Comments on: More Inflation Magic

By: US killing the dollar | The Dividend Pirate

US killing the dollar | The Dividend Pirate — Sat, 02 Feb 2008 21:22:15 +0000

[...] As a result of the debasing of the dollar, inflation is going to rise. We are soon going to see the cost of milk, vegetables, gas and everything else go up drastically(after the elections obviously). To see a few examples of rising inflation costs, read this post, http://www.livingoffdividends.com/2008/01/28/more-inflation-magic/ [...]

By: Deez

Deez — Wed, 30 Jan 2008 17:30:06 +0000

I wondered why the officially stated inflation rate was at < 4% whereas money supply was increasing at rates over 10%:

http://www.nowandfutures.com/key_stats.html

Like someone stated previously in the comments, if inflation is actually calculated by the “substitution” method it would certainly explain why the official inflation rate isn’t very practical at all.

I’ve also wondered that if the current trend continues, i.e. if the real inflation rate is closer to 10% and wage increases stay stagnant, how long would it take the poverty rates and quality of life in the US to become similar to those of 3rd world countries. My guess would be no more than a couple decades… again only if the current trend continues.

By: Living Off Dividends

Living Off Dividends — Wed, 30 Jan 2008 06:10:12 +0000

no you read that correct. Inflation is “supposed” to be the Fed’s enemy, but it seems their actions do not reflect their beliefs.

In the eighties, the Japanese came and overpaid for trophy real estate. This might be repeated, especially if we seen a long drawn out Japanese-style recession. That’ll be bad for everyone, but it looks like the Fed’s actions are fostering this sort of environment.

Making everything more expensive will not stimulate the economy, just lower our standard of living. However, devaluing the dollar might help bring back some manufacturing jobs. But we’d have to devalue a LOT for that too happen. Again, it looks like the Fed is hoping this will happen.

By: Jake (Dividend Investing Blog)

Jake (Dividend Investing Blog) — Tue, 29 Jan 2008 23:36:59 +0000

LOD, I have to agree. I eat out for lunch all the time and the prices have just continued to creep up. Today for instance, I ate at a sub shop and it cost me $8.50 for the small sandwich with chips and drink. Last year the same meal would have been just under $7. I was comparing my electric bill to last year as well. Unreal. I used less electricity but my bill is up 20%.

By: Max Asciutto

Max Asciutto — Tue, 29 Jan 2008 17:43:07 +0000

My interpretation of macroeconomics’ theories take on inflation is that:

1) In the short-term it lowers unemployment, always a plus.

2) All the increased prices in Grade A eggs and white bread will flow through the cycle of households and firms. The increased revenue on white bread will increase the pockets of Wonderbread’s employees. Having more money to spend will cause a higher demand for U.S. products and more jobs; which in turn raise nationwide productivity.

3) Next to the “Big Apple, Big Inflation” data it may be useful to post http://www.bls.gov/ro2/fax/qcew9310.pdf, New York Cities’ Bureau of Labor statistics from 07′. The average weekly income in Manhattan rose 16.7% (the second highest increase in the nation) to $2,281, so I can understand why the price at NYC’s finest restaurants rose in four years.

I feel that either the U.S. economy can dive head first into a thundering recession with the dollar devalued by less productivity or we can keep our jobs with a weaker dollar. I prefer the latter.