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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: TimbaBear who wrote (56462)	3/22/2006 9:54:55 AM
From: GST	Read Replies (1) \| Respond to of 110194

<IMO people are brainwashed to believe inflation is a measures of prices rather than a measure of money.> This alone is enough for me to pretty much ignore what Mish has to say about inflation and deflation.

To: TimbaBear who wrote (56462)	3/22/2006 11:00:17 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

If a new car is a new car then buy a Hundai for $11,000 and your cost just went way down. All the rest is Fluff? OK for the sake of argument I agree you are 100% correct. So Buy a Hundai or a Toyota, pay less and your price dropped. The very first sentence out of your mouth in response! Clueless! And I called you on it in a later post. Timba I suggest you look up the meaning of the word if. What does that sentence start with? I believe it starts with IF. I did not say a new car was a new car. I believe you implied such. IF (cleverly notice this sentence starts with the word IF) a new car is a new car then the rest of my sentence makes perfect sense. I attempted to explain that a new car was NOT a new car. You were the one that compared a 30 year old car to one of today and not me. You keep trying to hide it. Here it is, once again and not out of context either. Once again let me quote you exactly: "If one bought the cheapest new Ford offered by a dealer today and bought the cheapest new Ford offered by a dealer 30 years ago and if we assume the same level of bargaining skills, what one would be getting is comparable enough to measure the change in the price of a new Ford. No hedonics, no nonsense. Keep the value of the Dollar constant and see what the comparison is." It is absurd to say the cheapest cars of 30 years ago are "comparable" to cars of 30 years ago. The cars are not comparable at all. If you think cars of 1945 are better than cars of today, then I suggest you buy one and drive it. You do not seem to understand the word IF and you do not seem to understand the word COMPARABLE either. As for OK wise guy, why does the price of chicken compare favorably? Aren’t there medical improvements that make the survivor rates higher today than yesteryear? How about hormones that make them plumper? Genetics that make them produce bigger and better eggs? As for the survival rate of chickens... The consumer buying chickens is not concerned with the survival rate of chickens on the farm (except as it effects the price of them in the store). As for plumper, that is probably affected in the weight. I compared a 3 pound chicken to a 3 lb chicken. Now if you want to argue there is less bones on a chicken today and quantify that then yes, to that extent chickens should be hedonically adjusted. If copper is more pure today than 30 years ago, then to the extent that matters, copper probably should be hedonically adjusted as well. But those are very small things and I bet the government does already overstate such improvements which is one of the reasons I have stated repeatedly that the official CPI is low. Not only does the government measure quality they also have a reason to overstate such advances because it affects SS payments and COLA's etc. To the extent that you are willing to suggest that chickens are "better" today than 30 years ago, well I am willing to accommodate you by allowing prices of chickens to rise by that amount and say there was no inflation in chicken prices. Clearly that is the proper way to do it. If there is indeed 20% more chicken meat by weight compared to bones (if that is what you mean by plump), then by all means I agree with you: it only makes sense to account for that when comparing chicken prices today vs. 30 years ago. I was willing to dismiss such improvements as irrelevant but if you insist they are there, then I will glady accommodate you, as I should. Assume the extreme, a truely boneless chicken (as opposed to a de-boned chicken). Would you not be willing to pay more per pound for such a thing, or would you want to compare that to chickens of 30 years ago too? Are you or are you not willing to pay more for more meat on your chickens and turkeys, or is such quality irrelevant to you? The bottom line is simple. You want to dismiss fatter chickens, anti-lock brakes, seat belts, air bags, improved gas mileage, air conditioning, CD players, electronic ignition, fold down seats, better windows, etc etc etc. To dismiss those things as if they do matter is silly. Given that the measurement of those quality improvements is subjective and given that the government has a clear reason to bias that subjectivity up, then we have a CPI that is understated by that amount of bias. That goes for cars, houses, and chickens as well. Mish

To: TimbaBear who wrote (56462)	3/22/2006 11:09:49 AM
From: John Vosilla	Read Replies (3) \| Respond to of 110194

"Fancy that, brainwashed to believe inflation is a measure of prices! How could I possibly come to that conclusion when gasoline goes from $1.00 to $2.50 in 4 years? Medical costs climb well into the double digits every year and the insurance premiums reflect it. Housing goes through the roof. Services of all types that can’t be outsourced to India climb to recover their higher costs. Brainwashed by reality!" Would you agree pass through of rising RE and energy prices are main drivers of the cost push side of inflation? Just added fuel to the fire of demand pull due to increasing government debts and monetary aggregates? The major difference from the 70's is manipulation of the CPI pushed a disproportionate share of the inflation in this early part of the cycle into asset prices whereas last time it seemed to be more across the board. Rent's home prices, energy prices, incomes and basic necessities all moved up in lock step with interest rates. This time will look different but probably the end result when you look back at the end of this cycle will be the same. The biggest problem is home prices in many places have already factored in the inflation of the next decade in already<g>

To: TimbaBear who wrote (56462)	3/22/2006 11:49:34 AM
From: Chaka	Read Replies (2) \| Respond to of 110194

Timba,Mish, I have been following this debate and both sides have some valid points. I think the problem of comparing a car from 1930s to a car now is that they are two different animals. If you define a car as just a 4-wheeled means of transportation, then you cannot compare a ford then with a ford now - you have to compare the cheapest car in 1930 with the cheapest equivalent-functionality car that can be built today (I assume that this would definitely be result in price deflation, though nobody would buy such a car, given the safety hazards). I think that hedonics has some value though it is highly prone to being abused...