once again, short on time so i will have to steal someone else's work http://dailyreckoning.com/why-you-shouldnt-trust-the-core-cpi-numbers/
I read this - let's assume that all that it says is true, that the CPI is 5-10% lower than it should be in magical perma bear land - First, they don't provide a very convincing case of this, they just claim that something went down "in the early 80's" when the index was reweighted. But let's accept their point and assume they're right, Even by their "actual" numbers, inflation is not really an issue recently. Look at the graph they posted: That doesn't show the ridiculous 20% inflation figure you claimed, it shows 8%, which is still pretty much in line with the yearly average for the last 2 decades.
Interesting and all, but that doesn't explain why the price of corn produced in India and sold to Indian people costs more. Or why the price of gas in India has gone up - even if oil is traded in dollars, the rupee goes up in value compared to dollars, so why is the price of oil higher in rupees if it's all about inflation? Of course, the dollar is now on the exact trajectory it was on from 2000-2007 before it spiked up during the financial crisis. That means, if there was no crisis and no crazy Fed actions, the dollar would be worth exactly it is today. So what does that say about the effect of the Fed's interventions? The dollar is dropping because the fear is leaving the global market; just as the dollar rose because fear entered the global market. And it SHOULD be dropping because that's the nature of trade imbalances. No we don't - because most Americans buy stuff in America. And since GDP accounts for inflation, its a general measure of how much total buying power we have. Good thing most Americans don't spend all their money on oil, gas, and gold. Instead of being selective, we could actually look at the full basket of goods that people buy - you know, the one that includes all the many things that haven't gone up in price or have gotten cheaper - and we'd see that as a whole, inflation hasn't gone anywhere and thus Americans aren't spending more as a whole to buy the stuff they buy in life. Amazing what the move of potentially 3 billion people into middle class living in China & India will do to demand for food and industrial metals. I fail to see what this has to do with the dollar. Wait - if this is all about dollar inflation, what does it have to do with global starvation? By this standard, everyone else in the world is getting richer in terms of dollars and isn't seeing any price increases. Given that we have plenty of historical spikes in silver and gold, and the average American doesn't buy silver on a regular basis, yes, I would ignore that one. Yes, oil is bought in dollars. So when Brazil buys oil, and they can now convert their Real into more dollars, they shouldn't see an increase in cost when buying oil if the price increases were a result of the dollar going down in value. And yet, Brazilians are having to pay more for gas. As is every other country that have currencies strengthening vs dollars. Why is this?
BTW, if my post comes across as rude, I didn't mean it - I love this type of discussion. I hate the "you're wrong!" stuff that doesn't have any arguments attached to it - but I enjoy having a discussion when actual material to debate is presented.
Just wanted to say that people are fixated on the wrong issue. I can see why though. People have this irrational concern about currency devaluing. They remember when it cost 25 cents to watch a movie instead of $10. Naturally, they think that this is a very bad thing. They only see one side of it that a movie ticket now costs 40 times what it used to. Nobody ever focuses on the other side of the picture. Our salaries have gone up as well. But the real issue is that the rate salaries have increased are not equal to the rate the value of the dollar has decreased. You would want both to have same rate of change. Don't just argue that the dollar has fallen. See images below. Spoiler Spoiler From 1920 to 2000, average income increased from $15k to $50k. An increase of about 3.5%. From 1920 to 2000, dollar value has decreased $0.40 to $0.04. A decrease of about 10%. This is where the real issue lies.
Even this is sort of misleading though. The dollar falling faster than incomes only tells us that Americans aren't increasing wealth at the same rate as the rest of the world - but given that the starting point was a strong US economy and a post-WWI disaster in the rest of the world, that makes sense. There has been a global economic boom so the rest of the world is catching up to the US. But that's very different than saying Americans are losing value. Buying power has to be measured against what you buy, not against what your currency is worth in other people's currencies. In those terms, Americans are much wealthier today as a whole (regardless of the issue with bad distribution) than they were in 1920. Basically, everyone's getting richer, but other countries are getting richer faster than the US - thus, relatively speaking, they are gaining more buying power than we are.
You can take everything I say with a big grain of salt. I did get a degree in economics, but that was over 20 years ago and I have never used that degree. I hear a lot about the fear our currency and run away inflation on the horizon and it all seems to focus on fed policies. I think that most of these people are missing the issue of velocity of money and its huge relationship on the money supply. It is true that the fed has been running the printing presses overtime with the super low rates, QE, and QE2, along with government bailing out banks and providing stimulus, but the velocity of money is greatly reduced from a few years ago because banks are not loaning as much and people want to borrow less. I do not think M3 is being tracked any more, but I bet it would show a significant decline from a few years ago. Now if these same policies were used in the 80s and 90s, we may have had a real run away inflation problem, but economic conditions are different now. If these fed policies were used in the early 30s, we may have reduced the severity of the depression. As I think was mentioned, some inflation is good and we may be starting to see some signs of inflation from the quarterly reports of companies like Coke and Kimberly Clark. However, inflation without better job growth and income growth could be a problem, but just about anything is better than deflation.
major- this is my busiest time of the year at work but i will reply to your posts when i have the proper time (this weekend). in the meantime, going back to the food prices question and supply and demand, here is a good article that i was emailed today from a friend. worth the read. will get back to you when i can answer you properly with a well thought out post http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis
**** me, I was readign these posts on my way to the Ron Paul rally and I took all my dollars and converted them to Silver Doubloons last week.
Quite the bloody massacre on SLV. Looks like those still holding gold have one last chance to exit before it completely rolls over as well.
Not my forté, but I've thought about silver investment in the past, yet lately read in a few places (nearly posted here before but not knowledgeable enough about it that I thought I should) that those who control silver control the price at their liking making it a very dangerous market. Here is an Op-Ed from the NYT regarding the most recent place i saw it. -------- March 2, 2011, 7:40 PM A Conspiracy With a Silver Lining By WILLIAM D. COHAN A Conspiracy With a Silver Lining As Americans know all too well by this point, commodity prices — for corn, wheat, soybeans, crude oil, gold and even farmland — have been going through the roof for what seems like forever. There are many causes, primarily supply and demand pressures driven by fears about the unrest in the Middle East, the rise of consumerism in China and India, and the Fed’s $600 billion campaign to increase the money supply. Nonetheless, how to explain the price of silver? In the past six months, the value of the precious metal has increased nearly 80 percent, to more than $34 an ounce from around $19 an ounce. In the last month alone, its price has increased nearly 23 percent. This kind of price action in the silver market is reminiscent of the fortune-busting, roller-coaster ride enjoyed by the Hunt Brothers, Nelson Bunker and William Herbert, back in 1970s and early 1980s when they tried unsuccessfully to corner the market. When the Hunts started buying silver in 1973, the price of the metal was $1.95 an ounce. By early 1980, the brothers had driven the price up to $54 an ounce before the Federal Reserve intervened, changed the rules on speculative silver investments and the price plunged. The brothers later declared bankruptcy. Accusations that JPMorganChase and HSBC allegedly manipulated precious metal markets are worth looking into. The Hunts may be gone from the market, but there are still plenty of people suspicious about the trading in silver, and now they have the Web to explore and to expand their conspiracy narratives. This time around — according to bloggers and commenters on sites with names like Silverseek, 321Gold and Seeking Alpha — silver shot up in price after a whistleblower exposed an alleged conspiracy to keep the price artificially low despite the inflationary pressure of the Fed’s cheap money policy. (Some even suspect that the Fed itself was behind the effort to keep silver prices low, as a way to keep the dollar’s value artificially high.) Trying to unravel the mysterious rise in silver’s price is a conspiracy theorist’s dream, replete with powerful bankers, informants, suspicious car accidents and a now a squeeze on short sellers. Most intriguingly, however, much of the speculation seems highly plausible. The gist goes something like this: When JPMorgan Chase bought Bear Stearns in March 2008, it inherited Bear Stearns’ large bet that the price of silver would fall. Over time, it added to that bet, and then the international bank HSBC got into the market heavily on the bear side as well. These actions “artificially depressed the price of silver dramatically downward,” according to a class-action lawsuit initiated by a Florida futures trader and filed against both banks in November in federal court in the Southern District of New York. “The conspiracy and scheme was enormously successful, netting the defendants substantial illegal profits” in the billions of dollars between June 2008 and March 2010, according to the suit. The suit claims that JPMorgan and HSBC together “controlled over 85 percent the commercial net short positions” in silvers futures contracts at Comex, a Chicago-based exchange on which silver is traded, along with “25 percent of all open interest short positions” and a “a market share in excess of 9o percent of all precious metals derivative contracts, excluding gold.” In the United States, trading in precious metals and other commodities is regulated and closely monitored by a federal agency, the Commodity Futures Trading Commission. In September 2008, after receiving hundreds of complaints that silver future prices were being manipulated downward by JPMorgan and HSBC, the commission’s enforcement division started an investigation. In November 2009, an informant, described in the law suit only as a former employee of Goldman Sachs and a 40-year industry veteran, approached the commission with tales of how the silver traders at JPMorgan were bragging about all the money they were making “as a result of the manipulation,” which entailed “flooding the market” with “short positions” every time the price of silver started to creep upward. The idea was that by unloading its short positions like a time-released capsule, JPMorgan’s traders were keeping the price of silver artificially low. Soon enough, the informant was identified as Andrew Maguire, an independent precious metals trader in London. On Jan. 26, 2010, Maguire sent Bart Chilton, a member of the futures trading commission, an e-mail urging him to look into the silver trading that day. “It was a good example of how a single seller, when they hold such a concentrated position in the very small silver market can instigate a sell off at will,” Maguire wrote. On Feb. 3, 2010, Maguire gave the futures trading commission word about an impending “manipulation event” that he said would occur two days later, when the Labor Department’s non-farm payroll numbers would be released. He then spelled out two trading scenarios about which he had been told. “Both scenarios will spell an attempt by the two main short holders” — JPMorganChase and HSBC — “to illegally drive the market down and reap very large profits,” Maguire wrote in an e-mail to a trading-commission investigator. On Feb. 5, Maguire took a victory lap, writing in another e-mail to the trading commission that “silver manipulation was a great success and played out EXACTLY to plan as predicted.” He added, “I hope you took note of how and who added the short sales (I certainly have a copy) and I am certain you will find it is the same concentrated shorts who have been in full control since JPM took over the Bear Stearns position … I feel sorry for all those not in this loop. A serious amount of money was made and lost today and in my opinion as a result of the CFTC’s allowing by your own definition an illegal concentrated and manipulative position to continue.” In March 2010, Maguire released his e-mails publicly, in part because he felt the trading commission’s enforcement arm was not taking swift enough action. He was also unhappy over not being invited to a commission hearing on position limits scheduled for March 25. Then came the cloak and dagger element: the day after the hearing, Maguire was involved in a bizarre car accident in London. As he was at a gas station, a car came out of a side street and barreled into his car and two others; London police, using helicopters and chase cars, eventually nabbed the hit-and-run driver. Reports that the perpetrator was given a slap on the wrist inflamed the online crowds that had become captivated by Maguire’s odd story. In any case, the class-action lawsuit contends that between March 2010 and November 2010, JPMorgan Chase and HSBC reduced their short positions in the silver market by 30 percent, causing the metal’s price to rise dramatically, but leaving them still with a large short position. Now, with the value of silver rising nearly every day, the two banks are caught in a “massive short squeeze,” according to one market participant, that appears to be costing them the billions they made originally plus billions more. Whether these huge losses will show up on the books of JPMorgan Chase and HSBC remains to be seen. (Parsing through the publicly filed footnotes of derivative trades is no easy task.) Nonetheless, the conspiracy-minded have claimed that the Fed must have somehow agreed to make JPMorgan and HSBC whole for any losses the banks suffered if and when the price of silver rose above the artificially maintained low levels — as in right now, for instance. (About all this, a JPMorganChase spokesman declined to comment.) Some two-and-a-half years later, the Commodity Futures Trading Commission’s investigation is still unresolved, and at least one commissioner — Bart Chilton — thinks that after interviewing more than 32 people and reviewing more than 40,000 documents, there has been enough investigating and not enough prosecuting. “More than two years ago, the agency began an investigation into silver markets,” Chilton said at a commission hearing last October. “I have been urging the agency to say something on the matter for months … I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.” What’s more, Chilton said in an interview last week, that “one participant” in the silver market still controlled 35 percent of the silver market as recently as a few months ago, “enough to move prices,” he said, and well above the 10 percent “position limits” the commission has proposed to comply with Dodd-Frank financial reform law. Since that law’s passage last summer, the commodities exchanges have issued waivers permitting the ownership of silver positions above the limits the C.F.T.C. has proposed, and which were supposed to be in place by January of this year. Yet the waivers remain in place, and the big traders have not been penalized, much to Chilton’s frustration And the mystery deepens: last Thursday, the price of silver fell $1.50 per ounce in less than an hour before recovering. “This was robbery at its most obvious and most vindictive,” wrote Richard Guthrie, a London-based trader, in an e-mail to Chilton. “How many investors lost money and positions to the financial benefit of an elite few?” It’s getting harder and harder to continue to brush off Andrew Maguire’s claims as the rantings of a rogue trader with a nutty online following. The Commodities Futures Trading Commission should immediately release the files from its investigation into the supposed manipulation of the silver market so the public can determine whether JPMorganChase and HSBC did anything illegal, with or without the help of the Fed. In addition, the commission should start enforcing the 10 percent threshold on silver positions it has proposed to comply with Dodd-Frank law. Basically, the other commissioners must join with Bart Chilton to do the job they are required to do: Protecting the sanctity of the markets and preventing the sorts of manipulation we’ve seen all too often.
I agree it should but Gold won't go bust so easy. When people start insanely investing into a commodity that does nothing but plate headphone jacks for slightly better sound quality and look perty, you're going to get a bubble driven by fear. Gold should be invested in because you think global income levels are increasing which undoubtedly leads to people being able to afford luxury items such as gold jewelry (i.e. increased demand). It should NOT be invested in because our doomsday friends at fox news told you that Obama is here to destroy America and its currency.
And you really shouldn't buy from Goldline (one of Beck's biggest advertisers) because they steer you into gold coins that cost double or more the per-ounce price of raw gold because they are "collectible." http://www.huffingtonpost.com/2010/07/20/glenn-becks-sponsor-goldl_n_652766.html
