'There has been a recent big push by the government to focus attention on the PCE index and it is my belief that the government will shift from using the CPI as a core measure of inflation to the PCE index. While the CPI model somewhat measures inflation, albeit substitutions, geometric weighting, and hedonics, the PCE doesn't measure inflation by any means. The reason I believe the PCE will eventually take the place of CPI is that it reports even a lower number and now the government is heavily marketing it. Don't be surprised if we see the subtle switch after it is been heavily marketed, discussed, and the talking heads convinced that it is a more "accurate" measure of inflation. Remember interest rates, TIPS, and Social Security payments are all set to the CPI inflation rate, which is rising and that hurts the government, which is already in significant debt. If they could replace that with the PCE, a significantly lower number, then it could ease the burden on government debt.' This is from an emailed to me Silexx Market Preview - sorry I cannot provide a link to it. But a member here, Prohobo, writes it (I believe). http://www.politicalforum.com/members/prohobo.html
Even before I read this, I am convinced that the government will use whatever statistics it has to use to make inflation seem low so it can continue to 'print' more and more money AND to keep interest rates artificially low. But this article/newsletter makes sense to me (as these articles almost always do). So will the CPI be replaced by the PCE?
They(US govt and the FED) will do WHATEVER it takes to make it appear as though prices are not going up but are stable. Oil is a good example because everyday average americans can see how this affects them daily at the gas pump. What they do is try and convince the uninformed public the reason oil goes up is because speculation, energy policy, not allowing oil to be drilled off shore, etc...while all those play a part I believe one of the largest contributors is not only us meddling in the mid east but the devaluing of the currency it is priced in. It has very little to do with demand. Also...you have to take into account COLA in regards to welfare, SS, etc....they use these numbers as an excuse NOT to give COLA increases. This saves them some money but makes it tougher on those same people who are promised help or who have paid in all their lives. It really doesn't matter what rigged formula and calculation they use....as prices continue to rise people are going to notice even though right now the corporate owned media is doing a good job of dividing the country into left vs right such as the shooting death of that kid. That is all that is being talked about. What a joke. I can't believe americans are actually following that little soap opera like it really matters or means something. Just look at all the threads being created on this board and follow the people who are liberals and then the conservatives and notice which side they take. Getting back to the way inflation is calculated....the rest of the world is not going to continue to put up with this nonsense with the dollar holding reserve status. We are not going to be able to function as a service based economy with our major export being inflation.
Our major export is intellectual property. That is the problem though. I suppose. Common laborers can't make money from intellectual property.
a gallon of gasoline can still be purchases for a pre-1963 silver dime......this is proof that there is no shortage of oil....its only going up for the same reason as corn, copper, wheat, cocoa, cotton, rice and a host of other commodities are rising! Bernacke and his monetization!
You are correct.... We need to get back to production. That is what made us the most dominant economic force the world has ever known. Another problem is the governments involvement in education and this notion that EVERY student must go to college. I know it isn't politically correct to say but I could care less. We need more worker bees. We have to reduce government regulations and taxes. We have to make it affordable again for corporations and other companies to produce in the US. We can't all be lawyers, doctors, government workers, etc.... We have to produce. We have to have a strong dollar so investment can stem from savings and not borrowing and creation of new dollars.
Deindustrialisation is a natural evolution in a developed mature economy. Your argument is therefore inconsistent with what we expect to happen Now it is true that we should expect vibrant production in areas where a dynamic comparative advantage is achieved. Trade analysis informs us that is achieved through innovation. Your anti-education comments therefore make no sense, particularly as the US already has problems with low wage abundance (reflecting a long tail of low skilled labour). To promote innovation and production, more education is key!
most production has shifted to china and now all of the sudden china is an economic powerhouse.....that is no coincidence!
China has a comparative advantage in producing certain manufacturing product. That's a positive thing as the US should be driven by manufacturing innovative 'new product'
yes....low savings rate, high government spending, too many entitlements, too large a military budget......the reasons are endless!
japan has a huge savings rate...sure it bought the japanese government a little more time as it was able to borrow from its own people but soon they too will have to borrow abroad and at much higher interest rates I am sure!
Japan isn't particularly relevant to the point. The US trade imbalance reflects its savings rate, nothing more (and further huffing and puffing typically will become just mercantilist grunt). Can we refer also to high savings rates creating an imbalance? Certainly
Sure, we can talk about US savings rates, it starts with a very huge - sign. You have to have money to save any.
