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Why Inflation Is Severely Understated - Asset Price Bubbles Vs Price Inflation

Wednesday, February 12, 2014 - 3:16 PM
Mish in his Global Economics Trend Analysis blog makes some good points about the Fed, inflation and deflation:
In an absurd attempt to prevent price deflation on consumer goods, the Fed has spawns asset bubble after asset bubble, each with a greater amplitude.

Given exceptionally poor jobs and wage growth, the very thing consumers need to survive is falling prices!

Yet, the Fed tries to prevent just that, all based on the idiotic premise "A persistent drop in prices prompts households to delay purchases in anticipation of even lower costs".
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6
Ken TuminKen Tumin5,469 posts since
Nov 29, 2009
Rep Points: 125,077
1. Wednesday, February 12, 2014 - 8:32 PM
Deflation is always a greater worry than inflation. It about brought us down twice since this "recession".  Let us hope we never see it. Maybe with infrastructure upgrades, (roads, electric grids, minimum wage increase etc. we can get out of this again. 
Wait to buy? For over the 52 years I have been married I have never bought anything unless it is on sale and I have rebates or coupons and now I  use my cash back credit cards. The only thing I can say I buy that is not always on sale, is hormone free milk. But I found a place that sells it now cheaper that regular milk.  I even use gas buddy with my 5% cash back gas card. I have $40 synthetic oil changes and free car washes for as long as I own the car with the purchase of my car last year.  There are certain times of the year when it is better buying certain products and certain groceries always go on sale certain times of the year. Before Christmas I purchased a place setting for 16 people of Corelle dishes that would have cost about $280 and I was able to get it for $38. 
3
Ally6770Ally6770911 posts since
Jan 16, 2010
Rep Points: 2,652
2. Wednesday, February 12, 2014 - 9:01 PM
What Is Janet Yellen's Top Priority?

"From Ms. Yellen's comments in 2006, we can gain a sense of her top priority.  She has shown us that she is far more concerned about the prospect of inflationary pressures in the economy than she is about growth (or, in this case, non-growth) in employee wages.  I suspect that we will be getting more of the same now that she is Chairing the Federal Reserve."

Viable Opposition: What Is Janet Yellen's Top Priority?
2
ShorebreakShorebreak2,608 posts since
Apr 6, 2010
Rep Points: 14,146
3. Wednesday, February 12, 2014 - 9:11 PM
And what does 2006 have in common with today? Asset bubbles vs no jobs? Housing collapse and the collapse with the banking system vs no jobs? 
1
Ally6770Ally6770911 posts since
Jan 16, 2010
Rep Points: 2,652
4. Thursday, February 13, 2014 - 7:53 AM
Ally,

Chair Yellen has been since 2006, and still is today, concerned that wage increases for working people would cause "inflationary pressures". She is relieved that we have stagnating wages in this country and thus can continue ZIRP with little prospect of breaching the Fed's two percent inflation line that they have 'drawn in the sand'.
2
ShorebreakShorebreak2,608 posts since
Apr 6, 2010
Rep Points: 14,146
5. Thursday, February 13, 2014 - 8:15 AM
I guess you didn't read the post I did quite a while ago where she spoke about higher wages and the examples she used. One of the example she told was when she and her husband taught and they needed a reliable babysitter and all their friends were having issues with keeping  good ones that would show up, be extraordinary with the children and do what was expected. She and her husband never had any problems because they paid much more than everyone else. She said if you pay workers what they are worth you will have great workers who do a good job, are reliable and loyal. 
1
Ally6770Ally6770911 posts since
Jan 16, 2010
Rep Points: 2,652
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