Sarah Palin: Fed Historian, Part II
Invictus here.
I’m simply unable to resist the temptation to weigh in on the Sarah Palin v. Ben Bernanke QE2 inflation controversy. I’m drawn to the intersection of economics and politics like a moth to a flame. So apologies to those who read BR’s post on this and are now subjected to my take.
It appears to have started when National Review excerpted part of a Palin speech. The part to which I take exception is this (emphasis added):
All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so.
Her bold (and bolded) claim is simply not supported by the facts. The BLS reports — see Series CUSR0000SAF11, U.S. City Average, Food At Home (i.e. groceries) — that inflation over the past 12 months has run at 1.4 percent, hardly a “significant rise” by historical standards (unlike mid-2008). To be sure, some items have gone up, others have gone down, as is always the case. And one can drill down into the numbers and find whatever signs of inflation — or deflation — they’d like. There are dozens, if not hundreds, of items from which to choose. But the point remains that, on the whole, 1.4 percent is hardly runaway grocery inflation.
The Wall St. Journal’s Sudeep Reddy rightly called BS on Palin’s claim, to which she responded with a pile of self-deprecating, aw-shucks-I’m-just-an-ex-governor-and-homemaker nonsense (“I’m just a former governor and current housewife from Alaska, but even humble folks like me can read the newspaper. I’m surprised a prestigious reporter for the Wall Street Journal doesn’t.” Of course, reading and comprehending are two very different things). That exchange is here. In it, Palin tries to club Reddy over the head with an article that appeared in his own paper and in so doing proves that Reddy was, in fact, right in criticizing her factually challenged statement. Palin writes:
Mr. Reddy takes aim at this [ed. note: Refers to her inflation claim]. He writes: “Grocery prices haven’t risen all that significantly, in fact.” Really? That’s odd, because just last Thursday, November 4, I read an article in Mr. Reddy’s own Wall Street Journal titled “Food Sellers Grit Teeth, Raise Prices: Packagers and Supermarkets Pressured to Pass Along Rising Costs, Even as Consumers Pinch Pennies.”
The article noted that “an inflationary tide is beginning to ripple through America’s supermarkets and restaurants…Prices of staples including milk, beef, coffee, cocoa and sugar have risen sharply in recent months.”
First off, note that the article she cites states that an “inflationary tide is beginning to ripple…”. Not that it has rippled — past tense — but that it is beginning to ripple now, and may (or may not) pose a threat in the future.
More significantly, though, note Palin’s use of the ellipsis, indicating that something followed behind the word “restaurants.” What was it? It was this: “…threatening to end the tamest year of food pricing in nearly two decades.”
That’s right: The year in which Ms. Palin claims grocery prices had “risen significantly” was, according the very article she cited to try to discredit Reddy, the “tamest year of food pricing in nearly two decades.” By removing that from her excerpt, she completely changed the meaning of the original article.
Finally, I’d note that Palin had plenty of opportunity to opine about grocery inflation when it was a legitimate issue during her vice presidential run (see table above). I don’t recall her doing so.
The larger issue, of course, is that many millions more Americans will be aware of Palin’s comment than will ever be of Reddy’s proper takedown of it, and thus history will be rewritten to reflect a “significant rise” in grocery inflation from the period covering Fall 2009 – Fall 2010.
Below is a chart of how inflation and the Fed’s balance sheet (unavailable at FRED, but according to my FRED contact best approximated by Reserve Bank Credit) have correlated over the years, most importantly during the inital ~$1.5 trillion expansion of its balance sheet. That tripling of the Fed balance sheet (almost all of which came with a Republican in the White House and nary a peep from the right) was a ho-hum event as far as inflation was concerned. This $600 billion, undertaken with a Democrat in the White House, will be the end of life as we know it.
P.S. I’m not sympathetic to the all-government-statistics-are-manipulated/useless/rigged argument, and will not engage commentary on that front.
ADDING: BLS measures by weight/volume, and reductions of package sizes would not alter their results. Below is a typical example:
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November 11th, 2010 at 5:30 pm
Invictus and others – respectfully, hasn’t BR and others here already clearly established here previously that the bLS report on inflation is inaccruate, meaningless, absurd and ludicrous? Prices haven’t gone up? Really? Really?
November 11th, 2010 at 5:32 pm
Nice work, Invictus.. I’m also “not sympathetic to the all-government-statistics-are-manipulated/useless/rigged argument”, but when you read the comments on Reddy’s reply to Palin, that’s what most of them are about.
There seems to be a deep undercurrent of skepticism directed against the “intellectual elite”, and until there’s some way of reducing/resolving that, no amount of pointing out the facts will change her fans’ refusal to prefer her rhetoric and dissembling to reality.
November 11th, 2010 at 5:37 pm
God help me for defending Sarah, but…..
While prices do seem to be pretty flat in my personal experience, I’m noticing that many of the items I’m purchasing are now a LOT smaller / packages are shrinking — inflation for sure, but I’m not sure it’s the kind that would show up in your numbers
November 11th, 2010 at 5:37 pm
I’m going to borrow from A. Borowitz here: “Bush’s most prominent decision point is the one on top of his head.”
And Sarah b-s? In her case, the medium IS the message. Poor McCain got more than he bargained for.
I’m an equal opportunity person – the question should not be “right or left” but “right (correct) or wrong”?
November 11th, 2010 at 5:43 pm
Invictus,
You’re wasting your time arguing with the unenlightened American RightWing.
They believe that cutting federal income tax rates actually brings in more revenue. They believe that cutting federal income tax rates stimulates the national economy and creates jobs. They believe that Unemployment Insurance increases unemployment. They believe that the Federal Minimum Wage is a job killer. They believe Climate Change is a conspiracy. They believe that there is nothing in the Social Security Trust Fund.
It’s like a religion, and these are the same folks that persecuted Galileo for having the temerity to state that they were wrong about the sun revolving around the earth.
November 11th, 2010 at 5:46 pm
i suspect you, Invictus, that you have either not visited a grocery store in the past year or you are paying with plastic and never bother to look at your grocery receipts and your monthly bills, or you just no good at math.
food inflation is roughly 5-7% yoy, 10% in the UK, whose currency by the way appreciated in the very same timeframe.
and palin’s narrative was very well written which leads me to the suspicion it was not her own work.
November 11th, 2010 at 5:57 pm
Kevin Hassett of “Dow 36000″ (and AEI) fame is out defending her work.
I have not noticed food prices go up much…BUT I SURE HAVE SEEN WAGES AND HOUSING GO DOWN…much larger components of any measurement of price levels in a economy
November 11th, 2010 at 5:58 pm
Invictus, dude, (may i call you dude, because that’s what i’d say in a verbal conversation), you are telling me to trust BLS and not my own (lying) eyes? Really?
Look, dude, i don’t know what prices you see yourself, I don’t live in Manhattan or one of the “wealthier” ‘burbs, i don’t have a personal shopper, i only make a 5-figure income (low-6 figure total household income) and I have to tell you that the prices for daily necessities are HIGHER than ever. I try to buy as much as possible when it’s “on sale.” And I don’t see the “on sale” as often as i used to. And while before it was $5 off, now it’s mostly $1 off. or 50 cents off. My diet may be different from yours, but stuff that I bought just today (eggs, juice, meat, fish, tomatoes, etc) cost me noticeably more than even in 2008. The trick is that even if wholesale prices fall, they don’t fall in retail. There was hardly a drop in prices in 2008.
So, Invictus, I know that I end up spending more already, before any “inflationary wave.” Isn’t this what Ben Bernanke wants to see? It may be good for “the economy” but it prevents me from accumulating savings/wealth, which is the story for far too many people. This leads directly to much greater gap between “haves” and “have nots.” Eventually people will realize that the door to upward mobility is shut, sealed, and barricaded from the outside. If you’re born into middle class, you at best will remain in the lower middle class (with a few exceptions such as genius Steve Jobs and another near-genius Bernie Madoff.) That’s not a good thing. That leads to either fascism or socialism.
November 11th, 2010 at 6:02 pm
No one sees the general grocery inflation that is measured in statistics, except maybe the stores and their supply chain. What you see is inflation in the items that you buy. And if you eat a lot of pork/bacon, you just went through a big inflation spike.
November 11th, 2010 at 6:04 pm
Another BR/Invictus spotlight shined on The Darkness.
Sell !!!!
November 11th, 2010 at 6:06 pm
Didn’t you know? She meant “statistically significant”…
November 11th, 2010 at 6:17 pm
For probably the first time in my life I’m going to agree with Sarah Palin on something. I haven’t read the WSJ articles so I’m not commenting on the timeframes mentioned. I’ve done the grocery shopping for my family for a number of years and the prices are going up much more than government statistics indicate. There has been a significant rise at the grocery store in the past 12 to 15 months at both the package and unit price level.
Yes I am sympathetic to the “all-government-statistics-are-manipulated/useless/rigged argument” but irregardless that is no argument that the food inflation statistics are accurate.
In the future please don’t make me agree with SP again.
November 11th, 2010 at 6:22 pm
I’m with you, Phil. It pains to me to even remotely agree with SP but food prices ARE indeed higher (and some packages smaller) where I live, at least compared to last year.
November 11th, 2010 at 6:23 pm
Did SP really say “pump-priming”? Really? There’s NO way in hell those were her words and that she even understood or still understands what this means.
November 11th, 2010 at 6:23 pm
Run, Sarah! Run!
November 11th, 2010 at 6:26 pm
She must shop at Vons
November 11th, 2010 at 6:26 pm
Just today, but I can’t find the URL, Walmart says that food prices have gone up 0.6% in both Sep and Oct. And there’s China’s report that their CPI is +4.4% (which we know they are understading what the real number is.) Now, I’m not as smart as BR but even if an idiot is right, give her credit.
In my conversations with liberals we don’t talk too much about policies and whether they have worked or not for the talks reach an early impasse when they whine: “What do you think of Sara Palin?”, “Do you want Sara Palin to be President?” Now, I never bring up her name and maybe I’ve heard her speak for 10 minutes total therefore I have to surmise that my liberal friends are really just school yard kids, throwing sticks and stones withouth any touch of logic. I do know my high school speech teacher would shout the Palin-Thrower out of class.
I know its fun to be able to have an object of derision as then you don’t have to be very thoughtful. George Bush got the same treatment. But did you hear, when the war started he read fourteen biographies of Abraham Lincoln and thoroughout his eight years in office he read more than a book per week. I know, you’ll say, reading and learning are two different things as again a QED on your behalf.
November 11th, 2010 at 6:30 pm
I think you would be better served by John Williams and Shadow Statistics than some clown from the WSJ which even BR derides. Unless I am wrong; isn’t food excluded from inflation statistics as they are just too too volatile..sheeesh! Look, Sarah is cute, funny and loved by many and if she isn’t exactly an intellectual tower of strength, who would you rather have dinner with? Sarah or Ben or Barack or some other Administration clown?
November 11th, 2010 at 6:33 pm
If Mr. Bush read Lincoln, and governed like a dictator, then no, he didn’t learn anything.
The “right” has become a cult, that believes what they are fed to believe by their puppet masters.
Oil and Coal and Wall Street are treating this country like a third world dump.
November 11th, 2010 at 6:34 pm
The main thing that Fed QE will do (at a time when consumers are on strike) is to blow bubbles in assets. If the bubbles are in commodities they can lead to increases in consumer prices as we saw with the $150/barrel oil price bubble. But it is a down the road kind of effect that we have just begun seeing in stores and gas stations. The final magnitude of the commodities bubbles and associated price increases are hard to predict. So I agree that she is wrong to claim of significant price increases “over the past year”. But she is probably right that it will come in the future and in part be the result of QE (combined with failed tax and income distribution policies).
But it is almost standard procedure for politicians to not let fact get in the way of a good story line. With falling incomes, a lot of people feel like groceries have risen significantly – so it is not that hard to sell such BS to a population that has become used to statements not accompanied by supporting statistics and facts. I think it should be a rule that any opinion piece must be accompanied with at least 1 graph or table that demonstrate support for its claims.
My greatest concern about her and the other tea-baggers is still that they are not presenting any alternative solutions to the double D (debt & deflation) problem. QE2 is an imperfect and wasteful way to block the double D problem from getting out of control. But what are their alternatives or do they really think we should just let it all implode and have China (with their much more efficient growth policies) take over the role as world leader.
November 11th, 2010 at 6:59 pm
The government conspiracy “making up the data” meme is just a tool people use to be able to make up their own “fact” such that they can hang on to their unsubstantiated opinions. Yes there are problems with specific details of how data is collected and what is or is not included, but that simply means that you need to read all the fine print before you state what a specific dataset really means. However, that is completely different from “not believing” the data and then instead being a firm believer in some dump-ass conclusion that has absolutely none or only anecdotal evidence behind it.
November 11th, 2010 at 7:01 pm
Anyone who has gone grocery shopping and pays attention has seen prices have gone up, or sizes have shrunk pretty dramatically for a lot of everyday items. Just take a look along the cereal aisle for the most obvious example – the sugary kids’ cereals are now pricier than the hippie stuff. And while the prices of some items are lower than bubbly ’07 (flour, rice, etc.) a lot of the everyday basics seem to have stayed stubbornly higher. So long as incomes stay flat, people will continue to feel the pinch more as well. As for this year being the lowest price increases in two decades – let’s see when the entire year is out.
However, it is correct that prices have been rising for a few years now. And it’s not as simple as ‘inflation’ OR ‘fed printing’. Grocery stores have come under pressure both from higher transport and commodities costs, but also with consumers trying to spend less, so that shortfall has to be made up somewhere, such as boosting the margins on some items.
I’m pretty observant and have noticed all kinds of pricing tricks that go well beyond just keeping prices the same but shrinking the size, such as adding 50 cents to an item and then marking it ‘on sale’ for 25 cents less, or quietly raising the price a dollar for a few months, then boasting of a ‘new price’ that is fifty cents lower.
Milk where I am is obscenely expensive for one litre. However for a gallon, or four litres, the price is only a few dimes more than the two litre container. A pound of butter is ten cents cheaper than the half pound size. Ice cream is about $10 a tub now, but frequently on sale for $3.99. Bags of cookies are cheaper than ever but pasta has doubled. Sugar is way up, but flour and rice are down.
Such tricks certainly lead to the perception that prices have increased massively in recent months, even if the person walking out of the store has spent the same amount they ever did.
November 11th, 2010 at 7:02 pm
Yawn! Ho, Hum! Let’s split some overly-generalized hairs here. The point is some people think some prices are going up somewhere, although all prices may not be going up everywhere, and the number of people feel this way is growing, no matter what the statisticians say or report, especially when they have reasons to deny prices are higher.
People don’t eat statistics, and when I go shopping with my wife for groceries, I notice that we are spending more in the aggregate than we did a year or two ago. We can’t prove it to the demanding satisfaction of someone who wants to disbelieve me. If I had the prices of a list of items we bought a year ago and compared them with the ones we bought last night, we ‘know’ without looking they cost more, in the aggregate, than they cost a year ago. If I showed them to you, you would then argue that our sample is not statistically significant, and demand more inductive proof.
The trouble with over-generalizations (a form of fallacious argument) is that they cannot be absolutely proved to be true, and easily proved to not be absolutely true, and yet people make over-generalized statements all the time. It is hard to award anyone points for pointing out someone has made an over-generalization.
Writing about silly inherently fallacious arguments that waste time, but what does it tells about the guy who adopts a term from an long-dead language meaning ‘unconquered’ to mask his real personna and gives his words the ‘sound’ of ‘authority.’ Referring to an ancient antecedent is a fallacious form of argument, i.e. if Ceasar send said it, it must be true, when it is not the point of who but what is said is what matters. ‘Invictus’ has no more ring of ‘authority’ to today’s ignoramus populace than
‘fido.’ If what he says make sense, he doesn’t need an ancient antecedent reference, and if they don’t make sense, the reference will not help them make sense.
November 11th, 2010 at 7:14 pm
BR,
Okay so she ain’t the sharpest tool in the shed. Give it a rest. You should stick to a completely non-partisan and logical commentary. Speak and write like the mathematician you are instead “just another blogger getting high off his own words.” This shit is way too important to be filtered through the dirty socks of partisan perceptions.
Thanks for the other 97.5 percent!
November 11th, 2010 at 7:15 pm
@Fred C Dobbs
1) FYI, just so we’re clear on this: Invictus was my father’s favorite poem. You can read it here. He passed in 2000 and I have been using the name in his memory since I began blogging circa 2004. I continue to believe I could not have chosen a better nom de plume. What I write is there for all to see — if you’ve got a point to make about it, by all means do so with more than nonsensical rhetoric, please. If you’d like to discredit, dispute or disagree with what I’ve written, I’m all ears. But what I produced were facts, and I’d respectfully suggest you counter with same.
2) I have no idea WTF the balance of your rambling, incoherent comment is about.
November 11th, 2010 at 7:16 pm
Food prices are very subjective.
Hedonics in reverse-
Everyone is trying to spend less money. They go into the supermarket and instead of buying the fresh made pasta at twice the cost, they go over to the aisles and buy a box of store brand. This drives demand for the lower priced alternative, and then the producer has reason and ability to raise prices.
During 2008-2009 there were complete fire sales of very high end food. Lobster (not my favorite) was a subject many people wrote about at the time. Imported cheese was another great deal at the time.
November 11th, 2010 at 7:25 pm
One more thing. If you need more data, I will be happy to give you lists of items and what they cost now vs. times in the past, as well as this years price increases and weight reduction of product. My old man doesn’t read blogs and doesn’t even know about this one, but he has been telling me about all this for a while. He brokers food to most all the major chains, including the dollar stores.
November 11th, 2010 at 7:28 pm
Sarah Palin v. Ben Bernanke this is a fight between a moron and a moron with a college Phd. I mean really are we using Dr. Ben as a genius model? Really?
November 11th, 2010 at 7:37 pm
Incictus,
I am not a fan of Sara’s at all. Moreover, I don’t get why she gets all this attention. I don’t get why you felt obligated to even comment on something she said. What does it say about you? +
But discrediting her you discredited yourself. Just look at the series of 2010 numbers. There is only one scientific conclusion: the rate of increase is accelerating. Except for one month (June, when the rate decelerated but still was positive) and especially after August, the rate of increase is huge. The most recent data you give is for September, just before the commodities ran up. From my most recent experience: A dozen of ice cream cons that our family usually buys went up last week from $1.09 to $1.29. We don’t buy lamb anymore because the part we liked and always had for $3.49/lb went up to over $5 in the last few months in our local supermarket. These are just a few of many examples.
How is that for the food inflation? Who should I believe – BLS, you or my own eyes? Sara seems to be more credible on this than you.
November 11th, 2010 at 7:43 pm
i am thinking that it the method of measuring. measuring the cost rise without accounting for volume. but then we don’t do that. its like measuring how fast a car goes. and then changing how far a mile is. sounds like some thing that people used to do as far back as 2000 or more years ago. its why the is a mandated set of rules about weights and measurements. otherwise fraud flourished. and seems like some stuff did go up, but was it offset by other things that went down? a lot of stuff that could only be viable used to be shipped in to the US. but only because demand was so high. not demand has collapsed making it much more expensive to ship and buy. and we really noticed it because our incomes have been collapsing. its only faster now, but it has been going on for decades
November 11th, 2010 at 7:49 pm
@Ruschem
…I don’t get why she gets all this attention. I don’t get why you felt obligated to even comment on something she said. What does it say about you? +
I don’t know why she gets the attention she gets, either. I wish she would just go away, but she won’t. I commented on what she said because millions of people heard about it yet the facts don’t support it. What it says about me? I dunno, maybe that I dislike seeing those in power — or aspiring to it — lie to the public.
November 11th, 2010 at 7:49 pm
This can often be an aspect of location relative to metro market size and supply chain issues. For example, the underpopulated western side of Massachusetts in Berkshire County has a de facto chain monopoly or some degree of price collusion. Food costs are 10 to 20 percent more there than Cambridge with its much larger market size.
Seattle is more expensive due to its remoteness from the supply chain core. Alaska has long been ridiculous like star base 9.
And even in Cambridge, the smaller grubby chain down the street is 10 percent higher than a larger volume based chain a mile away and everything in Harvard square from small proprietors is 1 dollar more because of the ‘Harvard Tax’ ,(it is the main landlord and Summers wrecked it.)
A slice of pizza in Harvard Square is 2.50. One across from Rindge and Latin High School is 1.50.
And things with short shelf lives like dairy stuff get regularly reduced everywhere when the expire date gets close.
November 11th, 2010 at 7:51 pm
After my daughters were born in 1998 and 1999, I did food shopping on Sunday mornings at 8:00am for years, becasue the nanny couldn’t find the right baby formula, or buy the right oatmeal, or anything else my ever-lovely wife required for the proper care and feeding of these munchkins. So to keep the peace, I went and lugged $200+ groceries into the house every Sunday.
I still occassionally stop in at the local A&P.
The past year or two, I can say for sure that prices are up for all kinds of food stuffs.
For example, I paid $4.59 for a box of Malomars just a week ago. And that, my friends, is a lot.
As for Sarah Palin: I think invictus is splitting hairs. It costs a bunch more than it used to, to feed the kids, imo.
.
November 11th, 2010 at 7:54 pm
I agree with her about the prices at the supermarket. She said prices have risen for the past year “or so.” During the “or so” period they were parabolic. Last year they just made the packages 1.4% smaller. I did an exercise a couple of years ago, before the big downer, where I tried to denominate the S&P 500 in stuff like bread and milk. Let me tell you, stocks were losing big time and nor margin of error was going to change it.
Set aside those government numbers for a moment, Invictus. Give the servants a break and go to the store yourself. See how much $100 buys.
This is the first time I have agreed with something Sarah Palin said. They say hunger does weird things to you.
November 11th, 2010 at 7:57 pm
Palin is correct here. Whether it’s grains, orange juice, fruits vegetables, fish , meat, aluminum foil or coffee it’s all up. Barry is correct that the comments were written for her…but stop this nonsense that the CPI measures inflation.
November 11th, 2010 at 8:04 pm
Seriously, I-Man, you need to get up to speed on what Consumerist.com calls the Grocery Shrink Ray:
http://incredibleshrinkinggroceries.com/
http://consumerist.com/2008/08/15-victims-of-the-grocery-shrink-ray.html
Not to be confused with “shrinkage,” referring to lost or stolen merchandise.
http://consumerist.com/2008/09/34-victims-of-the-grocery-shrink-ray.html
The size reductions are not trivial.
November 11th, 2010 at 8:06 pm
@Chris Rich
FYI, the BLS data can be parsed by region and also by Metropolitan Statistical Area (MSA), to account for the issues you describe. Just a heads-up.
November 11th, 2010 at 8:07 pm
Here’s the whole Consumerist “Grocery Shrink Ray” 2 1/2-year thread:
http://consumerist.com/tag/grocery-shrink-ray
November 11th, 2010 at 8:12 pm
@Invictus
Yes, about the lie to the public. 17-years new to this country and from the Soviet Union, I was surprised by the obvious lies in TV election adds, debate lies, etc. It is getting worst and worst with each campaign. When I bring it to others attention, the answer I get is: “They all lie. Get used to it and chose the least of two evils”. I have recently learned that all these lies are legal and protected by the First Amendment. Go figure.
As far as your post is concerned, I still think that food inflation series is seriously sloping up and doesn’t even yet account for the recent run up. I live in a populated area with 4 supermarkets, BJ’s, Walmart and Target super centers all within 3 mile radius from my home. The competition here is high. We watch sales and use coupons and I know that food prices are going up. Stores are usually hold prices as long as they can, but when prices go up, most of the time it’s at least 5-10% and in some cases 20% increases.
November 11th, 2010 at 8:15 pm
Shoot a moose. Shop local.
November 11th, 2010 at 8:23 pm
Good job Invictus (btw, that poem came to me via a Frat initiation in college and I’ve always loved it since most of the time I’ve been bloodied but unbowed ;) but these responses make me sad. They also make me understand why the electorate voted the way they did. Never let facts get in the way of ideology of what you”know” anecdotally.
Of course I’d be guilty of my own sin if I said I’ve been doing the shopping for about 25 years now and have never, ever, ever, spent any more on groceries, proportionally, in the entire timeframe. People are so stupid about groceries. If it isn’t on sale DON’T BUY IT. If you don’t NEED it, DON’T BUY IT. Use coupons. Use those flippin tags you keep on your keychain. Shop the endcaps. It’s really simple. My grandmother taught me all of this and how to never spend more at the grocery store.
There is no inflation there. The figures don’t lie. Everyone’s anecdotal stories are different depending on locale and situation. But figures are figures regardless of “what you know”.
November 11th, 2010 at 8:28 pm
I think her argument is unsupported by the facts, but I’m still glad that she is criticizing the FED. Someone with an audience needs to.
Even if FED policy is correct, it needs to be debated more out in the open. People need to understand that the value of their hard earned money is at stake.
According to BR, only 100 people in the world understand QE. Do any of those people work at the FED?
If the government is enacting policy that only 100 people can understand, I’d prefer that policy wasn’t enacted at all. The world will survive without it.
November 11th, 2010 at 8:37 pm
@econimonium Say
well, the figures’ lover, if this series was a monthly stock chart series, would you say that it’s a strong stock with an excellent chart/momentum? You would buy it on Sep breakout in anticipation of a great return. Am I right or what?
November 11th, 2010 at 8:41 pm
Reality is irrelevant. Scary Sarah is winning this one. She is getting press with this, and prices are starting to rise. Now that she has people paying attention they will see it tho they didn’t notice it before. Especially if they like her. Propaganda-perfecto!
Inflation is understated anyway, having been changed twice to keep COLAs down, see shadowstats.com.
BTW my local high-price grocery store is having killer sales on 10-packs of everything, I am stocking up.
November 11th, 2010 at 8:48 pm
Palin has a microphone while Bernake has The Fed.
Because of this, I’m currently a “heckuva” lot more concerned andd curious about what Ben says and does than Sarah.
@ Caleric – I’d like to have cocktails with Ben, dinner with Barack and then an after dinner drink with Sarah.
November 11th, 2010 at 8:51 pm
@econimonium Say
figures are figures regardless of “what you know” is the greatest BS and naiveté that I have ever heard. I work with numbers day after day all my professional life. If you only knew how much “very solid” data has to be discarded because of various error. My experience with “technical” numbers tells me to be very careful, double check, identify faulty numbers, and correct if possible or discard.
November 11th, 2010 at 9:00 pm
does anyone here truly believe that the CPI’s measure of food and beverages for the first nine months of this year showed average annual inflation of less than 0.6%, which happens to be the slowest pace on record? I think everyone here has a right to think and believe what you want but to cite the The BLS as being credible seems somewhat naive, as it is the same organization that has created like 2mm jobs over the past 2 years via the birth-death model.
you have real companies like sarah lee(SLE), dean foods(DF) and even an clothing apparel company like Jones New York(JNY) all who have recently cited in earnings the impact of sky rocketing raw material input costs. you have grocers who have razor thin margins due to this exact problem and as price takers have yet to be able to fully pass on the rise in costs. are you seeing it directly yet? maybe not but that is a primary issue to food manufacturers and retailers that havent been able to pass it on just yet..even apartment rental rates are up 3% this year and expected to rise 3.9% next year?
look at China’s recent inflation reading. look at india. how is this country with the meteoric rise in commodities somehow exempt? i doubt it is and i suspect what we benchmark our inflation readings off of is being somewhat skewed? why? i dont know, if an inflation reading punched in over 2% would Bernanke be able to justify monetizing our debt through QEII? perhaps thats the rub, as long as we have “disinflation” as he calls it or below target readings so he can justify what seems to be his real dual mandate: artificially hold up mispriced assets so the banks can stay in business and monetize our debt so this country can roll its paper and stay in business.
does anyone even know how the government actually calculates inflation?? from what i understand from an article i read recently it goes somewhat like the following:
When calculating food inflation, the government uses deceptive geometric weighting, which gives a lower weighting to goods that are rising in price and a higher weighting to goods that are falling in price. If the price of steak is rising while the price of hamburgers is falling, the CPI will give a lower weighting to steak and a higher weighting to hamburgers. The government justifies this by saying that expensive steak prices mean Americans are more likely to eat hamburgers. Therefore, the CPI no longer accounts for the price to maintain the same standard of living. The CPI is now calculated based on the realization that America’s standard of living has been in decline and the expectation that it will continue to decline in the future.
love/hate sarah palin all you want, i for one dont care for her but she is on point here. whether you are seeing it yet or not, you will as its only a matter of time. you cant have a parabolic moves in commodities/raw materials and expect that we are exempt.
November 11th, 2010 at 9:11 pm
“Figures are Figures regardles of ‘what you know’.” – econimonium
“There are three kinds of lies: lies, damned lies, and statistics.” – Benjamin Disraeli
Take your pick — not all analytical challenges are the same. It takes wisdom to interpret a data set correctly — and to know how much to trust the inputs of that data set.
The thing that disturbs me about the smug “look here, no inflation” crowd is that the EXACT same type of “data-driven, can’t be wrong” mindset was employed by the hordes of formula-spewing quants who swore on their mother’s graves that housing prices would never decline, that credit default swaps were safe as milk etc on and on, because the data and equations offered absolute certainty (and godlike precision).
As Nassim Taleb has analogized, there is Dr. John, the naive academic who always trusts the math — even when it’s booby-trapped — and Fat Tony, the street smart player who knows bullshit when he smells it (and knows a way to profit from it).
Given the broader thrust of what is happening right now and why — and the tendency of spreadsheet crunchers to be self-righteously myopic at times — I am channeling my inner Fat Tony here. We’ll see which approach handles itself better in the markets.
November 11th, 2010 at 9:24 pm
I – good, thanks.
Folks saying there -is- food price inflation, I’ve -seen- it!: The -data- is that there is a lot of stuff up, and a lot of stuff down. So, in aggregate it’s flat-ish. There’s been no analysis afik which says “The good stuff is up, the crap is down”. Nor, even, the most-purchased is up, the least-purchased is down.
Jury still out.
November 11th, 2010 at 10:01 pm
Palin – Food Prices – accuracy of govt statistics
You are arguing about totally irrelevant data. Let’s get with the meat of the subject – The Fed and QE is dangerous. They are creating a bubble in stock prices and commodity prices. They have a much greater chance of destroying our economy and the dollar than they will ever have of creating a “Significant” number of jobs.
We had the Greenspan Put which created Moral Hazard and disregard for risk.
Now we have the Bernanke Bid – the explicit goal of pushing up asset prices, starting with bonds and stocks.
What risk – just buy the worst crap you can find, the lowest credit bonds, the close to bankrupt stocks, The Bernanke Bid means you are guaranteed to make money.
November 11th, 2010 at 10:03 pm
Hey – nice footwork – but what’s the point of telling us about using your time and resources in trying to explain any intellectual concept to a moron – you’re preaching to the choir – tell someone who doesn’t know she’s a moron – in small words and gradual steps – pretend you’re talking to a 4 year old. Sorry, we already know.
November 11th, 2010 at 10:13 pm
The only possible street-level argument I can come up with for prices not rising is that some shoppers, who’s budgets were buoyed by all number of froth from the either of the last two bubbles, simply started eating a little better; but now that the the table cloth has been yanked out from under the economy, contending with the price difference of those dietary upgrades has simply become more readily perceptible than when times were good.
That said, personally speaking, there is no denying that my grocery bill has taken a quantum leap from three years ago. What’s more, I find myself at the store more often; that’s because net weights have clearly been re-jigged over the years, while boxes are either shaved down, or left empty, and plastic containers sport ever-increasing divets on their bottoms while the price remains at least the same (I realize the BLS weighs packages by wt/volume, but they also employ substitution and other funky metrics). FWIW, Newman’s Own is the only product on the shelf that has remained par in every way.
Now, my personal experience may not jibe with your analysis, but it is sufficient enough evidence for me to question the the BLS’ conclusions. As a consumer, I’m not as interested in a battle of the charts, or the convoluted ways in which these stats are arrived at and massaged – in fact, I almost skipped right to the comments section on this post, which is usually that’s where I get the BIG PICTURE — rarely from the original posts alone.
And that’s the thing: you can’t just write-off the empirical, or poo-poo healthy skepticism (a hallmark of sound mind) when it comes to the reality of a situation. It’s just important to get at the coal face, as the Brits call it: get away from the spreadsheet circle jerk and see what the man in the street says and how it differs from the too-tidy conclusions of the bean counters.
November 11th, 2010 at 10:31 pm
I am a fine artist. Well, I still consider myself one at any rate. I used to sell enough art work to make a reasonable living in addition to my husbands income. It started to slide in 2007. I sold from my website and was a member of several galleries here in WA state. By 2008 I was lucky to sell 3 pieces the entire year. Since that time I have sold one painting. That is it. So, lets consider some points. I sort of think of my art as the canary in the mine. When it starts to die, discretionary spending is down if not tanked in some quarters. I sold steadily to my market for more than 10 years prior. My market just evaporated. It’s gone. I’m talking the 200k and under.
So I move to how best to “hedge” our bets so to speak. We live in a very rural area of northwestern WA. The closest and largest of the chain type stores is Walmart and Safeway, 60 miles away. Gas is up. And it has stayed up here in WA. It may not be tickling 5.00 like it was in 2008 but it has not dropped below 3.00. Before the 2008 jump in gas prices we were usually hovering around 1.95 or so. Ok. So there is gas. Now the store. 60 miles away. Yes, there are sales, but we certainly have to watch much closer for sales to stay in our budget. We get much less and have steadily been getting less for our money over the course of these last 2 years. When I say much less, I’m not kidding. The poster above who stated essentially that 100.00 doesn’t go very far is absolutely correct. At least for us. If the prices are not higher, the packages are most definately smaller. It’s a fact. At least, once again, here at these stores. I’ll use lettuce as one example. 10 years ago, it was .49 a head. 5 years ago, .79 a head. Then 2 years ago around 1.49 a head and now it is 1.79 a head. So now we grow our own and can only have it for about 4-6 months a year.
We decided 2 years ago to get some chickens. They are relatively inexpensive to keep if you free range them (which we do about 50% of the time) and who doesn’t like fresh eggs. It’s a nice way to start trying to get at least a feeling of self sufficiency. I was so angry about the gas prices and being caught with the old pants down I knew I would never let that happen again. Remember, we are quite rural. By choice, but we never saw the gas issue becoming any real problem. Just wasn’t looking I guess. Our fault.
Two years ago we start seeing some trends, reading economists and really paying attention now. We decide that we have the land to start expanding our self sufficientcy efforts. Bigger gardens, a rabbitry and dairy goats for milk and cheese. (can you say “learning curve??) We also threw in the composting worms because we usually run anywhere from 50-100 rabbits and needed something to do with all that manure. Good for gardens but we still had too much. Anyway, we started to hedge our bets and rely more on ourselves and not the grocery chain. Hay is cheaper (but has gone up a dollar a bail in this last year) and the feed was a savings over buying finished product. So we were ahead. But NOW the feed prices are going up. All of the animals we have are now just a little more expensive. From 1.00 to 2.00 bucks a 40-50 lb bag. All of the meds we need for various issues (mostly with newborn goats, we do not use antibiotics) have gone up. Between the two, the feed and the meds as needed it’s getting just a wee bit tighter.
We are still in reasonably good shape. But it gets harder and harder with these swings in commodities. When the food prices do go up, be it for human consumption from the store or feed for the animals, very rarely does it come back down, like gasoline will do (sometimes). And speaking of animals once more…the vets are charging more too. All of this has been occuring over the course of the last two years and of course my husbands paycheck isn’t growing. He works in a state prison.They are now forced as of December of this year to take a day of furlough once a month, and the state will be raising our insurance rates by 12%. The electric company is raising rates in January by 5%. There is a point where we can’t go any further. And we are coming precariously close.
But our governer gave herself a raise, this year. We have not had a cost of living increase or any raises in 10 years.
The squeeze is on.
November 11th, 2010 at 10:38 pm
Invictus, fess up… do you actually go to the grocery store on a regular basis? I mean that seriously, because you may have a significant other that handles the groceries for your household.
Regardless, you played right into this one by bringing her argument against the Fed to the masses …and Sarah Palin won this round. Why? Because whether or not she’s technically correct (per the figures), it is all about perception of what we as grocery store shoppers believe is happening at the checkout counter. And I for one, like many others apparently that have posted here, are seeing prices rise. She is the only major political figure that is taking a stand against the Fed and stating the dangers of what they’re doing and how it will costs the lower/middle classes. Congress has done nothing. The President has done nothing…. nothing to challenge the Fed on its decisions. But this one polarizing, unelected figure, love her or hate her, has stepped up to the plate to challenge the Fed. And that’s what folks will remember (even those that don’t agree with her as you can read in the comments above). Because food prices at the grocery store are bound to rise given the recent flights towards commodities. Just sayin’.
November 11th, 2010 at 10:45 pm
SAFEWAY CUTS YEAR VIEW, CITES PRICE DEFLATION
(Reuters) – Supermarket operator Safeway Inc cut its full-year outlook, citing falling prices for its merchandise as it tries to hold on to shoppers in a weak economy, and its shares fell 4 percent.
Safeway executives said the strength of that push on pricing caught them by surprise.
“DEFLATION CONTINUES IN PRICE PER ITEM and is not expected to significantly improve until the fourth quarter,” said Chief Executive Steve Burd, who oversees supermarkets including Safeway, Vons and Dominick’s.
Burd acknowledged that RETAIL DEFLATION WAS MUCH GREATER THAN EXPECTED and drove a decline in identical-store sales.
November 11th, 2010 at 10:47 pm
Americans spend such a small percentage of their income on food..which is prob. not going up, but what about bigger components…Cars..buy a 3k TATA…housing…you can get one for free..or close to it and wages are cratering…
For now at least..WE ARE NOT INFLATING!
I find this topic like arguing about the whole Iraq/911/wmd series of canards in real time. The same people,AEI,Heritage and their minions like Palin have the nation convinced…”we are the next Zimbabwe”
November 11th, 2010 at 11:10 pm
everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so.
Dumb broad is lucky she didn’t say the BLS reports — see Series CUSR0000SAF11, U.S. City Average, Food At Home shows grocery prices have risen significantly over the past year because then Invictus and Sudeep Reddy might actually have a winning argument. What Sarah Palin did say is that most people perceive grocery prices as significantly rising over the past year or so. If you read “or so ” as “the past couple of years” the BLS numbers confirm people’s perceptions. The plurality of above anecdotes, many by die-hard Team Blue Palin-haters shows this perception to be widespread. Perhaps all these ignorant fools don’t realize they are supposed to substitute turkey bacon for the real thing when the price rises 50% in a few short months.
November 11th, 2010 at 11:19 pm
It is amazing the effect Sarah Palin has on folks supposedly much smart than she. People who place themselves above her on some magical pedestal love to think about her. How does someone so “dumb” and lowly have such influence on those much more brilliant and cultured? Who’s the puppet and who’s the puppeteer?
November 11th, 2010 at 11:23 pm
Honestly I’m surprised there’s so much furor. Reddy and everyone who analyze her statement make a huge deal over the inflation time period (inflation this past year). Regardless of whether there has been real inflation (I think prices have been flat/slightly up), the real take-away of her spiel is pointing out that prices are rising now and the Fed’s actions could make things worse (in the sense of everyday prices going up).
I’m no fan of Palin but I think that’s an important point, and the debate should really be on what’s going to happen with QE2 going forwards.
November 11th, 2010 at 11:25 pm
Why don’t the smart Republicans ever become politicians?
http://www.philstockworld.com
November 11th, 2010 at 11:33 pm
grocers = price takers(for now). you’ll probably see GAP & SVU go out of biz in next 2 years….far too levered with gross margins racing to zero….
and to the above..food is a smaller part of the budget. but a necessity. in that sense, as a % of disposable income its more likely to go up as opposed to down. you can cut spending on discretionary(somewhat limited due to replacement needs) but you are always gonna buy food. the fed suggests that QEII creates a wealth effect and will in turn by the feedback loop convince people to spend. not sure they are paying attention but, the intended audience is indebted and let alone has the savings or tolerance to invest in stocks, additionaly, most baby boomers have moved from stocks to bonds and then we have the remainder and foreigners..
to me this suggests that the real and undeclared purpose is to replenish the elite…seems like QE as a concept has had little effect on job growth, hurts middle america on down in the pocket on rising costs on fixed necessities (although their is admittedly some trade down) rather then the expected benefit of increased paper wealthc from the slight tick up in Eminis at the end of every day.
see below. the data is extrapolated from the BLS
http://4.bp.blogspot.com/_SSUbVSG_KVY/TNbMo4o-xII/AAAAAAAAAR0/6w2-pHPm5pA/s1600/Data+chartiv.jpg
November 12th, 2010 at 12:04 am
Invictus- I notice the people disagreeing with you fall into main categories: people who think the statistics are rigged, and people with anecdotal evidence to the contrary. I’ll speak to the latter group.
While anecdotal experience is what we base most of our life around, it’s useful to understand the limitations of that way of perceiving reality. Our minds are barraged by huge amounts of information which our consciousness seeks to make sense of by focusing on some of the info and ignoring the rest. Once we form an opinion we generally pay more attention to data which supports that opinion while disregarding data which does not. For example, if we change automobile brands, we suddenly see more cars like our on the highway because we’re now paying attention to them, whereas previously we were ignoring them. Obviously there aren’t more people driving our brand of car than before, it’s just our minds perceiving reality differently.
I find it useful, particularly in investing, to try to use objective data, like statistics, to help me see where my preconceptions may be affecting my view of reality. But of course statistics also have their limitations and inaccuracies, so it remains a balancing act.
November 12th, 2010 at 12:21 am
“But the point remains that, on the whole, 1.4 percent is hardly runaway grocery inflation.”
———
If you have one foot in the oven and one in the fridge, on the whole, you are probably at a comfortable temperature…
November 12th, 2010 at 12:57 am
“I find it useful, particularly in investing, to try to use objective data, like statistics, to help me see where my preconceptions may be affecting my view of reality. But of course statistics also have their limitations and inaccuracies, so it remains a balancing act.”
My father-in-law — a simple man and a child of the depression — mentioned to me once that he foresaw another depression on the horizon. This was 2005. He was not a doom-n-gloomer and there was nothing in the 24 hour news cycle intimating such a premise — if anything, the news lent his portent a laughable even bizarre quality; but he knew whereof he spake, and opinions formulated from such a vantage are valuable information worth at least considering before settling on a conclusion.
I have to assume that’s why Barry has a comments section in the first place: because empirical evidence is a highly important facet to consider in a matter such as this. Choosing a point-of-view formulated exclusively from statistics gives you a picture lacking in dimensionality.
November 12th, 2010 at 1:02 am
In summary….she’s an idiot. But we already know that….
November 12th, 2010 at 1:03 am
To Captain Jack above: excellent post.
November 12th, 2010 at 1:24 am
“P.S. I’m not sympathetic to the all-government-statistics-are-manipulated/useless/rigged argument”
I didn’t realize a person could take that position and be allowed on the internet.
November 12th, 2010 at 1:26 am
Hey – perhaps some perspective from another country might help provide something new to your discussion.
I’m in India and this country suffers from politicians who are, fortunately, a lot less refined and evolved than the predators you guys have developed.
I can expect an Indian politician to call for a book burning without having ever read the book or having an understanding of the subject they are ranting on.
Most, (most) of our politicians don’t need to be highly educated or knowledgeable – they have a vote bank which expects them to look, talk and behave a certain way. Usually in a pandering, chauvinistic and aggressive manner.
But as long as they maintain appearances, even if it means pandering to the basest human instincts possible, they have a good shot at being elected.
I can understand the system, , even if I cannot condone it – the country is young, and is building its identity and history of leadership. Things are improving.
But on the other hand : what the hell is going in America???
Stuff like not reading an article NEVER went down with Americans. Heck, you guys created a host of thinkers who’s ideas still dominate and influence the world and were the most educated people possible.
In India a state government fell because the price of onions went up. The underlying reasons didn’t matter – it didn’t matter if there was a drought, or if the crop of onions had failed or that higher prices were a result of the market correctly pricing things. It didn’t matter that there was more to it than just first hand observations.
All that mattered is that people noticed prices of certain “sensitive” items were going up and made a snap decision based on it. The government now has a list of sensitive items and makes sure that those prices stay within a range – does this make economic sense? No. Its theater not economics or even good fiscal policy.
In India perception trumps logic and reason. Complex topics cannot be discussed because people don’t need to or have an incentive to. But thats fine – people are improving and learning.
I have to say it but anecdotal observations are NOT the basis for policy decisions, it doesn’t MATTER how bad you feel. They are definitely a starting point for getting some real fieldwork done though.
Does it not matter that someone completely did not understand an article in English? Written in a language suitable for 10th graders?
November 12th, 2010 at 2:35 am
Let’s not conflate the anecdotal with the empirical: one is a narrative which may be hearsay, the other is an account based upon real, contemporaneous experience. If you are a dynamic thinker, you should be able to interpret both statistical data and the more palpable input from the man-in-the-street (such as the comments found here — the consensus of which seems at odds with the BLS’ data) and combine them in order to get at a better understanding of what is really going on.
November 12th, 2010 at 4:34 am
Huh?
YOY %change Oct 2010:
Wheat: +74%
Corn: +14%
Oats: +68%
Canola: +36%
Heating Oil: +29%
Gasoline: +25%
Natural Gas: +15%
Beef: +18%
Pork: +60%
Coffee +27%
Sugar +44%
Cotton: +66%
Copper: +37%
Gold: +31%
Silver: +36%
CPI-U: +1.1%
Chart Form: http://www.caseyresearch.com/kkcImages/1286909168-image1.gif
November 12th, 2010 at 6:32 am
@ Investradamus
No! The BLS is right because it’s the BLS, and Sara Palin is wrong because she’s Sara Palin! That’s the way it has to be, right everybody, damn what we’re seeing at Stop and Shop.
November 12th, 2010 at 7:30 am
35 years doing own shopping and health nut
for me this falls under my own category of “Spread Sheet Blindness”, meaning if all u go is by spread sheets and u put enough numbers on there well u can get whatever u want versus what going on just by walking around
i buy the same stuff all the time, and noticed the creep two years ago, here’s my rye bread pricing
2.59 too 2.89, now when i notice the first jump i always think, ehhh, it’s been same price for x years, my rye had been 1.89 for almost a decade and in 05 they bumped it twice, okay fine by me
starting in january after holding 2,89 for a year in one week it jumped too 3.49
since then it’s gone 3.79 too 4.19
fruit and veggies about 40 per cent
if u shop hard though, u can find other stuff at big bulk discounts, i’ve started buying huge buckets of laundry detergent, last one has lasted me six months and should get me thru the year
two years ago my grocer cut down the sku’s dramatically, and this is a nationwide chaing, it got rid of 3/4 of what i call the dozens, like a dozen brands and tastes of mustards, stuff like that is now down too 3-4 choices, that is storewide
one corner is a huge deli section, u can tell they are having sales issues with it, fresh made cookies cakes and sandwiches and whatever maybe half the choices from before and what they offer is always on sale yet no many buy it, one item doing well, lol, pizza, half of what u get it delivered for
beginning in january they went from open 24 hours too 6AM-10pm
November 12th, 2010 at 7:59 am
@ LoriInNC
I think you hit the nail on the head. Obama campaigned with slogans like “If your car is driving off a cliff, you don’t hit the gas pedal.” By reappointing the architects of the crash, he has hit the gas pedal with a two foot stomp.
Palin is taking advantage of growing distrust of the FED. As wrong as her arguments may be, Bernanke’s “interest rates didn’t cause the housing bubble,” was just as ridiculous, and just as much about torturing logic for self interest.
November 12th, 2010 at 8:45 am
Why do people continue to devote precious data packets to Sarah Palin? It boggles the mind.
November 12th, 2010 at 9:14 am
Much like HuffPo, I can’t find the slams of Biden on this site, but here we are with 2 (of the SAME) attacks on Palin. Neat.
November 12th, 2010 at 9:53 am
Sorry, the CPI is off. I do much of the grocery shopping and prices are up. Your stats show it too. Notice, prices were declining, now they’re rising again. Meat’s up. Milk’s up. Butter’s up. Produce is up. Coffee’s up. Discounts are disappearing. In mid-’09, I could fill a bag for $9 or $10, now it’s hard to get out of the store for under $20, and its the same bag. (We have reusable bags.)
Plus your stats are Seasonally Adjusted. Those seasonally adjustments are way off once they left normal years.
Coming into the price cycle are scores of raw commodities with rising prices as an early commentator relates.
Just because Sarah said it, doesn’t make it so. But neither does the fact that BLS said it, make it so. As an economist, the economic stats have been way off during this recession. Grocery prices are up, mark my words. Even the BLS will soon have to figure it into their goobly gook figures.
November 12th, 2010 at 10:00 am
A tangent but I just replaced a brand name pair of running shoes–online discount price, free shipping. A couple years ago, these shoes were $100, the then cap on top line running shoes. This week the same shoes were $130. A year ago I saw the same shoes in a Main St. shoe store, read high priced, for $130 while they were still being discounted online. Likely inflation caused by dollar crashing. The shoes are made off shore, way off shore.
November 12th, 2010 at 10:35 am
Invictus,
You, Chris Matthews, Keith O, Rachel M must learn that the more someone mentions Sarah P, positive or negative, the stronger she becomes. If you could simply ignore her, her strength would recede. But love her or hate her, apparently people must comment on her. It’s perplexing.
November 12th, 2010 at 10:43 am
Another problem is that she is basically putting the tail on the wrong donkey. Yes QE is going to push prices in commodities and therefore groceries higher, but the speculation in commodities was there before and would have been there without QE. It’s a bit like putting the blame for the housing bubble on CRA (although admittedly this time with more connection to reality). The main driver of grocery inflation will not be a puny little 600 billion in QE, but the trillions of excess dollars that we failed to tax out of the investor class (to pay down our national debt). But the corporate media and its little minions have been given their marching orders, so the inflation tail shall be pinned onto Bernanke’s ass.
November 12th, 2010 at 11:49 am
Glenn Beck restated the inflationary sentiment yesterday as well. His statement of proof was, “Go shopping”. I was not surprised to see Beck echoing the cries of Palin. I will continue to use facts and data to make my decisions in regard to this, lest my emotions cloud my judgement.
November 12th, 2010 at 12:20 pm
And the BLS is just another government “Death Panel” right Palin?
Typical GOP hero.
November 12th, 2010 at 12:43 pm
Just found the CNBC piece on grocery and gasoline inflation, plus the report of the Walmart survey–3.6% inflation rate in groceries.
November 12th, 2010 at 12:45 pm
Invictus,
You began the post by saying “I’m drawn to the intersection of economics and politics like a moth to a flame.”
Rather than flip more bits on the veracity of the claim of food inflation stats, let me instead re-frame the situation in terms of your originally stated interest.
Any politician wants to go where the ball is going, not where it has been. Facts are for wonks. Perceptions are what counts in politics. QE2 has the stated objective of raising inflation and inflation expectations, and there’s little doubt in the minds of even the wonks that the fed has the means to achieve this objective. That’s where the ball is going. Palin wants to be there raging against the fed when it does so.
I have no dog in this fight. Just trying to put it in perspective.
November 12th, 2010 at 1:00 pm
Just bought a set of snow tires for my car. Same tires as I bought for my daughter’s car last year. Same tire merchant as well. $78 per tire last year, $95 per tire this year.
Convenience store where I buy coffee way too frequently — last month the price went from $1.20 to $1.25 for the same small-sized cup.
Gasoline — now at or above $3.00 per gallon at many stations in Capital Region of NY, that’s 10-15 cents higher than a couple of moths ago.
Granted, home prices are going down. So what, I don’t buy one frequently.
November 12th, 2010 at 1:21 pm
Inflation = debasing of the currency, it affects all goods and services. So if there is inflation as many posters here allege, then prices would be rising across the board– for everything, including wages. It’s not just a phenomena where many prices have risen.
November 12th, 2010 at 1:22 pm
@Niskyboy
Yes, but the BLS says this is not the case – you must be wrong.
November 12th, 2010 at 1:45 pm
http://finance.yahoo.com/news/No-Inflation-Grocery-Stores-cnbc-1559291069.html?x=0&sec=topStories&pos=1&asset=&ccode=
“It’s not good news from a whole variety of perspectives,” says Nicholas Colas, chief investment strategist at BNY ConvergEx in New York. “Food inflation is getting very bad and that’s just bad news for the majority of consumers who are still stretched. It’s bad news for the 42 million people who are on food stamps.”
General Mills (NYSE:GIS – News) recently said a quarter of its cereal brands will see single-digit price increases soon, and Kraft Foods (NYSE:KFT – News) plans to hike prices on about half of its products. McDonald’s (NYSE:MCD – News), Nestle and Unilever (NYSE:UN – News) are among those expected to follow suit.
And a new survey from MKM Partners shows prices at Wal-Mart (NYSE:WMT – News), the world’s largest retailer, have risen 0.6 percent in just the last two months.
In the meantime, regular unleaded gasoline is now $2.88 a gallon nationwide, up 6 cents in just the past week and about a quarter over the past two months-and an even longer way from the sub-$2 level of March 2009.
The Standard & Poor’s GSCI agricultural commodities index is up 25 percent for the year and 16 percent in the last quarter alone. Among the big gainers: cotton (90 percent for the year), coffee (45 percent) and Kansas wheat (31 percent). Sugar’s price has zoomed 26 percent in the fourth quarter, while corn, which is used to make so many other products, is up 20 percent for the year.
Yet BLS data show moves only in select areas when it comes to what consumers see on their grocer’s shelves.
====
There aren’t the droids you’re looking for.
November 12th, 2010 at 2:19 pm
Invictus borrows the name of a poem for his blogging. Fine, but the word means many different things to many different people. While Latin is an ancient language, the poem which was first published in 1888 is clearly not ancient at all. [The poem was a favorite of Timothy McVeigh as he left it as his last "message" to the world before he was executed in 2001. ]
In Latin, the word means ‘undefeated.’ (‘Invictus’ is the singular form, the plural form is “invicta.”) In its singular form, it appears as the name for a film, music album, rock bank, record label, and a video game). The word, in its plural form, is the motto for Kent, England, as William bestowed it on the County when he was unable to conquer it in 1066. It has been or is used to name a car, a locomotive, a sailboat, a bus service, a watch company, and a number of athletic clubs, and ships.
While it is comforting to know the reference is to a poem, rather than a car, it remains unclear whether ‘Invictus’ choses the name because he thinks it is inspirational or supports stoicism. Further, what does either inspiration or stoicism have to do with financial blogging.
November 12th, 2010 at 2:33 pm
“P.S. I’m not sympathetic to the all-government-statistics-are-manipulated/useless/rigged argument, and will not engage commentary on that front.”
Sure — it’s easy to be smug when one refuses to recognize, much less confront the obvious flaw in one’s argument.
November 12th, 2010 at 3:06 pm
Or dedicating three paragraphs to questioning a freaking name for that matter.
You don’t like Invictus. No need to beat around the bush.
November 12th, 2010 at 6:07 pm
@Kort
Seems you may have contracted whatever Palin has. The very first sentence of the story to which you link (my emphasis):
November 12th, 2010 at 7:08 pm
I read
“P.S. I’m not sympathetic to the all-government-statistics-are-manipulated/useless/rigged argument, and will not engage commentary on that front.”
and thought, “Now THERE’S a provocative line.”
Sure enough.
I do agree that concept determines percept – whether we’re looking at statistics or at prices at the checkout counter. I expect to see grocery inflation and I see it, just as I expect the BLS to lie to me and I see that.
For what it’s worth, I do all the shopping for my family of one, at the same store in the same town and always pay by credit card.
Diet this year is as close to last year’s as can be (no hedonic shopping – there are brands I like and I stick with ‘em). Each month I download the monthly cc statement and stick it into a new Excel tab and from time to time, break out categories.
The gross supermarket bill was 6% higher last month than it was in ’09.
Can I explain the difference between BLS and my own number? I can’t.
Which do I believe?
PS: I can not understand anyone who is completely closed to John Williams’ approach to gov’t statistics. I know that people brighter than I (Dave Rosenberg for one) accept the BLS stats but…
November 12th, 2010 at 11:21 pm
billmasi;
You just have to understand the difference between your method and the official method. One thing is the “hedonic substitutions” you mention. That is well known to give a underestimation of real inflation. Yours is grocery shopping, theirs is only food (probably a minor difference). Yours is one specific store in one town, theirs is more broad. I am inclined to think that your experience is closer to the average real life experience than theirs.
November 12th, 2010 at 11:24 pm
Invictus, I will repeat what others have said here. Your problem begins with the fact that you put serious stock in BLS statistics. Let me say this simply. These statistics are electioneering tools and little more. One only has to look at the success of those who have played the election cycle for proof (see http://tradesystemguru.com/content/view/305/61/ ). They are simply not credible economic tools due to the amount of tinkering through statistical slights of hand such as substitution, imputation and hedonics no matter what economist including David Rosenberg have to say.
I wonder if you have taken the time to view Chris Martenson’s video entitled Fuzzy Numbers, which explains this in detail? I would make a wild guess that you haven’t. (I w0uld also bet that you haven’t done any reading on the history of fiat paper money throughout civilization – books such as Ralph Foster’s Fiat Paper Money are a good start.)
Yes, many commodities dropped with stocks in 2007-8 but most of them have come back far more strongly. Cotton and rubber are now putting in new all time highs along with gold, silver and some other precious metals. For example, from their 2008 lows copper is up more than 200% as is silver and palladium as examples. We may not yet have widespread inflation but something more ominous, stagflation. But there is inflation where it matters and that is in commodity prices. If this trend continues, expect to see inflation in other key areas. When this happens, those like you who place their faith with fiat paper instruments like bonds will be in for a very rude awakening. QE1 and 2 have helped stocks but any impact they have on the economy will be muted long-term.
Matt Blackman
TradeSystemGuru.com
November 13th, 2010 at 2:45 am
For those of you who think Shadowstats tells the real story: take a look at his alternative CPI chart (at http://www.shadowstats.com/alternate_data/inflation-charts) which shows inflation averaging at least 9 percent since 1997 and 10 percent since 2005. Which means that, according to Williams, if your family’s income hasn’t gone up by close to 50 percent in the past 5 years, you have lost ground. Going back to 1997– if your nominal income hasn’t TRIPLED in the past 13 years, then your standard of living has dropped. Take a look at your income history and see how that fits your experience.
My family’s nominal income went up 17 percent from 2005 to 2009 (mid 90′s to 110,000, we are a humble state employee and school teacher, and I had some outside income from teaching on the side in 2009); according to Williams, our purchasing power dropped by a whopping 20 percent. Sorry, that’s nowhere near the case for us. Our experience is much closer to the BLS figures. I invite each of you to do the math and come to your own conclusions.
November 13th, 2010 at 8:53 am
Shame on all of the posters pointing to shadowstats. Don’t you know that B R and others have cognitive biases when it comes to Sarah Palin. They are emotionally invested in her being a fool. They will seek evidence to support this and disregard evidence to the contary.
By voting for Obama over her as VP they have effectively invested something. Even a hardened trader can have trouble admitting they are wrong in some other field. It is similar to the phenomena where experts in one field are often fools in another.
Should any readers of this site, which has lauded shadowstats in the past not know what is being referred to then look here: http://www.shadowstats.com/alternate_data/inflation-charts
The problems with aggregate measures like inflation, even if calculated as per Shadowstats, are numerous. People have different levels of disposable income and consumption bundles. They will experience different price changes and have different abilities to substitute products. In short just as all people are different, so is their experience of price changes.
Jumping all of Palin on inflation says more about the commentators than her. As for pulling the “not qualified” line. How scornfull were bloggers about the person who said that only people with a Phd in economics should be allowed to taklk about the economy. Lots of hypocracy. but that is OK as long as it involves attacking Sarah.
November 13th, 2010 at 9:04 am
Shadowstats has done a yeoman’s pointing to the weaknesses in BLS data output — I have referenced John William’s critiques repeatedly over the years — but he goes over the top (14% inflation, 23% unemployment) occasionally.
I always welcome any sort of cognitive critique, as those of us temporarily stuck in human form are susceptible to the inherent flaws in the wetware. Its an ongoing battle.
However, I am unconvinced that there are many people around here “invested” in the worldview of Palin as a fool. Those on the left would love to run against her, while those in the middle are annoyed at her disingenuous intellect.
As to inflation, I was screaming about it from 2003-07, and since then, we have had DEFLATION, with the future risk of inflation. That’s not an opinion, that is what the data shows.
Lastly, a comment about “substitution:” It is not, as Michale Boskin said, an alternative to inflation — it is PROOF of inflation. You can “substitute” chicken for filet mignon — a few academics will argue that you are not paying more for protein, but in the real world, you have just been priced out of steak. THAT is inflation.
November 13th, 2010 at 9:32 am
[...] because it was mildly political in nature or because it referred to government data, my recent critique of Sarah Palin’s foray into economics — specifically grocery inflation — garnered a fair amount of [...]
November 14th, 2010 at 1:01 pm
So, Sara Palin was correct?
It appears to have started when National Review excerpted part of a Palin speech. The part to which I take exception is this (emphasis added):
All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so.
Her bold (and bolded) claim is simply not supported by the facts