Stock market continues to head towards record highs…but the price of many things seem to be going up (lumber, building materials, food)…and the .gov has printed a ginormous amount of money which should result in inflation, right? But..we don’t see it in the reported (keyword there) numbers.
So, I was thinking about that the other day…we’re seeing price increases in many items, not just the Consumer Price Index items, that we use day to day….but there’s no marked uptick in inflation. So, what’s wonky in the way we figure inflation numbers?
Then it occurred to me…inflation isn’t when the price of something goes up, its when the purchasing power or value of the money used to purchase that item goes down, right? So…all these stock market gains we’ve seen. What if those aren’t the values of the securities going up, but rather the value of the dollars that they are denominated in going down? Couple that with the observed rising prices everywhere else and now it seems like perhaps the rising stock market is the barometer of inflation. I mean, did XYZ stock really become intrinsically more valuable than it was six months ago? Or are the dollars used to purchase XYZ stock just worth less and thereby requires more of them to buy it?
I’m all for stocks going up in value, but maybe it isn’t that they are going up as much as it is the value of the dollar, due to inflation, is going down. Do the surges in the market coincide with the creation of stimulus money? I suppose it could be people dumping their stimulus checks into the market that is rasing those numbers..but, couldn’t it also be……
I wouldn’t even call it a conspiracy theory. You increase the amount of dollars chasing any asset class and it goes up simple economics. Right now everyone that got a stimmulus check wants to play jordan belford. I do think ultimately though we will get not just inflation but self imposed stagflation. I cant speak for all industries but in warehousing, especially cold storage, it is almost impossible to get people to hire on and stay. Unemployment is too good of an offer for some folks even taking a fairly substantial pay cut to collect it.
we can’t find help in the manufacturing industry either. They’re making too much on unemployment!
Here in southern Minnesota NOW HIRING signs are everywhere.
The contract manufacturing place I work at has been understaffed for most of the last couple years. And I’m talking about both production and office (engineering/materials etc.).
If you actually want a job and aren’t being overly picky, you can find a job.
I’m about to start looking for a different one as I’m tired of being perpetually behind with no real end in sight. And it’s not just the area I’m in either.
Steelheart
You need to start reading Martin Armstrong’s web site Armstrong Economics on the web if you want to know what’s going on
I have subscribed to him for decades back when I managed a multi billion dollar institutional investment management company in the 80’s
This smells like a blow-off top to me. Oceans of loose money everywhere. Everything looks great for a while, but once a high-flying institutional investor gets scared, everybody will head for the exits. This is not going to end well.
Just like a good magician keeps the audience looking at the wrong things, those guiding the financial system are keeping everyone looking at the price of stocks and Bitcoin. You are correct in pointing out the fact that the real value of these things (especially Bitcoin) haven’t justified the dollar denomination attributed to them. Is it a coincidence that the World Economic Forum has been pushing for “The Great Reset”?
Mark my words that the reset IS coming – and it won’t be very pretty when it gets here.
Got food?
People have been saying this since at least Y2K (that’s just when I started tracking these proclamations), so when do you think it will be here and how long after that timeframe until you will admit you were wrong?
I’m not going to try to give you a date. I will confidently state that the longer it takes to get here, the worse it’s going to be.
You’re not wrong about the purchasing power of the dollar, but when it comes to the CPI, the answer is much simpler… The US Bureau of Labor Statistics simply changes the formula as needed to arrive at a desired inflation rate. One of the simplest ways they do this is via substitution. If the price of certain items rises significantly they simply lower the weight that item is given in the index calculation or they simply remove it and replace it with something else. The classic textbook example is if steak doubles in price, they replace steak with chicken in the CPI calculation. The Econ 101 theory here is that people will buy less of the expensive steak and replace it with cheaper chicken so the CPI should be adjusted to account for this.
So in essence, the quoted inflation is based on the products and services that the USBLS decides to use in their calculations and they are constantly changing these and re-weighting them based on the idea that as prices rise people choose lower priced alternatives.
It’s a complete and total scam and the CPI is next to useless. Plenty of people and business out there that calculate their own inflation numbers using a fixed bundle of goods and services so you can really see the change in prices over time and in most of these cases, inflation has been double digit over the last 2+ decades.
I was going to say hedonics and substitution.
like a balloon, expanding but getting thinner. about to pop any second. just like everything else. the big reset won’t be just economic in nature like the libs believe and want. beware the law of unintended consequences.
So… does this mean you did not meet your 2021 financial goals already?
I suppose it means I met them strictly from a numeric standpoint, but it’d be open to debate whether I met them from a value standpoint. I suppose I should factor a percentage for inflation next time I’m calculating what the goal should be. I mean, if I double the amount I had last year that doesnt mean I can buy twice as many things, right? Inflation would erode that value so that while I have twice as much money, perhaps I can only buy 90% more things than I could have with that money last year.
No surprise. They did the exact same thing during the 8 long dark days of Obama- Biden. Bread jumped from 75 cents a loaf at Wal-Mart to $1.50. But they claimed there was no inflation for 8 years. Fuel prices went up to more than double. Food went up as the price of production rose from the huge increase in oil prices. Diesel fuel and gasoline aren’t the only two things that rise in this situation. Fertilizer prices rose as well. Fertilizer is a petroleum by product as well. Just like plastic.
When we print money not based on anything it’s called counterfeiting, when govt does it it’s called, what is it, quantitive easing or some such bullshit. Either way it drives prices through the roof. All things are up way beyond normal not that you can actually get anything as the shortages of everything are starting to show up on a regular basis, and I’m not talking about ammo & reloading supplies here. Butt, the shelf is full of toilet paper, for now…… get ready for amerizuela, here we come….
I don’t know if anyone here is old enough to remember back to the year 2008 but the government printed a gazillion dollars in “stimulus” and we didn’t see any inflation. Its not just the quantity of money in circulation but also the velocity of money. Building materials have gone up in price because demand is through the roof, the Fed Reserve however has said they expect higher inflation in the next few years than what we have seen in the last few but we almost have to because inflation the last few years has been well below 2% which is not normal.
Inflation was rampant but papered over by .gov, “stimulus” went to big banks(too big to fail) who were then “encouraged” to deposit it back to FederalReserve to keep it from doing more damage.
Housing and durable goods demand is up. And maybe that demand is because people want to get their money OUT of savings and cash and into something that will hold value if the value of the dollar continues to drop.
I know that’s one reason why I’m looking for another house…
n