PPI Whopper

[Finster]

I can't believe no one has commented on this yet:

http://www.bls.gov/news.release/ppi.nr0.htm

Producer Price Indexes - November 2007

The Producer Price Index for Finished Goods rose 3.2 percent in November, seasonally
adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This
gain followed increases of 0.1 percent in October and 1.1 percent in September. At the earlier
stages of processing, prices for intermediate goods moved up 3.7 percent after rising 0.1 percent
in the prior month, while the crude goods index increased 8.7 percent following a 2.4-percent
advance in October. (See table A.)

Did you get that??? That 3.2% is NOT an annual figure ... it's for ONE MONTH. This is the highest monthly increase in 34 YEARS. If my arithmetic is correct, that would mean since the 1970s ...

[Finster]

Re: PPI Whopper

The year-over-year change in the PPI, BTW, is 7.2%.

PPI inflation: 7.20%
Fed Funds: 4.25%
Rate on your bank's savings account: ?.??%

HELLO???

[jk]

Re: PPI Whopper

and hello to you, too, finster. we've got the yoy ppi up 7% but the ted spread exceptionally wide, libor relatively high and, i deduce, velocity dropping. we live in an age of extremes. or, as the chinese curse goes, may you live in interesting times. [interesting times being those with warfare, pestilence, disasters, and so on.]

[metalman]

Re: PPI Whopper

and hello to you, too, finster. we've got the yoy ppi up 7% but the ted spread exceptionally wide, libor relatively high and, i deduce, velocity dropping. we live in an age of extremes. or, as the chinese curse goes, may you live in interesting times. [interesting times being those with warfare, pestilence, disasters, and so on.]

not so interesting if you consider how many times this road has been traveled...



new fangled debt... dead. old fashioned debt... print, baby!

oh, and new fangled printing, to boot.... $40 billion out the back door.

foreign investors getting neeeeerrrrvvvous. they'd demand payment in gold, if they could. but since they can't, they demand payment in shares of usa companies.

[Finster]

Re: PPI Whopper

and hello to you, too, finster. we've got the yoy ppi up 7% but the ted spread exceptionally wide, libor relatively high and, i deduce, velocity dropping. we live in an age of extremes. or, as the chinese curse goes, may you live in interesting times. [interesting times being those with warfare, pestilence, disasters, and so on.]

Despite my dislike of the term ... can you say "stagflation"?

[Guest]

Re: PPI Whopper

Finster -

Good to see yer postin' again Guvna! This was contributed yesterday on same CPI topic:

http://www.itulip.com/forums/showthr...2124#post22124

[metalman]

Re: PPI Whopper

Despite my dislike of the term ... can you say "stagflation"?

what? everyone knows that if we have a recession with declining growth that we can't possibly also have inflation. that's impossible! just ask mish!

[WDCRob]

Re: PPI Whopper

Really stupid/basic question...

How does one tell if the economy is really growing/slowing versus GDP changing due to changes in the length of Finster's Cotton Ruler?

Measure units of goods and services produced instead of their monetary value? Or somesuch? Where is this reported accurately?

[Spartacus]

Re: PPI Whopper

how prone have are these numbers been in the past to revision?

[bart]

Re: PPI Whopper

Despite my dislike of the term ... can you say "stagflation"?

Indeed, Manor Maven... and since the last bout of it was in the '70s and gold has been known to be discussed here, I fiddled together a chart showing the price during the last Dow/gold cycle and overlaid the price to date.

It sure does show what folk like Jim Sinclair are talking about... and who knows if it was play out like the '70s...

[Finster]

Re: PPI Whopper

Really stupid/basic question...

How does one tell if the economy is really growing/slowing versus GDP changing due to changes in the length of Finster's Cotton Ruler?

Measure units of goods and services produced instead of their monetary value? Or somesuch? Where is this reported accurately?

Really good question, really. Far as I know there are no official or widely published reports of real GDP ... if you insist on that "reported accurately" part. Real GDP is calculated by measuring nominal GDP and then backing out inflation. The first part is not problematic, but the second part is.

The government's inflation numbers are phony as a three dollar bill. This is one reason why I created my own inflation index. (The other is I wanted something broader than just consumer prices.) They understate inflation and as a result real GDP is overstated. Others have created alternative versions of the CPI, for example, John Williams at Shadow Government Statistics. Use either one and you learn that the question of what the probability is that the US will enter recession is moot. It already has.

There was an excellent interview with Rudolph-Riad Younes in this week's Barron's that touched on the point. His opening comments:

We are in an age of decadence, as I have said in the past, and the trick is understanding whether we are going to stay in that age or enter an age of renaissance. There are no Mother Teresas among us, from top to bottom, from the government to accounting firms and credit-rating agencies, down to CEOs, financial investors and regular citizens. If there is one panacea, it is fixing the inflation index. At the Fed we need more courgage and less politics, and we need to reverse many of the changes that were made in the early 1980s to the inflation index, beginning with the decision to remove house prices from it and replace them with equivalent rents.

He goes on to say that "The inflation index reminds me of a parent who invents Santa Claus and then believes the fantasy"...

[Finster]

Re: PPI Whopper

how prone have are these numbers been in the past to revision?

Follow the link back to the BLS web site for more than you ever wanted to know about such things ...

[Jim Nickerson]

Re: PPI Whopper

Really good question, really. Far as I know there are no official or widely published reports of real GDP ... if you insist on that "reported accurately" part. Real GDP is calculated by measuring nominal GDP and then backing out inflation. The first part is not problematic, but the second part is.

The government's inflation numbers are phony as a three dollar bill. This is one reason why I created my own inflation index. (The other is I wanted something broader than just consumer prices.) They understate inflation and as a result real GDP is overstated. Others have created alternative versions of the CPI, for example, John Williams at Shadow Government Statistics. Use either one and you learn that the question of what the probability is that the US will enter recession is moot. It already has.

There was an excellent interview with Rudolph-Riad Younes in this week's Barron's that touched on the point. His opening comments:

We are in an age of decadence, as I have said in the past, and the trick is understanding whether we are going to stay in that age or enter an age of renaissance. There are no Mother Teresas among us, from top to bottom, from the government to accounting firms and credit-rating agencies, down to CEOs, financial investors and regular citizens. If there is one panacea, it is fixing the inflation index. At the Fed we need more courgage and less politics, and we need to reverse many of the changes that were made in the early 1980s to the inflation index, beginning with the decision to remove house prices from it and replace them with equivalent rents.

He goes on to say that "The inflation index reminds me of a parent who invents Santa Claus and then believes the fantasy"...

Finster,

Can you please explain why with your index it is only necessary to update it periodically? Is because there is not much volatility in the US and things rarely change?

[Spartacus]

Re: PPI Whopper

There was an excellent interview with Rudolph-Riad Younes in this week's Barron's that touched on the point. His opening comments:

We are in an age of decadence, as I have said in the past, and the trick is understanding whether we are going to stay in that age or enter an age of renaissance. There are no Mother Teresas among us, ....

He goes on to say that "The inflation index reminds me of a parent who invents Santa Claus and then believes the fantasy"...

He believes in his own Santa Claus, though, apparently never having read Hitchens's "The Missionary Position"

[Finster]

Re: PPI Whopper

Indeed, Manor Maven... and since the last bout of it was in the '70s and gold has been known to be discussed here, I fiddled together a chart showing the price during the last Dow/gold cycle and overlaid the price to date.

It sure does show what folk like Jim Sinclair are talking about... and who knows if it was play out like the '70s...

[Chart]

Very high probability it will, El Bartos. We can say this noting that it has happened not once in the past century, but twice. The seventies were very much like the thirties ... if you express prices in gold instead of dollars. The main difference was that in the earlier period dollars and gold were the same thing. So when stock values fell to a tenth of their peaks, their dollar prices did much the same. In the seventies, basically the same thing happened, except that the dollar had been cut loose from gold. Thus as stock values fell to a tenth of their peaks, the same thing happened to the dollar, thus keeping nominal stock prices in a trading range.

This is abundantly clear when we remove the changing dollar effects from a chart of stock prices and instead use ounces of gold for our units. That puts stock prices in both the thirties and the seventies on the same footing. Any reason to expect it to be different this time?