Tuesday, August 16, 2011

U.S. Industrial Production Resumes Growth

The Federal Reserve released its monthly report on industrial production this morning, with the following highlights:

 1. At an index level of 94.2, industrial production in July was at the highest monthly level since August of 2008, almost three years ago (see chart above).

2.  Over the last year, industrial production has increased by 3.7%, and over the last three months industrial production has increased by 6% at an annual rate. 

3. On a monthly basis, industrial production increased by almost 1% from June to July, the highest monthly growth since December of last year.  

4. Manufacturing production increased in July by 3.8% on an annual basis. 

5. Sectoral growth over the last year was especially strong for business equipment (8.5%) and mining (6.6%).  On a monthly basis, motor vehicles and parts increased by a healthy 5.5% in July. 

MP: The strong industrial output growth in July, especially for autos and parts, suggests that the supply chain disruptions from the earthquake in Japan have eased, and the manufacturing sector is back on a positive growth trajectory.  The spring-early summer "soft patch" could be over.

Note: Industrial production measures real output.

84 Comments:

At 8/16/2011 9:37 AM, Blogger morganovich said...

first off, this is not strong growth.

this is a nominal number.

CPI has been 3.6% for the last 12 months.

that implies 0.1% real growth in production for the last 12 months.

second, all the regional surveys disagree.

the empire state survey was grim.

"This morning’s release of the Empire State Manufacturing Survey General Business Conditions Index showed further deteriorated from -3.76 to -7.7, its third consecutive decline. The new orders index also remained below zero, at -7.8. Overall, the report supported the view that the economy is in danger of sliding into recession"

the others look similar.

sorry, but this fed survey is nothing like good news and the odd acceleration it shows in production is completely dissonant with every other survey.

chicago manufacturing showed no growth.

"The Philadelphia Fed's Survey of Professional Forecasters (AKA the Consensus Forecast) for the 3rd quarter showed a sharp deterioration in both the growth rate for the 3rd quarter and later and a notable increase in the risk of a recession starting in either the 3rd or 4th quarter. The expected 3rd quarter GDP was lowered to 2.2% down from 3.4%. The risk of a negative quarter more than doubled for both the 3rd quarter and the 4th quarter 2011"

"University of Michigan Consumer Sentiment index, which reached another low, gapping down 8 points to 54.9 from 63.7. This level is worse than the 2008 crisis."

 
At 8/16/2011 10:14 AM, Blogger Buddy R Pacifico said...

The Federal Reserve link provided shows increases in Capacity Utilization. This would seem very healthy; not based on dollars but rather percentages up.

 
At 8/16/2011 10:22 AM, Blogger Mark J. Perry said...

Note: Industrial production is a measure of REAL OUTPUT, not nominal. See Federal Reserve website.

 
At 8/16/2011 10:32 AM, Blogger juandos said...

So will this increase in production be maintained after the costs of ObamaCare go into effect?

 
At 8/16/2011 10:32 AM, Blogger morganovich said...

ahh, thanks for the correction.

it does seem to be real output.

this does leave the question of why it is diverging so heavily from every single regional survey.

my suspicion is that it uses a much more limited sample set.

it focuses on only the biggest companies and the biggest inputs.

this would make its dissonance gel with what i am seeing:

the big companies are faring much better than the medium sized ones and small firms are suffering horribly.

focus only only the large firms could account for such series divergence.

other than that, i have no ideas as to why it would be so different from all the other data.

 
At 8/16/2011 10:39 AM, Blogger VangelV said...

Note: Industrial production is a measure of REAL OUTPUT, not nominal. See Federal Reserve website.

The problem Mark is that the reported inflation rate is much lower than the true inflation rate. If we used the same methods that we have today for the data in the 1970s there would have been very little reported inflation and the 1970s would have been seen as a period of high growth rather than stagnation.

 
At 8/16/2011 10:54 AM, Blogger PeakTrader said...

VangelV says: "The reported inflation rate is much lower than the true inflation rate."

No one has proved any bias in the inflation rate.

Yet, some continue to assume inflation is understated.

It's more likely inflation is overstated, since the adjustments, in the dynamic economy, have been too conservative.

 
At 8/16/2011 11:00 AM, Blogger Benjamin said...

A fair exchange rate is helping US exports. I hope this continues.

The Fed should print more money.

Also, Rick Perry should be sold to some peg-house in Baltimore.


Perry Says Fed Spending Before Election Almost ’Treasonous’
August 16, 2011, 10:49 AM EDT
MORE FROM BUSINESSWEEK

By John McCormick

Aug. 16 (Bloomberg) -- Texas Governor Rick Perry, finishing his first full day of campaigning for the U.S. Republican presidential nomination in Iowa, said it would be “almost treacherous -- or treasonous” for Federal Reserve Chairman Ben S. Bernanke to increase stimulus spending before the 2012 election.

“If this guy prints more money between now and the election, I don’t know what you would do with him,” Perry said at a backyard appearance in Cedar Rapids, Iowa. “We would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous in my opinion.”

 
At 8/16/2011 11:15 AM, Blogger VangelV said...

No one has proved any bias in the inflation rate.

Yet, some continue to assume inflation is understated.

It's more likely inflation is overstated, since the adjustments, in the dynamic economy, have been too conservative.


The methodology calculated inflation was changed but was not applied to the historical data. As I said, if we use the same methods to look at the 1970s data there would have been no reported inflation problem.

http://www.shadowstats.com/alternate_data/inflation-charts

 
At 8/16/2011 11:18 AM, Blogger morganovich said...

peak-

"It's more likely inflation is overstated, since the adjustments, in the dynamic economy, have been too conservative."

and you have some evidence for this?

rents are up nearly 7% from a year ago. food is up. healthcare is up. energy is up.

what % of the consumption basket is that, 70%?

i'll ask you the same question that benji always ducks:

do you believe that there was high inflation in the 70's?

if yes, then you must believe in it today. if we use the same CPI calculation, inflation is running over 8%.

alternately, if you believe that today's 3.6% is overstated, then you must believe that 1976 had only 2% inflation.

so which is it?

there is no consistent way to believe that inflation was high then and is low now.

underlying prices are currently moving upward at a higher rate than all but 3 years in the 70's.

so what's your view? was 1976 a year of low inflation?

 
At 8/16/2011 11:26 AM, Blogger PeakTrader said...

VangelV, why would you measure inflation the same way in two different economies, e.g. between the 1970s and the 2000s?

 
At 8/16/2011 11:26 AM, Blogger juandos said...

"It's more likely inflation is overstated, since the adjustments, in the dynamic economy, have been too conservative"...

No PT real world inflation has been in my opinion vastly understated...

The cost of food, fuel, and increases in taxes are what is happening in the real world...

The fluctuating price of cotton for instance has driven up the cost of clothes...

Commodity Price Index Monthly Price - Index Number

What does it matter what the 'official' inflation rate is when it does little if anything to effect the costs of items purchased daily or weekly?

 
At 8/16/2011 11:29 AM, Blogger VangelV said...

The Fed should print more money.

I take it that you own gold and hard assets and hope to make a killing by destroying the USD. But what about the rest of the population? You really want them to suffer the eventual hyperinflation?

 
At 8/16/2011 11:34 AM, Blogger VangelV said...

VangelV, why would you measure inflation the same way in two different economies, e.g. between the 1970s and the 2000s?

For the same reason we measure weight the same way today as we did in the 1970s. Do you really want to change the meaning of a pound or kilogram just because times are different?

 
At 8/16/2011 11:41 AM, Blogger PeakTrader said...

VangelV, if the U.S. produced the same output in the 2000s compared to the 1970s, then you can measure inflation the same way.

 
At 8/16/2011 11:45 AM, Blogger PeakTrader said...

Juandos, I stated before:

The only price rise I've seen over the past year is gasoline. My income has also gone up.

Housing, auto payments, food, insurance, health care co-payments, clothing, etc. have been unchanged or generally flat.

Prices rise and fall, not just rise.

Also, I may add, many refinanced their mortgages at lower rates, saving hundreds of dollars each month.

 
At 8/16/2011 12:05 PM, Blogger VangelV said...

VangelV, if the U.S. produced the same output in the 2000s compared to the 1970s, then you can measure inflation the same way.

As the man says, what we have is nonsense on stilts. We do not have to produce the same items. All we have to do is to look at the change in prices for a basket of goods that we select and report those changes honestly. People still send their kids to school, pay their taxes, eat food, drive cars, rent or own homes, consume health care. Just measure what happens to those goods and report it.

 
At 8/16/2011 12:10 PM, Blogger Benjamin said...

Donald J. Boudreaux is chairman of the Department of Economics at ultra hardcore right-wing George Mason University in Fairfax, Va.

In 2006, he wrote, "But can we trust the CPI? I think not. For a variety of reasons, it significantly overstates the amount of inflation we've suffered -- and, thus, it misleads us in estimating changes in real wages over time."

You just can't get more right-wing than Boudreaux without wearing a funny little mustache and having involuntary arm spasms. I mean, this guy probably wears shiny boots and jodhpurs. This is Austrian School material.

Vange and Morgan Frank say they know more about how the CPI is constructed than Dan Boudreaux. They say that Boudreaux is an idiot. They say that George Mason University has an idiot as chairman of their economics department.

Or, it might be, Vange and Frank are braying buffoons, hobbled by closed minds and intemperate characters.

 
At 8/16/2011 12:26 PM, Blogger VangelV said...

In 2006, he wrote, "But can we trust the CPI? I think not. For a variety of reasons, it significantly overstates the amount of inflation we've suffered -- and, thus, it misleads us in estimating changes in real wages over time."

You just can't get more right-wing than Boudreaux without wearing a funny little mustache and having involuntary arm spasms. I mean, this guy probably wears shiny boots and jodhpurs. This is Austrian School material.


First of all, the right-wing that you are speaking of is hardly monolithic just as the left is not monolithic. Second, appealing to imagined authority will not get you anywhere because the real world data shows that Boudreaux is clearly wrong on the subject of inflation.

I do not understand the intricacies of the ideas of Boudreaux about money and monetary policy but I doubt that they are any better than the Keynesians or Monetarists.

 
At 8/16/2011 12:57 PM, Blogger PeakTrader said...

We also need to note American tastes and preferences change over time.

Americans are more likely to spend more time at home, live in a much bigger and better house, watch nature shows on their big screen TVs than go on a safari, drive an SUV, light truck, or minivan to restaurants, take vacations closer to home, etc.

 
At 8/16/2011 1:04 PM, Blogger Benjamin said...

Peak Trader-

If you want to learn something, look at the CPI for July of 2008 and June of 2011. In three years, the CPI is up 2.6 percent--and that may overstate inflation, as real economists note.

Yet we have Chicken Inflation Littles and gold fetishists carnival-barking about inflation, and a cowed Ben Bernanke-san afraid to help his fellow Americans.

Add to that, Rick Perry today all but accused Bernanke of treason for bloating the money supply.

Egads.

 
At 8/16/2011 1:19 PM, Blogger juandos said...

PT says: "Housing, auto payments, food, insurance, health care co-payments, clothing, etc. have been unchanged or generally flat"...

Where are you living (something you failed to answer when I asked this question before over this very subject) where those other items you alledged have not gone up or remained flat?

Its NOT happening in Missouri or Illinois...

Its not happening in south Texas...

I just came back from Colorado and prices there compared to year ago have gone up sharply...

"Also, I may add, many refinanced their mortgages at lower rates, saving hundreds of dollars each month"...

I don't know of anyone who's actually refinanced their own mortgages though there's plenty of adverstising on local media to do so...

I'm sure people are though but those that I know and work with claim it isn't worth losing the difference in write offs...

Not being a homeowner myself I just have to take their word for it...

 
At 8/16/2011 1:20 PM, Blogger PeakTrader said...

This recession began with the Fed preempting inflation (measured by the general price level) that didn't really exist.

 
At 8/16/2011 1:22 PM, Blogger juandos said...

The following from Investors Business Daily: Regulation Business, Jobs Booming Under Obama

If the federal government's regulatory operation were a business, it would be one of the 50 biggest in the country in terms of revenues, and the third largest in terms of employees, with more people working for it than McDonald's, Ford, Disney and Boeing combined...

 
At 8/16/2011 1:30 PM, Blogger PeakTrader said...

Juandos, over the past four years, I've been living in a medium-size town in Northern California, near San Francisco.

I've seen little price inflation, although prices are high to begin with.

What I've seen are state and local governments squeezing as much money as they can out of California residents.

 
At 8/16/2011 1:38 PM, Blogger Rufus II said...

Heat Wave. Utility output up 2.8%, I think it was. That's most of it.

Also, Detroit got some parts in from Japan, I guess, and built a bunch more pickup trucks that aren't selling.

Consumer Spending is Down, and Factory Orders are down. That's all you really need to know.

Goldman Sachs Retail Sales number was down 1.5%, today. That's huge.

 
At 8/16/2011 2:34 PM, Blogger VangelV said...

Yet we have Chicken Inflation Littles and gold fetishists carnival-barking about inflation, and a cowed Ben Bernanke-san afraid to help his fellow Americans.

Add to that, Rick Perry today all but accused Bernanke of treason for bloating the money supply.


First, there is inflation. It is clear that the USD has lost a big chunk of its purchasing power over the past few decades. Second, Bernanke is the gold bugs' best friend because he will make them rich even as the fools who want him to do more will be ruined. Third, Perry is an establishment candidate who will not rock the boat. He would be begging for inflation if he were in Obama's place because he is a politician first and is as ignorant of economics as Obama.

 
At 8/16/2011 2:36 PM, Blogger VangelV said...

Heat Wave. Utility output up 2.8%, I think it was. That's most of it.

Also, Detroit got some parts in from Japan, I guess, and built a bunch more pickup trucks that aren't selling.

Consumer Spending is Down, and Factory Orders are down. That's all you really need to know.

Goldman Sachs Retail Sales number was down 1.5%, today. That's huge.


Mark tends to be selective when choosing what to look at.

 
At 8/16/2011 2:37 PM, Blogger morganovich said...

trade goods prices for july out today.

imports, up 14% from a year ago.

exports, up 9.8%.

amazing how much inflation you see when you don't cook the numbers.

 
At 8/16/2011 2:38 PM, Blogger VangelV said...

trade goods prices for july out today.

imports, up 14% from a year ago.

exports, up 9.8%.

amazing how much inflation you see when you don't cook the numbers.


You forgot to adjust for quality. The packaging is made from recyclable material. That must be worth a 15% improvement.

 
At 8/16/2011 2:47 PM, Blogger morganovich said...

vangel-

it would be interesting to adjust oil for quality.

if we refine more heavy, sour oil and that costs more, shouldn't we apply a negative quality adjustment?

 
At 8/16/2011 2:50 PM, Blogger Benjamin said...

Fro Michael Boskin, the Hoover-Stanford hero, in 2008:

"Finally, an additional bias results from the difficulty of adjusting fully for quality change and the introduction of new products. In the U.S. CPI, for example, VCRs, microwave ovens, and personal computers were included a decade or more after they had penetrated the market, by which time their prices had already fallen 80 percent or more. Cellular telephones were not included in the U.S. CPI until 1998.

The CPI currently overstates inflation by 0.8–0.9 percentage points: 0.3–0.4 points are attributable to failing to account for substitution among goods; 0.1 for failing to account for substitution among retail outlets; and 0.4 for failing to account for new products. Thus, the first 0.8 or 0.9 percentage points of measured CPI inflation is not really inflation at all. This may seem small, but the bias, if left uncorrected for, say, twenty years, would cause the change in the cost of living to be overstated by 22 percent."

From the ultra right-wing library of Economics and Liberty folks. I mean these guys probably have collections of Mussolini memorabilia in the Library nooks.

And even they think the CPI overstates inflation.

http://www.econlib.org/library/Enc/ConsumerPriceIndexes.html

BTW, if Boskin is right, we have had zero inflation for last three years. The CPI is up 2.6 percent in that period, a sum wiped out by the inherent biases of the CPI measurement system.

So, we should hear the Boskin's of the world screaming for a more-aggressive Fed policy. Which they will do if we get a GOP'er in the White House.

 
At 8/16/2011 2:59 PM, Blogger juandos said...

"I've seen little price inflation, although prices are high to begin with"...

So PT do you think then its just a case of the midwest catching up with other parts of the country when it comes to prices?

The reason I ask is that a loaf of bread in a year's time has gone from a buck eighty plus to just shy of the three bucks...

The price of a gallon of milk has jumped from $2.49 a year ago to $3.59 today locally...

The price of tortillas both corn and wheat have really jumped from about fifty cents a package of a dozen to almost a buck sixty for the same package...

The list is almost endless and what you seem to be indicating to me is that none of the jumps in food prices have happened out by you?

Amazing!

"What I've seen are state and local governments squeezing as much money as they can out of California residents"...

We're seeing the samething here...

Not only are the price of construction inspections going up along with the attempt to foist off higher property taxes (on housing of declining values) but all sorts of 'traps' are increasing in number, reasons, and fine prices...

 
At 8/16/2011 3:00 PM, Blogger morganovich said...

bunny-

yet again you trot out the boskin report.

it has ZERO actual evidence in it.

have you even read it?

it's a politically motivate piece by the guy who needed to justify this for clinton.

yet more appeals to poor authority.

i speak to maybe 50 economists a year.

no one believes that tripe.

 
At 8/16/2011 3:05 PM, Blogger juandos said...

"george mason is a third rate school taught mostly by hacks"...

So morganovich do you consider Dr. Walter Williams a hack?

 
At 8/16/2011 3:08 PM, Blogger morganovich said...

the boskin report is to inflation what mann's "hockey stick" is to global warming: a pile of unsubstantiated claims, dogma, and deliberate distortion to push a political agenda.

it is stunningly devoid of evidence. it wasn't even new research, just a survey of other research that invented a whole pile of subjective "quality adjustments" to please political masters who sought to reduce social security payments.

there is not a jot of hard science in it.

it's a bunch of made up estimates.

it also claimed a 1.1% overstatement by CPI.

new CPI diverges from old CPI by more like 5 percentage points.

even according to the boskin findings, new CPI is massively understating inflation.

your own champion makes my case, not yours.

 
At 8/16/2011 3:11 PM, Blogger morganovich said...

juandos-

i don't know him or his work, though it does, at first pass, seem to be pretty heavily slanted toward policy ends around race.

however, i'd be led to ask "if he's really a top flight guy, why is he at a 3rd rate school?"

 
At 8/16/2011 3:28 PM, Blogger juandos said...

"however, i'd be led to ask "if he's really a top flight guy, why is he at a 3rd rate school?""...

Besides you who else is making the dubious claim that George Mason is a third rate school?

What is your idea of a first rate school?

BTW if you would've looked a little closer at some of Williams postings from the link I gave you your, "seem to be pretty heavily slanted toward policy ends around race" wouldn't make any sense even to you...

Williams is NOT a Keynesian...

 
At 8/16/2011 3:30 PM, Blogger Rufus II said...

Way the biggest part of the YOY rise in Import Prices was Oil, and Oil Products.

Agricultural products accounted for most of the rise in Export Prices.

 
At 8/16/2011 3:35 PM, Blogger Rufus II said...

Juandos, Milk is selling for about $2.50 gal at Walmart, and, if I'm not mistaken, I paid $1.88 for Honey Wheat Bread, yesterday.

Corn was $0.68, as was green beans, and peas. As was Sam's cola.

A lot of the "inflation" is, really, just "brand" inflation.

 
At 8/16/2011 3:36 PM, Blogger Benjamin said...

You see Morgan teaches at a top-rated school. Not little dumps like Stanford or George Mason.

Where do you teach, Morgan?

UFO University, School of the Flat Earth? Are you an expert on Area 51?

 
At 8/16/2011 3:47 PM, Blogger morganovich said...

juandos-

1st teir-

ivy league, mit, maybe stanford, oxford, cambridge. chicago for economics.

second tier: williams, tufts, LSE etc.

you think george mason belongs in either of those groups?

they are number 143 in the rankings.

http://colleges.usnews.rankingsandreviews.com/best-colleges/george-mason-university-3749/rankings

that's third tier.

 
At 8/16/2011 3:49 PM, Blogger morganovich said...

ps-

what does keynes have to do with anything?

i said policy ends around race.

look at his list of publications on minority wages etc.

what would you call it?

 
At 8/16/2011 3:50 PM, Blogger morganovich said...

bunny-

i have TA'd and taught a class at Brown and a summer seminar at MIT.

where did you teach?

 
At 8/16/2011 3:52 PM, Blogger morganovich said...

ps-

i note that you have no response on boskin bunny.

see, this is what happens when all you know how to do is appeal to authority.

when someone actually argues substance, you have no response.

the boskin report is a work of creative fiction, not hard science.

 
At 8/16/2011 3:53 PM, Blogger juandos said...

"Juandos, Milk is selling for about $2.50 gal at Walmart, and, if I'm not mistaken, I paid $1.88 for Honey Wheat Bread, yesterday"...

Well rufus funny you should mention Walmart since I was there yesterday looking for a water filter for field trips...

Didn't find it but I did do a bit of grocery shopping and locally at that particular Walmart milk was $3.59/gallon and bread (which I didn't buy there) was $2.76 a loaf for some brand (Walmart?) of whole wheat sandwich bread....

The particular Walmart I go to (rarely) doesn't sell 'fresh fruits & vegtables' at all but lots of frozen items...

In season I can do better, much better actually as one would expect at the farmer's market of which there are several of within a five mile radius...

BTW rufus just out of curiosity what are you paying for gasoline?

Locally as of yesterday it was $3.28/gallon for the regular...

 
At 8/16/2011 3:57 PM, Blogger Benjamin said...

But what about UFOology? Surely you have taught at top-rate schools in that too?

 
At 8/16/2011 3:58 PM, Blogger juandos said...

morganovich says: "what does keynes have to do with anything?"...

LOL! Liar! You know damn well that for many institutions that if it isn't Keynesian in content it isn't economics...

"i said policy ends around race"...

Like I said before morganovich you should've read a few of his columns before you shot from the lip...

You go to US News for your college rankings?!?!

ROFLMAO!

Thanks for that, I needed a laugh...

 
At 8/16/2011 5:21 PM, Blogger morganovich said...

bunny-

i notice you are silent on your own experience.

you truly are a joke benji.

i'd go ahead and make you look like a fool again, but you are doing a good job all by yourself.

 
At 8/16/2011 5:28 PM, Blogger morganovich said...

juandos-

no, i don't fully buy us news ranking. but as a general yardstick, yes.

the likelihood that the number one school gets listed as 143 is very low.

you didn't answer my question.

if schools like yale are top tier and schools like williams or tufts second, how could you possibly rank GM anywhere above third tier?

where i went to high school, it wasn't even considered good enough to be a safety school.

there are lots of non keynsian econ professors. i have studied with many. i only had one keynsian as an undergrad.

i have no idea how GM leans in that regard.

so, no, i still don't really see what it has to do with anything.

how is that relevant to his publications on race and wealth and public policy?

 
At 8/16/2011 5:30 PM, Blogger morganovich said...

bunny-

ps-

still waiting for your substantive rebuttal on boskin.

the report is online.

please show me any hard data at all upon which he based his claims.

it's all subjective supposition about quality. it has no factual support.

even if it did, the original report said inflation was overstated by 1.1%. the new CPI reads 5% lower than the old one.

even you know that 5 is more than 1.1.

 
At 8/16/2011 6:07 PM, Blogger Benjamin said...

Morgan
Master and Commander, UFO Division, Flat Earth Society, Area 51 Brigade:

Boskin, Stanford scholar,is well known for his substantive research in economics, and particularly for his expertise about the CPI. Boskin has held national positions in organizations concerned with the measurement of inflation.

You, on the other hand, fail to grasp anything beyond your limited and evidently dwindling ken.

Get over it! Inflation is dead.

Beyond that, preserving the value of a Ben Franklin in monetary formaldehyde is destructive to our economy. A gold fetish does not make for good monetary policy.

Think about it. Our economy boomed through the 1980 and 1990s with moderate inflation, Then we went to low inflation in 2000s, and lower growth, and now to deflation.

For the last time: The old way of measuring inflation overstated inflation, and had to be updated. It has been updated,and it still overstates inflation by about one percent a year.

Sure, medical care costs more--and is a lot better. Cell phones cost less. $1 burgers are plenty at Burger King. They are giving away housing in many parts of the country, and mortgage rates have never been lower. Unions have been busted. Imports are rife and inexpensive.

Inflation is deader than Vincent Foster--or was he just kidnapped?

Rod Serling is calling you!

 
At 8/16/2011 6:08 PM, Blogger PeakTrader said...

Juandos, when a lot of people moved from California to Colorado, particularly in the '90s, home prices went way up, and there was a homebuilding boom.

I noticed some prices went up, although oil fell to $10 a barrel.

I don't recall if there was a lot of price inflation.

 
At 8/16/2011 6:17 PM, Blogger PeakTrader said...

Exports and imports don't accurately represent the CPI:

The top ten categories of exports from USA to other countries in dollar value were:

1. Civilian aircraft … $74 billion, up 1.3% from 2007 (5.7% of total US exports)

2. Semiconductors … $50.6 billion, up 0.3% (3.9%)

3. Passenger cars … $49.6 billion, up 13.3% (3.9%)

4. Medicinal, dental and pharmaceutical preparations … $40.4 billion, up 15% (3.1%)

5. Other vehicle parts and accessories … $39.9 billion, down 10.1% (3.1%)

6. Other industrial machinery … $38.1 billion, down 0.6% (3%)

7. Fuel oil … $34.9 billion, up 124.1% (2.7%)

8. Organic chemicals … $33.4 billion, up 5.5% (2.6%)

9. Telecommunications equipment … $32.9 billion, up 4.6% (2.6%)

10. Plastic materials … $31.6 billion, up 8.7% (2.5%).

The fastest growing exports from USA in 2008 by sector were:

1. Fuel oil … $34.9 billion, up 124.1% from 2007

2. Metallurgical grade coal … $5.8 billion, up 97.8%

3. Chemical fertilizers … $10.8 billion, up 71%

4. Other coal and fuels … $2.8 billion, up 66.6%

5. Non-farm tractors and parts … $3.4 billion, up 62.2%

6. Rice … $2.3 billion, up 57.1%

7. Oilseeds and food oils … $3.2 billion, up 56.8%

8. Natural gas liquids … $3.3 billion, up 54.7%

9. Natural gas … $4.9 billion, up 54.6%

10. Unmanufactured goods from agricultural industry … $3.3 billion, up 53.8%.

The top ten categories of imports to USA in 2008 from other countries are:

1. Crude oil … $341.9 billion, up 44.1% from 2007 (16.3% of total US imports)

2. Passenger cars … $125.6 billion, down 6.2% (6%)

3. Medicinal, dental and pharmaceutical preparations … $78.9 billion, up 10% (3.8%)

4. Other vehicle parts and accessories … $64.9 billion, down 11.5% (3.1%)

5. Other household goods … $61.6 billion, up 9.9% (2.9%)

6. Computer accessories … $60.2 billion, down 4.5% (2.9%)

7. Other petroleum products … $52.3 billion, up 8.2% (2.5%)

8. Cotton apparel and household goods … $49.5 billion, down 2.7% (2.4%)

9. Telecommunications equipment … $44.8 billion, up 1.1% (2.1%)

10. Video equipment (television receivers, VCRs, DVD players) … $41 billion, up 3% (1.9%).

The fastest growing imports to USA in 2008 by sector are:

1. Numismatic collectible coins … $1.3 billion, up 268.6%

2. Sulfur and non-metallic minerals … $1.8 billion, up 105.9%

3. Other coal and related fuels… $4.7 billion, up 86.7%

4. Fertilizers and pesticides … $15.1 billion, up 58.5%

5. Food oils and oilseeds … $5.3 billion, up 58%

6. Oilfield and drilling equipment … $12.5 billion, up 57%

7. Feedstuff and food grains … $4.5 billion, up 54.4%

8. Other non-agricultural foods and additives … $709.4 million, up 53.6%

9. Unmanufactured steelmaking materials … $10.8 billion, up 48%

10. Crude oil … $341.9 billion, up 44.1%.

 
At 8/16/2011 6:27 PM, Blogger VangelV said...

Way the biggest part of the YOY rise in Import Prices was Oil, and Oil Products.

Agricultural products accounted for most of the rise in Export Prices.


How convenient that the BLS ignores food and energy and underestimates health care.

 
At 8/16/2011 6:31 PM, Blogger PeakTrader said...

Your inflation rate is low, unless you buy a lot of aircraft, semiconductors, industrial machinery, organic chemicals, metallurgical grade coal, oilseeds and food oils, sulfur and non-metallic minerals, fertilizers and pesticides, unmanufactured steelmaking materials, etc.

 
At 8/16/2011 6:45 PM, Blogger PeakTrader said...

And in the production function Y = t(L, K, R, E ... x).

Output (or inflation) is a function of technology (or productivity) on labor, capital, raw materials, energy, land, etc.

Labor and capital are roughly 70% of input costs.

 
At 8/16/2011 6:53 PM, Blogger VangelV said...

1st teir-

ivy league, mit, maybe stanford, oxford, cambridge. chicago for economics.

second tier: williams, tufts, LSE etc.

you think george mason belongs in either of those groups?


That is the problem. I would not say that the economics departments of those institutions were any good at all. Most teach nonsensical theories that do not explain reality and have professors that care more about sucking up to the establishment than about finding out how things really are. Bernanke was an Ivy League professor who is supposedly an expert in the Great Depression and monetary policy. But when he speaks he reveals ignorance about both.

I would certainly rank Geroge Mason well above the institutions in your list but I still disagree with some of the positions taken by some of the professors on some of the issues. I would say that most of the professors are defenders of the free markets.

Peter Leeson
Peter Boettke
Russ Roberts
Tyler Cowen
Vernon Smith
Walter Williams
James Bennett
Lawrence White
Donald Boudreaux
Bryan Caplan
Alex Tabarrok

My disagreement with some of their position comes from their blind acceptance of data as fact when there is evidence that the data is not reflective of reality and some positions that I consider cannot be justified by those who favour individual liberty.

 
At 8/16/2011 6:55 PM, Blogger VangelV said...

i said policy ends around race.

look at his list of publications on minority wages etc.

what would you call it?


I would call it a defense of the free market.

Williams is colour blind. You are confusing his refutations of race based lefty economic ideas with a desire to promote race.

 
At 8/16/2011 7:01 PM, Blogger VangelV said...

you didn't answer my question.

if schools like yale are top tier and schools like williams or tufts second, how could you possibly rank GM anywhere above third tier?


I consider GM above both Yale and Tufts. Why don't you?

 
At 8/16/2011 7:13 PM, Blogger PeakTrader said...

VangelV, without economics, there wouldn't be an auto industry.

 
At 8/16/2011 8:06 PM, Blogger VangelV said...

there are lots of non keynsian econ professors. i have studied with many. i only had one keynsian as an undergrad.

i have no idea how GM leans in that regard.


Undergraduates at GM will get a lot of Keynes as will undergraduates in other universities. But the graduate department provides much better choices.

Peter Boettke, Peter Leeson, Tyler Cowen, Vernon Smith, Alex Tabbarok, Don Boudreaux, are strong free market voices and some might classify them as Austrians. Russell Roberts has shown himself to be a big fan of Hayek and anti-Keynes. Bryan Caplan, Gordon Tullock, and Walter Williams are anti-Keynes.

I would put GM among the top economics schools if one wishes to get an education that is not tainted by Keynes or other statist economic schools. At the top of the list would be GM, Universidad Francisco Marroquin, ESEADE, Aix-en-Provence, and New York University. For undergraduate I would look to Grove City College or Loyola.

 
At 8/16/2011 8:11 PM, Blogger VangelV said...

VangelV, without economics, there wouldn't be an auto industry.

Bad economics did not create the auto industry. What is your point?

 
At 8/17/2011 7:52 AM, Blogger morganovich said...

vang-

i have no idea upon what you are basing those ideas about GM, but i have to totally disagree.

GM is just not a top school, even in the DC area.

 
At 8/17/2011 7:58 AM, Blogger morganovich said...

PPI out this morning.

up a ton.

"core" excluding energy and food was up .4% in a month.

that annualizes to 5%.

bunny will call that "minuscule" but that's because any rate of inflation that doesn't require a wheelbarrow full of money to buy a loaf of bread is minuscule in his bizarre world.

5% is 2.5 times our target.

the data is reading up everywhere.

there is not a single inflation series that is not over target and trending up.

but hey, at least growth is slowing.

welcome to the failure of monetary intervention. (again)

 
At 8/17/2011 12:01 PM, Blogger juandos said...

Hey morganovich, sorry but I just plain ran out of time to answer your question: "if schools like yale are top tier and schools like williams or tufts second, how could you possibly rank GM anywhere above third tier?"...

My yardstick is simple m, if Keynesian economic theory is offered instead of ridiculed at a particular school then that school is just expensive propaganda...

 
At 8/17/2011 12:07 PM, Blogger Benjamin said...

BTW, the PPI index number for July is 192.4. The number for July 2008 was 185.

Do the math. The PPI index is up 4 percent in three years.

About 1.3 percent per year.

Oooohhhh!!!!

Chicken Inflation Little says the sky is falling!!!

And up in the sky I see UFOs!!!!

 
At 8/17/2011 12:07 PM, Blogger juandos said...

vangIV nails it! " I would not say that the economics departments of those institutions were any good at all. Most teach nonsensical theories that do not explain reality and have professors that care more about sucking up to the establishment than about finding out how things really are"...

Exactly!

 
At 8/17/2011 12:34 PM, Blogger morganovich said...

bunny-

that is some of the stupidest math i have ever heard.

it's like saying, well i drove 9 miles at 10 mph and the last mile at 110 mph and it only averages 20mph, so it should not have hurt when i crashed in that last 100 yards.

you are one of the most numerically illiterate people i have ever met.

 
At 8/17/2011 12:36 PM, Blogger morganovich said...

juandos-

my professors certainly ridiculed keynes.

i have heard the same from many of my ivy league peers.

i think you are being awfully assumptive with your imagined evidence.

 
At 8/17/2011 12:42 PM, Blogger morganovich said...

http://www.bls.gov/news.release/ppi.nr0.htm

also note:

12 month change in finished goods has not been below 3.3% in 2 years.

it was 7.2% in july and has been 7%+ for 3 months in a row.

only a fool would call that low inflation.

 
At 8/17/2011 1:40 PM, Blogger VangelV said...

i have no idea upon what you are basing those ideas about GM, but i have to totally disagree.

GM is just not a top school, even in the DC area.


You are looking at the prestige as granted by the establishment. I am looking at the ability to train economists who understand reality and are able to make predictions that the economists from other schools are unable to make because of the blind spots inherent in their theories.

GM is a school that has many scholars who are from the Austrian School or lean towards the Austrian School. Unlike the Monetarists and Keynesians they were able to predict the current crisis that we find ourselves in and were able to point to the cause of the crisis well before it became obvious to the establishment schools.

To understand why I say what I say think back to the last election cycle and the Republican debates that took place. One candidate called it exactly the way it was because he understood what was happening. The rest were as clueless as the Democrats. At the time the establishment laughed at him but what he predicted came true. Or think of the Peter Schiff versus the mainstream economists debates on CNN, CNBC, and elsewhere. The analysts from the 'establishment' schools were dead wrong while Schiff, who was an Austrian School follower got it right. Think of Jim Rogers, Mark Faber, Eric Sprott, John Embry, etc. Notice that all of them rejected the establishment nonsense and went with the Austrians?

So if you want to teach, be a lobbyist, or work for government go ahead and get an Ivy League economics degree that will signal to potential employers that you are worthy. But if you want to understand how the real economy works you are better off going with GM or the universities that I mentioned above.

 
At 8/17/2011 1:43 PM, Blogger VangelV said...

my professors certainly ridiculed keynes.

i have heard the same from many of my ivy league peers.

i think you are being awfully assumptive with your imagined evidence.


It isn't just Keynes that is the problem. It is the Monetarists and all of those schools who use mathematical tools to try to describe a dynamic, non-linear system that those tools are capable of analyzing.

Look around and tell me which schools are most represented in the establishment and are pushing statist control of the general economy. You will find that the central planners come from the very schools that you say are prestigious. But we all know that central planning and a top-down economy does not work. That means that either those people are self serving hypocrites, empty suits who have no idea about the real world, or elitists who do not believe in the free market that they claim to support.

 
At 8/17/2011 1:44 PM, Blogger VangelV said...

12 month change in finished goods has not been below 3.3% in 2 years.

it was 7.2% in july and has been 7%+ for 3 months in a row.

only a fool would call that low inflation.


But you are arguing with a fool who has no idea about economics. What do you expect him to write?

 
At 8/17/2011 10:24 PM, Blogger Ron H. said...

"Also, I may add, many refinanced their mortgages at lower rates, saving hundreds of dollars each month."

While that may be nice for those with extra money to spend on other things, what does that have to do with inflation?

 
At 8/17/2011 10:52 PM, Blogger Ron H. said...

"You just can't get more right-wing than Boudreaux without wearing a funny little mustache and having involuntary arm spasms. I mean, this guy probably wears shiny boots and jodhpurs. This is Austrian School material."

Right-wing? You need to update your political label dictionary. You will find that GMU Economics dept. is overflowing with libertarians, including Beaudreaux.

You should also be aware that the terms Austrian School and libertarian are often used almost interchangeably.

To avoid having people laugh at you, you should make sure you are using the correct label, if you must use labels at all.

 
At 8/17/2011 11:01 PM, Blogger Ron H. said...

Peak

"VangelV, why would you measure inflation the same way in two different economies, e.g. between the 1970s and the 2000s?"

Even if that were a valid question, and I don't believe it is, why would anyone believe the economy suddenly changed drastically in 1992 and has remained in a state that allows accurate measurement with the new CPI calculations ever since?

 
At 8/17/2011 11:15 PM, Blogger Ron H. said...

juandos

"I'm sure people are though but those that I know and work with claim it isn't worth losing the difference in write offs..."

I've never understood this particular argument. I assume they are referring to the mortgage interest deduction. this does put a little icing on the cake, but to say that paying interest on a home loan is a good thing because of the tax deduction means that paying 3 dollars in interest to a lender and getting 1 dollar back from the IRS is a good deal.

As nearly as I can tell, that's what people are saying when they say they don't want to refinance because the improvement in interest rates is worth less than the tax deduction. In other words, they are paying more that 100% marginal tax rate.

 
At 8/17/2011 11:20 PM, Blogger Ron H. said...

"You forgot to adjust for quality. The packaging is made from recyclable material. That must be worth a 15% improvement."

*like*

 
At 8/17/2011 11:36 PM, Blogger Ron H. said...

"Boskin has held national positions in organizations concerned with the measurement of inflation."

LOL

Yeah, the Clinton administration. That's pretty prestigious.

I'm not sure I'd include that stint on my resume.

 
At 8/17/2011 11:42 PM, Blogger Ron H. said...

"For the last time: The old way of measuring inflation overstated inflation, and had to be updated. It has been updated,and it still overstates inflation by about one percent a year."

OK, I'll buy that, I don't remember any particularly worrisome inflation in the '70s. I have no idea why Volker stood on the brakes with both feet until mortgage rates topped 18%. I thought getting 12% pay raises was due to merit.

Hahahahaha

 
At 8/18/2011 12:03 AM, Blogger Ron H. said...

"Your inflation rate is low, unless you buy a lot of aircraft, semiconductors, industrial machinery, organic chemicals, metallurgical grade coal, oilseeds and food oils, sulfur and non-metallic minerals, fertilizers and pesticides, unmanufactured steelmaking materials, etc."

While you are correct that those items don't accurately represent the CPI, I think that is exactly the point morganovich was making. The fact that the prices of those items are higher means that the inputs required to make them are higher, which means that goods consumed in the US must also be higher.

The fact that export volume as well as $ value has increased at the same time import prices have risen means the USD has taken a nosedive, which means pretty much everything we buy costs more. Many of these higher prices are easy to see.

Your personal experience notwithstanding, most people are spending more for many things.

A look at the increased money supply in recent times should tell you that you should expect massive inflation in the near future, unless you believe The Beard can suck it all back out with a snap of his fingers, as he claims.

 
At 8/18/2011 9:53 AM, Blogger morganovich said...

bunny-

if you are arguing that boskin was a political hack, then i agree with you.

he started with his conclusion, then invented a bunch of subjective adjustments to justify lowering CPI to keep social security costs down.

i notice you are totally silent on my challenge to find even one piece of objective argument in the boskin report.

it's all subjective quality assumptions.

his work makes climate science look objective.

 
At 8/18/2011 12:40 PM, Blogger VangelV said...

there are lots of austrian and chicago school economists all over.

that's certainly what they taught at brown.

my thesis adviser was a policy advisory to Reagan.

i think you guys are assuming your conclusion and inventing data to fit it.

look around wall st. you're not going to find GM economists.


As I wrote, the establishment prefers Keynesians and Chicago School economists so it is not surprising that they dominate positions that are advocacy platforms for statism and corporatism. But if you want to be able to understand and predict the real world you really need to get an education at a school that is mainly teaching the Austrian economic ideas. GM is better than most on that front and would be in the top ten in the world. Chicago and the Ivy League schools do not make the grade and are only good if economic understanding is not all that important because the job is one of advocacy or creating narratives.

 

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