Tag Archives: inflation

Deflation is Here!!!!

By Biiwii

In case you were not suitably moved by the post’s title…


I just wanted you to be sure to know that deflation is here.  Just like you used to know that…


You see, many of the same people who used to scare the crap out of us to prepare for the coming blow off in inflation (as in El Hyper) are now promoting deflation, just to make sure we are well up to speed with the current thinking.

Got to hand it to Prechter; he of the infinite patience promoted deflation through thick and thin.  But it is a sure sign that something is readying for change when those who made their bones schooling us on one thing, go whole hog to its opposite after never seriously entertaining its viability until well after it became obvious fact.

Deflation Warning: The Next Wave

It is just one tool, but I think a lot of answers reside in the Gold-Silver ratio, which continues in its uptrend during this deflationary phase.  But remember our big picture chart has its limits.  Registering the low-mid 80’s to 90 (which could still be many months out) will likely coincide with the next inflationary episode.  Meanwhile, Prechter is getting a lot of weight on his side of the boat.

gold-silver ratio, inflation and deflation

Credit Follows the Dollar

By Jeffrey Snider @ Alhambra

Goodnight Janet; Credit Follows The ‘Dollar’ Now

On this side of the “dollar” world, credit markets have all but written Janet Yellen into irrelevance. Despite her pleas (because of?) last week, there isn’t any part of money dealing or fixed income that is taking her “certainty” about recovery and “inflation” as even a partial setting. So lost is the FOMC, that everywhere you turn these markets are moving opposite.

Where that has to sting the most is “inflation expectations.” Proving to be far more than just crude prices (which have largely been stable since August, at least in the view of not crashing again), breakevens are now at lows last seen in the dark days of 2009, surpassing that first “wave” earlier this year. Trading in the past few days has seen TIPS hedging interest drop sharply, which can only count as credit markets giving up on the recovery narrative in full – once (to January 14) might be “transitory”, but twice eight months later and at new lows is goodnight Yellen.

ABOOK Sept 2015 Asian Dollar Inflation Breakevens New LowsABOOK Sept 2015 Asian Dollar Inflation Breakevens Continue reading Credit Follows the Dollar


By Michael Ashton

Below is a summary of my post-CPI tweets. You can (and should!) follow me @inflation_guy or sign up for email updates to my occasional articles here. Investors with interests in this area be sure to stop by Enduring Investments. And sign up to receive notice when my book is published! The title of the book is What’s Wrong with Money?: The Biggest Bubble of All – and How to Invest with it in Mind, and if you would like to be on the notification list to receive an email when the book is published, simply send an email to [email protected].

Also note that I have been invited to be a guest on “What’d You Miss?” today at 4pm ET. Catch it!

  • Core CPI +0.1%, but y/y stays at +1.8% as it was a “soft” 0.1%. Specifically 0.07%, weaker than expected.
  • Core services remains +2.6%; core goods -0.5% y/y.
  • The -0.5% drag in core goods remains about what we can expect from the dollar’s current strength.
  • But remember core goods is the smaller part of core inflation (and the more volatile part).
  • Bottom line on Fed has been: plenty of argument either way. This number doesn’t affect the argument either way. Doves will be doves.
  • No idea if Fed hikes tomorrow, but SHOULD have removed extraordinary accommodation when extraordinary risks were past. Years ago.
  • Speaking of housing: Primary rents 3.62% from 3.56%; OER at 3.02% from 3.00%. This acceleration will continue.
  • Lodging away from home is a small piece (0.8% of total CPI) but always fascinates me. 1.7% y/y versus 5.7% six months ago.
  • Medical care was unch, 2.47% vs 2.49%, but pharmaceuticals was 3.5% vs 3.2% while professional services 1.7% vs 2.1%.
  • The weakness in medical care continues to be the main story holding down core vs median, since 2013.
  • Motor fuel of course a big drag on headline, but New and used motor vehicles also still weak (a dollar effect): -0.1% vs +0.2%.
  • I actually think Median stands a decent chance of an 0.2% month, based on my back-of-the-envelope calculation.
  • If I am right, then Median may be at the highest level since the crisis ended. Currently 2.28%; 2012 high was 2.38%.
  • We won’t know for a few hours and my calculator doesn’t seasonally adjust the regional housing indexes so don’t take that to the bank.
  • But even if median just stays at 2.3%, that’s consistent with PCE inflation being at the Fed’s target.
  • Really looking forward to this: On Bloomberg TV at 4pm ET with Joe and Alix.
  • Good time to mention my book “What’s Wrong with Money: The Biggest Bubble of All” due out in Feb. Can preorder: http://amzn.to/1YbJT0p
  • We don’t even have cover art yet! But the manuscript is done.
  • Much more interesting discussion [than OER] is medical care. MUCH harder to measure than OER, because consumers don’t pay for it directly.
  • We all know insurance costs are going up, but part of this is a price effect and part is a utilization effect.
  • Part of the effect of the ACA is to get people to consume less health care by making them pay for smaller costs directly.
  • …of course, that lessens overall welfare since your tradeoffs are worse. But I don’t want to get too ‘inside baseball’ in 140 char.
  • BTW, it occurs to me I never mentioned y/y core CPI is 1.83% from 1.80%, so it rose a smidge even though a weak core #.

Continue reading Post-CPI

NFTRH 359 Out Now

By Biiwii

20 pages, a little Tin Foil, a lot of historical facts and some logical deductions.  NFTRH 359 out now.

nftrh 359


By Michael Ashton

Below is a summary of my post-CPI tweets. You can (and should!) follow me @inflation_guy or sign up for email updates to my occasional articles here. Investors with interests in this area be sure to stop by Enduring Investments. And sign up to receive notice when my book is published! The title of the book is What’s Wrong with Money?: The Biggest Bubble of All – and How to Invest with it in Mind, and if you would like to be on the notification list to receive an email when the book is published, simply send an email to [email protected].

  • core CPI+0.13%, softer than expected. Core y/y rose from 1.77% to 1.80% due to soft year-ago comparison.
  • Next month we drop off an 0.05%, so we will almost surely get a core uptick. Surprising we haven’t yet. Waiting for breakdn.
  • Both primary rents and owners’ equiv accelerated slightly, Which means core EX HOUSING was actually slightly down m/m
  • core services rose to 2.6% (mostly on housing); core goods fell to -0.5% from -0.4% y/y. Same story overall.
  • Apparel accelerated to -1.64% from -1.85% y/y. Story for years in apparel was deflation; in 2011-12 prices rose>>
  • >>and looked like return to pre-90s rate of rise. Then it flattened off, and has been declining again.
  • Apparel could well be a dollar story now – it’s almost all made overseas, almost no domestic competition so dollar matters.
  • our proxy for core commodities is apparel + cars + med care commodities. all 3 decelerated. Cars went from +0.5% to 0.0% y/y.
  • sorry, Apparel actually ACCELERATED to -1.6% from -1.9%, but still negative.
  • airfares not really a story. -5.6% y/y vs -5.2% y/y. The NSA number dropped but it always drops in late summer. [Ed note: see chart below]
  • airfares was -8.5%, but it was -8.1% last july, -2.9% in 2013, -2.6% in 2012…no story there. didn’t affect core meaningfully.
  • Primary rents 3.56% from 3.53%. OEW 3.00% from 2.95%. Both will continue to rise.
  • Lodging away from home also rebounded to 2.9% y/y after a one-off plunge to 0.8% y/y last month. Household energy of course down.
  • Transportation accelerated (-6.6% y/y vs -6.9%) on small motor fuel recovery. btw, airline fares are only 0.7% of CPI, so 0.9% of core.
  • Med Care: goods were dn (drugs 3.2% vs 3.4%,equipment -0.9% vs 0.0%) but prof services up (2.1% vs 1.8%),hospital svcs dn (3.2% vs 3.5%)
  • Health insurance only +0.9% y/y vs 0.7%, but more expenditures out-of-pocket under the ACA so higher infl for those categories hurts.
  • Median (due out later) might only be +0.1% this month. I have it cuffed at 0.15% but I don’t seasonally-adjust the housing sub-components.
  • Last yr Median was +0.17% m/m, so best guess is it roughly holds steady at 2.3%.
  • I don’t see how the Fed embarks on a meaningful tightening in Sep, with global economy weaker than it has been in a couple yrs.
  • Median inflation and growth plenty strong enough to “normalize” rates but that’s not a new story.
  • I’ve been saying they should tighten for a few years but not sure why they would NOW if they didn’t in 2011.
  • But Fed doesn’t use common sense or monetarist models.It’s all DSGE;who knows what those models are saying?Depends how they calibrated.
  • FWIW our OER models diverge here. Our nominal model says pressures on core start to ebb in a few mo; our real model predicts more rise.
  • I like the real model as it makes mose sense…but it’s not tested in a real upswing.
  • US #Inflation mkt pricing: 2015 0.8%;2016 0.7%;then 1.6%, 1.7%, 1.8%, 1.9%, 2.0%, 2.1%, 2.2%, 2.3%, & 2025:2.2%.
  • …so inflation market doesn’t see inflation at the Fed’s target (about 2.2% on CPI vs 2.0% on PCE) until 2023.
  • The market is not CORRECT about that, but another reason the Fed can defer tightening if they want to. And they have always wanted to.

Continue reading Post-CPI

The Fed and Inflation

By Tom McClellan

Debunking the Fed as the Controller of Inflation

Global temperatures and CPI Inflation Rate
July 31, 2015

A commentator on CNBC recently stated that former Fed Chairman Paul Volcker is “revered” in the bond market for having slayed the inflation dragon.  While that version of history is widely believed to be true, and while then-Chairman Volcker did take aggressive action with interest rates, the causal relationship between Fed action and inflation rates has now been debunked by revelations from other data.

Continue reading The Fed and Inflation

‘More Informed’ Inflation

By Alhambra Investment Partners

Agitating For A More Informed Inflation

There are numerous problems created by asset bubbles and many more as a result of a series of them. The financial system becomes highly destabilized, especially as authorities and policymaking bodies misunderstand them to the point of determined stasis rather than courting necessary evolution and reform, which in turn has the same effect on the economy. This is not a linear exchange, however, which is why the major alteration to the governing dynamics due to asset bubbles may really be how they mask and often hide what is really taking place.

A healthy economy in the modern sense is one that fosters labor specialization, period. An economy that does not create greater participation is not a healthy economy, so in that sense or under those circumstances measuring the “dollar” value of goods and services produced and traded may be misleading. If such commerce is redirected to only specific economic segments, even determined by income (as asset bubbles tend to stratify income levels), there can be dissonance between those figures and the economy as it actually exists.

Continue reading ‘More Informed’ Inflation


By Michael Ashton

Below is a summary of my post-CPI tweets. You can (and should!) follow me @inflation_guy or sign up for email updates to my occasional articles here. Investors with interests in this area be sure to stop by Enduring Investments.

  • Core CPI +0.18%, y/y rises to 1.77%. Pretty much as-expected on the headline figures.
  • Was some market concern about a possible higher print following PPI, but there isn’t much correlation.
  • Note that the next two months of CPI will ‘drop off’ an 0.10% and an 0.05%, so we should get to 2% on core inflation by mid-September.
  • Of course the Fed’s target is ~2.25% on core CPI (since they tgt core PCE) so Fed can argue it’s still below tgt. Uptrend may concern.
  • Housing inflation on the other hand going to the moon
  • This is great chart and it’s the reason core never had a chance of entering deflation territory. & will go up. (retweeted Matthew B)

oer Continue reading Post-CPI

Bulletin: It’s a Credit Bubble!

By Biiwii

As posted at NFTRH.com

You may have caught the title’s little inside joke.

Sometimes you (well, I anyway) can look at a graph representing data that is a culmination of history (i.e. reality) and just let it settle in for some perspective and even some conclusions.

Whether these conclusions are right or wrong is subjective and open to debate. But what I see here when viewing the Prime Rate historical is summed up after the graph (graphs courtesy of Economagic, mark ups mine).


In the pre-Greenspan era, every rise in Prime rates was eventually corrected through recession. This makes sense as the Federal reserve would, through its Funds Rate, make borrowing by banks more expensive during economic up cycles and hence, this was passed on to the borrowing public by the spread between FFR and Prime.

Continue reading Bulletin: It’s a Credit Bubble!


By Doug Noland

Credit Bubble Bulletin: Broken

The Shanghai Composite rallied 10% this week, enjoying the “biggest two-day rebound since 2008.” Friday saw Germany’s DAX surge 2.9%. French, Spanish and Italian equities rallied about 3%. European periphery bond yields dropped (some). The S&P500 advanced 1.2%. It was, however, another rocky week for commodities.

Global markets this week approached the edge – then recoiled, as they tend to do. Over recent years it’s become the typical pattern. Wait long enough and market stress is met with whatever desperate policy response it takes at that moment. Officials in China moved aggressively to adopt their belligerent brand of “whatever it makes” central market control. Crazy stuff. And as market participants expected, the Game of Chicken saw the Greeks and Europeans eventually cave to market pressure. Markets win again. Long live the king.

Continue reading Broken

Austrian Economics…

By Steve Saville

Does “Austrian Economics” Predict Inflation or Deflation?

The answer to the above question is no, meaning that “Austrian Economics” makes no prediction about whether the future will be inflationary or deflationary. That’s why some adherents to “Austrian” economic theory predict inflation while others predict deflation. A good economic theory can give you insights into the likely short-term, long-term, direct and indirect effects of policy choices, but it doesn’t tell you what will happen regardless of future choices and events. I’ll try to explain using two well-known quotes from Ludwig von Mises, the most important economist of the “Austrian” school.

Here’s the first quote:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

Continue reading Austrian Economics…