation rate of at least 10% and perhaps as much as 12%. Anyone who declares that the core inflation rate since 2007 has been declining isn't working with a full set of tools.

The Coming Crash of 2008: A Result of Overleveraging

I think Matt makes very good points. I don't think it is possible however to nail a disaster timeline successfully, any more than it is possible to successfully "time the market". But there are deep problems not only in the derivatives market but in nuts-and-bolts investing as well. The business world is so divorced from reality that when any company has a pot of cash to spend, do they distribute it in the form of dividends, or invest it in R&D? No, they announce stock buy-back plans, one of the worse uses of cash imaginable. (The theory is that with fewer shares outstanding the price per share will be driven up, but this never has any long term positive effect--it is exactly like inflating a bicycle tire that has a hole in it. It works only for a while.)

This is the sort of insanity (along with silly schemes that squeeze another cent onto the earnings report merely for the sake of "beating the estimates", the company be damned) that has to be shaken out of business thinking before the current whipsaw, panicky markets can return to some semblance of usefulness for investors.