Posts Tagged ‘shadowstats’

Hyperinflation Hoax: China still cannot emport that much inflation to the U.S.

May 29, 2011 6 comments

We do not face much inflation threat here in the U.S.

It’s a never ending battle against the forces of willful ignorance over here at the Trader’s Crucible. We now have Soc Gen and The Business Insider warning about how we will be facing huge inflation from China.

One thing you’ll notice in many of these hyperinflation hyperventilation pieces is a distinct lack of math. Yes, the story sounds good – China and India are growing rapidly – but the math does not support the story that there is an ocean of inflation that will swamp the U.S.  The numbers do not support this narrative at all.

The math is simple: Take the total amount of inflation in the U.S. and China, and then divvy it up anyway you like.  The total amount of inflation will remain nearly the same no matter who gets it.  If you want 0% inflation in China and see what happens to inflation in the U.S., you can do this with math.

Note that the total size of the combined Chinese and U.S. economies is huge.  Some of the inflation that China is experiencing must be allocated to China as well.

Total Inflation Calculations for China and U.S.

I wrote a whole post on what to do and how to do it.  It is not hard work and requires nothing more than a few spreadsheet calculations.  I used extremely aggressive assumptions about inflation for China at 10% in my calculations.  But even using this very high 10% figure, there isn’t that much inflation in the world.    Unless something fundamentally changes, the U.S. does not face a huge inflation threat from China.


Our Story so far…

May 11, 2011 25 comments

Just to recap the story so far, here at The Traders Crucible:

Government Budget Constraint: I think we put this old horse down.  [Update: More here.  We cannot tell ex ante if we are violating or holding to the no Ponzi assumption with any certainty.  Any violation is and can only be ex post knowledge. We can only act on what we can see today, which is probably inflation and the treasury yield curve. If you think there are unobservable factors and risks, well, how can we know what they are and what should we do about them today besides pray to the gods? If you want to take rational action, you need to act on the observables.]

Solvency vs. Debasement:  We Cannot Become Insolvent.  We Can Debase the Currency. Even Bill Gross – head of Pimco and the largest bond trader in the world – admits it now.

The TC rule: A simple rule that gives a target budget deficit. It will probably be linked to a floating tax holiday.  Needs work – and I have a post/update brewing, but it isn’t all bad as it stands today!

The Meta-Critique: Can we know this information before we make the decision? We cannot make decisions using information we do not know ex ante. Can we know this information at all?  I am seeing this pop up over at Matt Rognlie’s place.

Anti-Democratic Conspiracy in Economics: I’ll have more to say on this, but it is everywhere.

MMT on the move:  Moving to Violently Opposed.  Even Caroline Baum of Bloomberg fame knows about us. Paul Krugman is talking smack at us. The next step must be Self-Evident!

We live in bubble land:  We live in a world where the economy demands credit bubbles. Mr. Rowe disagrees with my interpretation. but I suspect that real rates, and not an unobservable, unknowable natural rate(ex ante and ex post – thanks JKH!), will prove to be the cause of this.

Shadow stats and the Hyperinflation Hoax: Gaining Traction here too.  The myth that we have high inflation right now, but the government won’t report it, is surprisingly common.

Crushing Austrian critiques of MMT: It’s obvious how to do it.  Looking at the comments section at The Pragmatic Capitalist (Cullen is doing gods work over there) and reminds me how hard it is to think scientifically.  Some people – smart, educated, talented, productive people – can miss the subtle differences of scientific vs. logical thought, and there is little we can do to remove the scales from their eyes.

Oil demand is inelastic: We cannot impact the price of oil at all – so why bother with targeting it with monetary policy?  Matt Rognlie says something similar here.

More soon!

Update on The Hyperinflation Hoax – we’re gaining ground!

May 9, 2011 4 comments

Great news!  TC is now on the first page of Google results for “shadow government statistics”!  for the post Why Shadow Government Statistics is very, very, very Wrong.  One of the major ways people reach this blog is through a variety of searches for “shadow stats”, “shadow statistics” and such.  It is great to see this on the first page of results.

We do not have hyperinflation.  People that say we do have Hyperinflation are either deluded, or not being truthful with you.   Hyperinflation in the U.S. on May 9th, 2011, is a cruel hoax.   Inflation is about 2-3% at this time.

Fighting the Hyperinflation Hoax – and Winning!

April 19, 2011 2 comments

The post, “ShadowStats: Still Very, Very, Very Wrong” has been receiving consistent hits from the search “Shadowstats”. A quick investigation shows- We’ve made the front page of searches for “Shadowstats”!

That means some random people are clicking to find out that our inflation rate is only 2-3%, and are getting disabused of the 10% hyperinflation hoax.

Bonus: They get an exposure to Functional Finance and MMT.

We could probably get higher in the rankings – hint, hint, hint… 🙂

Shadow Government Statistics just does not match reality.

[Update: It turns out that a search for “shadowstats 10% inflation”, Traders Crucible is 2 and 3 in Googles search.  This “10% Inflation!” was a big story a few days ago, and gets repeated endlessly on places like zerohedge and other bond vigilante wanna-be places. Fighting the good fight here at TC.]

Shadow Stats: Still Very, Very, Very Wrong

April 13, 2011 5 comments


Shadow Stats is frackin’ wrong.  No doubt about it.  Shadow stats is wrong, even if Zero Hedge thinks they might be right.  And yet gullible John Malloy sees fit to report this crappy data on CNBC.

Once again:

1 +U.S. Treasury Rates = (1 + inflation) * ( 1 + real rates)

We know what the Treasury Rate is with a high degree of certainty for points on the Yield Curve for the next 5 years, because they are traded in a highly liquid market.  The real rate is what investors really make after you take into account inflation.

So rearrange this equation to find out how much investors are really making by investing in U.S. Debt:

(1 + U.S. Treasury rates )/ (1 + Inflation) = ( 1+ real rates)

If we use 10% inflation and plug in the latest 6 month T-Bill Rate, we can see how much investors are making.

The 6 month T-Bill rate is 0.11%  Shadow Stats says we have 10% inflation.  So using grade school math, investors in 6 month T-Bills are losing 8.99% per year due to inflation!  

Wow – those investors are really stupid or really worried!  Or maybe, just maybe, John Williams is wrong.  Which one could it possibly be?  Who can know?

Can you believe that this BS gets reported in the major media, by a guy who works for CNBC and used to work for Bloomberg?  He must be a smart guy – every Bloomberg guy I’ve ever talked too has been whipsmart, and to go on CNBC is another huge step.  So how can he not know this?

[Update: Here it is on the Front page of CNBC.  We’re getting less informed by this “news.”]

[Update 2: Google “Shadowstats is wrong”, and TC comes up #3. Slowly, we’re getting traction.]

[Update 3 4/19/2011  Getting even more traction debunking Shadow Government Statistics.  We’ve made the front page on the simple search term Shadowstats.  For a complete roundup on why Shadowstats is wrong, and who is silly enough to promote this nonsense, see here, here, and here. ]

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