Bernanke proves his critics wrong about surge in inflation Read more here: http://www.the

[JasonM]

hxxp://www.thenewstribune.com/2012/02/12/2022918/bernanke-proves-his-critics-wrong.html

According to the article, "The personal-consumption-expenditures price index rose 2.4 percent for the 12 months ending in December, near the central bank’s 2 percent target."

How do we debunk this? They obviously must be using some flawed metrics right in that 2.4 percent right?

Or perhaps we simply haven't reached a breaking point yet with our currency?

 

[Elfshadow]

Is not that the number that don't include Fuel or food?

 

[kylejack]

My theory is that destroying the economy is having a depressing effect on the cost of goods. I as a business owner can't very well raise my prices if there's nobody buying at the more expensive price.

The economy is now recovering, and unemployment seems to be going back down. As it recovers I am predicting we'll see a boom in inflation.

 

[JasonM]

But we need wage inflation to accompany this as well don't we? Otherwise all that excess cash ends up locked away in electronic accounts and exotic investments or exported to foreign investors speculating in US treasuries. This is what Bernanke is talking about when he talks about things like "liquidity traps". If you can't spend it on real things, or investments that affect the cost of real things, then it won't cause inflation.

 

[rpwi]

Many points to consider.

The first is that the government's official measure of inflation is heavily manipulated (some of it to keep SS payments down). Shadowstats.com has a nice primer on how the CPI has been manipulated and has real charts for if we were still measuring inflation/CPI like we were before 1990.

http://www.shadowstats.com/article/consumer_price_index

The dollar is also a reserve currency. What this means is that other countries use the dollar a a means for exchange. We can say export dollars to Bolivia for fruit...then the dollar get circulated internally inside of Bolivia as a means of exchange without coming home. This is a HUGE windfall for the US and it majorly covers up our inflation. We've been doing this a long time...exporting dollars while importing the things dollars can buy. This doesn't erase inflation however...just delays the effect. One day all these foreign dollars will come home...and they'll want food, land, electronics, machine tools, etc...and we will have hyperinflation.

Let's look at the amount of money government has created in the past 5-6 years. In 2006, the monetary was about 600 billion dollars. Thx to the bailouts and low interest rates the MB is now 2600 billion dollars. That's HUGE and completely unprecedented int he history of the united states. Normally the MB grows at a somewhat constant rate...but NOT THIS MUCH. Here is a hockey stick curve of the 'adjusted' data:

http://research.stlouisfed.org/fred2/graph/?id=BASE

Why didn't we experience mega-inflation? Granted we did experience a lot of inflation but the CPI hasn't been covering it. But the main reason we didn't have hyper-inflation is because bank money has been getting destroyed thx to the financial crisis and this causes deflation (bank money is also very dishonest like government money). Once (well if) the banks recover...they will continue counterfetting money like they have at they're current pace. Presently the money multiplier is below one...historically extremely low (doesn't show the whole picture as M2 and M3 multipliers are still large). Historically we've had a money multiplier at around X3...once we get back to that instead of X1..we could see a tripling of the money supply and mega inflation.

http://research.stlouisfed.org/fred2/series/MULT

 

[thoughtomator]

To anyone who believes the government's numbers, ask why prices at the grocery store went up 30% over the past year if there was only 2.4% inflation.