Comments on: O (Don’t) Look, Everything is Fine

By: dmac

dmac — Thu, 08 May 2008 02:24:01 +0000

bonger too freakin’ confusing is RIGHT………

ass hat.

sent one, came back, am trying again……….srv will make me go further……try harder…..the man who cleaned off layers of skin cuz he heard another song he wanted to play and had to play it………for hours till he played it like he heard it…….

email is nuthin’……..

By: dmac

dmac — Thu, 08 May 2008 02:18:18 +0000

bongerhead- i just tested the email….sorry no facebook, would be easier……if no contendre, then we’ll meet up and you can translate it again or i’ll give mine……my guitar playin friend (and i) would love the srv, would be a nice surprise.

i sure miss havin’ a concert right next to my computer……..

By: egregious

egregious — Thu, 08 May 2008 02:10:29 +0000

Another element to consider regarding how inflation is measured: whatever the “cost of living” increases turn out to be, that costs the government real money in the form of COL adjustments which increase the amount directly paid to people, for example, government employees or Social Security recipients.

If you artificially keep the COL low, it saves the government money. Of course, it’s unfair, if one cares about such things.

By: Ian Welsh

Ian Welsh — Thu, 08 May 2008 01:41:12 +0000

The official reason they are out of consumer inflation is to smooth down spikes - oil and food prices can fluctuate significantly, and the party line is that if you remove them you remove that. That is, of course, BS. If you want to smooth down fluctuations you’d just use a moving average.

GDP, on the other hand, is supposed to be a gross measure of all economic activity.

Core inflation is what is tracked by the Fed. So, the bottom line is that they don’t want to, or don’t believe it is their job to, manage either oil or food inflation (or housing inflation, or housing deflation). I’m not sure what the reasoning on food is, but the reasoning on oil is simple enough - oil supply and demand isn’t really controlled by the US.

Now that too is only half true, or it was only half true (it’s about 90% true now). In the Clinton era, oil prices were more or less controlled by the Fed by keeping the dollar supply really tight. With the US needing less oil than the oilarchies needed dollars, the Fed was able to keep a lid on oil prices. They’ve lost control now, and I doubt they’ll ever get it back.

The converse of this was the way real estate prices aren’t in the index. If they had been, inflation would have been through the roof years ago, forcing the Fed to tighten. They don’t want to do that, because they don’t believe that asset prices matter or they don’t believe that it’s job to regulate it or they don’t believe in socking it to their fellow elites when they’re making a bundle during a bubble (same thing - why aren’t stock prices and securities prices in the inflation index?)

By: egregious

egregious — Thu, 08 May 2008 01:36:46 +0000

Guessing here: I think the reasoning is that they are too volatile over the short term compared with underlying “core” inflation but a more cynical view is that they exclude items that reflect rapid price increases affecting most households in a period of high inflation.

I defer to Ian, as always, for the informed explanation.

By: DrBong

DrBong — Thu, 08 May 2008 01:27:05 +0000

I was trying to refer to when 2001: A Space Odyssey came out

Too much bong juice

;~P

By: cbl2

cbl2 — Thu, 08 May 2008 01:24:36 +0000

However the nature of seasonal adjustment means that when going into a recession the BLS will always overstate job gains and when coming out of one will understate them.

Eg and Ian,
Speaking of recession; Can y’all explain to me why fuel and groceries are eliminated when calculating inflation and included when calculating the GDP? This seems to insure that we have “growth” for the last 2 quarters when in reality that is a bad joke. Please help, thanks.

By: egregious

egregious — Thu, 08 May 2008 01:17:57 +0000

Thanks Ian, that means a lot coming from you. I’ve been inspired by your combination of scholarship and snark on a generally serious subject.

I just hate that the goverment is lying to people. It seems wrong.

By: egregious

egregious — Thu, 08 May 2008 01:15:50 +0000

We gotta get our metaphors straight. Is it 1984 or 2001.

By: Ian Welsh

Ian Welsh — Thu, 08 May 2008 01:10:32 +0000

Aside on seasonal adjustment: I did my own seasonal adjustment model once because I was suspicious, and found that the BLS’s seasonal adjustment model was actually less aggressive (added less jobs) than what I would consider a baseline model. Unless things have changed since then (it was a few years ago) I agree that seasonal adjustment isn’t a problem.

However the nature of seasonal adjustment means that when going into a recession the BLS will always overstate job gains and when coming out of one will understate them.