Falling prices.....yay!

[Kirkland Laing]

Kilrkland, I am beginning to see why Lyle uses such horrible language to describe you. You contort and twist and abuse, whilst at the same time fail to acknowledge all the obvious and real examples of inflation in the economy. House prices, energy bills, public transportation costs, stock market etc all display real and obvious inflationary pressures. Yet for some reason you want to tell me that I have only just learned that banking is a fraud, I'm an idiot, and that there is 'No inflation, nothing to see here because I am just great'. Talk about deflection and an inability to talk about inflation. You are a very rude man and I have no reason to converse with you. You should learn an honest trade and act with grace.

I'm not contorting or twisting anything. I'm simply asking you to square your belief that various economic numbers are being manipulated and altered with you claiming to agree with the beliefs of an economist who clearly accepts that these economic numbers are accurate. You can't make both claims at once.

And you can't come up with a coherent reply because it's impossible to do. You either believe that the numbers are bollocks or you don't. And because you can't come up with a reply you're resorting to Lyle-style word salad posts or claiming that I'm mean and unpleasant and an absolute rotter.

What I am is annoyed when people are wrong about things so I waste my time replying to them, even when they don't have a fucking clue what they're talking about.

But things have gone up in price and you were going to prove that this wasn't the case and you haven't done so. My own experience and by looking through the media is that there is price inflation certainly there and also out here. I gave you specific examples of inflation, but you don't seem hear that part of my post. Some like Greece sure, but in the UK prices don't fall. They certainly don't fall here either. There is inflation. Now tell me why my existential evidence is faulty. Tell me why my home is going up instead of down, why my chocolate is shrinking and getting more expensive, why energy bills are far more than they were 5 years ago. Surely this is INFLATION. Only wages are down and cheaper fuel is only slightly being passed on the the consumer. For the consumer they are earning less, but things are costing more too!

Yes Miles, some things are going up in price by more than a couple of percent. But the way we measure inflation, whether it's the consumer price index or pce or factory gate prices or inflation breakevens or five/ten year/five/ten year forward indexes or bond derivative prices all show the same thing.

Right now the markets expect US five year inflation to be 1.3% and ten year inflation to be 1.6%. UK ten year inflation is predicted to be 1.3%. The smartest investors on the planet, managers of pension and other funds and the central bankers running these economies all believe that these numbers are accurate too.

I realise that they don't have the background in Korean English teaching that you have but they do have quite a lot of knowledge of bond and debt markets and they're investing tens of trillions of dollars, euros, yen and sterling in fixed income bonds that are paying out tiny amounts of yearly income over 5/10/20/30 year periods.

Here are the current US bond yields.

http://www.treasury.gov/resource-cen...spx?data=yield

Look at the ten year bond yield. The government can borrow at a nominal rate of 1.68%. But inflation is expected to be 1.6% yearly over this period so the government can borrow at a real rate of 0.08%.

Here are the real rates :

Daily Treasury Real Yield Curve Rates


For people who don't know the ifference between nominal and real rates, the government has to pay 1.68% actual interest every year on this bond but because inflation goes up by 1.6% a year every hundred dollars the government had at the start of the year has inflated to one o one dollars and sixty cents, leaving the government to only have to come up with eight cents of actual real money to pay the interest it owes.

Now Miles, imagine you're a pension fund manager looking to make a nice safe predictable investment for your customers so they get their nice safe predictable pension when they retire. You buy a 30 year US bond. That gives you a real income of 0.5% a year for thirty years as predicted inflation is 1.75% over 30 years.

Now imagine that prdicted inflation is wrong and it's actually going to be 2% higher than that. Hardly hyperinflation, just two percent. That would mean in thirty years your investment would half in real terms and you'd be out of a job long before then.

So Miles, all these guys managing tens of trillions of dollars of fixed income assets. They're all idiots? You think you know more than they do? None of them know what the real inflation rate is?