Tuesday, August 09, 2011

Quote of the Day: No Time to Panic

"The economy can hold up. 

During a period like this, with stocks plunging almost on a daily basis, it’s clear that fear and shock are ruling the roost. But fear can be overdone. As someone who has been around awhile and has seen many sell-offs, let me offer some advice: Do not panic. Market corrections come and go. They are not the end of the world. Most times they are actually healthy.

The American free-enterprise system can weather these shocks, and I believe favorable political and policy changes are on the way. It will take time. But time heals. Longer-term investors would do well to think about the many stock market opportunities that are opening up as a tough correction runs its course."

~Larry Kudlow

72 Comments:

At 8/09/2011 9:18 AM, Blogger morganovich said...

well, with small business optimism this low, it's difficult to see how we get any kind of serious economic recovery.

http://cr4re.com/charts/charts.html?Manufacturing#category=Manufacturing&chart=NFIBJuly2011.jpg

panic is never a great idea, but ignoring reality doesn't work too well either.

larry was cheer-leading 1900 points ago too.

 
At 8/09/2011 10:00 AM, Blogger Evergreen Libertarian said...

I hate to be rude but maybe someone could tell Larry that America doesn't have a free enterprise system.

 
At 8/09/2011 10:04 AM, Blogger Eric H said...

What are the in-trade odds that the double dip will be blamed on the "tea party"?

 
At 8/09/2011 10:12 AM, Blogger juandos said...

"I hate to be rude but maybe someone could tell Larry that America doesn't have a free enterprise system"...

Oh! Come on now! Are you trying to put the esteemed Mr. Kudlow out of work?...:-)

Hmmm, Larry Kudlow should remember how the question of the free enterprise hadn't already been mortally wounded back when FDR was president...

 
At 8/09/2011 10:44 AM, Blogger geoih said...

People need to remember that stock prices are just that, prices. They are based on the subjective valuations of the demanders, the same as the prices of houses, haircuts and cheese burgers. If a stock price falls today, it just means buyers are valuing it less today, but it still represents the same fraction of ownership in that company.

 
At 8/09/2011 10:46 AM, Blogger morganovich said...

"A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship,"

-tytler

guess where we are in the cycle...

 
At 8/09/2011 10:58 AM, Blogger Buddy R Pacifico said...

On morganovich's question after the quote he presented:

The tipping point.

 
At 8/09/2011 11:04 AM, Blogger Benjamin said...

Kudlow is right.

The time to buy is when the wimps and Chicken Littles are pettifogging to a national audience.

The sell to sell is when they are dancing in the streets, spritzing each other with champagne.

The wimps and Chicken Littles are ruling the roost today.

Buy baby--and write Bernanke-san a letter. Tell him we do not want to be the United States of Japan.

 
At 8/09/2011 11:05 AM, Blogger Rufus II said...

My track record is probably about 10 times better than Larry's, and I'm figuring we'll be, mostly, in recession for the next 10 years.

The only one that called the present downturn quicker than the NFIB (they got there on the second tuesday of April) was me. I got there on the first week of March (that's when the parking lots at the Tunica Casinos went from full to half empty in the last week of Feb.)

Of course, I made the call in the Fall that we would be in full-fledged recession by Dec, and that this might be a good year to "sell in May, and Go Away."

Basically, it just boils down to this: Gasoline Prices over $3.25/gal puts the bottom 40% in jeopardy. At $3.50 it's just a Death Watch.

 
At 8/09/2011 11:06 AM, Blogger morganovich said...

WASHINGTON (MarketWatch) — The productivity of U.S. businesses fell in the second quarter as labor costs accelerated, the government said Tuesday, while revised first-quarter figures were slashed to show a decline.

Second-quarter productivity fell by a 0.3% annual rate on a seasonally adjusted basis, according to the Labor Department. Economists surveyed by MarketWatch expected productivity to decline by 0.9%.

What’s more, productivity in the first quarter was revised lower to a 0.6% decline instead of a 1.8% increase.

The economy hasn’t experienced two straight drops in productivity since the second half of 2008. Over the past 12 months productivity has risen at a meager 0.8% pace.

The rising cost of labor has been the key driver of declining productivity. The unit cost of labor rose 2.2% on top of a 4.8% surge in the first quarter. The first-quarter increase was initially put at 0.7%.

 
At 8/09/2011 11:09 AM, Blogger morganovich said...

bunny-

wasn't it you saying "buy" at dow 12700?

why yes, it was.

how has that worked out for you?

the time to sell was when you were talking about how the economy was recovering and the market was going up.

thank goodness i did.

man i wish there were an ETF to bet against you.

 
At 8/09/2011 11:17 AM, Blogger Benjamin said...

Morgan-
And you have been long on Japan for 20 years. Down 80 percent, but hey--the yen is strong, you get half of that back, in dollars.

 
At 8/09/2011 11:20 AM, Blogger Rufus II said...

The highest qtr GDP number this go-around will be, in Real Dollars, less than the 4th qtr of 2007.

After this downturn, the next very short uptick will peak out with a GDP, in real dollars, lower than this one.

It is a Declining Sinusoidal Wave.

We're going to be very seasick before this storm has passed.

 
At 8/09/2011 11:22 AM, Blogger juandos said...

"The time to buy is when the wimps and Chicken Littles are pettifogging to a national audience"...

Yeah pseudo benny, go ahead and spend YOUR money on stocks...

This administration will always engender a good atmosphere for doing business in this country...

From USNews: Report: Obama Administration Added $9.5 Billion in Red Tape in July

 
At 8/09/2011 11:26 AM, Blogger morganovich said...

buddy-

i admire your optimism.

i fear the tipping point may have come and gone.

our only hope is to deeply rein in entitlements immediately.

the 61tn in unfunded liability they represent is completely unpayable. it's a mathematical impossibility.

even if we could break hauser's law and get 20% of gdp in taxes, that's only $3tn/year.

add in the actual debt, and out 75tn in obligations is 25 years of revenues.

the killer is going to be cutting SS and medicare.

ss should be easy, but it won't be. it's obvious what needs to happen.

raise the age to 75 and means test. that will cut costs by 2/3-3/4.

when SS was put in place, 65 was the avg life expectancy. the average person got 0 years, now they get 22. that doesn't work.

we also need to stop pretending it's a "pension plan" as opposed to an entitlement.

but these things will never happen. the AARP is a fearsome voting block and they will sink anyone who tries this. the left will fight against means testing just as aggressively. if you means test, SS look like a social program.

medicare is even more difficult. the whole system is failing now. they underpay docs so badly that many are refusing to take it.

it has zero cost control built into it.

it needs to become block HSA grants to spend as you like. it needs to be run like foodstamps.

my mom had a $70k ankle replacement on medicare. we could have afforded it. but why bother when uncle sam pays?

you've been paying into it your whole life, why hold back?

so long as the buffet is open, costs cannot be controlled.

but try closing it, and again, the AARP is all over you.

the kids of "greatest generation" are going to be the generation that sinks us.

i'd love to believe we have the will to fix this, but i just do not see it.

we have a climate in DC where reducing the rate of growth of a program is treated like "deep cuts".

i just do not see the will.

we missed our window.

we needed to be doing this in the 90's whent he economy was good and had not yet been wrecked by the concatenated bubbles spawned by insane fed policy and massive governmental subsidy.

in a boom, you might be able to sell this, but in a bust, it's much more difficult.

 
At 8/09/2011 11:33 AM, Blogger morganovich said...

bunny-

"And you have been long on Japan for 20 years. Down 80 percent, but hey--the yen is strong, you get half of that back, in dollars."

you are making that up.

you keep pretending i have some sort of optimism about/bet on japan.

that has never, ever been the case.

i explained this to you just yesterday.

they are a demographic bomb. nothing can pull their economy out.

you are making the scatterbrained assumption that because i do not think their problem is monetary, that i think they are OK, when i have told you the opposite over and over.

so now you're just lying benji.

not even you have such poor reading comprehension that you could not understand that i have never bet on japan's economy.

you are just telling blatant untruths to try to mask just how bad your calls have been.

is this what you do when you run out of other ad hominem and appeals to authority? just flat out make stuff up? i know it hurts to get killed like you did yesterday, but that's not reason to go around telling fibs.

it's kind of pathetic bunny.

if you can show me one example EVER of my recommending being long japan, i'll take it all back, but you can't because i never have.

 
At 8/09/2011 11:37 AM, Blogger Jason said...

Given how well documented the Great Depression is, we've lost sight of a number of crucial missteps. Ok so we don't have smoot-hawley and a rise in interest rates. But what we do have is interventionist government in the form of new financial, labor, environmental and medical regulations. This time there will be no World War II to kick start the economy and destroy the rest of the world's economy.

AND we have the bitter harvest of western socialism as the largest generational human collective reaches their 60's. (Palm face slap)

Of course the economy can, and will, persevere. But what it does and the path it takes is not predictable. Not possibly predictable.

As I see it: 30-40 years if middling growth and stagnation. Unless we de-entitle, de-regulate and de-Obamify our economy now, then we may only suffer 10 years of suffering.

 
At 8/09/2011 11:43 AM, Blogger Buddy R Pacifico said...

OK, we have the historic downgrading of U.S. debt. What do many big investors do? They buy U.S. treasurys and drive down yields! I think the safe haven is U.S. multinationals and various Swiss holdings -- but my stuff got clobbered. Oh well, I'm basically in for the long haul with my petite portfolio.

 
At 8/09/2011 12:38 PM, Blogger Rufus II said...

Everyone is waiting with bated breath to hear from the Fed. All the Fed can do is prop up the Stock Market by making Bonds less attractive. That doesn't help the "real" economy one whit.


Absolutely, Every swinging d*** is completely ignoring the fundamental problems of the U.S. Economy.

Rising Energy (petroleum) Costs

High Unemployment

Stagnant Wages

Horribly Negative "Trade Balance"

"Investment" Money hoarded in overseas tax havens.


There's not a thing Bernanke can do about Any of these things.

 
At 8/09/2011 12:42 PM, Blogger Rufus II said...

30 days ago Bernanke was projecting 3.0% GDP Growth in the Second Half of the Year.

And he's going to show us the way?

Has every last person in the world lost his/her mind?

 
At 8/09/2011 1:05 PM, Blogger morganovich said...

rufus-

actually, there is one thing he can do:

if eh stopped debasing the dollar, people like me might pull some of my money back from swiss franc accounts in geneva.

believe me, with the new tax rules, keeping offshore money is a huge pain.

but for 22% appreciation of the CHF/USD so far this year, well, it's worth it.

he could also stop pouring money into the system and actually let it correct.

running up huge debts to try to inflate the next bubble is worse than useless, it's counterproductive.

 
At 8/09/2011 1:31 PM, Blogger Rufus II said...

Fedspeak translated: Rufus was/is Right.



(except, for some unfathomable reason, we're still referring to higher petroleum prices as transitory.)

 
At 8/09/2011 1:40 PM, Blogger Rufus II said...

They're afraid of "Deflation," Morgan, not inflation.


Truth be told, right now they're clueless, and, they "know" they're clueless.

Like a toothless dog gnawing at a bone.

 
At 8/09/2011 1:54 PM, Blogger morganovich said...

rufus-

CPI is running at 3.6% and rising.

in the 70's (before we adulterated the CPI) we would have called this over 8% inflation.

they are not afraid of deflation. no sane person could look at this money supply growth and think "deflation".

they are using it as a hobgoblin to scare us into wanting yet more money printed.

there were 3 dissents at the FOMC. that's very unusual. others are not swallowing bernankes nonsense.

currencies undergoing deflation appreciate. the dollar has dropped like a rock.

the beard is lying to you pal. look at the data.

6% money growth, dollar down 15% in a year, and sub 1% growth and you think there's going to be DEflation?

seems pretty implausible.

bernake's "heal from over liquidity by providing liquidity" plan is like trying to save someone from drowning by giving him a glass of water.

 
At 8/09/2011 2:02 PM, Blogger Benjamin said...

BTW.

According to the BLS, the CPI-All Urban Consumers was at 225.722 in June 2011. It stood at 219.964 on July 2008.

Let's get scared. That is a 2.62 percent increase in just three years.

Really this is less than one percent a year, well under any reasonable target.

When Reagan left office, the great inflation-fighter had 5 percent inflation.

Why are my right-wing friends now so hysterical about inflation?

 
At 8/09/2011 2:08 PM, Blogger Rufus II said...

Oil is way off. 10 yr note is 2.12%. And, growth is somewhere south of zero.

I think they're discounting much chance for inflation.

 
At 8/09/2011 2:11 PM, Blogger Rufus II said...

10 yr note 2.05%

 
At 8/09/2011 2:22 PM, Blogger Rufus II said...

10 yr yield: 2.16%

Gold soaring. $1764.00


Somebody is really, really, really, really wrong.

 
At 8/09/2011 2:59 PM, Blogger morganovich said...

rufus-

if you print enough money you can make bonds, commodities, and equities all run at the same time.

that's what people took away from the fomc -

free money until mid 2013.

i agree that there is no set of economic events that should drive that.

but huge money supply growth can.

 
At 8/09/2011 3:38 PM, Blogger Rufus II said...

I don' know, Morgan; Spending was down 0.2% in the last report, and Factory Orders were also down 0.2%.

If 193,000 hadn't left the work force we would have 9.2 or 9.3% Unemployment instead of 9.1%.

We'll see. :)

 
At 8/09/2011 4:09 PM, Blogger Hydra said...

Basically, it just boils down to this: Gasoline Prices over $3.25/gal puts the bottom 40% in jeopardy. At $3.50 it's just a Death Watch.

=====================

How does that work in Europe?

 
At 8/09/2011 4:25 PM, Blogger Methinks said...

I can't take Larry "bring back the uptick rule because I don't know how markets work" Kudlow seriously.

I have been a trader for a long time and I haven't seen the market respond to anything that could reasonably be mistaken for a "free enterprise system" since early 2008. Since then, the market has been trading on whatever the central planners are concocting. Gosplan as good as announced more money printing today. Rally!

Or maybe it's just because the Wrecking Ball in Chief didn't open his trap about people "paying their fair share" again today. Or it's because everyone got a 204 notice and had to cover their short by the end of the day.

Whatever it was, "free enterprise" had nothing to do with it.

 
At 8/09/2011 4:26 PM, Blogger morganovich said...

rufus-

i'm not sure i understand your point.

you listed several things that ought to tank, not rally an equity market.

i agree that gdp, income, productivity, employment, and business confidence are all trending badly.

but how does that rally equities?

that would rally bonds, but not stocks nor gold.

 
At 8/09/2011 4:31 PM, Blogger Rufus II said...

Europe isn't too awfully similar.

Europe built into their high petrol taxes over time, coincidenally converting to smaller, and smaller highly fuel-efficient cars.

They, also, drive a lot less. Shorter commutes, more public transit, etc.

Also, a certain amount of their fuel taxes go toward government-paid healthcare.

We, also, will become more fuel efficient, but we can't do it overnight. I'm figuring a decade before we can really start to get on top of the situation.

 
At 8/09/2011 4:33 PM, Blogger morganovich said...

"how does that work in europe"

it keeps them from owning cars and keeps them poor and clustered in urban centers.

short term demand for gasoline is pretty price inelastic.

you don't stop driving to work just because gas is up from $3 to $4 over the summer.

but if it moved to $8 and you thought it would stay there forever, you'd likely change your behavior.

you'd move to where you could use public transport and likely not have a car.

but the US is not (has not been) like that, so when prices spike, it has a serious effect on disposable income.

 
At 8/09/2011 4:33 PM, Blogger Rufus II said...

Morgan, the market is a mob. Sometimes "Mobs" just do weird things. If I understood it all I'd be busy counting my money, not fooling around on the web.

 
At 8/09/2011 4:44 PM, Blogger Rufus II said...

They say it's hard to come up with a proposition that at least 1/3 of the "people" won't go along with (if presented in a sufficiently charismatic manner, I suppose.)

Today, it seems 1/3 though we were heading for recession, and bought bonds.

1/3 believed the charismatic spokesmen that preached, "we're still growing, inflation is low, and who wants 2% on a ten year bond?"

And, 1/3 somehow, look at all this and see "Rampant Inflation."

And the other 1/3 (we're doing Yogi Berra math, here, okay?) just said, this is nuts, I going to take a nap/get drunk/go fishing/go stick my head in an electric oven. :)

I'm pretty much in the latter (Yogi Berra) group.

 
At 8/09/2011 4:47 PM, Blogger Rufus II said...

It Was a heck of a day, though, wasn't it? :)

 
At 8/09/2011 4:52 PM, Blogger Seth said...

"I hate to be rude but maybe someone could tell Larry that America doesn't have a free enterprise system."

Sure it does. It's just enveloped by a gigantic parasite at the moment.

 
At 8/09/2011 5:02 PM, Blogger Mike said...

Rufus,

"Absolutely, Every swinging d*** is completely ignoring the fundamental problems of the U.S. Economy....."

I'd have to agree with you, but some of the things on your list seem inextricable, or at least symptomatic of one another.

I think the uncertainties created by the president's 'villain du jour' (people making over $250k....or is it $175k....or is it couples making $200k....or is it jet owners and millionaires) and the obvious issues with the clear-as-mud health care policy-to-come are problems that could be avoided and corrected. In no way would I argue that clearing some comparatively small potato issues would solve our problems, but I feel like a little stability would go a long way.

 
At 8/09/2011 5:19 PM, Blogger Rufus II said...

Well, sure they are, Mike. My solution would be to incentivise (I mean, make'm a deal they can't refuse) the Corporations with massive profits held overseas to bring them home, and invest them in 3,000 cellulosic ethanol refineries - approx. one in every county.)

I think the government should "guarantee" the loans, and give them a break on taxes owed (which I would make "Payable Now.)

Get all those boilermakers, ironworkers, pipefitters, steelworkers, carpenters, machinery operators, electricians, plumbers, etc, off the Unemployment/Food Assistance/Medicaid/ rolls, and onto the Payrolls, paying taxes.

It would go a long way toward solving our "balance of trade" issues, and make for a stronger dollar, and higher prosperity.

In the meantime we could take those 30 Million Acres that we're paying landowners NOT to plant out of the CRP, and put a few more equipment manufacturers to work.

That's how I would solve the problem.

I bet they get started "right away," don't you? :)

 
At 8/09/2011 5:24 PM, Blogger Mike said...

Rufufs,

Hahaha...it's a good thing I speak sarcasm too or I may not have understood your last sentence.

I think I'd be shocked at the results if they'd just stop DISincentivising, let alone incentivising.

 
At 8/09/2011 5:31 PM, Blogger bix1951 said...

more stuff
and
better stuff(I love my new Sonata with all the bells and whistles)
Isn't that what we really have?
It keeps piling up all around
But the guys measuring things can't see the forest because they are looking at the CPI or the number of unemployed.
I am richer than before regardless of the number somebody puts on my house.
It is real stuff that constitutes wealth, buildings, machines, skilled laborers, etc. not entries in the books.

 
At 8/09/2011 5:38 PM, Blogger Mike said...

Benjamin,

I know that you know that we all know that the CPI information mostly real-world worthless.

I'm obviously no economist, so let me ask you a very layman question:

If you had the choice to put your money in a simple c.d. during Reagan's last couple years (with the rate of return between 8 & 9%) @ 5% inflation.....or, you could do the same thing over the last couple years with our current rates, which would you choose to have the most value at the end?

If my available, usable liquid sits in a current c.d., I lose value...even if I use your CPI numbers. Shouldn't that make me hysterical?

 
At 8/09/2011 5:44 PM, Blogger Ron H. said...

"How does that work in Europe?"

Apparently Europe has been on death watch for the last 40 years. Who knew?

 
At 8/09/2011 5:48 PM, Blogger Mike said...

bix,

Most here would agree that even the poor are now richer....but, I think you may be confusing materialism for capitalism....and without the latter functioning properly, you'll have a tough time with the former.
And I hate to be a downer, but if you need to sell a $300,000 home you bought 5 years ago and the market is only willing to give you $200,000, you are most definitely poorer.

 
At 8/09/2011 6:52 PM, Blogger Benjamin said...

The Fed evidently thinks that price stability is when prices are perfectly poised between deflation and inflation.

This echoes sentiments rebounding the conservative blogosphere that any inflation is a moral sin, and that a nation that debases its currency is likely to do anything, like welshing on contracts or bonds, or setting up a gay brothel in the White House. Heck, we might even occupy a landlocked Asian nation and set up a narco-state and use Marines to protect poppy fields of farmers loyal to the their Islamic rulers--oh wait, we already did that.

BTW: The CPI-U was at 219.964 in July 2008. It is now at 225.722. Run for the exits–that is a huge 2.62 percent increase in just three years!!!! And that we will see some outright deflation in coming months to no reason to let your guard down.

Buy gold! Use your dollar bills for toilet paper! Set up barter networks! Get on your Flying Saucers with Morgan!!!

 
At 8/09/2011 7:14 PM, Blogger Mike said...

Benjamin,
Was that your way of answering my question? If so, run for office.

I actually own a good deal of gold, unfortunately, it makes for terrible currency since the bartender at my local saloon rarely has enough dust in his pouch to give me correct change.
Sometimes I need a few thousand dollars for various things and I'd like to keep it handy without it losing value.

 
At 8/09/2011 7:37 PM, Blogger Benjamin said...

Mike-

I did not see your question when I posted. I try to be polite to any sincere question or posts.

If you own gold, lucky you. Every day for the past three years I have thought gold has hit its top. Now I really think it has--so that means it may have a two-year run yet. I remember thinking the NASDAQ had topped out in 1997--but it had a two-year run yet. Markets get momentum, and carnival barking goes on...

In contrast to you, I think the CPI does a good job. Many right-wing economists think it overstates inflation.

In the last three years I have-

Bought a cell phone, wiping out three land lines. $150 a month savings.

Got cheaper auto insurance. $45 a month.

Renegotiated a commercial mortgage, savings $700 a month.

Discovered $1 stores. $30-40 a month.

Got rid of the fax line, as I had free e-mail. $40 a month.

Got rid of general manager, as I had e-mail, cell phones, and business was way off. $2k a month (furniture making).

Read for free online what I used to buy any number of magazines, newspapers etc. $75 a month, and content is better.

Thanks to new digital broadcasting, got rid of cable and just watch TV for free now. $65 a month savings. Some decline in content, but I only watch The Honeymooners and Star Trek and crap anyway.

Seems like fast food is getting cheaper, but switched to not-bad frozen Marie Callender pies for $3 each for lunch. More than enough for one meal. $15 a month in savings.

Buy used books through Amazon.com, some for $2. Maybe $20 a month savings.

I can't remember other things--life is not getting more expensive for me.

I just want an effing recovery. Bush or Obama I don't care, I would vote for Elvis Presley (he rides shotgun on Morgan's Flying Saucer) if he got the economy going.

 
At 8/09/2011 8:55 PM, Blogger Mike said...

Benjamin,

If you'd like to answer it, my question is 6 post above this one.

I don't think Morgan believes the CPI overstates inflation, it understates inflation. Some items are obviously cheaper (and/or better for the same money) but the CPI doesn't include the things that are drastically higher like energy....and you can argue food prices (excluded as well) are flat, but extremely important segments certainly are not.

It's kind of an odd thing, as I read through your list of things that you have replaced with other items (not purchased at lower prices) I thought of two things:
1. Almost everything on that list, if purchased (NOT replaced with a different item or method) is either higher or flat due to falling demand.
and....
2. Wow. Those are a lot of lost jobs.

 
At 8/09/2011 10:04 PM, Blogger VangelV said...

The American free-enterprise system can weather these shocks, and I believe favorable political and policy changes are on the way. It will take time. But time heals. Longer-term investors would do well to think about the many stock market opportunities that are opening up as a tough correction runs its course."


The US has a managed economy that has little to do with free enterprise.

 
At 8/09/2011 10:44 PM, Blogger Benjamin said...

Mike-

No, hysteria is needed.

According to the BLS, the CPI-All Urban Consumers was at 225.722 in June 2011. It stood at 219.964 on July 2008.

That is a 2.62 percent increase in three years. And next month is likely to be deflation, due to oil prices.

Ironically, we have not had inflation this low in decades and decades.

Every investment entails risk. Bondholders, despite their pathetic moral pettifogging and posturing, are no better than stock buyers, real estate investors, or homebuyers.

We can choose to protect bondholders forever, and we will suffocate the modern economy.

An unhealthy obsession with minute rates of inflation does not become our modern right-wing, It suggests a sort of dementia has set in.

 
At 8/10/2011 7:01 AM, Blogger Larry G said...

" The US has a managed economy that has little to do with free enterprise."

fair enough.

Name the top 3 in the world that ARE "free enterprise" (NOT managed) and their rank relative to the US "managed economy".

Bonus Question:

Name the top 3 countries in the world with the LEAST regulations - and rank how they compare to countries with the MOST regulations.

 
At 8/10/2011 8:16 AM, Blogger morganovich said...

bunny-

cpi ran 3.6% in the last 12 months and is climbing.

if that's "a knife edge between inflation and deflation" then i'd hate to see what you think actual inflation is.

it also dramatically understates inflation.

using substitution is akin to saying, well, your quality of life dropped, but you didn't pay more.

you ate hamburger instead of steak. this kept your costs down, so: voila! no inflation.

i don't know about you, but i care about quality of life.

saying "prices are stable but quality of life is declining" is really not the same as stable.

food is way up.

healthcare? way up.

rent? surging (along with the % of renters)

home prices only matter if you are a first time buyer. otherwise, you need to sell you existing one at a lower price and then try to come up with a down payment.

there are very few first time homebuyers right now. certainly not enough to overcome the surging rents.

energy, yup, way up.

getting deal on car insurance or a marked down iphone hardly compensates the the above.

as ever, you seem to lack any concept of what inflation actually is.

and you never answer this question:

was there high inflation in the 70's?

if you say yes, then you must agree that there is high inflation now because if we use the same measures, inflation looks like 1978 and is running higher than many of the years in that decade.

if you use the current methodology, then inflation in the 70's was never over about 5% and mostly around 3.5%.

so which is it bunny?

did we not have inflation in the 70's or are we having inflation now?

you must believe that one or the other is true to have any consistency in your beliefs (not that i expect that of you)

 
At 8/10/2011 8:24 AM, Blogger Larry G said...

countervailing evidence:

" Information About 2011 Social Security Cost-of-Living Adjustment

Under existing law, there can be no COLA in 2011. Why? As determined by the Bureau of Labor Statistics, there is no increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of 2008, the last year a COLA was determined, to the third quarter of 2010."

http://www.ssa.gov/cola/

here's the history:

http://www.ssa.gov/oact/STATS/cpiw.html

 
At 8/10/2011 9:05 AM, Blogger morganovich said...

larry-

your logic is circular. cola is based off of BLS numbers.

that is EXACTLY why they changed the CPI to read lower: to rein in entitlement growth.

go back and read the debates when clinton and greenspan did it.

they are now trying to do it again by moving to chained cpi.

inflation denial for political ends does not change the economy and more than setting your scale back 20 pounds helps you get into your pants.

 
At 8/10/2011 9:07 AM, Blogger Larry G said...

Morg - are you saying that we do have inflation but they are refusing to adjust the benefits to reflect that inflation?

How about other non-govt, inflation-adjusted products - like private pensions?

 
At 8/10/2011 9:10 AM, Blogger morganovich said...

if the bls was using the pre 1992 methodology, COLA would be up nearly 20% from 2008.

this whole change was an attempt to cut entitlements without actually being seen to cut them.

but overall CPI is just too blunt an instrument to use.

the reason we have had bubble after bubble since the 90's is that the fed is targeting an inflation level that would have been called 6% in the 80's and often running at a rate more like 8%.

with money that loose, you will rapidly get bubbles every time.

 
At 8/10/2011 9:21 AM, Blogger Walt G. said...

Larry G,

Here's a report showing a proposed change to a chain CPI to reduce the deficit or a new elderly CPI to maintain elderly income. I tried inserting a hyperlink below, but it kept going to my Blogger dashboard page. Does anyone have any idea why?

www.socialsecurity.gov/OACT/solvency/XBecerra_20110621.pdf


The new elderly CPI more closely follows expenditures in that age group such as food and medical. It looks like a +0.5%-per-year swing to me from the chained -0.3% to elderly +0.2%. That's a huge difference over time. Will the seniors or the youngsters win this battle?

 
At 8/10/2011 9:24 AM, Blogger Walt G. said...

Now it chopped off the end of the URL below:

_20110621.pdf

I give up!

 
At 8/10/2011 9:38 AM, Blogger Walt G. said...

Larry G.

Private pensions that I am aware of usually are not inflation protected (straight annuties). We've (UAW) fought like hell for that, but the best we can get is lump sums negotiated by each contract. Corporations don't want to open that can of worms. I assume public pensions have inflation adjustments or are pegged at a percentage of an active worker.

Track you own expenses over time to see your personal inflation rate because any CPI is useless at the individual level of measurement. I have 8 years worth of personal data. My personal inflation is in the + 6 - 7% range from last year.

 
At 8/10/2011 9:52 AM, Blogger morganovich said...

walt-

agreed.

of interest, that 6-7% number you experienced looks a great deal like what CPI would be reading if we used the pre 1992 methodology.

as it seems you have personally experienced, calling 7% inflation 3% doesn't make things any cheaper.

 
At 8/10/2011 11:28 AM, Blogger Ron H. said...

Walt: "I tried inserting a hyperlink below, but it kept going to my Blogger dashboard page. Does anyone have any idea why?"

www.socialsecurity.gov/OACT/solvency/XBecerra_20110621.pdf

No, but when I paste it and select it my browser crashes.

I can open the page at -

www.socialsecurity.gov/OACT/solvency/

-but if I select the link to the Becerra memorandom, my browser crashes. I suspect an Adobe Acrobat problem with the PDF file. I can open other PDFs on that page. Spooky stuff.

 
At 8/10/2011 11:42 AM, Blogger Ron H. said...

Walt: "Corporations don't want to open that can of worms. I assume public pensions have inflation adjustments or are pegged at a percentage of an active worker."

That certainly is a can of worms. COLA increases bake inflation into Fed monetary policy. This is planned inflation without any gains in productivity. The only way for those who receive COLA increases to stay ahead, is with an ever increasing rate of inflation.

 
At 8/10/2011 11:54 AM, Blogger Ron H. said...

continued:

That is almost certainly why the CPI is calculated to understate inflation.

A separate CPI for seniors won't improve that, but will only muddy the water further. What's next? a separate CPI for Women? Bus drivers? How many meaningless CPIs will it take to cover up the core problem, now that so many realize that CPI doesn't reflect conditions in the real world?

 
At 8/10/2011 12:42 PM, Blogger morganovich said...

COLA is also why we cannot inflate our way out of debt.

we have 14tn in debt.

we have 65tn in unfunded liabilities that are indexed to inflation.

thus, every $1 we save on bonds through inflation costs us 4 in entitlements.

spending 4 to save 1 is not how you get out of a hole.

 
At 8/10/2011 1:35 PM, Blogger Larry G said...

there are all manner of financial instruments that are adjusted for inflation... in general... though and I would think that - they also would be indicators ....

Here's the inflation factor in private 401(k) allowed by the govt:

http://economy.cbh.com/2010/12/irs-announces-inflation-adjusted-retirement-plan-contribution-limits-for-2011/

what I'm saying here is that there are a variety of ways - both govt and private to account for inflation and I'd seek some level of consistency on the various different ways to get a more true picture of overall inflation.

 
At 8/10/2011 2:21 PM, Blogger morganovich said...

larry-

the problem is that all of the federal measures are playing a game of "who can understate inflation the most" to try and rein in costs.

averaging several pieces of deliberately falsified data does not get you to a true result.

 
At 8/10/2011 2:42 PM, Blogger Larry G said...

not average... just articulating the various ones... to see how many agree (or not) and by how much.

that will give a truer picture than just cherry-picking a single one that one person prefers.

 
At 8/10/2011 3:21 PM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

Please have Larry K. put me on the mailing list to be notified when it's time to panic.

That way I will know when we are at the bottom (assuming there IS a bottom).

 
At 8/10/2011 4:01 PM, Blogger Benjamin said...

Morgan The Man: He arrived by Flying Saucer, and soon reigned supreme over the Flat Earth Society, Utah Division.

Through clever sleuthing, he unearthed a global plot to under-report inflation. Even hardcore USA right-wing economists were in on it, along with socialist governments of Europe.

It explained that while poor people in the USA actually lived better than ever, due to under-reported inflation, they were actually worse off than ever.

It explained why you see even "wealthy" people like Bill Gates driving around beat-up rotary-engine Mazdas from the early 1980s.

Morgan plans a major news conference on the back side of the moon to explain reality to his fellow galaxy-girdlers, and important news outlets.

 
At 8/11/2011 9:18 AM, Blogger morganovich said...

bunny-

as ever, senseless commentary from you.

i note you never answer this question:

was there high inflation in the 70's?

if yes, how can you deny it today?

using the same measure they sued then, inflation is over 8% today.

you can either believe in low inflation now and low inflation in the 70's, or high inflation in the 70's and high inflation now, but not both.

so which is it?

as ever, you'll have no answer, but this cut and paste respond to bunny file is really coming in handy.

at least it makes you slink away for a while.

is it really so difficult to believe that the government would deliberately manipulate numbers for their own gain?

you seem critical and suspicious of government in many other cases. that seems highly incongruous with your view that they are scrupulously honest on economic data.

do you trust the CBO?

why is the BLS different?

 

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