August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

[MarkL]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

EJ is obviously really bothering the deflationistas, with first post folk tearing into his analysis with either trollish posts or with biased presentations. At least this one tried to use actual statistics, but failed.
Funny how all the rest of the facts and charts that EJ noted were ignored too, and the poster concentrated on the Target visit.

Bart: Jeesh, talk about an unwarranted attack!? In case you were unclear on this, pretty much everybody in a forum has an opinion and thus it's all a "biased presentation." Duh! And the "trollish posts" comment was unwarranted. You started the flame war here...

Rob: Welcome to the forum. I appreciate a dissenting opinion and apologize for those who throw out "trollish" comments that don't contribute to the discussion.

[ASH]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

Anyone care to engage?

Hi rdrees. In the context of EJ's body of work prior to this post, I would interpret what EJ wrote anecdotally about his local Target as a demonstration of an effect that he was expecting to see, rather than "proof" of something. See my response to talaicito in this thread:

I can see your point about a limited number of data points not proving his case. If you prefer, perhaps you should interpret EJ's citation of the last few CPI readings as a prediction that the trend won't reverse, rather than a critical piece of evidence; there is an awful lot more behind his analysis than those recent CPI data points.

In my view, some of the observations in this essay are not meant to stand on their own merit. They are weak arguments when viewed in isolation. Readers who have followed EJ's analysis for a long period of time, and who have read the "meatier" arguments in other threads, aren't bothered by this. I think readers who haven't read the earlier work are apt to feel that EJ is drawing too elaborate a conclusion from scant evidence. iTulip recently announced an editorial policy change in which they will not attempt to recap their core arguments in every post, and I believe your objections, and those of talaicito, are the inevitable result. iTulip is no longer repeating their best arguments in every post, but rather pointing out how data fits their thesis as it comes in.

That said, I agree with bart that at a turning point in inflation trends, it is better to track the monthly change in the index rather than the year-on-year change. The plots of various inflation measures which I have seen recently show something that looks like a "zig-zag". I agree that a few data points don't prove anything, but I think you should realize that EJ isn't attempting to "prove" anything with those data points -- he's just pointing out what he thinks he recognizes as an early marker in a process that he predicted.

[rdrees]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

I did concede that the oil bubble was a factor in these figures. And you're right year on year numbers of this magnitude are unlikely to persist.

But why might the PPI not stay consistently down year on year (or at least flat) if/when oil prices stabilize? The data certainly appears to support that. As "EJ" pointed out, the energy price bias of the PPI flows throughout the economy, so the PPI is not so much biased by energy relative to other price metrics as it is affected by energy prices, just as pretty much everything else is.

From what I've understood in reading up on this site's "Ka-Poom" theory, the idea is not that Poom results from a spike in oil prices because oil demand is exceeding oil supply (though that could certainly add to it, presumably, and I think what is called "Peak Cheap Oil" here). Rather, Poom is posited as a distinct phenomenon arising from the Fed essentially overprinting money and devaluing the dollar. We're just not seeing that at this point.

So yes, we may certainly see energy-related inflation. But ask whether these PPI numbers suggest that the Fed is anywhere near devaluing the dollar to any significant extent. If they were, not only should this acceleration in the rate of decline in the PPI slow at some point over 8 months--especially since oil is not flat but has been rising since the beginning of the year--but you should see at least some rise in the PPI month to month, too. But as bart's figures showed, they actually fell in the most recent month. A summer month at that--one that is typically associated with higher demand, which should lead to higher prices.

So to answer your last question, it would seem to me that the PPI still shows a deflation bias that is overstated by, but not entirely caused by, the oil bubble.

[rdrees]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

I appreciate the engaged response, Ash.

My understanding of the iTulip thesis, the "Ka-Poom" theory is based on wandering around and reading past posts. And the one that sticks out to me is the 2006 post entitled, "No deflation, just disinflation" or something to that effect. It would seem to me that the PPI numbers I posted would tend to refute that, as they sure seem to reflect deflation to me.

Now I know there's a definitional subtlety that has been interlaid over that post suggesting that what "EJ" means by deflation is not some small amounts of deflation here and there, but actually a deflationary spiral. But it's hard not to look at 8 straight months of accelerating and large declines in the PPI as stronger evidence even of a deflationary spiral than some small deflation here and there.

And sorry to have seized so much on the Target anecdote, but it does seem to be demonstrative of a larger issue about a near-term inflation call. Why would retailers be raising their prices any time soon when both demand is down and supply costs are down? Any retailer worth his salt would undercut the person who raised prices and could do so without hurting their bottom line given sharply reduced input costs. That would seem to hold true for at least some time to come given how much cheaper they can make things now than just one year ago.

I'm not sure I see as much value in monthly trends over a small time period as it's very easy to get lost in noise that way. But even still, doesn't it seem significant that both PPI and CPI have taken a turn downwards from June to July? And this after nearly $300 billion in quantitative easing and months and months of 0% Fed funds rate. Maybe the Fed is not as powerful as Ka-Poom posited, or at least not in the face of as severe a recession as we've got.

[jk]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

recent bloomberg article on the empire manufacturing index showed prices paid up a lot, prices received up a little, thus margins squeezed.

rdrees, as ash said, each post these days sits atop a rather large, multi-year stack of previous analyses, and we've been around the inflation-deflation block a gazillion times. it was hot and heavy at least back as far as whenever it was i came to the site [i forget when, but it's in the upper right]. i think that's part of why you meet with impatience.

i think it would be useful for itulip to post a faq's, including e.g. "inflation-deflation debate", with links to the relevant articles. then a new member could be directed there, and expected to have read the key earlier pieces before weighing in with something new, if there's ever something new.

fwiw, i will forward a copy of this post to fred.

[MarkL]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

And the one that sticks out to me is the 2006 post entitled, "No deflation, just disinflation"

I originally interpreted "Disinflation" as the slowing of inflation, and that the inflation rate wouldn't go below 0. However it does seem we have gone below zero.

And sorry to have seized so much on the Target anecdote

The Target anecdotal evidence is just weak. Weak to start and weak to reference.

Have "input costs" reduced? The "root" input costs of commodities and energy seem to have gone up... unless you're only tracking against the 2008 summer energy bubble.

[bart]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

Bart: Jeesh, talk about an unwarranted attack!? In case you were unclear on this, pretty much everybody in a forum has an opinion and thus it's all a "biased presentation." Duh! And the "trollish posts" comment was unwarranted. You started the flame war here...

I call them as I see them, and don't tolerate people well who have few to no manners and attack EJ and the article in their very first post. Perhaps you don't see comments in his very first post like "flies in the face of actual statistics" or "overwhelming empiric evidence of deflation, not inflation." or " "EJ" seems to assume that lower purchasing power equals inflation, but that's not right. " as accusatory or quite excessive, but I do - especially when the poster apparently doesn't have *any* background to speak of in KaPoom or the general iTulip story.

It's well beyond tacky (at best) in my opinion to post like he did.



Also if you don't see the difference between the annual change rate and the data I posted about the last 5 months, and how using an annual change rate masks and biases a conclusion near turning points, then that's your opinion and option... but if you're going to try and attack me with an "unwarranted attack" accusation, then do it with actual facts and look at what I actually wrote and what he actually posted - especially in the first post.

And I also recommend that more folk read and understand things like the 25 rules of disinformation or the area of cognitive biases. They do exist, as do trolls etc. and the use of them are not getting less.

[jk]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

Why would retailers be raising their prices any time soon when both demand is down and supply costs are down?

1. see note re empire manufacturing index 2 posts up. if "supply costs are down" why is the prices paid index up sharply?
2. posted elsewhere [can't give you a link, ask metalman] - you want something from inventory, it's cheap to get cashflow. you want something that has to be ordered, it's expensive, not cheap.

[MarkL]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

recent bloomberg article on the empire manufacturing index showed prices paid up a lot, prices received up a little, thus margins squeezed.

rdrees, as ash said, each post these days sits atop a rather large, multi-year stack of previous analyses, and we've been around the inflation-deflation block a gazillion times. it was hot and heavy at least back as far as whenever it was i came to the site [i forget when, but it's in the upper right]. i think that's part of why you meet with impatience.

i think it would be useful for itulip to post a faq's, including e.g. "inflation-deflation debate", with links to the relevant articles. then a new member could be directed there, and expected to have read the key earlier pieces before weighing in with something new, if there's ever something new.

fwiw, i will forward a copy of this post to fred.

The rdrees/bart/Ash discussion is based on the latest PPI and CPI numbers. And I haven't seen the PPI numbers presented as a strong argument for deflation like this on here before. Whether this latest evidence indicates inflation or deflation is of perpetual interest to me.

[jk]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

Whether this latest evidence indicates inflation or deflation is of perpetual interest to me.

it's like trying to discern the trend in a market. what's the signal? what's the noise? yes, we want all the evidence, up to the minute, but it's only by stepping back and seeing that evidence within a larger context that we can come to reasoned judgments. and still be wrong.

[MarkL]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

I call them as I see them, and don't tolerate people well who have few to no manners and attack EJ and the article in their very first post.

If you don't see the difference between the annual change rate and the data I posted about the last 5 months, and how using an annual change rate masks and biases a conclusion near turning points, then that's your opinion and option... but if you're going to try and attack me with an "unwarranted attack" accusation, then do it with actual facts and look at what I actually wrote - especially in the first post.

And I also recommend that more folk read and understand things like the 25 rules of disinformation or the area of cognitive biases. They do exist, as do trolls etc.

"Attack EJ"... is that what we call a dissenting opinion nowadays?

I do comprehend your claim that an annual change rate may mask a turning point. I also see rdrees's point that the short term (month to month) also indicates deflation. Maybe we're not in a turning point... and your assumption is incorrect. Both the one year and the month-month are interesting arguments.

I've never visited your website before just now... and I find it fascinating that you used the CPI to defend your position, but your second article on your website is "The Consumer Price Index Is a Lie." Hypocrisy? Using stats when they are convenient?

I'm actually a devout inflationista like most of us here on iTulip. But I like a good dissenting opinion as it tunes my thinking and I think that we should encourage dissenters to visit and challenge us here. Not call them names and then walk away with our tail between our legs.

[MarkL]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

it's like trying to discern the trend in a market. what's the signal? what's the noise? yes, we want all the evidence, up to the minute, but it's only by stepping back and seeing that evidence within a larger context that we can come to reasoned judgments. and still be wrong.

ROFLMAO. Tips hat to JK.

[MarkL]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

1. see note re empire manufacturing index 2 posts up. if "supply costs are down" why is the prices paid index up sharply?
2. posted elsewhere [can't give you a link, ask metalman] - you want something from inventory, it's cheap to get cashflow. you want something that has to be ordered, it's expensive, not cheap.

I remember an article about DOW chemical's prices jumping for a second time too this year. Their price increases will probably cause prices (ultimately after inventory burns off) to go up in a variety of end-products.

[jk]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

i think the issue is in the socialization of new members to the community's shared history of extensive discussion and debate. a newcomer arrives all charged up, ready to debate vigorously something that's been beaten to death in literally dozens of threads and hundreds or even thousands of posts over a period of years. so the newcomer's energetic exposition of another p.o.v. is greeted with irritability and labeled as trollish behavior.

i just realized i put the issue in my own frame as a [relative] old-timer around here. alternately, i might have said the issue is the openness of long-time community members to the eagerness for debate among newcomers.

[bart]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

"Attack EJ"... is that what we call a dissenting opinion nowadays?

I do comprehend your claim that an annual change rate may mask a turning point. I also see that the short term (month to month) also indicates deflation. So maybe we're not in a turning point... and the facts indicate disinflation.

I've never visited your website before just now... and I find it fascinating that you used the CPI to defend your position, but your second article on your website is "The Consumer Price Index Is a Lie." Hypocrisy? Using stats when they are convenient?

I'm actually a devout inflationista like most of us here on iTulip. But I like a good dissenting opinion as it tunes my thinking and I think that we should encourage dissenters to visit and challenge us here. Not call them names and then walk away with our tail between our legs.

I see you didn't comment about manners or how tacky it is to post a first post like that, and without even having studied KaPoom, etc. but rather chose to focus on dissent, which is not and never has been the issue - but is a red herring. And I note that you eliminated some of my key points and facts from my post when quoting it.

Call it however you like, the PPI and CPI being up in the last 5 months since the stock bottom in March are the actual facts.

If you also choose to get into straw man type "arguments" about how I used the CPI, then how about commenting on the huge amount of coverage of John Williams and shadowstats.com CPI corrections on my site, and perhaps post one of my charts that shows the "real" inflation - which is over 6% higher than current CPI, and shows yet more facts and data about what is really going on with real inflation (or disinflation if you prefer)? Did you even read my "The Consumer Price Index Is a Lie."?

Did you get the point about who is the one truly being disingenuous and hypocritical and practicing logical fallacies like straw man attacks, etc. yet?


Feel free to ignore all my specific points in prior posts about disinformation, initial critical posts, etc. too. Feel free to attack me again about having strong opinions in the area too.


I see he at least is doing his research now and seeing a fuller picture, so he's probably not a troll... but as I said, that kind of initial post combined with unfamiliarity with KaPoom, etc. is well beyond tacky in my book - and I'll always call someone on it.