Debt Ceiling To Be GOP "Leverage Moment"

[Hydesland]

We do have a problem with inflation. Food, energy are up significantly.

Fiscal stimulus shouldn't be especially inflationary regardless, the economy is obviously way below capacity.

And don't tell me that food and energy are excluded for a reason from the CPI. Food and energy are 2 of the most basic needs.

Food & energy are not excluded from CPI, only core CPI.

[Trotskylvania]

we don't have a problem with crowding out currently. and right now the only problem we have with inflation is that it is too low. what we have is a massive problem of idleness - in terms of unemployment, underemployment, empty storefronts, you name it. my way solves the current problem without causing any significant changes to the medium and long-term future-problems.

after all, it isn't borrowing during a downturn that is the future-problem here. its the all-consuming behemoth of our broken medical system and the republican party's dysfunctional and unserious politics.

We do have a problem with inflation. Food, energy are up significantly.

And don't tell me that food and energy are excluded for a reason from the CPI. Food and energy are 2 of the most basic needs.

That inflation isn't being caused by a devaluation of the dollar. Food and energy prices are inflating because demand is rising faster than supply.

[Alien Space Bats]

frugality WILL wreck our economy.

the only way through this is to stimulate the economy so that people get back to work. the quicker the better. THEN we can stop the wars (please god that it is already in the works), get rid of the bush tax cuts and see where we need to cut to get to a balanced budget.

you cant fix it by artifically lowering spending. where will people get the money to buy stuff and get the economy going?

Actually, we're probably past the point in the business cycle where any further stimulus will help. That said, cutbacks can hurt - at least until the economy has found its legs. A year or two would make a huge difference on this score.

Which is why the GOP wants to make them. They hope to tank the economy, and then win for a generation by saying "Democrats destroy wealth, Republicans create it."

It's putting party goals ahead of national needs - but then, ideologues are incapable to seeing the difference between the former and the latter.

[Sibirsky]

We do have a problem with inflation. Food, energy are up significantly.

And don't tell me that food and energy are excluded for a reason from the CPI. Food and energy are 2 of the most basic needs.

That inflation isn't being caused by a devaluation of the dollar. Food and energy prices are inflating because demand is rising faster than supply.

Yes. Quite suddenly, In the last 6 months. Before that, who needed food?

Not only is food inflation caused by a devaluation of the dollar, it's causing governments to topple. And the closest thing we have to commodity currencies are setting all time highs against the dollar.

[Wamitoria]

Which is why the GOP wants to make them. They hope to tank the economy, and then win for a generation by saying "Democrats destroy wealth, Republicans create it."

The fact that they believe that's what will happen just testifies to their disconnect from reality.

[Tahar Joblis]

That inflation isn't being caused by a devaluation of the dollar. Food and energy prices are inflating because demand is rising faster than supply.

Yes. Quite suddenly, In the last 6 months. Before that, who needed food?

Not only is food inflation caused by a devaluation of the dollar, it's causing governments to topple. And the closest thing we have to commodity currencies are setting all time highs against the dollar.

Sibirsky, I don't know if you're aware of this, but major climate events have a significant impact on food prices. So does commodity speculation. Food prices still experience short-term variation, especially on the seasonal scale. Major droughts or flooding can significantly alter output, and shifts in the price of oil - which is pretty volatile politically and speculatively - have a significant effect on them as well.

Russia had a new record-setting drought last summer. The US experienced some sharp cold snaps quite recently. There have been lots of droughts and flooding, extreme [and altered] weather patterns (fueled in part by the extra energy poured into the system by global warming, we might hazard to guess.)

Food prices have always been sensitive to poor seasons, and the last year has seen rough seasons in many countries. Does inflation play a role? Yes, but that's hardly the whole story, and blaming devaluation of the dollar for the collapse of Egypt's government seems a little facetious.

Which is why the GOP wants to make them. They hope to tank the economy, and then win for a generation by saying "Democrats destroy wealth, Republicans create it."

It's putting party goals ahead of national needs - but then, ideologues are incapable to seeing the difference between the former and the latter.

Depressing.

[Ashmoria]

frugality WILL wreck our economy.

the only way through this is to stimulate the economy so that people get back to work. the quicker the better. THEN we can stop the wars (please god that it is already in the works), get rid of the bush tax cuts and see where we need to cut to get to a balanced budget.

you cant fix it by artifically lowering spending. where will people get the money to buy stuff and get the economy going?

The wars never ends doing the last 60 years almost every prsident has been to war eventhough the latest is probbably the most ekspensive since the vietnam and korean war. I find it quit shooking that the amarican goverment have now runed for almost six month without an official budget. It indicates the debt of the amarican crisis. The fact is tha the kenyian policy this were started by Bush and now is continued by Obama is flawed. Doing the last 10 years the amarican goverment has tried to make growth through increased spendins and tax cuts and all it has achived is inflation, an astronomical debt of historical proportion and the submarked crises. Amarica needs to reduce cost and prehaps increasse taxs in order to balance the ecconomy and they need to do it soon every day the debt growths paying it bak becomes more dificult. The truth is you cant spend yur way to an increased growed in the long run. All kenyian policy aims to do is to smooth the economical instabilities. You cant create money just by spending them if that were the case we wouldn´t haveeconomical crises. The population of the U.S.A needs to realish that they have been on an unhealthy spending spree for the last 10 yearsand that this need to end. So if the repblicans have finaly realised the economical problems they for a large part caused them self nd are willing to finnaly make a realistic effort at reducing the budget deficit. I dont think it´s cracy but ofcausse they will need to take new loans atleast to buffer the budget to the end of this year or the gowerment would have to declear itself bankrupt or make a cut in ekspenses that were to drastical. And remember the rest of the world will suffer greatly is the ammarican economy colapses but the world ecconomy will surweiv.

there is quite a difference between a little carribean adventurism and spending 10 years trying to pacify an unpacifiable country, tossing in billions of unaccounted for dollars that only serve to enrich our puppets. and 8 years destroying and rebuilding a country that never did anything to us.

that is money we havent started to pay out yet.

we need to get the economy going well enough that everyone has a job. then we can get rid of the bush tax cuts and see where we are economically. then we can cut spending and raise taxes as necessary to reach a balanced budget

but we cant do that if we have massive unemployment or if we keep fighting endless useless wars that are kept off the books.

[Ashmoria]

frugality WILL wreck our economy.

the only way through this is to stimulate the economy so that people get back to work. the quicker the better. THEN we can stop the wars (please god that it is already in the works), get rid of the bush tax cuts and see where we need to cut to get to a balanced budget.

you cant fix it by artifically lowering spending. where will people get the money to buy stuff and get the economy going?

Actually, we're probably past the point in the business cycle where any further stimulus will help. That said, cutbacks can hurt - at least until the economy has found its legs. A year or two would make a huge difference on this score.

Which is why the GOP wants to make them. They hope to tank the economy, and then win for a generation by saying "Democrats destroy wealth, Republicans create it."

It's putting party goals ahead of national needs - but then, ideologues are incapable to seeing the difference between the former and the latter.

aye

they want to have dragged us through 4 years of pain so that they can get the whitehouse back and they can screw us some more.

[Sibirsky]

Yes. Quite suddenly, In the last 6 months. Before that, who needed food?

Not only is food inflation caused by a devaluation of the dollar, it's causing governments to topple. And the closest thing we have to commodity currencies are setting all time highs against the dollar.

Sibirsky, I don't know if you're aware of this, but major climate events have a significant impact on food prices. So does commodity speculation. Food prices still experience short-term variation, especially on the seasonal scale. Major droughts or flooding can significantly alter output, and shifts in the price of oil - which is pretty volatile politically and speculatively - have a significant effect on them as well.

Russia had a new record-setting drought last summer. The US experienced some sharp cold snaps quite recently. There have been lots of droughts and flooding, extreme [and altered] weather patterns (fueled in part by the extra energy poured into the system by global warming, we might hazard to guess.)

Food prices have always been sensitive to poor seasons, and the last year has seen rough seasons in many countries. Does inflation play a role? Yes, but that's hardly the whole story, and blaming devaluation of the dollar for the collapse of Egypt's government seems a little facetious.

I should clarify. Those factors indeed caused price rises. However, to deny that there is any inflation, or that it is partially caused by currency devaluation is to deny reality.

Bernanke prints. Investors sell bonds, buy commodities. Prices go up.

Bill Gross is now short treasuries. When was the last time that happened?

Moving on to Egypt. Now that we have established that food inflation is partially caused by the Fed, we need to factor in that 40% of Egyptians live on $1 per day or less. They, on average spend 40% of their income on food. When that food goes up by 30% in price, it's extremely painful to those people. They riot.

Another factor is an extremely high unemployment rate amongst young adults. But Bernanke is not at fault there.

So, three decades of oppression is the fuel, while a 30% increase in food prices is the spark for the revolution.

Why now? Tunisia was first, so why now? Why not last year? Why not 3 years ago? Where they not as oppressed then? Of course they were. But buying food was much easier.

[Alien Space Bats]

What's not clear, just now, is whether the increase in food and energy prices is due to inflation or due to other factors. I would tend to discount the idea that we're seeing an inflationary trend, or at least one that is attributable to monetary factors. That said, we could see cost-push inflation from those factors that are drive food and energy price increases; but then I would be wary about drawing inferences about monetary policy from such cost-push inflation, and certain reluctant to see the Fed (or anybody else) act on them.

We currently have 7 million fewer persons employed in this country than we did in 1999; I'm deeply reluctant to say that some underlying structural change in the economy means that this state of affairs is now "the new normal" - IOW, that we don't have significant under-utilization of both labor and capital here in America.

[Sibirsky]

Inflation Actually Near 10% Using Older Measure
After former Federal Reserve Chairman Paul Volcker was appointed in 1979, the consumer price index surged into the double digits, causing the now revered Fed Chief to double the benchmark interest rate in order to break the back of inflation. Using the methodology in place at that time puts the CPI back near those levels.

Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.

Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site, Shadowstats.com.

“Near-term circumstances generally have continued to deteriorate,” said John Williams, creator of the site, in a new note out Tuesday. “Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem. Until such time as financial-market expectations catch up with underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the month and months ahead.”

The pay-site and newsletter by Williams, an economic consultant for the last 30 years to companies, has gained a cult following among bloggers hungry to criticize Bernanke these days. The mission statement of the newsletter, according to the site, is to expose and analyze “flaws in current U.S. government economic data and reporting…net of financial-market and political hype.”

Investors are anxiously awaiting the release of March’s CPI reading on Friday. The consensus estimate from economists is for an annual inflation rate of 2.6 percent.

“Given ongoing inflation problems with food and the spreading impact of higher oil-related costs in the broad economy, reporting risk is to the upside of consensus expectation,” said Williams, citing a 10 percent jump in gasoline prices in March, in the note.

“While the federal government would have us believe the numbers are rather tame, our own personal gauge leads us to believe inflation is running between 5 percent to 6 percent annually,” wrote Alan Newman in his latest Crosscurrents newsletter that refers to Williams’ statistics.

Newman uses recent comments from Walmart CEO Bill Simon that inflation is going to be “serious” to back up the much higher CPI figures from him and Williams.

“Given Walmart’s [WMT 53.52 0.70 (+1.33%) ] sales of $422 billion, we think Mr. Simon has a good idea of what’s in the pipeline,” said Newman.

To be sure, the BLS argues that the changes it has made over the last three decades more accurately reflect a true change in the cost of living. For example, in response to its hedonic adjustments, the BLS web site states, “to measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change.

Still, going by recent strong comments from Federal Reserve officials, even members of the central bank must believe inflation is being underreported. Dallas Federal Reserve President Richard Fisher said in a speech last week that the central bank was reaching a “tipping point” as far as changing its policy so it can react to inflation. Maybe Fisher stumbled across Shadowstats.com. The voting member did, after all, mention Volcker in the same speech.

“The need to break the back of that (budgetary debt) spiral is as dire now as was the need for Paul Volcker to break the back of inflation in the 1980s,” said Fisher on April 8th. “As a result of his steadfast determination to press on with exorcising inflation, Mr. Volcker is today among the most respected living Americans and widely considered an exemplar for public servants worldwide.”

[Greed and Death]

Inflation Actually Near 10% Using Older Measure
After former Federal Reserve Chairman Paul Volcker was appointed in 1979, the consumer price index surged into the double digits, causing the now revered Fed Chief to double the benchmark interest rate in order to break the back of inflation. Using the methodology in place at that time puts the CPI back near those levels.

Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.

Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site, Shadowstats.com.

“Near-term circumstances generally have continued to deteriorate,” said John Williams, creator of the site, in a new note out Tuesday. “Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem. Until such time as financial-market expectations catch up with underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the month and months ahead.”

The pay-site and newsletter by Williams, an economic consultant for the last 30 years to companies, has gained a cult following among bloggers hungry to criticize Bernanke these days. The mission statement of the newsletter, according to the site, is to expose and analyze “flaws in current U.S. government economic data and reporting…net of financial-market and political hype.”

Investors are anxiously awaiting the release of March’s CPI reading on Friday. The consensus estimate from economists is for an annual inflation rate of 2.6 percent.

“Given ongoing inflation problems with food and the spreading impact of higher oil-related costs in the broad economy, reporting risk is to the upside of consensus expectation,” said Williams, citing a 10 percent jump in gasoline prices in March, in the note.

“While the federal government would have us believe the numbers are rather tame, our own personal gauge leads us to believe inflation is running between 5 percent to 6 percent annually,” wrote Alan Newman in his latest Crosscurrents newsletter that refers to Williams’ statistics.

Newman uses recent comments from Walmart CEO Bill Simon that inflation is going to be “serious” to back up the much higher CPI figures from him and Williams.

“Given Walmart’s [WMT 53.52 0.70 (+1.33%) ] sales of $422 billion, we think Mr. Simon has a good idea of what’s in the pipeline,” said Newman.

To be sure, the BLS argues that the changes it has made over the last three decades more accurately reflect a true change in the cost of living. For example, in response to its hedonic adjustments, the BLS web site states, “to measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change.

Still, going by recent strong comments from Federal Reserve officials, even members of the central bank must believe inflation is being underreported. Dallas Federal Reserve President Richard Fisher said in a speech last week that the central bank was reaching a “tipping point” as far as changing its policy so it can react to inflation. Maybe Fisher stumbled across Shadowstats.com. The voting member did, after all, mention Volcker in the same speech.

“The need to break the back of that (budgetary debt) spiral is as dire now as was the need for Paul Volcker to break the back of inflation in the 1980s,” said Fisher on April 8th. “As a result of his steadfast determination to press on with exorcising inflation, Mr. Volcker is today among the most respected living Americans and widely considered an exemplar for public servants worldwide.”

Inflation might get bad enough that using my student loans to buy gold will be a good investment.

[The Black Forrest]

Inflation might get bad enough that using my student loans to buy gold will be a good investment.

I don't know I am seeing more comments about the gold bubble......

[Mongolian Khanate]

Inflation might get bad enough that using my student loans to buy gold will be a good investment.

I don't know I am seeing more comments about the gold bubble......

There are other investments which are armored against inflation thought.

[Greed and Death]

Inflation might get bad enough that using my student loans to buy gold will be a good investment.

I don't know I am seeing more comments about the gold bubble......

OIL might be the better investment then.

[The Black Forrest]

I don't know I am seeing more comments about the gold bubble......

OIL might be the better investment then.

Indeed. With the industry being driven by the speculators. It's a pretty good deal......

[Sibirsky]

Inflation might get bad enough that using my student loans to buy gold will be a good investment.

I don't know I am seeing more comments about the gold bubble......

When you go to a sports bar and see CNBC with talking heads discussing how much gold went up that day is when you know you are in a bubble. Mania. Gold stocks soaring. Everyone talking about it. A parabolic move. We're no where near a bubble. Yet.

[Sibirsky]

I don't know I am seeing more comments about the gold bubble......

There are other investments which are armored against inflation thought.

Silver?

I had a nice little Canadian company that I have a hard on for. Then mother nature had to come and fuck with Japan and it fucked them up 27% in 2 days.

[Mongolian Khanate]

I don't know I am seeing more comments about the gold bubble......

When you go to a sports bar and see CNBC with talking heads discussing how much gold went up that day is when you know you are in a bubble. Mania. Gold stocks soaring. Everyone talking about it. A parabolic move. We're no where near a bubble. Yet.

I thought it was when Dollars4Gold keep pushing their horrible publicities throught every goddamn TV channel at any hour of the day

[The Black Forrest]

I don't know I am seeing more comments about the gold bubble......

When you go to a sports bar and see CNBC with talking heads discussing how much gold went up that day is when you know you are in a bubble. Mania. Gold stocks soaring. Everyone talking about it. A parabolic move. We're no where near a bubble. Yet.

Investing in gold are we?

[Sibirsky]

When you go to a sports bar and see CNBC with talking heads discussing how much gold went up that day is when you know you are in a bubble. Mania. Gold stocks soaring. Everyone talking about it. A parabolic move. We're no where near a bubble. Yet.

Investing in gold are we?

Me? No. You know what they say about gold? It takes the stairs up, but the elevator down.

[Mongolian Khanate]

Investing in gold are we?

Me? No. You know what they say about gold? It takes the stairs up, but the elevator down.

The spanish monarchy would certainly agree with you

[The Black Forrest]

Investing in gold are we?

Me? No. You know what they say about gold? It takes the stairs up, but the elevator down.

Indeed.

A couple of my "get rich quick" scheming relations got nailed by that process....

[The Black Forrest]

When you go to a sports bar and see CNBC with talking heads discussing how much gold went up that day is when you know you are in a bubble. Mania. Gold stocks soaring. Everyone talking about it. A parabolic move. We're no where near a bubble. Yet.

I thought it was when Dollars4Gold keep pushing their horrible publicities throught every goddamn TV channel at any hour of the day

Indeed. I have seen a couple of those groups with stands in local malls.....

[Hydesland]

What's not clear, just now, is whether the increase in food and energy prices is due to inflation or due to other factors. I would tend to discount the idea that we're seeing an inflationary trend, or at least one that is attributable to monetary factors. That said, we could see cost-push inflation from those factors that are drive food and energy price increases; but then I would be wary about drawing inferences about monetary policy from such cost-push inflation, and certain reluctant to see the Fed (or anybody else) act on them.

We currently have 7 million fewer persons employed in this country than we did in 1999; I'm deeply reluctant to say that some underlying structural change in the economy means that this state of affairs is now "the new normal" - IOW, that we don't have significant under-utilization of both labor and capital here in America.

The main way monetary stimulus would cause inflation is through creating excess demand, I can't think of how it could cause any major supply shock. And only maniacs right now think the US is suffering from excess demand, rather than a major shortfall of demand that needs to be returned to capacity.