One Point about Bernake and Inflation

[Yavin4]

Inflation is tamed because there's 9%+ unemployment which effectively kills wage growth because American labor is largely non-union. The only unions are public sector ones, and they are under direct assault by various governors, both Dem and Repub.

In the 1970s, we experienced hyper-inflation because a sizeable portion of the American workforce had union contracts, and in many of those contracts were automatic cost of living raises. Thus, whenever prices rose, so did wages.

In sum, there is inflation happening, but it's not hyper-inflation that we experienced in the 1970s because labor no longer has the power to keep wages constant with rising prices.

Finally, this is the reason why Obama did not fight for a bigger stimulus package nor a bigger jobs program. His economic team is telling him that high unemployment is necessary in order to have orderly inflation and avoid hyper-inflation.

[bemildred]

1. A great deal of money is not in circulation.

Whatever effect the money supply has on inflation, it is the money in circulation that does it, money used for investment only affects the price of those investments, money that sits there does nothing.

[Yavin4]

2. It's Not In Circulation Because It's Not Going To Labor

Labor spends money. By taking labor out of the inflation picture entirely, you can have inflation while avoiding hyper-inflation.

[bemildred]

3. Indeed. It's not even going to this country. nt

[evilDonkey]

4. MIT Billion Prices Project

According to the MIT Billion Prices Project annual inflation is running at 4%.

http://bpp.mit.edu/usa/">The Billion Prices Project @ MIT

This is happening in an environment of massive unemployment, falling hours worked and shrinking family incomes.

According to the experts inflation shouldn't be happening. Once again 99% of the economists are wrong.

[roamer65]

6. It's the leading edge of price inflation from the monetary inflation...

that is current Fed policy. People need to remember that the monetary inflation from the Vietnam War took nearly 10 years to result in double-digit price inflation. By 2020, we ought to be rolling along at 20-30% a year.

I believe your MIT group and in truth it is actually around 11% using the pre-1980 measurements.

http://www.shadowstats.com/alternate_data/inflation-charts

[Yavin4]

5. This Chart Proves My Point

As you can see, the labor side of the chart (Employment, Household income, Household net worth, and Home Prices) are all deflating. Meanwhile, GDP, Corporate Profits (mostly banks) are inflating largely due to Fed policies.

Health Insurance and Energy both have pricing power in our economy, so they rise in an inflationary environment.

Again, high unemployment places a deflationary weight against in an inflating price environment.

Source: http://www.deptofnumbers.com/blog/2011/01/ten-years/