$4 per gallon gas today... where does it end???

[deejaydana]

Great post techboy. Of course, deejaydana, who has studied the BLS formulas and developed a theory as to why they are wildly inaccurate, believes only suckers think CPI is a decent gauge of inflation. I am still waiting to hear a detailed and thoughtful explanation as to why the BLS formulas are bogus.

Once again more ascribing words that I never used. This time out it's "wildly inaccurate" You're on a roll, keep going. I study the financial markets like a hawk (not on the level of techboy) but I also don't speak out of my rear end.

[boofMcboof]

There's no point in arguing over the stated percentage of inflation. First of all there is no universal definition of inflation. Second, both inflation and deflation are happening right now.

The Banks via access to the Fed's discount window of 0.25% (ZIRP) and through POMO operations (Quantitative Easing) are funneling a mountain of money straight towards short term assets like commodities and emerging market equity by borrowing or flipping bonds to the Fed, sometimes as quick as a week after purchasing them through the Treasury. This is increasing costs in everything that matters for people day to day. Inflation.

All this money was supposed to go to providing loans for mortgages and long term assets for small businesses. At least that was the stated public purpose of QE. Combine this with high unemployment and a deleveraging private sector, we are seeing housing prices and longer term assets fall. Deflation.

Cost of living going up. Assets going down. This is exactly what we didn't want to happen. Arguing over some stupid government BLS or CPI number is farkin stupid.

[Hubbs]

Food only accounts for 15% of the CPI.

Housing accounts for 41%.

Since housing costs have been dropping for the past 4 years, overall inflation is not a problem. Housing will continue to be a bulwark against inflation for years to come.

Components of CPI calculation

Oh good, now we get to play questions and answers.

Question 1 for you, Mr Stillers: What do you think happens to real estate during periods of high inflation?

Question 2: How much do you think the BLS said the cost of housing increased between 2001 and 2008?

Madison, I'd be interested in your guess for Question 2 as well. I'd also suggest that you consider the possibility that the BLS could have a less-than-stellar grasp on reporting inflation, if for no other reason than the fact that it's changed the way it calculates inflation plenty of times. I'll post more about it later. Techboy, I'll have time for a more substantial post in response to yours later, but I'll start with a few thoughts:

1: Your assumption that the under-reporting of inflation wouldn't happen simply because of the AARP is more than a little bit of a logical leap given the fact that even if inflation is still over-reported, the repeated changes to the BLS calculations have resulted in lower "official" inflation numbers than the old calculations would have given us. If this were simply a matter of politics, we'd be using the formulas we used in the 70's.

2: Along similar lines, the elderly are getting killed by ultra-low interest rates right now. I believe I saw a story about the problem in the WSJ just this week. Where are the mass elderly protests against Bernanke? Why isn't the AARP demanding a change in monetary policy, if your thesis about the silver-haired political monster is true? (Not the thesis that they're influential, the thesis that they're so tuned into economic minutia that they should be enough to prevent significant changes to their retirement income.)

3: Who said housing shouldn't be a big part of the CPI?

[Madison Redskin]

Once again more ascribing words that I never used. This time out it's "wildly inaccurate" You're on a roll, keep going. I study the financial markets like a hawk (not on the level of techboy) but I also don't speak out of my rear end.

Fine. Why don't you just explain why you strongly implied that I'm gullible for believing that the DOL/BLS stats are not good measures of inflation?

[Dead Money]

Boo friggin hoo people. I paid over $6 today... wussies.

Ride a bike and STFU.

Same people who ***** are the same who get a little coin and buy a hummer, or a friggin big 4x4 or a huge SUV "for their family". So sick and tired of everybody playing the blame game. Look in the mirror and tell me you are truly doing what you can do? There is not a viable option to rapidly convert to another energy source... Where we gonna put all those failed batteries from your precious freaking Prius in 5 yrs? No one man has the answers, it will take everyone doing their part to get this done, and that's just the problem with us isn't it... when it comes down to it, nobody does there part and thinks they're more important than the next guy.

How many bottles of water did you drink today? You have drinkable tap water. If you don't - move or do something about it.

How long did you sit at the drivethru today with your car running?

Do you really Need to run the AC while your driving, it reduces you MPG you know? Oh NOES YOUR HAIR!

How many times did you drink pop or eat crap that has no value for you today? Who ships all that crap all over the world and where does all the trash go?

Did you drive somewhere today when you couldve walked? God forbid you miss American Idol or Oprah or break a sweat.

Where'd you get your coffee today? I bet you have a coffeemaker at home, why you gotta burn through three styrofoam cups just cause you cant get up early enough to make yourself some coffee? Why do you need three anyway?

I could go on for days... Wake up people, everyone and I mean EVERYONE can change a hundred things they do a week to make an huge impact on how much energy we use in this country.

[Sikbug]

Bravo Dead Money. I agree.

I haven't owned a car in 6 years now, I could not think of spending 4 bucks a gallon on gas. The suburbs are a waste.

[Koolblue13]

I could go on for days... Wake up people, everyone and I mean EVERYONE can change a hundred things they do a week to make an huge impact on how much energy we use in this country.

That rant was right on.

[88Comrade2000]

For those who can afford to, they definitely should look into replace their gas guzzler.

At the moment I can't get one, but I hope to be able to purchase a better mileage car sooner. Gas is taking way to much of my money.

My sister plans on buying a second car, one with good gas mileage- probably in the fall.

------------------------------------------------------------------------------------------------------------------------------------------

For those who can't afford to take on a new car, they will have to adjust. You are going to have to alter your habits. Drive only when necessary, try to do everything on one trip. I did that alot. Carpool, mass transit, etc... If you can't afford a better mileage vehicle, then you have to take other methods to reduce your expenses.

As for the president. The president sets national policy. Whether that's a liberal or conservative way. Bill Clinton didn't do anything on this. George Bush didn't.

Instead of wasting his time on social security in early 2005; Bush could've pushed a new national energy policy. His poll numbers were still good then.

This country has sent men to the moon. Are you telling me, we can't find technologies that would burn less fuel or alternative sources without much reduction in size or power.

Why can't a big Chevy Suburban be able to get say 50 to 60 MPG and run and say garbage?

Both recent presidents has their own ideology and refused to do anything beyond their ideological solutions.

Bush was drill baby drill. Obama is no drill- You must use solar, wind, other non-fossil fuels.

IT would take a generation to transformation us from an oil/coal society into something else and long term if that's something we can do- I'm all for it. Short term, you have to use the natural resources you have.

---------- Post added April-8th-2011 at 10:09 PM ----------

Some places you need a SUV. My parents live in WV- you need a SUV to get around.

My current vehicle is a CUV they say, Forester. Good car, which was fine when I was in Ohio. My last 3 cars were all Subarus, needed that for winter. Time for a change since they are no winters down here in FL.

[Stadium-Armory]

I "need" an SUV because I have 4 kids, 2 dogs, and live in a place that gets lots of snow.

It occurs to me though that maybe the concept of a large, suburban family, is untenable as petroleum supplies dwindle.

I do wish though that there was an all wheel drive, hybrid, 6 seater that was resonably priced and got better than 35mpg. The Tahoe hybrid is an option, but its expensive and gets 20something mpg.

[skinfan2k]

thank god for costco.

[88Comrade2000]

I "need" an SUV because I have 4 kids, 2 dogs, and live in a place that gets lots of snow.

It occurs to me though that maybe the concept of a large, suburban family, is untenable as petroleum supplies dwindle.

I do wish though that there was an all wheel drive, hybrid, 6 seater that was resonably priced and got better than 35mpg. The Tahoe hybrid is an option, but its expensive and gets 20something mpg.

When I am to get a new car; I plan on writing Subaru and tell them; they lost me not because of the car, but because they don't have an AWD vehicle that gets close to 30 MPG in the city. My previous Subaru- 2005 Legacy, which my uncle has; is still running.

The Forester, while a good car, just plan sucks on mileage.

---------- Post added April-8th-2011 at 10:21 PM ----------

I "need" an SUV because I have 4 kids, 2 dogs, and live in a place that gets lots of snow.

It occurs to me though that maybe the concept of a large, suburban family, is untenable as petroleum supplies dwindle.

I do wish though that there was an all wheel drive, hybrid, 6 seater that was resonably priced and got better than 35mpg. The Tahoe hybrid is an option, but its expensive and gets 20something mpg.

When I am to get a new car; I plan on writing Subaru and tell them; they lost me not because of the car, but because they don't have an AWD vehicle that gets close to 30 MPG in the city. My previous Subaru- 2005 Legacy, which my uncle has; is still running.

The Forester, while a good car, just plan sucks on mileage.

[TheGoodBits]

When I am to get a new car; I plan on writing Subaru and tell them; they lost me not because of the car, but because they don't have an AWD vehicle that gets close to 30 MPG in the city. My previous Subaru- 2005 Legacy, which my uncle has; is still running.

The Forester, while a good car, just plan sucks on mileage.

Look for that to change in 2012 or 2013. The Forester is basically a bigger version of the Impreza (same engine, transmission, etc). The Impreza is supposedly going down from a 2.5 to 2.0 engine for 2012, and adding a CVT transmission. There are also rumors of them introducing a hybrid. I would expect these options to be available to the Forester as well. It'll be nice having the chance to have all these with an AWD vehicle.

[88Comrade2000]

Look for that to change in 2012 or 2013. The Forester is basically a bigger version of the Impreza (same engine, transmission, etc). The Impreza is supposedly going down from a 2.5 to 2.0 engine for 2012, and adding a CVT transmission. There are also rumors of them introducing a hybrid. I would expect these options to be available to the Forester as well. It'll be nice having the chance to have all these with an AWD vehicle.

When I am able to get the new car- the Forester is going to my dad. It's in his name anyway, due to my poor credit.

If I ever move back North, I would look into another Subaru. In Florida, I've had to drive more than I ever did in Ohio and need something with better mileage.

The hybrid is supposedly coming out in a couple of years though no word on what model they will put it in. I'm not so sure hybrid is all it is meant to be accept for maybe in the smaller cars.

I am probably getting a 2012 Ford Focus Hatchback sometime between next month and by the end of the year.

[mojobo]

He scoffed at the notion that I would buy the DoL's numbers. Enlighten me as to what you think he meant.

He didn't use the word "hyperinflation." However, he strongly implied the rise in gas prices is due to inflation and he said the price of "everything" is "skyrocketing."

He didn't use the word "hyperinflation." However, he strongly implied the rise in gas prices is due to inflation and he said the price of "everything" is "skyrocketing."

We aren't experiencing hyperinflation, but we have a lot more inflation than 1-2.5%. When I say "everything is skyrocketing" I'm looking at things like food, energy, cotton, etc going up 100-300%. Things like TV's, laptops, housing prices, and a few others have gone down in price. Just because we say we have an official inflation number doesn't really mean that's what the official number is, especially because it can be very subjective. Anybody can make their own basket of goods and weight it any way they want to measure inflation. The fact that a government agency uses the basket they do doesn't make it better or worse than any other, all it really says is "if you were to spend $100 on this given basket of goods last year (or whatever the base year you are using) then in order to get the same amount of goods this year you will have to spend $102".

I don't think oil is jumping this high because the gas companies all of a sudden got greedier or somehow found a way to charge more for their product (if they did why did they wait until now to make their price go up so high?). I don't think it's due to oil becoming more scarce because relative to other commodities that have no real change in supply its price is just about in line. I know the money supply has grown significantly which would make the dollar less valuable relative to other goods and currencies which it has.

[da#1skinsfan]

Ok again, I simply don't get this.

Gas is higher than its ever been.

Oil companies are making more profits than they ever have.

I realize what I am alluding to is an intervention, and extremely dangerous, but right or wrong, help me understand. People blame the middle east, they blame OPEC, blame speculators, etc.....but it comes down to a simple fact. oil companies are profiting exorbitantly at our expense while the nation struggles with the consumption of a mandatory resource (right wrong or indifferent). Whether you agree with the statement or not, can someone explain to me, what am i missing here? If we make it as simple as possible...we are paying 4 bucks a gallon, and when our prices rise, the oil companies profits skyrocket.

So in theory if we capped their profits, woldnt our prices go down?

[Stillers6SB]

Oh good, now we get to play questions and answers.

Question 1 for you, Mr Stillers: What do you think happens to real estate during periods of high inflation?

Question 2: How much do you think the BLS said the cost of housing increased between 2001 and 2008?

Answer 1: Seems like you're equating "high inflation" with "commodity prices increasing rapidly". Real estate could go up or down; down is more likely in our current situation with the overhang of foreclosed homes.

Answer 2: About 3% per year. It ranged from 2.2% to 3.8% for those years. For the last two years, it's been unchanged. It will likely be minimally changed for the next few years also.

BLS data

fwiw, I agree that food and energy increasing rapidly are important. For many people, they are a larger part of their budget than the CPI would indicate. Lower income households tend to spend much more on food and energy than upper income households.

[techboy]

There's another angle to this as well.

There are absolutely a group of people in this country that think that were are either in now, or will be in soon, a period of severe inflation (or both).

What do these people do to hedge their portfolios, do you suppose?

They buy commodities, like gold, copper, wheat, corn, etc.

And what happens to prices when a bunch of people suddenly start buying something?

And could those rising commodities prices be read as confirmation, causing said people to buy more?

GLD, for instance, is the second most owned ETF in the world today source.

When we look at the bond market, on the other hand, we see that future inflation expectations, though rising, are under 3%, and bonds aren't hyped on late night TV and Glenn Beck.

The totally transparent CPI (and my own anecdotal experience) tell me the same thing.

There's even theory to explain this: inflation is caused by an increase in money supply plus credit, and while the money supply has increased, credit has been devastated in this country. It's why "the Bernank" dumped so much money into the system" to avoid deflation.

These days, credit is slowly coming back, and commensurate with that, inflation expectations are rising a bit.

Notice that this doesn't even account yet for the very real impact that rising oil places have on other commodity prices, due to cost of transport, and there are very real risks other than inflation in the global situation today that warrant some or all of the oil price increases.

fwiw, I agree that food and energy increasing rapidly are important. For many people, they are a larger part of their budget than the CPI would indicate. Lower income households tend to spend much more on food and energy than upper income households.

This is also true. Every individual has a "personal inflation" rate that might be very close or completely different to the CPI.

[Heisenberg]

AN Escape is a mini-SUV, not to be confused with it's bigger brothers, Explorer and Expedition.

I understand that but a lot of people don't.

I've caught **** from people for driving "a gas guzzling SUV" several times before I had to correct them.

[mojobo]

Ok again, I simply don't get this.

Gas is higher than its ever been.

Oil companies are making more profits than they ever have.

I realize what I am alluding to is an intervention, and extremely dangerous, but right or wrong, help me understand. People blame the middle east, they blame OPEC, blame speculators, etc.....but it comes down to a simple fact. oil companies are profiting exorbitantly at our expense while the nation struggles with the consumption of a mandatory resource (right wrong or indifferent). Whether you agree with the statement or not, can someone explain to me, what am i missing here? If we make it as simple as possible...we are paying 4 bucks a gallon, and when our prices rise, the oil companies profits skyrocket.

So in theory if we capped their profits, woldnt our prices go down?

The reason profits go up when prices go up (at least nominally) is that they own oil producing assets. It's like if you own a rental property and the market price for rent goes up your profits will go up too. If you cap their profits or put a price control, which is what I think will ultimately happen, you end up with shortages. Prices would be less but it would be a lot harder to get gasoline, and with economies emerging around the world we wont have the relative monopsony power over oil that we once had making the scarcity problem even worse.

There's another angle to this as well.

There are absolutely a group of people in this country that think that were are either in now, or will be in soon, a period of severe inflation (or both).

What do these people do to hedge their portfolios, do you suppose?

They buy commodities, like gold, copper, wheat, corn, etc.

And what happens to prices when a bunch of people suddenly start buying something?

And could those rising commodities prices be read as confirmation, causing said people to buy more?

GLD, for instance, is the second most owned ETF in the world today source.

When we look at the bond market, on the other hand, we see that future inflation expectations, though rising, are under 3%, and bonds aren't hyped on late night TV and Glenn Beck.

Its not just commodities. Foreign currencies which are also inflated are going up relative to the dollar too. When the largest holder of U.S. debt is a printing press followed by foreign printing presses how can you expect to get a good read on inflation from that? (P.S. I'll give you Glenn Beck being a commodity whore for endorsing goldline and really screwing people over in the process). Again we see whats happening with inflation extremely differently but I wish you luck with everything your doing. So far AGQ has gone up 60% since you wished me luck on it in mid February so maybe this will return the favor

[88Comrade2000]

I understand that but a lot of people don't.

I've caught **** from people for driving "a gas guzzling SUV" several times before I had to correct them.

Well, they call the smaller SUVs, CUVs now.

The next gen Escape, which might have a new name, is supposed to look like this:

[Zazzaro703]

It ends in lake tahoe with $4.59 cent gas.

[DRSmith]

If you look at gas prices around the world it is only those nations that nationailize their oil companies or put in regualtion that they must provide x amount of oil to the nation they are drilling first and can sell the rest on the open markets that have gas prices that are low.

[Stillers6SB]

There's even theory to explain this: inflation is caused by an increase in money supply plus credit, and while the money supply has increased, credit has been devastated in this country. It's why "the Bernank" dumped so much money into the system" to avoid deflation.

These days, credit is slowly coming back, and commensurate with that, inflation expectations are rising a bit.

So true. Most people ignore the role of credit (debt) when they try to predict future inflation.

Mortgage equity withdrawals helped fuel much of the gdp growth in the past decade. That's gone. HELOCs have diminished over the past 3 years.

Two words to characterize this period: debt deleveraging

[USS Redskins]

Oil goes up and so does the cost for everything we eat and drink.

If gas keeps rising, the economy will definitley tank and that could mean its curtains for Obama in 2012.

[The Evil Genius]

It ends in lake tahoe with $4.59 cent gas.

Is that the Nevada or California side? I suspect its even more on the Cali side...when I drove to California back in 1999 from Va. Beach, I was shocked that gas entering into California from Nevada (around Reno) was 70-80 cents more than what I had left in Virginia.

I remember being pissed about paying $1.69 for gas at that location.

If I had only known.

:doh:

$4.15 this morning at two locations near where I live.