Krugman Claims No Inflation

[lektrode]

Re: Krugman Claims No Inflation

Does Dr. Krugman celebrate Thanksgiving?

well.. the price of caviar prolly hasnt gone up _that_ much, right?
http://homecooking.about.com/od/seaf...fordcaviar.htm

[lektrode]

Re: Krugman Claims No Inflation

That's a purely political response. The public hears 'inflation' and they think 'cost of living'. And this linguistic trick is taken advantage of up and down the line by media talking heads and politicians.

well isnt _everything_ regarding 'inflation' or the 'cost of living' purely political?
esp the way they keep redefining/calculating it...

http://newsok.com/future-social-secu...rticle/3621220
Published: November 8, 2011


WASHINGTON — Just as 55 million Social Security recipients are about to get their first benefit increase in three years, Congress is looking at reducing future raises by adopting a new measure of inflation that also would increase taxes for most families — the biggest impact falling on those with low incomes.

If adopted across the government, the inflation measure would have widespread ramifications. Future increases in veterans' benefits and pensions for federal workers and military personnel would be smaller. And over time, fewer people would qualify for Medicaid, Head Start, food stamps, school lunch programs and home heating assistance than under the current measure.
Taxes would go up by $60 billion over the next decade because annual adjustments to the tax brackets would be smaller, resulting in more people jumping into higher tax brackets because their wages rose faster than the new inflation measure. Annual increases in the standard deduction and personal exemptions would become smaller.
Despite fierce opposition from seniors groups, the proposal is gaining momentum in part because it would let policymakers gradually cut benefits and increase taxes in a way that might not be readily apparent to most Americans. Changes at first would be small — the Social Security increase would be cut by just a few dollars in the first year.
But the impact, as well as savings to the government, would grow over time, generating about $200 billion in the first decade and much more after that.
The proposal to adopt a new Consumer Price Index was floated by the Obama administration during deficit reduction talks in the summer. Now, it is one of the few options supported by both Democratic and Republican members of a joint supercommittee in Congress working to reduce government borrowing.
The committee of six Democrats and six Republicans is struggling to come up with a plan to reduce government red ink by at least $1.2 trillion over the next decade. Changing the inflation index alone would put them a sixth of the way there.
“I think the thought process behind this is, slip this in, people won't understand it,” said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
Richtman's group is spending about $2 million on radio, TV and direct mail ads to fight cuts in Social Security and Medicare.
A TV ad by AARP puts it this way: “We are 50 million seniors who earned our benefits, and you will be hearing from us today — and on Election Day.”
Changing the system
The inflation measure under consideration is called the Chained Consumer Price Index, or chained CPI. On average, the measure shows a lower level of inflation than the more widely used CPI for All Urban Consumers.
Many economists argue that the chained CPI is more accurate because it assumes that as prices increase, consumers switch to lower cost alternatives, reducing the amount of inflation they experience.
For example, if the price of beef increases while the price of pork does not, people will buy more pork. Or, as opponents mockingly argue, if the price of home heating oil goes up, people will turn down their heat and wear more sweaters.
A report by the Moment of Truth Project, a group formed to promote the deficit reduction package produced by President Barack Obama's deficit commission late last year, supports a new inflation measure.
“Rather than serving to raise taxes and cut benefits, switching to the chained CPI would simply be fulfilling the mission of properly adjusting for cost of living,” it argues.
The new measure would reduce Social Security cost-of-living adjustments, or COLAs, by an average of 0.3 percentage points each year, according to the Social Security Administration. Next year's increase, the first since 2009, will be 3.6 percent.
Under the chained CPI, yearly benefits for a typical 65-year-old would be about $136 less, according to an analysis of Social Security data. At age 75, annual benefits under the new index would be $560 less. At 85, the cut would be $984 a year.
“For someone in the first year, it may not seem a lot,” said AARP's David Certner. “But as people get older and then they get poorer and more reliant on Social Security, the cut gradually gets larger and larger.”

[gwynedd1]

Re: Krugman Claims No Inflation

A rise in prices = inflation is a rather stupid definition. If half the goods and services disappeared, prices would rise. What the hell inflated?

[lektrode]

Re: Krugman Claims No Inflation

but wouldnt that be 'demand-pull' vs 'cost-push' ?

[gwynedd1]

Re: Krugman Claims No Inflation

Don't worry about inflation. Its not going to be a problem. Soon reserves will be around 100 trillion, until it will finally all be loaned out. However don't worry about that. The loan will be for a small group of kleptocrats who will use it to invest in capital( buy the entire world). Billions of people will have lots of money but, not to worry, the kleptocrats will raise prices and mop up all that nasty inflation until there is very little of that 100 trillion causing so much trouble. Prices will then start to fall due to lack of demand right where we want them to be.

[raja]

Re: Krugman Claims No Inflation

not a fair comparison, as one doesnt buy a house every week, meanwhile RENTS are going up.

One pays a mortgage every month . . . .

[charliebrown]

Re: Krugman Claims No Inflation

purchase prices may be heading down which is a help for those looking to buy their first house, or move up, but real-estate taxes, maintenance and utilitities are rising rapidly. My taxes, utilities, and maintenance are now more than mortgage payments. I used to think that once you had no mortgage payment it would be easy sailing. Not so anymore.

[lektrode]

Re: Krugman Claims No Inflation

and - to respond to raja - 'theoretically' ones mortgage payment is _fixed_
so, while RE prices are falling, thats true only for those who dont own yet - or for those who CAN re-fi... meanwhile - the news eye am seeing indicates RENTS are climbing in nearly all metro areas, along with cb's obs that the ancillary costs of RE are pumping up at least as fast as the stated CPI -
so how are 'housing costs' (other than asset values of existing owners) NOT inflating?
(well.. at least in dollar terms, guess in gold terms, they goin down... ;)

[lektrode]

Re: Krugman Claims No Inflation

it sure wont be a problem fer krugman - wonder if 100 trill will be enuf to keep him (and the rest of his pals in lwr manhattan/the beltway) happy - and i wonder if maybe then it will be ok to have REAL interest rates again - before demand falls to zero, because nobody - cept them (and the gold bugs) - can afford to buy anything

[raja]

Re: Krugman Claims No Inflation

and - to respond to raja - 'theoretically' ones mortgage payment is _fixed_
so, while RE prices are falling, thats true only for those who dont own yet - or for those who CAN re-fi... meanwhile - the news eye am seeing indicates RENTS are climbing in nearly all metro areas, along with cb's obs that the ancillary costs of RE are pumping up at least as fast as the stated CPI -
so how are 'housing costs' (other than asset values of existing owners) NOT inflating?
(well.. at least in dollar terms, guess in gold terms, they goin down... ;)

High unemployment equals lower rents.
If people can't pay, they won't, and landlords will lower their prices or their properties will go unrented as more and more people move in with friends and family.

[c1ue]

Re: Krugman Claims No Inflation

Krugman continues being a useful idiot.

http://www.nytimes.com/2011/11/07/op...y.html?_r=1&hp

Here he argues that because solar companies are failing, that this shows the success of the industry.

Nowhere does he mention the fact that the single largest factor in solar rollout is government subsidies, and that it is the recession in these subsidies which accounts for the solar industry's woes, though he is quick to attack subsidies on the fossil fuel side:

So it’s worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government “pick winners,” yet they demand special treatment for this industry precisely because they claim it will be a winner.

...

Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.

The US spent $6 billion in 2010 on solar cell installation subsidies, almost as much as was spent on ethanol.

I've posted extensively on the problems of solar:

1) Cost to install. It is damned expensive.

Even at less than $1 per watt of solar panel, the actual cost per watt post installation is much higher. Add in the fact that solar provides power at 1/3 or less the rate of fossil fuel/nuclear and it gets just ugly: solar cell costs must fall to $0.30/watt or less in order to achieve true grid cost parity.

The big lie being used by the solar industry is that somehow 1 watt of solar PV is in any way equivalent to 1 watt of any existing fossil or fuel nuclear based electricity generation. This is flat out wrong because solar at best can generate electricity 1/3 as much during any given day as a conventional electricity generation plant, thus 3x as much solar PV watts must be installed to even produce the equivalent kwh as a conventional plant. Throw in the weather based variability and it gets much worse.

2) Solar PV is an expensive solution to a tiny part of the problem

Residential electricity use is only 38.5% of overall electricity usage in 2010. Within this category, solar PV can only even theoretically supply 1/3 of this electricity barring the installation of (even more expensive) electricity storage.

Overall energy use - electricity or otherwise - is mostly in manufacturing and industry. Within manufacturing and industry, the primary usage of fossil fuel energy isn't electricity, it is heat. Note the article on this subject in the 'Energy' section: http://www.itulip.com/forums/showthr...ic-vs.-thermal

But of course, Krugman is really good at sounding smart and plausible without actually knowing anything.