Sunday, September 25, 2011

I Say Price Inflation, Krugman Says No Price Inflation

Paul Krugman is running the below Price Inflation chart. It shows the CPI inflation rate and MIT's Billion Price Index.

Krugman even admits:
Well, if you look at the detail, you see that it’s very largely about commodity prices — oil mostly, but also to some extent food, and even the bulge in apparel prices is probably mainly about cotton.
But then he states:
And all that is history — it’s the bulge of late 2010 and early 2011 working its way through the pipeline. And that commodity price boom didn’t persist; indeed, it’s gone into reverse.

All of that is the reason the markets don’t see a lot of inflation looking forward — and neither do I
Earlier in the post, he wrote:
He is writing all this, as the Producer Price Index growth rate continues to accelerate and Bernanke is pumping money at near record double digit rates. In my book, this is an indication that more severe price inflation is on the way.

Krugman is setting himself up, as far as I'm concerned for more (high priced) egg on his face.

12 comments:

  1. Finished goods PPI just fell from 7.2% to 6.5%. What kind of weird definition of "accelerate" is that?

    "pumping money at near record double digit rates."

    That's irrelevant if money demand is increasing.

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  2. The title of this post, isn't that also the title of a Beatles song?

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  3. Has any one ever called this guy out in his face about the garbarge that he says?

    Speaking of books Robert when you going to write one?

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  4. @Desolation Jones

    I don't know why RW continues to allow you to post here. You are an idiot.

    From month to month anyting can happen to the PPI number, but the accelerating trend is clear, if you look at where PPI started at the beginning of the year and where it is now.

    Further, you use the number 6.5% PPI number but in the same breath you talk about an increase in the demand for money. Does an increase in prices of 6.5% sound like an increase in the demand for money to you?

    Your worse than Krugman.

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  5. The monthly percent change in PPI for the past four months have been 4%, -4%, 2%, and 0%. Compare that to .9%, 1%, 1.5%, 7%,and 8% of the months before. The acceleration clearly stopped a few months ago and is now DEcelerating. I still can't figure out what weird definition of acceleration you have to you use when the 12 moth change of PPI from August is LOWER than it was in April.


    For similar reason, Wenzel made the horrible prediction that severe price inflation was on the way when he looked at the double digit M2 growth in late 2008/early 2009. For all the hate Wenzel has for Milton Friedman, he sounds exactly like an old school monetarist by looking at m2 and predicting inflation as if velocity and money demand is constant.

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  6. @Desolation Jones

    Oh so you lost on the last comment so you switched to different data. Loser.

    For the record in January, 12 month PPI growth was at 3.6%, as of August it is 6.5%. What part of annual inflation don't you get?

    I suspect RW could run circles around Friedman's money equation, much the way I am running circles around you.

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  7. I've been reading some Mish and watched some Gary Shilling stuff. The deflationists claim that credit is contracting, and since most of our money supply comes from bank credit, this is a deflationary depression. Also, Europe is falling apart, creating even more demand for the dollar. They acknowledge that the Fed is inflating, but say most of that new money is not getting out of bank reserves. What a stupid monetary system we have.

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  8. "For the record in January, 12 month PPI growth was at 3.6%, as of August it is 6.5%."

    Pretend I'm driving. In the first minute I'm driving at 1 hour per hour. Next minute at 3mph. Then 5mph. Then 7mph. Finally on the 7th minute, I'm driving at 13th mph. Then I went down to 12 mph in the 8th minute. Then to 11 mph. Then 10 mph. Then 9 mph. Then 8 mph in the 12 minute.

    In the last 5 minutes, did I decelerate, or accelerate? It's as simple as that. Use the same logic on the monthly PPI data.

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  9. @Desolation Jones

    Your confusion never ceases to amaze me. So are you saying price inflation went up (or at least stayed the same} every day of the month when inflation was up for the month and that it was down every day (or at least stayed the same ) for such a month.

    You are a trapped caged animal, you can't win. Give up.

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  10. @ anonymous You said,

    "Has any one ever called this guy out in his face about the garbarge that he says?"



    Check out krugmandebate.com

    As previously covered by this blog, Robert Murphy has challenged Krugman to a debate and has gotten about $60,000 dollars of pledges that will go to a New York City food bank if Krugman agrees to the debate. Still hasn't accepted as far as I know.

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  11. @Banacek

    Based on the technical definition of accelerate he is correct. Acceleration is an increase in the rate of increase, a positive second derivative.

    The rate of inflation can be increasing, yet decelerating if each monthly increase is smaller than the previous one.

    Many people without a background in physics use it in a less precise way as a synonym for increasing.

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  12. @PMix

    So I put to you the question I put to Desolation Jones. So are you saying price inflation went up (or at least stayed the same} every day of the month when inflation was up for the month and that it was down every day (or at least stayed the same ) for such a down month?

    As I note, I am, and I believe also RW, are discussing 12-month annual changes.

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