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Where Is the Inflation?

Critics of the Austrian School of economics have been throwing barbs at Austrians like Robert Murphy because there is very little inflation in the economy. Of course, these critics are speaking about the mainstream concept of the price level as measured by the Consumer Price Index (i.e., CPI).

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http://mises.org/daily/6340/Where-Is-the-Inflation



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There is inflation

At the grocery store it's becoming very apparent. Today at Costco the bacon I usually buy went up $2, the milk I buy went up ¢30. Vegetables are insanely expensive, even the local stuff. If you adjusted the CPI for the 1980 specs, inflation is way more than 2%. The news keeps talking about the stock market reaching new highs, but again if you adjusted for 1980 specs, the DOW would need to be way over 20,000

Speaking of Costco

Snack bar prices at Costco have remained the same for the past 13 years (at least). No price inflation there. The milk at the local Walmart went from $3.25 to $2.85 a few weeks ago and remains there. Gas prices have been going down over the past several weeks as well.
This is all just anecdotal information, but "Austrians" seem a bit surprised too that prices don't appear to be responding much to the expansion of the money supply.

Agreed.

the banks are holding the money, aren't they?

Won't that all change once the banks start loaning the money? i.e., actually releasing it into the economy? Just looking for some insight and/or answers here...

You Need Willing Borrowers

Those who are not optimistic about the future are unlikely to borrow money, even at 0%.

DJP333's picture

Economic law

Crushing it tonight tama! Really interesting post. You cannot just ignore the laws of economics, they catch up to you. Simple article, easy for others to understand, I am sharing with friends and family in hopes to educate those who don't "get" why the economy is the state it is right now. We have a really long road to recovery ahead of us.

"It’s not pessimistic, brother, because this is the blues. We are blues people. The blues aren’t pessimistic. We’re prisoners of hope but we tell the truth and the truth is dark. That’s different." ~CW

Thanks. =)

I'm distributing it to friends and family too.

several factors are at work

some of the money/and credit being created is being hoarded around the globe by those seeking safe haven. Most of it is being held by banks and non-banks like Goldman Sachs that have been insolvent since summer of 07. The economy was in a deflationary death spiral and has been stablized

If you're talking price of oil and gas -well that's a whole other racket -silver lining is it's super dirty and the price fixing will turn people to cleaner alternatives..

Healthcare and Education are other corporatist rackets where overcharging is totally legal thanks to the cronies

Government is supposed to protect our freedom, our property, our privacy, not invade it. Ron Paul 2007

What do you mean by hoarding?

Still learning a lot of stuff about economics, but do you mean to say that these banks are just hoarding dollars in their reserves and not lending it out? I thought that instead of loaning this easy liquid money out to regular people, these banks were instead putting them into stocks and bonds and stuff. But that's technically not hoarding, it's just seeking higher returns in the stock market since it's not as risky as lending to regular people right now. If you prop up the stock market like this and artificially raise asset prices, does this not create inflation? Or are banks just hoarding this money and not using it on stocks/bonds? Just a little confused when people say hoarding!

The banks are hoarding....

to keep their financial sheets afloat. Most of the "bailout" money from 2008 was stuffed into the big US banks accounts to offset the mortgage derivatives losses. The banks cannot let this money go (or lend it) because if they do they can't even pretend to not be bankrupt anymore.

Since 2008 most of big batches of new fake money have gone to FOREIGN banks that are stuffing in it in their coffers for the same reasons. To offset their losses from the even wider array of global derivatives they loaned as "assets" to governments and corporations for pensions, infrastructure, repayment of foreign loans (IMF), etc.. (the mess you see unfolding in Europe right now)

Money sitting in bank coffers does not cause inflation in the open economy because it is not "in the wild" in use in the domestic/consumer economy...

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~wobbles but doesn't fall down~

Hoarding in their Federal Reserve Accounts

When a bank goes to the bank they access their federal reserve account. It's my understanding that this is where most of this money is sitting. Waiting. For what? The right crisis? When all the loans issued to the 3rd world went belly up and the big banks balance sheets went to crap in the 70's? 80's? they just ignored the rules and marched on like they were not insolvent.

My guess is when the shtf with the global economy they will just chunk their old balance sheet's bad debt, convert their federal reserve cash to the NEW new world order money and finish up the purchase of all middle class assets.

Ultimate Leveraged Buyout, using our full faith and credit of course to take us down.

Expect more smoke and mirrors, same result, we pay for our own destruction....kind of like the middle east...

Yep...

the "Davos Plan"...

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~wobbles but doesn't fall down~