CRB Index, ex-Food and Energy

Several people (Muckdog, amongst others) think there is very little "core" inflation.

Putting aside the absurdity of ignoring food and energy for a moment, lets take a long term look at price increases WITHOUT food and energy, courtesy of Investech’s Jim Stack.   

Hmmmm, what do you think? Can you look at this chart and say there very little Core inflation?:

Crb_ex_food_energy

I prefer a logarithmic chart for longer time periods like this . . .
but Stack’s chart makes the point pretty clearly:  Since the Fed took
rates down to 1%, we first reflated, and now we have price inflation.

I got your yer god-damned core right here . . .

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What's been said:

Discussions found on the web:
  1. tjofpa commented on Nov 5

    Gee, how come that index started FLYING after 1971?

  2. Marcus Aurelius commented on Nov 5

    “I got your yer god-damned core right here . . .”

    Yes, you do.

  3. zao commented on Nov 5

    nice. In the ’70s it wasn’t the Fed printing money, it was the oil sheiks. This time around it is demand boom from Asia. THe fixed income market was slow to realize the inflationary impact in the 70s, just as it is now.

  4. Strasser commented on Nov 5

    No inflation: just received a + 25% bump for my health insurance.

    And as for a sign of the times:

    Arizona Republic reports “No bidders show up for 400-acre parcel… appraised at $100 million.”

    Where are the dip buyers?

  5. wally commented on Nov 5

    I sincerely hope that the recent break in solidarity in the Fed means they realize that got stampeded by pressure from the ‘club’. The instant rise in oil prices following their caving should have given them a clue even if nothing else did. Lots of people in this country are going through far worse than Chuck Prince is, but that hasn’t registered on the Fed’s radar. They have talked ‘tough’ on inflation for quite some time, but done nothing… and it shows.

  6. Mike G. commented on Nov 5

    Not that I like high oil prices, but if you sold something in dollars and those who control the dollar kept weakening it, what would you do? Raise your prices!

  7. monkeyfister commented on Nov 5

    A small sidebar in regard to food inflation.

    Here, in west Tennessee, I’ve noticed a rather disturbing trend– the farmers have all planted CORN instead of Winter Wheat. Field after field of corn that will never produce a single ear. It’s not Milo Sorghum or sugar cane– it’s knee-high corn (I checked it out yesterday). It will all be dead by the New Year.

    Wanna talk food inflation? If this is a National trend across this Latitude in America, then come Spring, the shortages of wheat and hay will drive bread, cereals, milk and meat prices through the roof.

    Has anyone else noticed corn in the fields this fall?

    –mf

  8. miller commented on Nov 5

    This is what I have been questioning for at least two years. I still do not understand why the bond market does not punish this behavior and I expect it will in the not too distant future. I don’t see a easy fix.

  9. lewis commented on Nov 5

    Not that this would be the first time, but the United States seems to be it’s own little self delusional island with regard to inflation. Gold over 800, oil pushing 100, and everyone running around saying we got no steenking inflation – who knew the Whip Inflation Now campaign would take 35 years to kick in?

    As you are an info porn lover (almost slipped and left info off there after your news media/porn star blog the other day), how about a chart comparing inflation rates around the industrialized world for the last five or ten years? Maybe side by side with one showing GDPs around the world for the same period.

    On another note, I see that the MEW world moved to credit cards as I suspected. Now the tricky part – will the credit card companies now overextend to people who can’t pay them back like the subprime lenders did? My guess, heck yes, as long as we can book a profit today, we’ll worry about the details tomorrow…….

    Lewis

  10. Lyon commented on Nov 5

    Shoudn’t a parabolic chart like this be shorted on principle?

  11. Eric Davis commented on Nov 5

    Honestly Besides how Hyperinflation will help wallstreet, by taking the market to infinity, I don’t get the bull case. The Growth for Q4, needs to be re-evaluated here. Beyond all the Bank Whack-a-mole, that is the reason for this downward move…. Who the hell told CNBC that the market moved based only on “Todays News”.

    What did someone say today “LTC was 4 billion, and this is over 30 now.”

  12. Ross commented on Nov 5

    Monkeyfister, we Texicans have always had a high regard for those we left behind in Tennessee but planting corn in the Fall? Just bailed my third cutting and can send you 200 round bales of hay if you need them. I can only say that those planting corn must be recently retired investment bankers from say N.Y. CITY!!!

  13. Jay commented on Nov 5

    Putting it all together: Could all of this be a play to save American banking interests?

    Are Citibank, Merrill Lynch, and other institutions quietly getting out of the dollar, thereby making it even more worthless?

    Are the Fed rate cuts and oil speculation calculated to spur inflation so the financial institutions’ write-downs in the tens of billions of dollars are less costly?

    Would an attack on Iran and the attendant spike in oil prices tend to support even more inflationary pressure, dollar devaluation, and less-painful writedowns?

    Although petro profits are down temporarily, would a spike and new plateau in oil prices really hurt oil companies in the long run?

    Could we be seeing a massive market manipulation to bail out major financial institutions over the next few months, before some of the more catastrophic ARM revaluations (and attendant bankruptcies) take place between December and February?

    Would a scenario like this not put a major dent in the write-downs, by taking it out of the average American’s financial well-being by devaluing his/her single largest investment, a home, by 20%-40%; by devaluing his income on the global marketplace by 30%; by inflating the price of essential commodities like oil, gasoline, milk, wheat, corn by 60%?

    What are the alternatives? A run on America’s largest bank? Will the Tier-3 estimates scheduled for November 15 show that enough of America’s financial institutions are insolvent, and cause a huge international financial shock?

  14. JKB commented on Nov 5

    Perhaps the fall corn planters are some of the new “gentlemen” farmers with their brand new over-priced mini farm and apparently a huge amount of faith in global warming. Must be followers of Al Gore.

    While they may have a lot of faith in the climatologists, I would remind them these same “scientists” predicted a very active hurricane season in June, instead we got one of the quietest seasons on record and no rain in the SE.

  15. wunsacon commented on Nov 5

    Predicting the market’s short-term movements is more difficult than its long-term movements. No, JKB?

  16. The Dirty Mac commented on Nov 5

    Where does the overwhelming public support for heavily subsidizing the conversion of food into gasoline fit into all this?

    “A run on America’s largest bank?”

    The George Bailey speech will be interesting.

  17. Peter Boockvar commented on Nov 5

    With the implied inflation rate in the 10 yr TIPS mkt now at almost 2.39%, the highest since July 9th, we get some inflation and $ talk from Fed Pres Mishkin. He is the 1st Fed member that I can remember that is finally publicly admitting that they must account for the weakness in the $ and its impact on inflation. The spike in commodity prices and drop in the $ after their 75bps in cuts and subsequent higher inflation expectations priced into TIPS, has put the Fed in this we can ‘never take eye off the inflation ball’ talk. The implied inflation rate was at 2.28% the day before the Fed cut 50 bps in Sept.

  18. squeezed commented on Nov 5

    JKB,
    Scientists are not in the hurricaine prediction business. This is the realm of meteorologists, who tend to be near-illiterate republicans.

    ” instead we got one of the quietest seasons on record and no rain in the SE.”

    S-T-A-T-I-S-T-I-C-S.

    And that wooshing noise was the sound of another basic scientific concept buzzing your dense noggin.

  19. mr obvious commented on Nov 5

    lewis, i dont think you want to be around when shorting inflation works! food and energy will be cheap but 75% of the earth’s population will have starved to death………..

  20. Camille commented on Nov 5

    JKB,

    This hurricane season’s ACE index puts this year’s activity at around average or slightly above average…I also wouldn’t trivialize two massive category 5 hurricanes. Enjoy living in your little world of denial while you still can.

  21. michael schumacher commented on Nov 5

    Add Mexican farmers to the list of corn producers. Early this year the PRI party decided it was going to get into the food biz and offered some pretty hefty subsidies to Agave farmers to plant corn instead of the Cactus used to produce Tequila.

    Acres of Agave no longer exist so that the stupid policy of using a food staple for fuel could be followed. Some large payouts occurred (to the large conglomerate farmer’s) and the Mexican economy (at least in Jalisco) will be paying the price as the infrastructure is based on processing cactus and not shipping corn product to be processed in other places.

    I bought shares in a well known tequila provider earlier this year……

    I still say that anyone who came up with the policy of using food for fuel should be….nevermind…would’nt matter anyway.

    Ciao
    MS

  22. tree commented on Nov 5

    Obviously the government needs to exclude more items from core inflation index.

  23. zao commented on Nov 5

    Peter Boockvar,
    He also said that the effect of dollar fall on inflation is not much. Paying lip service to inflation is all this Fed ever does.

  24. neil commented on Nov 5

    Here’s a macro question that maybe someone can enlighten me on. I live in a small country which is a net exporter to the U.S. The dollar has come crashing to a new 8- or 10-year low, which has the export industries very upset. They’ve asked the central government to try to get the exchange rate under control. My question is, what impact will the local currency being overvalued against the dollar have on the internal economy of this country? I think it’ll make gas and other imports more expensive — what else, though?

  25. Francois Theberge commented on Nov 5

    Why do I have the nasty feeling that when a majority of people decide that all inflation headlines and official spin are lies, something rather ugly will happen?

    Also, I can’t understand why NO MSM outlet ever put this chart on their screens.

    Have they all abandoned any pretense of informing their audience?

    Francois

  26. Bob A commented on Nov 5

    There is no inflation and we do not torture!

  27. Dodney Rangerfield commented on Nov 5

    We have declared victory in the war on inflation and have begun a phased withdrawal of interest rates.

  28. The Dirty Mac commented on Nov 5

    “anyone who came up with the policy of using food for fuel should be….nevermind…would’nt matter anyway.”

    I’m with you 1000% MS. But I can’t think of too many policies that have had more enthusiastic public support.

  29. Dave commented on Nov 5

    The CRB charts are great. Looking at them it is amazing that anyone actually thinks inflation is only 2.8%. What a joke.

    If you want to look at the rest of the CRB charts they have free monthly ones on their site for each of their indexes. http://www.crbtrader.com/crbindex/ click on monthly charts and data.

  30. muckdog commented on Nov 5

    Maybe they need to add lard back in to the CRB. Don’t be afraid to admit it: Refried beans taste best made with lard.

    In total, the CRB revisions in recent years included a significant increase in the weighting of energy. And rightly so. But that also is a sector that has seen significant increases the past 6 years.

    (And don’t forget, now corn is food AND energy!)

    Barry’s chart excludes food and energy, so what explains the rise in the CRB?

    How about a slow and steady declining dollar? While a declining dollar will add some inflation from the increasing costs of imports, folks buy less imports. This is helping our trade deficit, as our exports are now less expensive. This also helps our manufacturing sector, no?

    I wonder how European exporters are doing these days?

    The government jawbones about wanting a stronger dollar, but that may be the big lie right there.

    Also, because of higher energy costs, folks have less money to spend on other things, which is keeping a lid on economic growth and inflation. When you’re sending more money to OPEC, you’re spending less at the malls and restaurants.

  31. SamuariDave commented on Nov 5

    No one has mentioned the price increase on Monday’s edition of Investors Business Daily, from $2.00 to $2.50. Ouch!

  32. Rich Lather commented on Nov 5

    Muckdog,

    What do we export that is exclusively made in the USA?

  33. Winston Munn commented on Nov 5

    What do we export that is exclusively made in the USA?

    Answer: Debt

  34. muckdog commented on Nov 5

    Agricultural products, autos and auto parts, chemicals, metals… Etc. Take a look at the BLS.gov website.

  35. DealBreaker.com commented on Nov 6

    Opening Bell: 11.6.07

    California State Revenues: Into the Housing Abyss (Infectious Greed) As if you needed more evidence that houses are/were the .com stocks of the day, look at what the housing market is doing to California’s state coffers. The state is…

  36. Quantitative Contemplations commented on Nov 10

    CRB Core Inflation? Hardly.

    Barry Ritholtz uses the CRB “excluding food and energy” in a post today to show how high ‘core’ inflation is.
    UPDATE: I should have guessed; Barry intended to be a bit over-the-top in his post…

  37. Bill B commented on Nov 14

    “anyone who came up with the policy of using food for fuel should be….nevermind…would’nt matter anyway.”

    A few years ago, there was an article in Harpers Magazine on energy consumption of US agriculture.
    It takes more calories, which is an energy unit if you don’t know, in the form of oils to produce calories in term of corns in Iowa. In other words, it takes much more energy to produce foods in US mega-farms. The less human labor is compensated by
    using more energy.

    Now one wants to convert corns back to the liquid fuel form, it has to use some more energy. The cycle then got to be a negative energy gain cycle. One would be better off cutting the middle steps by using the oils directly, except some people would profit from the farm subs. in the corn growing step and from clean energy incentive in the biofuel step.

    In Brazil, using cheap labors plus sunshine, the biofuel may be a positive energy gain process. If the Harper’s article is right, not so in US using the corns.

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