| Author |
 Topic  |
|
|
Nickelless
Administrator
USA
5580 Posts |
 Posted - 06/04/2008 : 20:59:12
|
I just saw this on Yahoo News:
By JEANNINE AVERSA, AP Economics Writer
WASHINGTON - Federal Reserve Chairman Ben Bernanke said Wednesday he does not believe the United States will experience the out-of-control prices seen with 1970s oil shocks.
His assessment came in a speech delivered Wednesday to graduating students at Harvard University, where he earned a bachelor's degree in economics in 1975.
Back then, the economy suffered from a dangerous combination of stubborn inflation and stagnant growth. There are fears today that the U.S. may be heading in that direction again.
"We see little indication today of the beginnings of a 1970s-style wage-price spiral, in which wages and prices chased each other ever upward," Bernanke said at Harvard.
Then, as now, the U.S. endured a serious oil price shock, sharply rising prices for food and other commodities and subpar economic growth, he said.
Today's economy, however, is more flexible in responding to difficulties and the country is more energy efficient than a generation ago, Bernanke said.
"Since 1975, the energy required to produce a given amount of output in the United States has fallen by half," he said.
Over the years, Fed policymakers also have learned more about inflation and how to fight it, he said.
Bernanke's remarks come just one day after he said that the Fed's rate-cutting campaign was coming to an end because of increasing concerns about inflation. He took aim at the role of the weakened dollar in pushing prices higher. It was a rare public pronouncement by a Fed chairman about the U.S. greenback.
The Fed is paying attention to the extent to which consumers, investors and businesses believe prices will rise in the future. Monitoring those "inflation expectations" are important. If people believe inflation will keep going up, they will change their behavior in ways that aggravate inflation — thus, a self-fulfilling prophecy.
"Some indicators of longer-term inflation expectations have risen in recent months, which is a significant concern for the Federal Reserve," Bernanke told the Harvard students. "We will need to monitor that situation closely."
Changes in current inflation expectations have been measured in just "tenths of a percentage point" as opposed to "whole percentage points" in the mid-1970s, he said. That highlighted the difference between how people now and then viewed inflation.
Paychecks today are shrinking as rising prices bite into them. In the 1970s, people were demanding — and getting — higher wages in anticipation of rapidly rising prices; hence, the "wage-price" spiral Bernanke cited.
The inflation rate has averaged about 3.5 percent over the past four quarters. That is "significantly higher" than the Fed would like but much less than the double-digit inflation rates of the mid-1970s and 1980, Bernanke said.
Paul Volcker, Fed chairman in the 1980s, broke inflation's grip by raising interest rates to the highest levels since the Civil War. That approach, however, plunged the country into a painful recession in 1981-82.
Bernanke and other Fed officials have put inflation higher on their current list of concerns. But the economy remains fragile, buffeted by housing, credit and financial crises.
To help brace the economy, the Fed dropped interest rates in late April to 2 percent, a nearly four-year low, and continued a rate-cutting campaign that started last September. Bernanke suggested Tuesday that the Fed would not be inclined to cut rates further given inflation concerns.
Many economists believe the Fed will hold rates steady at its next meeting on June 24-25 and probably through much, if not all, this year. But some believe that inflation could flare up and force the Fed to begin boosting rates later this year or in 2009.
Despite the pain in people's purses, the economy as a whole has "thus far dealt with the current oil price shock comparatively well," Bernanke said. Challenges remain, he added, "in dealing with rising global demand for energy, especially if continued demand growth and constrained supplies maintain intense pressure on prices."
|
Visit my new preparedness site: Preparedness.cc/SurvivalPrep.net
--Latest article: Stocking up on spices to keep food preps lively
---------------
Be prepared...and prepared to help: http://www.survivalblog.com/charity.html
Are you ready spiritually for hard times? http://www.jesusfreak.com/rapture.asp |
Edited by - Nickelless on 06/04/2008 21:00:21 |
|
|
HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 06/05/2008 : 00:26:38
|
He is right of course. Prices are going up.. wages aren't. 
Quote:
Changes in current inflation expectations have been measured in just "tenths of a percentage point" as opposed to "whole percentage points" in the mid-1970s, he said. That highlighted the difference between how people now and then viewed inflation.
And here I thought it was just highlighting the difference between how the government now and then measured inflation. 
|
If your percentages are low.. just sort more. If your percentages are high.. just sort more.
Now selling Copper pennies. 1.6x plus shipping. Limited amounts available. |
Edited by - HoardCopperByTheTon on 06/05/2008 00:29:27 |
 |
|
|
horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 06/05/2008 : 07:17:17
|
quote:
He is right of course. Prices are going up.. wages aren't.
Yeah in that sense it is worse than the 70s. Thanks Ben. I feel better now. Now when I go to fill-up the car, I will remember to console myself by saying that at least my wages are stagnant and not inflating. |
|
|
|
fb101
Administrator
USA
2856 Posts |
Posted - 06/05/2008 : 07:33:49
|
So in the fed's opinion.... It's just fine if prices go up till you cannot afford food, as long as your wages don't go up so you can Bernanke sees the truckers continuing to drive for $1 a mile even though diesel costs them $0.90 a mile. And he sees a lot of minimum wage workers continuing to spend $50 a week to make an $85 a week take home pay.--- I'll bet he sees light at the end of that tunnel too!! LOL |
 |
Edited by - fb101 on 06/05/2008 07:36:47 |
|
|
|
n/a
deleted
139 Posts |
Posted - 06/05/2008 : 10:03:36
|
theres NO light in the "tunnel" his head is up!!
|
|
|
|
pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 06/05/2008 : 12:55:06
|
The light at the end of the tunnel is the headlight of an oncoming train- Murph'y Law.
Put a german helmet on Bernake and think the words,
"I know nothing, NOTTHHHING!" |
|
|
|
HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 06/05/2008 : 15:05:30
|
| If we give him some strudel will he treat us nicer? |
If your percentages are low.. just sort more. If your percentages are high.. just sort more.
Now selling Copper pennies. 1.6x plus shipping. Limited amounts available. |
|
|
|
swusc
Penny Hoarding Member
USA
553 Posts |
Posted - 06/05/2008 : 19:09:09
|
What I got out of that is that is that food/energy are a lower part of spending(GDP), so those increases hurt less than they did in 1970s. The lower wage growth shows all cost inputs into goods aren't increasing, so overall goods outside of food/fuel shouldn't be increasing as much. Plus lower incomes will lower demand for goods causing prices to drop.
If the cost increases are contained to food/fuel, then that isn't an inflation problem. That is a supply/demand problem. You can't blame the Fed for everything. Don't you think most of the problems are thanks to Congress? Lets see using food to replace fuel (Congress did that). Congress has spent borrowed tons of money (look at the increase in the growth rate of U.S. Debt vs value of the Dollar). Congress is the spender of money.
Outside of the money issue. The U.S. uses a lot of oil. Way more than their fair share of the World's resources. We either have to cut back or pay more. That is the way it.
I think a lot of people could cut back on the amount of food they buy. Maybe the higher food prices are good for us. It might save some lives.
<<About 30% of Americans are obese, putting them at risk of developing diabetes, heart disease, cancer, arthritis and other diseases. About 112,000 deaths were blamed on obesity in 2000, the most recent year for which figures are available, according to the Centers for Disease Control and Prevention.>>>
Tax payers are going to pay for that health care for all those people. They eat themselves into obesity, and then want everyone else to pay their health care bills. If we are going to provide healthcare cover for people over 65 then you shouldn't be allowed to be obese. If you want to sign to waive that coverage fine, but if you want it, then you should take care of yourself.
You must be logged in to see this link.
-SWUSC |
`Everybody is ignorant. Only on different subjects.' Will Rogers
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." Alan Greenspan, 1966. |
|
|
|
fb101
Administrator
USA
2856 Posts |
Posted - 06/05/2008 : 22:05:25
|
| Totally correct! Freedom stinks doesn't it? It makes it impossible to control what people will do, say, eat, or think. I've given up! I'm in the "Minding my own business" camp now. If people want to eat what's bad for them, smoke, have babies, or drive SUV's, well, I'm not going to aggravate myself by telling them how to live! |
|
|
|
|
horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 06/06/2008 : 07:08:09
|
quote:
Originally posted by swusc
What I got out of that is that is that food/energy are a lower part of spending(GDP), so those increases hurt less than they did in 1970s. The lower wage growth shows all cost inputs into goods aren't increasing, so overall goods outside of food/fuel shouldn't be increasing as much. Plus lower incomes will lower demand for goods causing prices to drop.
If the cost increases are contained to food/fuel, then that isn't an inflation problem. That is a supply/demand problem. You can't blame the Fed for everything. Don't you think most of the problems are thanks to Congress? Lets see using food to replace fuel (Congress did that). Congress has spent borrowed tons of money (look at the
There is alot that I could say here, so I probably won't get it all out, but here is a few thoughts. Many, many people in the US were on tight budgets and barely squeeking by before gas and food went bonkers. These people are in a world of hurt.
There are at least three classes of people who are getting kicked around good right now: illegal immigrants (jobs for them are drying up fast and not included in the unemployment numbers), low wage workers or anybody living paycheck to paycheck, and fixed income elderly and disabled. I don't think that it matters to them that statisically they or OK compared to the 70s.
Low incomes and lower demand in the US may not lead to lower prices. We have a world a economy now. If the Chinese and Indians are willing and able to pay more for essentials like food, gas, copper etc then Joe American can afford, then Joe American is screwed.
I agree that what we are experiencing is not runaway inflation. Classic runaway inflation always includes salary increases, but this is not some small supply/demand problem contained to food and energy. What we are experiencing with out a doubt is stagflation. Salaries and business growth are stagnating, house prices are falling, and the price of stuff we need is going up.
The bottom line being that the standard of living in the USA is getting the crap kicked out of it. The middle class is under attack and shrinking as more and more people slip and fall out of it. We are heading ever closer to a two class society and all the turmoil associated with such a society.
Lastly, the Fed and Government are for the most part one in the same. They have so many ties at this point it hard to keep them separate. So yes I blame Clowngress as much as the Feds. Ben just happen to make a good whipping boy as he is the one that is getting paid to stand up and utter the BS that is suppose to keep us all calm and passive while the middle class is slowly destroyed... |
|
|
|
redneck
1000+ Penny Miser Member
1273 Posts |
Posted - 06/06/2008 : 08:05:39
|
Quote;
Ben just happen to make a good whipping boy as he is the one that is getting paid to stand up and utter the BS that is suppose to keep us all calm and passive while the middle class is slowly destroyed...
Wouldn't it be nice if,"We the People" could give him a "REAL" whipping
instead....(along with all of Congress)
|
|
|
|
swusc
Penny Hoarding Member
USA
553 Posts |
Posted - 06/06/2008 : 21:32:47
|
I don't disagree people are hurting. Inflation isn't measured by people hurting though.
Inflation is bad for low income people. They don't have assets that increase in value over time to offset those price increases. Plus their wages are usually lower skills and increase at a slower rate.
Dropping demand in the U.S. will lower prices of goods. It has no choice in the fact U.S. is still so large a part of the world economy. Oil prices can stay high due to China and India, but they aren't going to buy enough consumer goods to help support prices. I doubt many in those countries are going to buy high end goods, cars, TVs, Computers, and etc. Food is going to stay high until we stop burn food for fuel and paying farmers not to grow crops. (I think this is one of the stupidest things Congress has ever done, which is saying something. If they wanted to support the prices, then they should just buy the excess goods. We could can them to store or donate it to food banks. It is just stupid to pay someone not to produce anything.)
Housing prices dropping and the credit problems are deflationary. The dollar dropping is inflationary and Congress spending like a teenage girl is inflationary as well. So far, I think we are seeing the inflation hitting goods that Asian countries want (oil and food) and see the deflation in goods they don't want.
You hit the nail on the head though. Most of the country isn't going to give a crap about the deflationary goods because they aren't buying those every day. Long term though, that deflationary part is more dangerous. If people stop buying those goods, then layoffs will start happening. You are seeing that now. GM and Ford are closing a lot of plants.
It is a cycle though. If the U.S. can't buy goods from Asian due to lower demand, then those countries will get less dollars. If their hard currency reserves start dropping due to subsidizing oil for their citizens, then that help will be lowered. That will start killing their demand. (It could be real bad here before that happens)
I would be less worried about the Middle East. I think they are worried about their oil supply vs. net investment assets. When those countries run out of oil, then they are going to be screwed unless they have big enough investment accounts to support their populations. I don't think they have much in the way of producing anything else.
Big picture we are still in better shape than the 1970s. No one knows how this will play out, but hopefully it gets better before it gets 70s bad.
-SWUSC |
`Everybody is ignorant. Only on different subjects.' Will Rogers
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." Alan Greenspan, 1966. |
|
|
|
Ponce
Penny Hoarding Member
Cuba
630 Posts |
Posted - 06/25/2008 : 19:33:36
|
| It wont be the same because is going to be worse.......be ready. |
"If you don't hold it, you don't own it"...Ponce |
|
|
| |
Topic |
|
|
|
Bernanke sees no repeat of `70s-style inflation
Forum Locked
